An exciting transformation and the ugly side of growth.
Part One - Transforming short-term rentals.
Hi there, my name is Adam Hiatt, and I’m the CEO of Dodgeball. In 2017, I joined a budding short-term-rental startup called Lyric as VP of Engineering. Short term rentals were a legacy industry filled with inefficiency. Lyric was building automated pricing software to move this industry into the modern era. Our engine took in signals like location, seasonality, rain forecasting, etc to better understand properties and their potential as vacation rentals. The goal was to run a full-service short-term rental company that digitized the entire experience from discovery to check-in to concierge to check-out.
A quick note about the time - trust and safety was still early. The big tech companies had begun to put real resources behind it, but for many, it was still a buzzword. Terms like Fraud or Risk were better understood, but brought with them connotations that didn’t fit the new class of online-first businesses.
At this point, I had a background in digitizing operations-heavy industries. I built software bridging technology and operations for food companies like Eatsa. Lyric was on a mission to do the same thing for real estate. We built an operations management platform, booking software, direct sales interfaces, and automated distribution (via Online Travel Agents like Booking.com and Global Distribution Systems). We built a full-stack hospitality experience - global sales from various online properties down to a mobile check-in and concierge app. It was all about taking the entire short-term rental market and flipping it – delivering a high quality experience with low overhead. This drive to automation delivered on customer delight, but a security gap began to form…
The front desk of a hotel isn’t just a hospitality service; it’s a security service. Front desks ask for credit cards and IDs as part of the check-in process, but they also want to look you in the eye. This overlooked part of digitization is all too common. This moment, though brief, can be critical; many online businesses don’t even notice this moment disappearing. For every new category of online business comes a unique disappearing moment and a new category of online fraud.
Part Two - The ugly side of growth
The problem of emerging online fraud is not unique to Lyric. All online companies that are growing have blind spots generated by that growth. The trouble is that blindspots are…blindspots. You don’t know what you don’t know. Many executives don’t see these problems, unless they’ve been bit by them in the past. Individual contributors in the accounting department, the support department, or the customer success department might see the earliest signs, but it takes a while for them to go up the chain of command. This makes sense for executives, since they’re focused on the company’s principal priority – to delight their customer base. Lyric was no different. Many of today’s growing companies are no different. Now, what did we do about it?
When I was at Lyric, I led our technology organization. But with our success as chief motivation, I took a broad interest in the business. I didn’t stop at engineering; I was always eager to wear any hat and help folks across the business: Product, Growth, Design (physical and digital), Branding, Operations, Real Estate, and so on. I helped repurpose our pricing engine to help the Real Estate team identify high value properties; I flew to on-site locations to help test and improve our physical spaces; I helped our Finance team with COGS modeling and FP&A work; I moved office furniture; I installed wireless access points. As many early stage folks do, I wanted to help all of us succeed.
While helping various corners of the business, I made friends throughout and began to see some patterns emerging for my colleagues in Finance/Accounting (payments), Customer Success, Support, and Field Operations.
Accounting began to see an issue with chargebacks. Customers would charge their personal card, and then claim it wasn’t them. I would hear from support, “I’ve talked with that person many times before, I know it’s them.” As we peeled back the onion, we saw that the chargeback rate was significant. Enough of a chunk of revenue that it could not be ignored.
Anecdotes around the lunch table, at happy hours, or while passing each other in the kitchen began to trigger deja vu. Someone stole a TV from one unit. At another unit, someone left behind meth paraphernalia. My customer success colleagues would have to be on calls with police over noise violations. We began to find patterns. All three of those incidents were actually caused by the same group. Interestingly, the people who were paying for the units weren’t the actual occupants. People were reselling the units online. Not just casual criminals, but we identified Brazilian crime networks using stolen cards to rent units to resell them. Unfortunately, we weren’t in a position to work with the Brazilian police to investigate further. The damage was too small and the burden of proof too laborious. This issue wasn’t confined to Brazilian police. In general, law enforcement wouldn’t or couldn’t care about the problem until it became large and the evidence became particularly damning.
The problem was our own and we would have to do something about it. We began rolling out a solution: blacklisting, enhanced background checks, blending human processes with technology, and general fraud process experimentation. If we tried one thing, fraud would pivot and adapt. We had to adapt with it. We spent lots of engineering effort to split off the fraudsters from the true customers – to protect the good revenue from the fraud. In the end, we honed our processes to react as fast as fraudsters did. We grew the team, grew the company, and learned lots of valuable lessons along the way.
The team at Dodgeball took many of these lessons and turned them into solutions for online companies just like ours. We’re passionate builders, who want to help builders get back to building. We’re here to help you filter out the fraudsters, while making sure you don’t treat customers like criminals. Don’t hesitate to reach out; we’d love to be of service.