Mr. Patterson

Skift broke the news today that former Jetsetter cofounder Drew Patterson was named the new CEO of Room 77, a hotel price comparison startup that raised almost $44 million in funding from investors like Expedia, Concur, Bob Pittman, and General Catalyst Partners.

Mr. Patterson was CEO of Jetsetter--a flash sales luxury travel site operated independently under the Gilt Groupe umbrella--for more than three years until Gilt Groupe chairman Kevin Ryan asked him to step down last May. The move by Jetsetter's board followed an exodus of senior executives, low morale, and fears of a "mutiny" among staffers. 

After leaving Jetsetter, Mr. Patterson, a former executive at Kayak.com, cofounded CheckMate, an app that allows hotel guests to check-in from their smartphone. He's served as CEO there since January, according to his LinkedIn profile and has changed his Twitter handle from @JetSetDrew to the more nimble @DrewPats. Skift reports that Room 77 has "absorbed" CheckMate, as well as Mr. Patterson's cofounder, Adam Rugel and some team members.

Skift also reports that Mr. Patterson been busy raising money for Checkmate and already secured funding from high-profile techies like Twitter cofounder Biz Stone and Twitter's former chief scientist Abdur Chowdhury.

In an interview with Skift, Patterson, who was VP of marketing at Kayak for three years before co-founding Gilt Groupe’s Jetsetter in 2009, said no company has “claimed the mantle of leadership” in mobile and vertical hotel search, which he described as only being “in the second or third inning.”

With all that investor pedigree, Skift wondered whether Room 77 should have "tapped a CEO candidate with public company experience for a possible IPO," posing questions about the motivations of Room 77 founder and chairman Brad Gerstner:

Speaking of spin, some will question the announcement’s back story.

Gerstner and Patterson say the idea to hire Patterson as Room 77′s first CEO only emerged around three weeks ago when the two were having dinner and discussing mobile, hotel search, and Patterson’s fledgling CheckMate.

As chairman and founder, Gerstner has wielded control of Room 77 since its beginnings in 2010. Perhaps opting for Patterson instead of one of the “bigger names” would ensure that Gerstner’s choreography goes unchallenged.

That's the thing about founder/chairman, they tend to like to control.

As for Mr. Patterson's former company, Gilt Groupe put Jetsetter up for sale last October. At the time, the Wall Street Journal reported Gilt had trouble finding buyers and lowered its asking price.

When we spoke to Mr. Ryan in December, he said everything was on schedule for the sale and that he expected "binding bids" due that month. We asked about the status of the sale this afternoon, but a Gilt Groupe representative declined to comment.

Mr. Ryan (Photo: Invoke Media)

After a tumultuous spring that led to staffer mutiny and the ouster of CEO Drew Patterson, Gilt Groupe has decided to put its travel site up for sale, according to sources who talked to The Wall Street Journal. The Journal reports that the company has been shopping around Jetsetter for the past few weeks with an asking price around $50 million, but so far no interested bidders have taken the bait.

Writes the Journal:

Gilt's move to sell the unit underscores how the New York-based company has struggled at times to expand beyond its core business of holding time-limited online "flash sales" of women's fashions. It is under pressure to increase its revenue and expand into new markets, having raised another $138 million last year from a group of venture capitalists, a deal that valued the small retailer at $1 billion.

The Journal notes that sources said the asking price of the flailing travel company was set too high at $100 million, underscoring the fact that "there hasn't been much interest" from buyers.

UPDATE: A source close the situation told Betabeat that the $100 million figure was never discussed and that the actual price is in the $30 to $50 million range. The source also said the process is several weeks along and that Gilt has had discussions with both companies in the travel space and financial players. New owners, the source reasoned, could allow Jetsetter to accelerate its growth.

Drew Patterson, Jetsetter's former CEO, left in May following an exodus of six senior executives. Gilt Groupe CEO Kevin Ryan asked Mr. Patterson to step down, citing increased staff turnover and sinking morale. Since then, Jetsetter has not publicly named a new CEO. Rob Deeming, Gilt Groupe's director of strategy and operation, was named as acting manager. At the time, Mr. Ryan told Betabeat he expected to appoint a new CEO by November.

