When Gabrielle Andrews arrived for work at the ATL Airport District Convention & Visitors Bureau in Georgia on May 7, she was surprised by an email from Gilad Berenstein, CEO of Utrip, the Seattle-based travel itinerary planning startup.
“It is with deep sadness that I inform you that Utrip, Inc. will be ceasing operations,” read the message, sent early that morning to the company’s corporate and institutional customers. “This follows our extended efforts to bring about a transaction for the company’s continuance that fell through at the last second. We are devastated to no longer be able to continue to operate and partner with you.”
The message thanked them for their partnership, laid out a schedule for the Utrip service to shut down, and directed any questions to an attorney representing the company.
Andrews couldn’t believe it. Just five days before, she said, Utrip had taken a $10,000 check from the ATL Airport District. The organization paid a lump sum to use Utrip’s itinerary-planning software for a year. Andrews submitted the check after Utrip prompted her to renew the annual subscription that the visitors bureau had first purchased a year prior.
“We reached out to our bank to try and stop payment but it was too late,” she said. “We were all really pissed about the fact that it went down like that.”
Utrip officially shut down this spring after eight years in business. Despite raising millions from high-profile investors and generating revenue from about 80 clients, many of whom still praise the product, Berenstein told GeekWire that the company could not continue down the path it was on. He said Utrip had been in negotiations to be acquired by a larger travel company, but an unexpected twist in the eleventh hour of those talks dealt a fatal blow to the startup.
However, some former employees said the seeds of Utrip’s demise were sown months earlier.
The behind-the-scenes story of the company’s ending shows the risks of betting on startups, the cost of gunning for an exit, and the fallout when things don’t go according to plan.
Berenstein was raised in Israel before moving to Washington state in the late 1990s when his father got a job at a startup. He launched Utrip in 2011, when he was 23 years old, with his father, engineer Yair Berenstein, and startup entrepreneur Edan Shahar as co-founders. He got the idea for an itinerary-planning app for travelers when planning a European trip after grad school at the University of Washington.
The first iteration of Utrip was a trip-planning app built on machine learning technology. Users entered information about their interests, the dates of their trips, and other details. Utrip then produced a complete schedule that accounted for things like distance and time to get from one activity to the next.
In a 2012 Startup Spotlight on GeekWire, Berenstein offered advice to other entrepreneurs: “Execute, execute, execute,” he said. While it’s “great to have awesome ideas,” he said, it’s far more important to be able see them through.
By every indication, he was doing just that. Utrip rolled out new features in 2013 and launched out of beta in 2014 with a $750,000 funding round led by Virtuoso CEO Matthew Upchurch and New York-based CB Alliance. A few months later, Utrip raised another $850,000 and added new investors, including Costco CFO Richard Galanti.
By late 2014, Utrip had hundreds of thousands of users and was serving 32 markets. That early momentum helped Berenstein win Young Entrepreneur of the Year at the 2015 GeekWire Awards, based on votes from members of the Pacific Northwest tech community.
But Berenstein discovered the same challenge that had plagued other consumer startups.
“Driving traffic is really hard and really expensive,” he said in an interview with GeekWire.
The direct-to-consumer travel business is crowded and littered with failed attempts. Travel startups have to compete with big incumbents including TripAdvisor and Expedia, which has made a habit of gobbling up competitors through acquisitions. Other well-funded tech giants such as Google and Airbnb are also becoming leaders in the travel planning space.
Even though travel tech companies were attracting hundreds of millions in venture capital, in 2016 travel research firm Skift found that trip-planning startups receive the least funding of any segment of the industry. Utrip faced an additional challenge. Rather than comparing Utrip to other travel startups, investors measured it against artificial intelligence companies with much more substantial revenue, Berenstein said.
Faced with those odds, Utrip shifted to a business-to-business model, licensing its software to other travel companies. The pivot worked. Utrip signed new clients and raised a $4 million Series A round in 2017. It also launched a partnership with JetBlue.
2017 was a big year for Berenstein. He married Lisa Bridge of the Ben Bridge Jewelry family. She had recently been promoted to president of Ben Bridge, the Seattle jewelry company under the Berkshire Hathaway umbrella. The two shared a passion for travel and adventure, according to a New York Times marriage announcement.
At that point, one Utrip investor noticed a shift. The investor spoke with GeekWire on the condition of anonymity to be able to speak candidly about behind-the-scenes issues related to the company. “Gilad’s heart wasn’t in the game anymore,” the investor said.
Berenstein said his personal life did not impact the company negatively.
“After I got married, we signed the biggest clients we ever signed,” he said. “We raised more money than we’d ever raised.” He also noted that Utrip saw the greatest revenue growth between 2016-to-2017 than any other year in its history.
The acquisition that wasn’t
One year later, in 2018, Berenstein decided Utrip needed more funds to scale up sales and marketing. He began courting venture capital investors to raise a larger round. When it didn’t look like a major venture round was in the cards, he started considering an acquisition.
A large travel company agreed to buy Utrip and the two companies went into the due diligence phase, said Berenstein, who declined to name the would-be acquirer, citing a confidentiality agreement. But what was expected to take 4-to-6 weeks stretched out over nearly four months, he said. Finally, the two companies negotiated a 94-page acquisition agreement that was ready for final approval. The deal was set to close in 48 hours. All that remained was sign-off from an oversight board within the buying company. That’s when things fell apart, according to Berenstein.
He said he never learned why the oversight team did not sign-off on the deal. He just “knew that it was over.”
“We informed our team the next day,” he said. “We informed our clients and investors the day after that.”
Investors wondered why Utrip couldn’t continue to operate after the acquisition fell through. The company had more than 80 paying clients and the technology had promise.
