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Bone Yard for Travel Startups

My personal math has the Travel Startup success rate at lower than 1/2 of 1%.

I’m calculating over 1000 travel startups in the last decade with less than 50 ‘successful’ startups.

The rate for Big Time success is even lower maybe 1/10 of 1%

 

It may be too early to tell, but I essentially agree with this post on Pando Daily from a few months ago.  Travel was one of the early candidates for a market that could be disrupted by the creation of the Internet.  There are several very profitable companies that have fundamentally monopolized the space.  In the US Market, there is Expedia (created by Microsoft in partnership with GDS’s) 1996.
Orbitz.com (created by United Airlines, Delta Air Lines, Continental Airlines & Northwest Airlines in 1999).  Two of Orbitz’s founding creators no longer exist.   Travelocity.com  was created by Sabre (a GDS) which was wholly owned by American Airlines at the time.  Priceline.com was founded by Walker Digital (a very successful company with over $300M in revenues in 1998).  
So of the big 4 Online Travel Agencies in the US, none  represents what we typcially consider a startup, and 2 were actuall existing players in the market just shifting from offline to online.

If you look at the last decade, there a few very successful companies but very few that started in a dorm room.  Kayak was started by Paul English (an exec at Intuit) and Steve Hafner who was part of the original Orbitz team.  They started with a ton of funding and industry experience.

ITA Software was essentially a true startup.  It slogged along in the “Might Make it” status for 15 years before getting snatched up by Google.  Granted they had > $100M in revenues and > $200M in funding for many of their final years, but with a limited supplier chain and colossal failures in attempting to scale from Shopping Engine to PSS provider there was never going to be any future other than an acquisition for ITA.  Still an $800M acquisiton deal is clearly a SUCCESS.

 

Tripadvisor.com (11 years since founding) certainly meets the criteria.

As does Tripit.com which was acquried for $120M by Concur.

Farecompare has done very well (founded by Rick Seaney & Graeme Wallace from work they did at Hotels.com)

There’s also Farecast (founded by Oren Etzioni) purchased by Bing.

Flightcaster (Evan Konweiser, ex-kayak staff member) was purchased by NextJump.  I’m not sure NextJump is successful, but I guess I count this as a good exit.

Portland based Flightstats.com (a Datalex spin-out) seems to be doing quite well.

More recently there is Gogobot (too soon to tell whether it will last, but it has strong user growth)

And of course there is star-studded Hipmunk.com

 

Sidestep and Swoodo, both acquired by Kayak can probably also be considered true startups that succeeded by getting acquired. ($200M for Sidestep, unknown for Swoodo).  But now we’re venturing outside the US Market where there are a few other notables:

 Cheapflights.com (founded in 1996)

 Skyscanner (11 years in the making, started on the backs of 3 guys, 2 of whom kept their fulltime jobs for a while)

Danish born Momondo, (6 years old),

Maybe you can count Datalex (founded in 1985) but they don’t really fit the criteria of a start-up

There are many more notables like ClearTrip.com from India, but the point I’m trying to get it is this:

In just 2010-2011 Tnooz lists in excess of 300 startups in the travel space, only Gogobot and Hipmunk from that era are surviving at any significant level of success.

The era of the Travel startup may be over.  The cost of creating a startup in other areas is just too low, and trying to disrupt the travel space without serious connections and money is seeming less and less likely.  I’m not sure if developers will ever stop trying to tackle this space, but it’s certainly beginning to seem less and less likely that they will succeed.

Want to mention some other companies that you think qualify as ‘successful’ travel startups?  Send me a note or comment and I’ll update my post. 

 

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Startup Failure Analysis

I saw this on Mashable.com  but the original source was AllmandLaw.com 

I’m always astonished by the articles that discuss startup failures.  There are many definitions, but in the tech community.  If you’re not fully funded or have overwhelming user acquisition momentum within the 1st 12 months, you probably fall in the FAILED category.  This one doesn’t attempt to cover the whole 90% statistic, but looks at a few side by side cases.  Worth looking at.

 

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Quit while you are behind

This is in response to a recent post by OM Malik

http://om.co/2012/03/20/entrepreneur-lesson-1-from-mark-pincus-stay-with-it/

Basically it’s that Stick With It advice you hear so often.  I usually agree with most of his insights but this one just rubbed me the wrong way.