“More than half of us are looking to leave within the next month, at which point the business won’t be operational,” a Jetsetter employee told Betabeat at the time.

If you have any information about the sale, please email: tips@betabeat.com

With contributing reporting from Nitasha Tiku

Previously:

Kevin Ryan Asks Jetsetter CEO Drew Patterson to Step Down After ‘Mutiny’ From Staffers

Flash Dance! Luxury Flash Sales Sites Regroup After Layoffs

Mr. Patterson via @jetsetdrew

Gilt Groupe founder Kevin Ryan and chairman Susan Lyne spent Monday at the offices of Jetsetter, a deals site for luxury travel that operates independently under the Gilt Groupe umbrella. When the day was done, the Jetsetter board, where Mr. Ryan serves as chairman, approved a bold decision in response to an exodus of six senior executives and pervasive frustration among Jetsetter's nearly 90 employees. "More than half of us are looking to leave within the next month, at which point the business won't be operational," a Jetsetter employee told Betabeat last week, recounting "mutiny" among staffers.

"Drew [Patterson, the company's CEO and cofounder] is going to step down effective immediately," Mr. Ryan told Betabeat by phone this morning. In his stead, Mr. Ryan named Rob Deeming, Gilt Groupe's director of strategy and operations, and Mr. Ryan's former "chief of staff," as acting general manager of Jetsetter. Mr. Deeming had been in charge of Jetsetter's UK office, which was launched last September.

Mr. Ryan said the change at the top was motivated by turnover and morale. "Too many people have left. When you’re the CEO, you’re responsible for that. We’ve had a lot of communication over the last six months on this issue. At a certain point, for myself, you make a change."

Interviews with staffers, who spoke under condition of anonymity last week, painted the picture of a company hampered by Mr. Patterson's and CTO Colin Kroll's unwillingness to listen to and implement other people's ideas--at the expense of employees eager to grow the brand. The initiatives that the duo had put forward, such as a UK office, had flopped, sources said. "They talk to themselves and they think they're smarter than everybody, but they don't know how their customer works," said another Jetsetter staffer, referring to Mr. Patterson and Mr. Kroll. "We have great members, we want to keep them happy."

The way some employees tell it, morale started nose dive around the time Barry Herstein, the company's first-ever chief marketing officer, left Jetsetter. Mr. Herstein, a veteran marketing executive from PayPal, American Express, and the Financial Times Group, had actually been in consideration for the CMO gig at Gilt Groupe. When his appointment was announced last month, Mr. Patterson hailed the opportunity to "get the Jetsetter brand to a larger audience.”

But Mr. Herstein's tenure was short-lived. "Barry started on a Monday, didn't show up for work the following Tuesday and it was announced on Wednesday that he wasn't coming back," said one Jetsetter employee who agreed to speak under condition of anonymity. "He came in and realized all the things that were wrong with the company immediately."

Turnover and disagreement over direction are routine for a startup, but Mr. Herstein was the third highly-respected senior executive to leave Jetsetter this year, following Heather Leisman, the former VP of merchandising and operations and Stephanie Dolgins, the former head of marketing.

Sensing unease among the ranks, two weeks ago, Mr. Patterson broke staffers up into small groups to meet with top executives. Sources say the most successful session, in terms of open dialogue, was with Taleeb Noormohamed, a Canadian entrepreneur brought in to head up Jetsetter's "Homes" division. A week after the meeting, Mr. Noormohamed announced he would be leaving the company as well. "I definitely think Drew was threatened by how much people trust and respect Taleeb. His loss is a huge blow to hope," said one employee. The day of Mr. Noormohamed's goodbye party--for which Mr. Patterson showed up two hours late--employees found out that two more staffers would be leaving as well: Stuart Horowitz, VP of human resources, and Ivana Naeymi-Rad, director of engineering for business platforms. Five minutes after Mr. Patterson arrived at the party, hosted on the roof of the Gansevoort Park Avenue, employees started dispersing. "They all get marginalized, they all get frustrated and they all leave," a source said last Wednesday, adding, "There are about twenty people who are ready to walk out the door tomorrow."

