No ‘Sugarcoating’: Travel Startup Navan’s Turbulent Ride Toward an IPO

He also thanked individual executives for their contributions to the rebranding: “What we built is so, so amazing.”

For Cohen—a 47-year-old former Israeli tank commander—boldness has paid off so far. He raised about $1.4 billion over seven years from venture capitalists including Andreessen Horowitz, Lightspeed Venture Partners and Zeev Ventures, while capturing a growing amount of corporate spending in travel. He steered the firm through a revenue plunge from $50 million to $17 million when travel cratered during Covid-19, and then back up to roughly $300 million last year.

But he has been a polarizing leader as he has dragged his firm out of obscurity and into the spotlight, according to interviews with 15 current and former employees. Like other Silicon Valley upstarts, Navan is trying to keep growing despite economic and stock-market headwinds. Meanwhile, tensions have been spreading throughout management and staff, usually as a result of Cohen’s aggressive management style.

During the all-hands, Cohen joked that one outside marketing agency had a photo of a vibrator in a presentation. He lamented that other marketing firms were too “boring.” He disregarded reports of customer complaints about the rebranding: “We have 9,000 customers and I know of two complaints, and those two complain about everything,” he said.

He talked about pulling off the rebrand without a chief marketing officer, whom he had fired months earlier. “I don’t know anything about marketing, but I decided to be CMO,” he said.

Cohen routinely tells all employees when and why Navan fired executives, and his tone has struck some at the company as inappropriate. He often yells in meetings.

A number of company leaders have churned out of Navan quickly in recent years. Cohen has called managers at the company “stupid” behind their backs, according to a person who heard him. He told some managers to never hire people back who left the company. “I’ll never rehire those motherfuckers,” he said, according to a person present when the comment was made.

Still, the company has in fact rehired some leaders it previously fired. “Don’t fuck up again,” Cohen joked to one executive in front of the company.

In an interview with The Information, Cohen acknowledged that Navan is “a tough place” to work. “In a fairly antiquated industry, you need to fight your way into this. You need to make sure that everything works smoothly all the time. It’s tough, and sometimes people will have it and sometimes they will not,” he said.

“Being open, being direct, are values I embrace,” he added. He cited Netflix, which has a well-documented reputation of candor, as a company that also gives public feedback to executives.

The Path to Public Markets

Navan has been working with Goldman Sachs on IPO preparations, according to people familiar with the matter, and executives have told employees to be ready to go public as soon as July, depending on market conditions. Rising interest rates and souring investor appetite for risky stocks have kept the IPO market on ice for more than a year.

Navan executives are gearing up. The rebrand was done in part to show Navan is branching out from its core corporate travel software business. Ilan Twig, the company’s chief technology officer and Cohen’s co-founder, alluded to the implications of the branding change for a public listing: “If I’m a banker or a customer and I look at this rebrand, I get it—and everything that comes with it. ‘Holy shit! These guys are serious,’” Twig said at the companywide meeting.

While Cohen and Twig aren’t famous, they have attracted a number of Silicon Valley-famous investors since Navan’s 2015 founding, including Ben Horowitz, Elad Gil and Adam Bain. “I’ve never seen someone so successful at raising money in business travel,” said Norm Rose, who runs Travel Tech Consulting and has followed Navan’s rise.

Cohen used classic Silicon Valley “software eats the world” tactics to grab market share in a staid industry. Corporate travel is dominated by larger, more traditional firms like American Express Global Business Travel and Concur, owned by SAP. Navan’s booking tool for business travelers is designed to be easier to use than older rivals’, and the firm recently launched a corporate credit card to capture more customer spending.

The company is a “classic disruptor,” said George Roukas, a travel industry consultant. “You had a lot of software that was really bad. No one optimized to make it easier for the traveler.”

After sales plummeted during the pandemic, Navan was able to raise hundreds of millions more to expand product lines and more than quadruple its number of employees. Sales more than tripled in the latest fiscal year to about $300 million, people familiar with the matter said. “It happens to be the best performer in [my] portfolio,” Bain, a former Twitter executive whose venture firm is 01 Advisors, told Navan employees at the rebranding meeting.

“This company could have died 100 times. As a result, they’ve had to do hard things as a team,” Bain told The Information in an email.

Cohen soon may have a tougher audience: public market investors, who are increasingly scrutinizing fast-growing but unprofitable tech firms.