“We thought it was a gold mine for itinerary building or trip planning,” said Andrews, Utrip’s Atlanta client. “It’s unfortunate how the whole thing ended up.”
Staying afloat after the acquisition fell apart wasn’t a realistic option, Berenstein said. The company didn’t have the capital necessary to expand its sales team and continue landing top engineering talent.
“There wasn’t an option for a company like ours to reduce burn and lay some people off and try to be really lean and do that. If we had done that, we would have found ourselves in the same position later,” he said, explaining that this desire to “do it right” was why the company wanted to raise a larger round the year before. “We wanted to be able to invest in technology and in sales and marketing at the same time.”
Shahar, Utrip’s co-founder, concurred. He remained a shareholder and board member until the closure, and said continuing on after the acquisition fell through simply wasn’t an option.
“There was just no money,” he said. “It’s just a startup. Every single month it costs more to keep the team on than the money that’s coming in.”
A former employee, who asked to remain anonymous to share internal company details, said Utrip’s leadership prioritized the acquisition over everything else.
“We wouldn’t make sales because of it,” the former employee said. “We wouldn’t help our partners because of it. Clients left us. We were losing more clients than we were getting in 2018. We lost more partners than we gained and that’s because the endgame was to sell. We weren’t helping our partners, we weren’t helping our clients at all.”
Berenstein’s May 7 email was Andrews’ first indication that the company was having financial trouble. She was one of several clients and investors surprised by Utrip’s sudden demise.
Christian Watts is CEO of City Sightseeing San Francisco, a tour bus operator in the Bay Area. He had a 3-month contract with Utrip that was billed in January but didn’t know the company had shut down when contacted by GeekWire.
“It’s a shame,” he said. “It’s got value.”
Three days after Berenstein announced Utrip would shut its doors, he posted photos to Instagram from Virtuoso Symposium, a luxury business travel conference in Australia, one stop on a multi-city trip that included island resorts and live entertainment.
— Gilad Berenstein (@giladb87) May 10, 2019
It’s not unusual for an entrepreneur to take time to decompress when a tumultuous startup journey comes to an end, and Berenstein told GeekWire there was nothing out of the ordinary about his trip. He’s on the board of a luxury travel brand.
“I started a travel company,” he said when asked how often he was out of the office. “My clients, investors, and advisors were located across 50 cities around the world.”
But the timing and optics of this particular trip, so soon after Utrip shut down, felt like “salt in the wound,” said the investor who spoke with GeekWire anonymously.
The investor said the trip reflected a broader trend of Berenstein going off the radar in the startup’s final weeks. In his experience, the investor said, “the lack of communication was unique. It was absolutely not aligned with the norms of investing.”
Some investors and insiders disagreed that the shutdown was unusual.
“I’ve invested in a number of companies and some of them do well and some of them do not do well,” said Felix Anthony, an early Utrip investor and former Amazon vice president. “Sometimes when things aren’t going well, entrepreneurs go into a shell.”
“We are, of course, disappointed when any of our investments fail to achieve success,” said Susan Preston, managing partner of the SeaChange Fund, formerly known as Seattle Angel Fund, another Utrip investor. “Early-stage investing is high risk, which drives a commensurate need for high potential return specifically because many of these companies fail. Despite our best efforts at the time of investment, you cannot entirely predict or control a company’s future course.”
Shahar, Utrip’s co-founder, said that some criticism is to be expected. But what happened at Utrip was not out of the ordinary, he said, based on his experience.
“It’s Monday morning quarterbacking,” Shahar said of the second-guessing. “I’m sure if there was a positive outcome, maybe there would be a different perception.”
Berenstein disagrees with assertions that Utrip’s closure was a result of mismanagement. However, he acknowledged something he would have done differently, in hindsight. Knowing what he knows now, he said he would have objected to the timing of the oversight review during the acquisition process.
“I certainly would not have agreed to it being 48 hours before the deal was going to close,” he said. “I would have said, ‘let’s do it two weeks ago.'”
Berenstein said he wishes he had more time to communicate with investors and clients but the last-minute review didn’t make that possible. In the weeks since Utrip shut down, he has been working to sell off company assets to try and get a return for stakeholders.
Aimee Willig, the lawyer referenced in Berenstein’s email to customers, declined to comment for this story. A search of bankruptcy filings and other court records did not show any pending cases involving Utrip.
“Everything happened really quickly,” Berenstein said. “We did the best we could to give both our clients and our team the longest possible notice that we could to try to ease the transition whenever possible.”
Shahar echoed his co-founder. “We were fighting to get the thing done until the very end,” he said. “That was part of it, to continue to serve all of the clients and all of the investors and all of the team members until the very end. Once it was clear that there was no path forward, information was made available.”
But that doesn’t satisfy the ATL Airport District, which is out $10,000 as a result of the closure.
“It was a deal that fell through at the last minute but that has nothing to do with the fact that we paid him for a service that he did not provide, so we’re highly upset,” Andrews said.
Asked what lessons she learned from the experience she said, “We’re now super cautious with the partners that we do business with. We’re probably not signing any annual agreements and we’re going to look more into the longevity of whatever company that we’re looking at.”
Berenstein expressed regret about what happened with the ATL Airport District. “I’m really sorry,” he said when GeekWire asked him about the situation. However, he noted that software-as-a-service products renew automatically on an annual basis.
Andrews did receive a notification when the subscription was up for renewal. She contacted Utrip with questions about the service but had a hard time getting answers, even when she was connected directly with Berenstein.
Berenstein said he was working throughout the process to do right by all of the company’s stakeholders.
“I’m sorry that I wasn’t responsive,” Berenstein said, “but as you can imagine it was a very challenging time.”