Employees told Betabeat that revenue at Jetsetter was "flat," despite adding new venues, wondering why the board didn't act, despite the fact that there were "no positive signs coming from the company (including financial)." But the company vehemently disputed that claim on the phone. Jetsetter is poised to do close to $100 million in gross bookings this year, a spokesman said, adding that at yesterday's board meeting, Jetsetter reported 16 percent growth year-over-year for this quarter despite an industry-wide lag in the discount offerings. "The travel market is doing pretty well right now, which means there is less discount inventory available," noted Mr. Ryan. Individuals months may have been flat, but never a quarter, said the spokesman.

We had heard that Jetsetter was burning through $500,000 a month, but a company spokesman says Jetsetter has been cash-flow break-even since it was launched, which is unusual for ecommerce companies that normally require a fair amount of cash to build up. Jetsetter was capitalized with $1 million three years ago and hasn't raised since. After that initial raise, neither Gilt nor any outside investors have put money into Jetsetter, says the company. From an accounting perspective, however, Jetsetter still loses a few hundred thousand dollars per month, which is half of what it was six months ago. But the business should cross over into profitability next year, on schedule.

In terms of cash flow, said the spokesman, Jetsetter has been the single best business in all of Gilt.

The company also disputed employee statements that Jetsetter's UK office, one of Mr. Patterson's pet projects, had shut down. "That was a pretty big deal when we opened up another office," said a Jetsetter staffer. "And then to see it fail so quickly was pretty demoralizing for everyone. There’s still some people over there, but we’re no longer really operational in the UK. They’re more there just for the sales side." Jetsetter, on the other hand, says the UK has not closed down and claims the company is in the proces of hiring five more people. Currently, however, the UK office is just there to source deals for the US. Originally, Jetsetter had hoped for an independent UK team to create a business overseas, but found it difficult to get members. The last entry from Twitter account @jetsetter_uk was February 1st.

According to one employee, during a meeting of twenty staffers, Shaun Stewart, VP of sales and operations, suggested that Jetsetter start copying their competitor, Tablet Hotels. The source said Mr. Herstein, the short-lived CMO, asked why Jetsetter wouldn't stick with what it's good at it--beautiful pictures and editorial content--over copying someone else. Jetsetter used to showcase "quality products," said the staffer, "now it's crappy hotels."

Mr. Ryan offered praise for Mr. Patterson's willingess to try new things, contrary to what we had heard from employees. "When Drew came up with the idea of selling full-price hotels a year and a half ago, no one at Gilt had done this and no one in the flash sales space had done this," said Mr. Ryan. "Now it’s 40 percent of our business." Jetsetter also plans on announcing a number of new hotel chains into its offering this coming month, including the recently added Mandarin Oriental. He also spoke highly of Jetsetter's product, especially as compared to its competitors. "The product itself is fantastic. I actually think it’s one of the best products we have at Gilt. It’s won lots of awards. I’m sitting here in the conference room looking at the 2011 Webby award," he said.

"Most of our competitors like RueLaLa or Haute Look that entered the travel space two years ago, either have dropped out or have small businesses," said Mr. Ryan. "Neither one is doing even $15 million in revenue. Ideeli same thing. We all started at about the same time. We have a bigger travel flash sales business than the three of them combined." He also pointed out how a European competitor called Voyage Privé tried to enter the U.S. market a year ago, but "dropped out because they couldn’t compete with Jetsetter in this market."

Ultimately, however, Mr. Ryan's decision to replace Mr. Patterson, a former VP of marketing at Kayak.com, was motivated by the fact that, "There’s been more management turnover for a variety of reasons in a small company than there should be. There’s always some unhappy people everywhere but I think the internal cooperation within Jetsetter is not great between various departments." During the breakout sessions with senior executives a couple weeks ago, Mr. Patterson's staff also blamed low morale on lack of communication, which one source called merely superficial. "It was still a top-down movement of them telling us what was wrong with the company, rather than us telling them what they needed to change," said the source. Mr. Kroll, Jetsetter's CTO who led alongside Mr. Patterson, will be staying in place.

