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Welcome to our December Portfolio Company Spotlight. This is our final issue of the year, but we look forward to continuing the series in 2016. We hope  you've enjoyed these glimpses behind the scenes and truly look forward to your continued engagement. 
Happy holidays and best wishes for a happy and prosperous new year!
In This Issue:  Spotlight on duetto 
Not everyone gets a call from the Oval office when they get accepted to Harvard Business School. Then again, not everyone has Patrick Bosworth's combination of Forest Gump serendipity, magnetic personality and timing. The mercurial CEO of Duetto has a resume that weaves a circuitous path through adventures in acting, every conceivable restaurant role, politics- where he served as the first family's driver prior to the presidential inauguration and leadership positions at the Department of Labor, Harvard Business School and Wynn Resorts. Really? Yet here he is at the helm of Duetto, one of Thayer's hottest portfolio companies.

Patrick's co-founders also bring impressive histories to the company; Marco Benvenuti as strategic marketer and forward thinking revenue management guru and Craig Weissman as one of Silicon Valley's elite technologists. Calling these guys the new "A-Team" of the hospitality technology stack would not be reaching. In fact, the team at Duetto has clearly taken the poll position when it comes to the race for technical leadership in global revenue management software, a podium potentially worth billions.

At  its essence, Duetto takes complex data and simplifies it in order to make quality decisions. The specific decision the company focuses on today is room price for hotels. Although some might argue that Duetto is a big data company, it's more accurate to think of it as a little data company that sifts through a growing data storm in order to find actionable insights. In short, the company finds the needle in the haystack in order to answer a clear yet infinitely difficult question; given a complex range of stay cases, what is the optimal price that will achieve maximum RevPar in a dynamic and competitive environment? By the way, this is not easy!

Improving the answer to that question in a range of use cases and on a global stage has taken Duetto past the $10 million in annual recurring revenue (ARR) mark with a growth rate this year of more than 400% and projected growth rate of more than 200% next year. The company is deployed to more than 1,000 properties worldwide and is currently working with three of the twelve largest global chains. The company's products are credited for increasing RevPar growth by 2X across its broad client base while reducing distribution costs and labor. Patrick believes the company's momentum can be maintained well into the future and that $50 million in ARR by end of 2017 is imminently achievable. That would make Duetto a $500 million to $1,000 million enterprise based on today's multiples and would generate a significant return on Thayer's investment.

Unlike many disruptive Silicon Valley companies that create new markets, revenue management is not a new concept. In fact, there are several well established players in the space that have successfully competed for meaningful chain contracts. Further, several of the largest global chains have built their own revenue management platforms and are sitting on huge investments in legacy infrastructure. Finally, the question itself is hardy new. Managers have been grappling with optimizing price since the Dark Ages. This begs the obvious question; why is revenue management vulnerable to attack now and why won't competitors respond in ways that will stunt Duetto's growth? 
CDislocation Dislocation of the Status Quo
There are several answers to this question. First, all of the incumbents grew up between 1985 and 1995 when the industry itself was on the cusp of experiencing radical transformation. The opportunity to introduce software into pricing was significant and the demand for solutions only accelerated as online travel agencies took hold. Yet software was still an "on-prem" tool and companies had to architect themselves accordingly with large service organizations, on-premises support features and the like. It became increasingly difficult to maintain version control and to keep up with the range of technical infrastructure in play. Flexibility and innovation were sacrificed for incremental improvement, efficiency and association building.

The winners in this race were rewarded for their operational prowess and large EBITDA margins. Financial acquirers, aggregators and founders themselves grew addicted to the cash flows and many, many people made small fortunes. The on-prem infrastructure provided a moat of sorts for the incumbents and complacency set in. In took a revolution at the platform level itself to drive change and it wasn't until 2005 that the clouds started to appear on the horizon.

This cloud changed everything. Suddenly distribution costs collapsed and small organizations could access solutions that had historically been the toys of giants. Innovation also became the mantra, not just during the initial beach assault phase of companies but as a systemic part of their ongoing strategies. On-prem was all but over and the incumbents had to choose between radical restructuring, self initiated cannibalization and near-term risk verses circling the wagons and enjoying a long yet controlled decline with handsome cash flows along the way. It was never really a choice.
DCompetitiveLandscapeThe Competitive Landscape
The cloud verses on-prem shift only explains the defanged incumbents but not the nature of the competitive landscape. If the cloud enables a new family of solutions that pierce the high entry barriers introduced by a fragmented landscape, then wouldn't the revenue management space become crowded with competitors? "Turns out, technology is very hard", Patrick said during a recent lunch near his corporate apartment in Berkeley. "To do what we do you have to talk to a range of fragmented vendors, digest many, many variables and most importantly, change institutionalized behaviors. Convincing managers to sell out later in order to optimize price is not easy and takes time," said Patrick. To accomplish that, Duetto needed to assemble a technology team like no other, a global sales and marketing organization and a leadership team with deep domain expertise. 

$63.2 million in four rounds of funding from some of Silicon Valley's leading investors including Thayer Ventures, Icon Ventures, Accel, Altimeter Capital and Battery Ventures is not a bad start. Add to that industry leadership at the Board level, Lee Pillsbury, and a strong team of hotel industry veterans including co-founders Patrick Bosworth and Marco Benvenuti and one could argue the table is set. The finishing touch and secret weapon that makes Duetto's global leadership almost inevitable, of course, is technology and Craig Weissman is the Wayne Gretzky of the category. Craig is a virtuoso software architect who has worked in Enterprise Software since 1995. Prior to Duetto, Craig worked at for nine years where he helped build the leading enterprise cloud platform. Many people in "the Valley" see Craig as a true savant and, as evidenced by Duetto's engineering team, a Pied Piper to great engineers.
E2015andBeyond 2015 and Beyond - New Data Frontiers 

With offices in San Francisco, London and Singapore and boots on the ground in Brazil and UAE, Duetto is truly a global enterprise. The company currently employs just under 100 professionals and is well positioned to achieve cash flow positive with its current balance sheet. Assuming the core metrics continue to impress and Craig's team continues to execute against its ambitions product road map, it is hard to see meaningful roadblocks in Duetto's vision of global domination in the hotel revenue management space. That in and of itself will result in a handsome market cap but it may just be the beginning for this posse of data hunters. "We see patterns in the hotel revenue management problem that repeat themselves in other large verticals", said Patrick. "It's hard to name a destination service that's not being transformed by power shifts in technology and distribution. These are precisely the kinds of patterns that attract us and we see no reason why our platform can't extend to them." Patrick, Marco and Craig are on to something.  

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