FACT => Most startups fail
CONJECTURE => Many go down in flames with debt, unpaid salaries, legal liabilities, broken promises, divorces, friendships ended etc

CONCLUSION => Most startups fail too late.


In my experience startup Entrepeneurs have by definition already got the stick with it gene. They wouldn’t be doing a startup of they didn’t. In fact I would say too many of them have a delusional sense that of they just keep trying to hang on, somehow it will all work out allright.

In fact the best piece of advice I can give is this: When you find yourself with a shovel, deep in a hole, STOP DIGGING.

Practically what this means is that it’s better to retreat when the writing is CLEARLY on the wall, regroup, maybe take a temp job, and come at it again a bit later when you’ve digested what went wrong how your luck worked against you.

So stick with it by all means, but don’t believe the fantasy that if you stick with something that isn’t working, all you need is persaverence.

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Suits Versus Nerds

I’ve been working for a while on trying to develop a toolbox for the Suits I meet to understand the Geeks I work with.  One of the most common process problems I’ve encountered in a mangement culture is a complete and total misunderstanding of how tech works, what motivates technical people, and the value that technical teams bring.  The reverese is also completely true.

Ask any developer what the non-technical people in their organization do, and usually you’ll get an answer like:  

“There are non-technical people here?”

“The have meetings?”

or “I have no frigging clue.”

I’m designing a series of surveys (non-scientific) to suss out the nature of the most common problems and possible solutions.  If you’re a Geek, a tech person, a designer (still on the technical side of Suits versus Nerds) please help me out and take the survey.

Nerds Click Here

If you’re ALL Business, please help by taking the Survey for Suits!

Suits Click Here

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Judge Not lest Ye Be Judged – Gigabit Google Challenge

UPDATE:  So the BIG news I had was about Gramercy Private Equity’s prize offer.  See below the fold for details.

Google is rolling out its experimental Gigabit Broadband Fiber  networks across the country in lab like experiments.  One of the early locations is Kansas City and Think Big Partners, a local Incubator that has sponsored a Business Plan competition worth $100,000K.  The Gigabit Challenge.

I’m honored to be a part of the judging panel with some very esteemed folks from  both local KC Enterprises like the Kauffman Foundation, and National players like Silicon Valley Bank.

Continue reading “Judge Not lest Ye Be Judged – Gigabit Google Challenge”

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childless white men at work – hipmunk.com

Every now and then I look at meaningless numbers posted from Alexa.com about Travel companies and user growth etc.

But I always love the descriptions provided:

 

http://www.alexa.com/siteinfo/hipmunk.com

 

Statistics Summary for hipmunk.com

Hipmunk.com has a three-month global Alexa traffic rank of 15,128, and approximately 62% of visits to this site consist of only one pageview (i.e., are bounces). Visitors to the site view an average of 1.2 unique pages per day. The site is relatively popular among users in the cities of San Francisco (where it is ranked #1,325) and Seattle-Tacoma (#3,117). Compared with internet averages, Hipmunk.com appeals more to Caucasians; its audience also tends to consist of childless, highly educated men earning over $60,000 who browse from work.

 

 

 


 

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Startup Bubble Peaking or Popping

With all the talk about the Startup Bubble, one thing that is commonly lost is that we are MEASURING the wrong thing.  If we’re talking about the Startup Financing bubble, then by all means, it’s likely to peak, or even pop, and soon, for sure.  But today’s startups don’t require the same amount of capital to get going that the 1st DotCom Bubble’s startups did.  It’s easy to bootstrap with low cost Cloud Computing, Software frameworks that let developers get apps or sites up & running in 1-3 months, and a new clean startup philosophy to focuses on Customer Development and Iterating (pivots) over large scale tech investment.  These days, you never hear the phrase “If you build it they will come”.

This graph is from WallStreet Journal post in 2010 this time last year.  Of course it can’t/couldn’t continue.  I’ve read at least 10 posts in the last 2 weeks about the investment market peaking for Startups, and at a minimum that the Valuations are beginning to stablize or even decrease.

Now I’m glossing over an important point: which is

Nevertheless, the global economic slowdown, which already has begun according to America’s recession arbiters, will hurt sales at companies both large and small.