Mr. Ryan said Jetsetter has not yet begun a search for a new CEO. Considering that Voyage Privé is about a $400 million business in Europe, he said, Jetsetter could be expected to approach that as well. "The person in charge, we need to feel comfortable that they can scale this into an international large travel business. It’s too early to learn if Rob is that person," said Mr. Ryan. "But we'll do a search. And my guess is within six months, we’ll have someone new in here from a travel background."

We will be covering this story as it breaks. If you have information about Jetsetter, please contact ntiku@observer.com.

Mr. Patterson via @jetsetdrew

Today, Jetsetter, the luxury vacation deals site (think flash sales on villas in St. Vincent or a pied-à-terre in Paris) announced the appointment of its first-ever chief marketing officer, Barry Herstein. A former CMO at PayPal, American Express, and the Financial Times Group, most recently Mr. Herstein was responsible for revitalizing Snapfish, the photo sharing and printing service, after a decline in revenue growth.

(Ex-Snapfishers seemed to be everywhere these days. Former Snapfish CEO Ben Nelson recently set his sights on reimagining an Ivy League experience at half the cost.)

Betabeat chatted with Jetsetter CEO Drew Patterson about the need for a CMO, Jetsetter's role within the Gilt Groupe family, and those pesky tech blogs.

Over email, Mr. Patterson said that hiring a CMO was crucial because "investing in marketing to get the Jetsetter brand to a larger audience," is the next stage in the company's development. Jetsetter already has 2.2 million members since launching in the fall of 2009. Although 95 percent of travelers return to to Jetsetter after their trip, they have booked just over 500,000 nights.

Jetsetter also seems to be heading in the same direction as parent company Gilt Groupe by offering more full-price vacations--over the steep sales that may have initially lured you in. (Vendors, naturally, prefer not selling at a discount.) "I am most excited about the growth in Jetsetter’s full-price retail collection, which is contributing over 35% of revenue each month," said Mr. Patterson, noting the 800 hotels and resorts in Jetsetter's full-price retail collection.

Don't let the "deals," part fool you. Things can get pretty pricey, if you let it. The highest purchase on Jetsetter so far has been a $217,000 for renting Caribbean home for two weeks over Christmas. The highest price for a flash sale item, on the other hand, was a number of $42,560 packages for a cruise to the North Pole. Mr. Patterson also noted that the second highest flash purchase was a trip to Antarctica for $23,375. "Apparently the poles are both expensive and popular!" he said.

As for its relationship with Gilt, Mr. Patterson said setting Jetsetter up as a separate company has enabled them to offer a more tailored service. "Travel is a massive category, with different purchase behavior and product needs from fashion," he said. "The product and technology teams spend every day thinking about how we can improve the experience of booking travel and going on the road."

The companies still collaborate. "Gilt has been a big part of Jetsetter’s history and success, incubating the company with seed capital and introducing Jetsetter to passionate Gilt shoppers," Mr. Patterson, said, pointing to a number of cross-category initiatives. "For example, Jetsetter destination weddings and honeymoons will be presented alongside Gilt’s wedding apparel and product in an upcoming wedding sale later this week."

During the recent layoffs at Gilt Groupe, sources posited that there may have been too much overlap between Gilt City, an "adventures" and local lifestyles vertical and Jetsetter. When asked why Jetsetter has grown while Gilt City has been forced to close in six markets and layoff top staffers, Mr. Patterson said. "We’ve got a great relationship and work closely with the folks at Gilt City (and I happen to be a passionate consumer of their restaurant deals). My guess is that any chatter about overlap was just an attempt to drive PVs by gossipy tech blogs (which I also read passionately)."

Well, much of that gossip turned out to be true. Regardless, thank you kindly for the passionate pageviews?! We'll take it!

As Jetsetter scales, Mr. Patterson said the next challenge will be around execution. "It’s hard to keep the same level of service and focus as the enterprise expands. My goal is that we maintain the same attention to detail and service level for our millionth customer as we had for our first."

