Travel Tech Essentialist #78: Network
A telephone — without a connection at the other end of the line — is not even a toy or a scientific instrument. It is one of the most useless things in the world. Its value depends on the connection with the other telephone— and increases with the number of connections. — American Telephone and Telegraph Company annual report, 1908
Network effects are the #1 way to create defensibility in the digital world. Companies with the strongest types of network effects built into their core business model tend to win, and win big. — James Currier, NFX Partner, 2021
This newsletter is sponsored by
Following its initial $25 million Series A funding round completed in October 2021, Selfbook, a booking platform helping hotels modernize their transaction capabilities, raised a $15 million Series A extension in Q1 of 2022. This most recent funding round brings the hospitality disruptor to a $300 million valuation in its first year of business. Discover more about how Selfbook is revolutionizing the direct hotel booking process here.
Would you want to sponsor Travel Tech Essentialist? More information here.
1. The state of venture funding
Redpoint Ventures published an interesting deck on the state of venture funding as public and private markets recalibrate.
2. Travel retailers must understand the messiness of human decision making
Ogilvy’s Vice Chairman Rory Sutherland addresses the relationship between tech and psychology in the travel industry. Travel companies must understand how human psychology and emotion play a pivotal role in customer behavior rather than trying to measure everything rationally. “Travel is a business of engineers desperately trying to pretend they are not in the entertainment industry. Airlines are a mixture of hardcore logistics combined with the fact that you are dealing with a bunch of completely irrational customers.” Read +.
3. Y Combinator travel startups
According to Marc Andreessen, General Partner of Andreessen Horowitz, “Y Combinator is the best program for creating top-end entrepreneurs that has ever existed.” Of the 414 startups that went through the YC Winter 2022 Batch, 10% had more than $50k of monthly revenue entering the program. These are the 3 travel companies that were part of the latest batch:
Pursuit (Ohio, USA). Marketplace for urban professionals to find lodging and guided outdoor experiences in amazing natural locations.
VacationHomeRents (Seattle, USA). Kayak.com for vacation rentals. Helps users explore and compare vacation rental options across many platforms.
Shuttle Central (Cancun, Mexico). API for travel companies to sell ground transportation.
4. OTA customer acquisition ratios
Back in early 2020, Peter Kern (the then new Expedia CEO) said the COVID crisis presented an opportunity to reduce their reliance on Google and performance marketing in general. The intention was to use customer data to rein in spending, optimize customer acquisition costs and focus more on customer retention. Other OTAs expressed similar intentions. Comparing the ratio of marketing costs to revenues in Q4 2021 and Q4 2019 gives us a glimpse of whether things are changing on that front. Airbnb had the greatest reduction in marketing/revenues, going from 39% in Q4 2019 to 23% in Q4 2021. eDreams, on the other hand, saw a strong increase from 62% to 83%. (Note: eDreams does not disclose its marketing costs, so I have used “variable costs” data instead, of which marketing is the largest component).
5. The power of network effects
NFX is a pre-seed & seed stage venture firm with a unique focus in network effects. In 2018 they released a study that showed that network effects are responsible for 70% of the value created by tech companies since 1994. It turns out that having a network effect is the single most predictable attribute of the highest value technology companies — other than perhaps “having a great CEO.” And yet surprisingly, only 20% of startups have network effects in them. Worth revisiting the different types of network effects and some of the conclusions of this study given that there are few areas of expertise that are more valuable and impactful for founders. Read +.
6. Simple math to set up a sales team
This post by David Sacks (known as one of the best startup product strategists and operators of the last 20 years) provides simple rules that you can use to structure quotas, compensation, and territories for a new sales team.
7. Startup graveyard
Back in 2016, there was a much publicized study that revealed that “in the 45 days prior to booking a trip, Americans made 140 visits to travel sites, British travelers made 121 visits and Canadians made 161 visits”. This study and the perceived pain point may have sparked many travel planning startups, most of which have not survived. And not only startups. It turns out that the answer to the question raised in the tweet below (from 2016) is “no”. Google Trips was discontinued in 2019. To be continued.
Google @GoogleIntroducing Trips — a new app that’s like a personalized tour guide in your pocket. https://t.co/zPvlFAMfRa https://t.co/gXGemgVRsF
8. Business travel is up
Corporate travel transactions are up significantly over the past nine weeks, with small and medium-size companies driving the acceleration. This WSJ article highlights that the increase is driven by a variety of factors: workers are returning to offices, restrictions are dropping around the world, and clients who once avoided in-person meetings are once again comfortable with it.
Icelandic airline software vendor Dohop announced an undisclosed growth equity round from Scottish Equity Partners to accelerate growth and develop its virtual interlining offering that allows airlines to sell complex itineraries without the need for codesharing or traditional interline agreements.
10. M&A and other
Bookaway Group acquired Plataforma 10, a leading ground transportation technology company from Argentina which partners with more than 400 bus companies in Latin America to retail their tickets through multiple channels, including its own website, via travel agencies as well as more than 2,000 local shops and kiosks across the country. Bookaway has raised $46 million in two funding rounds since 2020 to create a global ground transportation. Read +.
Travelzoo announced the creation of a metaverse division. Travelzoo Meta will launch in April as a paid subscription-based service that provides members with exclusive access to Metaverse travel experiences. Read +.
Travel Tech Essentialist job board
There are currently 89 exciting jobs posted in the Travel Essentialist job board. This job board can be a great resource whether you’re hiring or looking to be hired. Here are just a few of the amazing jobs seen on the board:
Wheel The World: CTO (Santiago, Chile)
Airbnb: Experience Designer (Los Angeles, San Francisco)
Expedia: Principal Product Manager (London)
TripActions: Growth Marketing Analyst (Remote)
Browse more open roles (or add your own open roles) at Travel Tech Essentialist Job Board
You can now read Travel Tech Essentialist in the new Substack app for iPhone.
With the app, you’ll have a dedicated Inbox for my Substack and any others you subscribe to. New posts will never get lost in your email filters, or stuck in spam. Longer posts will never cut-off by your email app. Comments and rich media will all work seamlessly. Overall, it’s a big upgrade to the reading experience.
The Substack app is currently available for iOS. If you don’t have an Apple device, you can join the Android waitlist here.
If you're getting value from the newsletter, you can help a whole lot by forwarding it to an entrepreneur, investor, or corporate innovator :-)
If this newsletter was forwarded to you, click the button below and subscribe to Travel Tech Essentialist for free.
Take care and see you soon,