In this newsletter, we’ll see how some VCs can distinguish between good and great founders; how desperation can lead to great new beginnings; how “better quality” revenue leads to higher valuations; how a single-digit growth startup grew 4.5x and became an IPO-ready unicorn by focusing on one lever; how a new technology could separate the SaaS also-rans from the SaaS new leaders.
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Hoteliers not digitalizing their business may find themselves left behind.
The latest Duetto Outlook & Trends 2023 Survey shows more hoteliers are investing in tech investment to drive revenue and team efficiencies. Of those surveyed, 82.3% were using a revenue management system (RMS). Of those not using an RMS, 71.4% planned to invest in revenue management technology in 2023.
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1. Unlikely beneficiaries of inflation
Online Travel Agencies such as Airbnb, Expedia, and Booking.com invest billions of dollars of their customers’ money for their own profit. Because of rising interest rates, returns on these investments are higher than ever. OTAs typically collect money from guests at the time of booking, park it in bank accounts, money-market funds and short-term bonds, and then pass it on to suppliers when the guest stay starts, which can be several months later. These investments didn’t offer much when short-term interest rates were near zero, but surging interest rates have brought in tens of millions of dollars in additional income for these firms. WSJ reports that as of Q3 2022, Booking.com, Airbnb and Expedia held, respectively, $2.3 billion, $4.8 billion and $7.5 billion in funds on behalf of customers. Read + WSJ (free link, bypasses paywall).
2. Great startups are an act of desperation
Elad Gil writes that most great startups result from an act of desperation (such as career, financial, and product/mission) by the founder. As the macro environment becomes more complicated, it will push great people to desperately accomplish great things again. Read +.
3. The difference between a good and great founder
Pear VC writes on what a “big enough market” for venture financing means quantitatively and qualitatively and how you can communicate that effectively to venture capitalists. They give an example of how one idea and market potential can be communicated by founders from three different angles, each with very different outcomes. Read + Pear VC.
4. Online Travel Q4 2022 revenue growth
Growth Q4 2022 vs Q4 2021: growth across the board, ranging from Expedia’s +15% to MakeMyTrip’s +48%
Growth Q4 2022 vs Q4 2019 (pre-pandemic): Only eDreams (-1%) and Expedia (-5%) had revenues in Q4 2022 below Q4 2019, with Airbnb surging with +75% growth.
5. Top 10 travel apps for select countries
Booking.com is the only app that ranks in the top 10 travel apps for all 6 of these countries. Airbnb (5 countries) and Hopper (4 countries) also show a strong global performance. More rankings.
6. Might airlines start to spin out their subscription businesses to better capture the upside value?
In software, recurring revenue trades at twice the multiple of perpetual license (source). A Credit Suisse analysis shows that equity markets are willing to pay more for airlines with lower volatility of revenue growth, i.e., more predictable revenue. That same analysis showed that subscription-based business models have dramatically outperformed the broader market. Airline retailing and the search for better quality and more predictable revenue are trends that have accelerated in recent years. Since airline revenue differs in quality and given that the market applies a higher multiple to predictable revenue and subscription-based businesses, I would not be surprised to see airlines with higher quality revenues start spinning out their recurring revenue business units to more effectively capture the upside value. We've seen how airlines like Volaris and Frontier or OTAs like eDreams are providing increased visibility and details about their subscription business results.
7. Reigniting user growth
By mid-2018, Duolingo’s daily active users (DAU) were growing at a single-digit rate year-over-year. Jorge Mazal, former CPO of Duolingo, explains in actionable detail how Duolingo grew DAU by 4.5x over the next four years for a mature product, driven by a small handful of product changes with an innovative growth model, thereby supercharging Duolingo toward its successful 2021 IPO. Learn about current user retention rate (CURR) and how it helped Duolingo reignite growth. Read +.
8. Travel is 80% anticipation
If you lack the discipline to go to the gym but love to travel, you may find inspiration in this video of a motivated traveler who prepares for his trip by running on the treadmill with luggage. I particularly liked how he gives it an added dose of realism when he checks his watch (12 seconds into it) as if he were about to miss his flight. Some people claim that anticipation is the happiest part of a travel journey. This person seems to share that school of thought.
9. One great tweet
10. Travel Impact Lab launches an accelerator program focused on sustainable travel
Travel Impact Lab will give each startup a €100,000 investment in the company in exchange for an 8% equity stake. Of this investment, half is immediately available to the team and the other half upon completion of the accelerator program. The cost to participate in the program is €30,000. Read +.
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As an app specialist, I am very surprised to see an analysis of Similarweb data which are not accurate regarding apps. SensorTower or Data.ai are the most app store analytics providers.