We spotted Jetsetter founder Drew Patterson right away and demanded to know what happened to the killer acceptance speech he promised us on the red carpet. Mr. Patterson said the preponderance of Anthony Weiner riffs made him decide last minute to swap out "A picture tells a story . . . Ask Weiner" for the more chaste, "Kids, we're going to Disneyland."

Mr. Patterson was standing next to GroupMe's Steve "Bosu ball" Martocci, a fellow Gilt Groupe alum, who hadn't made it to actual ceremony. The two reminisced about the old days. "About this time last year I had this little product," said Mr. Martocci, making his hands into box-shape. "I asked Drew what I should do . . ."

"What did I tell you?" Mr. Patterson asked.

"Don't take money from Gilt," Mr. Martocci shot back. They laughed. It was hard to tell if it was a joke.

***

Betabeat walked past the cordoned-off VIP section, but didn't recognize any VIPs and headed upstairs where we ran into the affable Evan Gregory, one of the co-founders of Auto-Tune the News, who performed earlier that night with inadvertent Bed Intruder Antoine Dodson and a full band. "In some ways, we look at ourselves as odd talent scouts for unintentional singers. Having applied our craft over months and years to Congress and newscasters--we look for people that have many of those same qualities that a conventional, intentional singer might have, meaning like sonically  . . ."

" . . . Like cadence?" Betabeat interrupted?

"Exactly. Antoine is at the top of the hall of fame of unintentional singers."

Mr. Gregory, who grew up in Virginia--along with the rest of the Gregory brothers--said he had been living in Williamsburg, close to the bridge for the past eight and a half years. Betabeat gave his boyish face the once-over. Wait, how old are you?

“Exceedingly old, just very very old.”

"What are you 24?"

"Yeah I’ll be 21 next week and I’ve been in Brooklyn for 8 years," he laughed. “I’m 32.”

Mr. Gregory then helped Betabeat parse how exactly Auto-the-News was connected to tech-scene veteran Fred Seibert. "Our relationship with [Seibert's] Next New Network doesn’t exist anymore because they were bought by Google. I’m looking at like six of their employees now," he said gesturing at a  of people walking past the booth. "Everyone there is now a Google employee. But our deal with them was basically: they manage our partnership with YouTube while we create all of our content independently. They simply operated the relationship between us and YouTube and were allowed to sell ads against us. Now that deal is dissolved so we're even more independent."

So, we had to know. How do the Williamsburg hipsters react when they find out what Mr. Gregory does? "It varies between (a) What is that? (b) I’ve never heard of that, or occasionally (c) I think my mom showed me that!”

You can still snag a good .tv or a billiant .ki, but the .com land grab was over a long time ago. Most catchy, easily-remembered names are taken, either by legitimate companies or squatters, and there's not much you can do about it. But there are still good deals to be had, we learned from Jetsetter founder Drew Patterson's musings on Quora. (Jetsetter is a Gilt Groupe affiliate, a members-only site for deals on high-end travel.)

"Landing on Jetsetter was a stroke of good fortune," Mr. Patterson wrote. "I had been playing with a number of names, and most were clearly taken or controlled by squatters. Jetsetter.com had promise, because the owner had a clear commercial purpose (it was a jet set printing business), but hadn't touched the site in years. I loved the potential, and it was sooooo much better than the alternatives ("Valise" and "TripNoir" were two potential alternatives, to give some context).

"Unfortunately, getting in touch with the owner of the site wasn't easy. I must have sent 10 emails the address listed in the DNS and called multiple times to no avail. Jim xxx (the listed owner) didn't respond. I even tried looking him up in the phone book, but Jim xxx wasn't listed in the phone book for his town.

The breakthrough came when he thought to check under "James" instead of "Jim." After 3 days, it dawned on me that Jim might not be listed as "Jim" in the phone book. "Sure enough, 'James xxxx'--the first name listed in the phone book--answered my call and was the proud owner of the site. As I thought, he hadn't touched the domain in a while, and it wasn't a focus for him."

Mr. Patterson negotiated $3,000 for the name. Quora commenters were impressed: "3k is cheapo."