‘Chatbot Replaces Agents’: Cutting Costs and Curbing Cash Burn

Late last year, the company told people it was on pace to burn through more than $200 million in cash, people familiar with the matter said. And its sales growth wasn’t entirely organic: Roughly one-third of revenue growth was attributed to its recent acquisition of a luxury travel agency, Reed & Mackay, a person familiar with the matter said. It’s also on the hook for $125 million in debt it raised from Coatue Management last year at a high interest rate, a person familiar with the matter said.

And while Navan’s app sits on millions of tech employees’ smartphones, few of the world’s biggest business travel spenders use it. The company doesn’t work with any of the largest 100 business travel spenders in the U.S., as measured by Business Travel News. (Last year, however, it nabbed one of its biggest customers, U.K.-based Unilever.)

With interest rates rising, the company is unlikely to live up to its most recent private valuation, $9 billion last year, in the public markets. An analysis by The Information of a group of similar publicly traded firms—Booking Holdings, AmEx GBT and Bill.com—shows that Navan seems overvalued at that price. Those similar firms have much wider operating margins, but their future sales trade at a lower multiple of future sales than how investors last valued Navan.

Navan executives think they can show a greater potential for profits. The company has charged more forcefully into an area some other startups have danced around: lowering costs by firing customer service agents. About 14% of revenue last year went into travel support expenses, which include the cost of customer service agents, a person familiar with the matter said.

That is part of Navan’s strategy behind using ChatGPT, in part to replace work by customer service agents who have to rebook flights and finagle hotel bookings, the company announced last month. (The company’s previous custom-built chatbot ran into problems, a person familiar with the matter said.)

Navan executives told prospective investors in a slide deck last summer what it ultimately wants: “chatbot replaces agents.”

Cohen told The Information he expects to double revenue this year and by the end of the year get to positive earnings before interest, taxes, depreciation and amortization. “When we IPO, you will see a tech company’s margins, that’s for sure,” he said.

Culture Clash

Even as business has roared back, some employees have resented the firm’s culture.

Executives had to step in to respond to a slew of negative reviews from current and former employees on the Glassdoor website. One employee’s Glassdoor review last year noted “poor morale” at the company. “When your CEO swears at you and there’s no meritocratic promotion in sight, your morale and your team morale will be low,” the review read. “Everyone just wants to get through work and see the company go public.”

The employee later took down the review after Navan executives began interviewing staff to find out who had written it.

Current and former employees who spoke to The Information did so on the condition of anonymity, with most saying they either feared retribution from the firm’s founders or had signed documents that prevented them from speaking.

Loyalty doesn’t always matter, either. A few years ago, one senior employee was fired a few weeks after he shared that he had gotten a tattoo of the company logo on his arm, two people familiar with the matter said.

Cohen often emails staff when he has fired an executive. After he ousted the company’s CMO last August, he wrote to all staff: “It was a tough business critical decision I made to fuel faster growth.” Earlier last year, a sales executive cried on a call with employees after his firing earlier that day. The executive, who was allowed to speak for transparency’s sake, told employees he disagreed with Cohen’s decision.

Cohen told The Information he prefers to be transparent about executive firings because “the employees are smart. They will know whether we made up a story….It doesn’t mean that exec is no longer good.”

Cohen has defenders, too. Heidi Norris, who worked at Navan between 2017 and 2020, said she saw in Cohen a savvy, straightforward leader. “If you had a problem, you could address him and he’d be very fair,” she said.

Others at the company are leaning into the reputation they say separates it from other startups. “In the San Francisco Bay Area, I think a lot of companies are perhaps sugarcoating too much—and are afraid or don’t want to be as blunt and as direct [as Cohen],” said Thomas Tuscherer, Navan’s chief financial and people officer, in an interview.

Navan spokesperson Kelly Soderlund added: “The Navan team takes immense pride in the exceptional company culture that we have fostered. Founded upon a bedrock of candor and transparency, at Navan hard work is rewarded, and personal and professional growth is continuously encouraged.”

Over the past 18 months, five of Navan’s top 10 executives have left the company. Soderlund said the company had also expanded its executive team.

Some of the rapid turnover across the organization appears to be by design. “One of the steps of the hiring process is to let go very quickly,” Twig said on a recent podcast. “If you don’t do it quick enough, you are being disrespectful to the person, to the company, their peers and lastly to yourself.”

But customers have started to grumble about the many executive departures, said Rose of Travel Tech Consulting.

“When you bring in all these people and there’s a churn, it does create a concern about: What is the endgame? Is it to do the IPO and make a lot of money? Sell it to AmEx?” he said. “What is the endgame?”