There is a lot to be said for this theory, but when you’re labor costs are 1 developer, 1 business development/sales guy, and 1 designer (most of whom are under 25 and don’t have families) then it doesn’t take a large amount of Revenue to keep the growth going strong.

It’s true folks, there is less money being sloshed around today than there was a year ago, and that’s going to have an impact on your next Round.  Blogger’s typical end this kind of post with “Better go get that money now!”

I’m with Fred Wilson.  Pay less attention to the money issues, and go build your damn product.

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Google Flight Search User Review

Caveats
Travel Data
As Co-Founder and former CTO/Designer of Everbread and it’s Haystack Flight Shopping Engine, I’m midly qualified to speak and pontificate about Air Travel Technology.  There is a lot more that I don’t than I do, but I guess I know enough to understand some things.
Usability
On Usability, UI, UX and other forms of the Field’s name, I’m a novice. I know what I like, and I can observer what tends to work well and intuitively, but I’m no Jason Putorti
Travel Business
Anything I have to say on this topic is extremely likely to be wrong, incorrect, fallacious, idiotic, and misguided. But I won’t let that stop me.

Still. I wanted to take a crack at a couple of topics in this post which is a reaction to Google’s New Flight Search Tool, released Tuesday.

TravelData

The first ingredient in producing scheduled flights with a ticketable fare is pure computational magic. I’m not giving away any secrets in this section. Most of what I can say is well known at least “inside” the Travel Tech sector.  ITA’s primary Data Service product QPX is built in LISP and is pretty fast at computing the set of possible fares that can apply to the possible flight itineraries, and then validating the complex dynamic rule set needed to allow a fare to be shopped.  (No point in showing a fare that can’t be ticketed now is there??)  

For those of you who aren’t familiar with just how difficult this is to do, correctly, and completely, here’s the simple version , there’s a slideshow produced by Carl de Marcken from ITA Software that is often referred to.  I’ve added a second source in case it ever gets pulled from the ITA site.

Anyway, the 2nd Ingredient needed to Display Ticketable Flights with Fares is Seat Availability Data.  QPX is completely depenednt upon ITA’s DACS system which requires Airlines to participate in a sensitive data sharing relationship with ITA.  Only a few of the world’s airlines do and most of these are US Domestic and are sharing data only for US Domestic Routes (Continental is one of ITA’s Chief partners in this area).

As a result, currently QPX is reputed to work more perfectly with US Domestic Itineraries, and certainly given ITA’s customer Base, it will have an up-to-date fresh Cache which is US Domestic Flight Centric.

The 3rd Ingredient in this Data Shuffle is The Results Cache. It’s the industry’s dirtiest little secret. All of the GDS’s use a results cache to manage load.  Why shouldn’t they?  If You just asked for Fares from LAX-BER 10 seconds ago, the likelihood that the answer has changed in those 10 seconds, is very very low.  Unfortunately most of the Fare Shopping systems have much higher loads than they are designed for, and also most queries produce little actionable revenue (A lot more people Shop for Fares than actually book them) so there is a lot of weird black magic in deciding whether to compute an answer or serve and old answer.  As for speed, this is where cache’s excel better than pure computation and this is what you’re seeing on the Google Flight Search system.  It may be a Cache this is being constantly refreshed (if someone is seeing data change on the results page after the Query has been completed, please point it out, that would indicate that the page is getting relatively fresh updates from the Cache).

Baking a Cake There are a lot more factors that I’m not prepared to babble on about, but private fares, and point-of-sale issues will also have an impact on the quality of the fares being shown, most of which is driven by the seat availability cache. There are many ways to bake a cake and different spices you can add to make it tastier. However, most people are happy with good cake, it doesn’t have to be heavenly to eat it.  After all, it’s still cake!  That’s my way of saying that it’s certainly not obvious that Google’s Flight Search product will produce cheaper or more convenient fares/flights than Travelocity, Orbitz, Expedia, or Kayak for that matter who are using a mix of Data providers, not just ITA.  Furthermore, the system is not going to perform at it’s best for international and non-US Domestic flights until ITA addresses that in it’s core product offering (QPX).  

Still, for a first effort, it’s an amazing solution (it really is FAST) that produces a wide range of results and will likely satisfy the airfare shopping needs of a majority of customers who may not going to shop beyond the search and click. (More on this later)