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What is innovation in travel, where do you find it, and how can would-be entrepreneurs avoid wasting years of their lives?

These are some of the themes that three venture capitalists, namely John Balen, general partner of Canaan Partners (OneFineStay);
Joel Cutler, managing director of General Catalyst Partners (ITA Software, Kayak and Airbnb), and Brad Gerstner, founder and CEO of Altimeter Capital (Duetto Research, Kayak, Hupspot) took up during an Investors Insights session at the PhoCusWright conference in Los Angeles yesterday.

Cutler argued that to succeed in a way that pleases venture capital investors a startup has to be an original like an Airbnb or Uber, and can’t be satisfied describing itself as the Airbnb or Uber of this or that segment.

Gerstner and Balen disagreed.

Gerstner countered that there were short-term rentals of apartments on Craigslist before the launch of Airbnb and that “everyone stands on the shoulders of somebody else.”

Balen said Airbnb has done a “wonderful job” and that OneFineStay has “played the market out a little differently,” offering peer-to-peer home rentals that are more upscale than Airbnb’s.

There is plenty of room for innovation in travel in areas such as customer relationship management because there is still so much friction in trip-planning, Balen said.

Gerstner offered that a successful travel startup doesn’t always have to make its impact felt in an entirely new arena, arguing that 95% of the enterprise value created by public and private travel companies over the last 15 years has been hotel-related. There is much opportunity for startups in the “software stack” that sits alongside the hotel industry, he said.

Gerstner, though, said he’s tired of seeing so many “incredibly smart” entrepreneurs wasting so much time trying to build trip-planning startups, an arena that has seen hundreds of failed startups. He stated that he’d rather see companies working closer to the transaction where people are booking hotels.

All agreed that venture capitalists often overlook eventual winners. They have “missed incredible companies,” Balen said, citing PeopleSoft as an example, more than a decade ago.

Gerstner said entrepreneurs need to be extremely passionate about their startups and should ask themselves whether the tremendous sacrifices they would need to make for a successful outcome would indeed be worth all the pain.

Is the prize at the end worth the investment of time and energy? Gerstner asked. “This is hand to hand combat.”

“In the unlikely chance that I win is the time investment worth the prize? Gerstner asked.

Openlist was a “horrible venture capital bet,” Gerstner said, but was his most lucrative as an entrepreneur.

Attracting venture capital shouldn’t be the end-all and be-all, Gerstner said, stating that building a great small- to medium-size company can be a “noble calling.”

Photo Credit: Uber seems to be making a lot of the right moves. Uber