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Freebird, a business-to-business startup whose predictive technology enables agents to sell smarter flight insurance and rebooking services, was namechecked by Skift last month twice in our lists of 17 travel startups to watch in 2017 and the 11 most interesting corporate travel startups.
This week the Boston-based company says it has received $5 million in fresh funding in an “inside round” by its previous investors. The investment round was co-led by General Catalyst, the venture firm that was early to spot meteoric companies such as Airbnb, Kayak, and ITA Software, and Accomplice, whose investments have included eDreams, KDS, and Secret Escapes.
The equity investment brings the startup’s total funding to $8.5 million.
Freebird helps the typical corporate traveler whose flight has been canceled to more quickly and cheaply rebook on another one.
The startup says it has signed up eight travel management companies (TMCs) as clients for its service. Altour, Options Travel, Safe Harbors Business Travel, Short’s Travel Management, Travel and Transport, and Upside Travel join Casto Travel and Flight Centre Travel Group (USA) as Freebird resellers. This group manages more than $6 billion in travel spend a year for clients.
Why is General Catalyst fond of Freebird? Managing Director Joel Cutler says:
“On an early-stage deal, it’s quality of founders that’s critical. This is really early-stage. It’s the quality of the two of them, Ethan and Sam, that made this. Ethan is a business model kind of guy and Sam is a total data wonk with a machine learning expertise.”
“So there’s a balance of engineering and business smarts they fit together. It was clear they weren’t going to compete on personality, and they have an instinct for explaining the business to customers in a clear way.”
To keep costs low, Freebird leverages math to assess the risk of a disruption and to price the risk accordingly.
The risk model helps the company understand the likelihood that a specific flight may be disrupted and, once a flight is disrupted, the cost to buy a last-minute, one-way ticket to replace it. The company ingests data from flight alerts, pricing, availability, and other disparate metrics to make its predictions.
The company then looks at a year’s worth of historical data for a corporate client of a travel management company to create a risk profile for those travelers and to assign a particular risk level for covering those travelers over their expected volume of travel — a bit like creating an insurance policy.
Freebird’s business takes on real balance sheet risk. Some readers may ask, “What is the risk model for the risk model?” In other words, if an unpronounceable Icelandic volcano erupts and closes airspace for a few days, would that event clip Freebird’s wings?
Ethan Bernstein, Freebird co-founder and chief executive, says it has factored that type of risk into its product and its pricing.
But sometimes models fail, and people make decisions like, say, not adequately funding political campaigns in states such as Michigan and Wisconsin because, say, their models say it’s not necessary. How can Freebird be so confident?
Ethan says that he and co-founder Sam Zimmerman are aware of the challenge. “In addition to what we’ve observed in the past, we have to check for “black swan” risks for unusual weather, sharp changes in oil prices, etc. But given that, so far, we’re not perfect, but in aggregate we will be able to predict the vast majority of things. The fresh investment will enable us to navigate anything that may come along as well.”
For a relatively small fee, the traveler gets rebooked on an alternate flight. Freebird integrates directly with the GDS, which allows it to go-live with TMC partners in less than a month with no development work required, the company says.
As of today, the primary way TMCs connect with Freebird requires no development work on the agency’s part. It is currently integrated with Sabre’s global distribution system and it has plans to integrate with other systems. Anytime an agent books a flight for a traveler within Sabre’s desktop platform, Freebird will monitor the flight without the agent or employer needing to act.
Freebird says it will be hiring aggressively to be able to handle the new work from TMCs and to make sure TMCs’s corporate clients adopt their product.
A skeptic may wonder, if such a tiny startup has been able to build a sophisticated model, why couldn’t large travel companies like airlines, TMCs, or global distribution systems duplicate the product and scale it up faster?
Bernstein says the company an edge on three counts: First is that travel is very complicated and Freebird has created a tool that is simpler to use than what others would likely build. Second is that Freebird has hired Ph.D.’s with specialized knowledge that gives them a lead in tackling the hard risk modeling work “with a level of sophistication that’s required to scale.” Third is that Freebird is giving complete focus on this problem, whereas likely competitors would likely have divided attention.
The company believes it has achieved “product/market” fit and that the name of the game now is execution so that it will be able to scale.
Ellen Keszler, a Freebird investor and advisor, says, “It’s rare that a product is a win-win for everyone in the travel ecosystem… and Freebird seems to be one. There is no villain, other than the inefficiency of flight disruptions.”