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There has been a spate of travel companies launching programs to help travel technology startups get a leg up. One of the messages they try to impart to entrepreneurs is the need to both act and learn from mistakes quickly.
“Launching too slowly has probably killed a hundred times more startups than launching too fast,” as was noted in 2006 by Paul Graham, the force behind YCombinator, the most famous of startup mentorship programs.
But the incubators and accelerators themselves need to learn from their own mistakes, too, and adjust course. Otherwise, they won’t be able to compete to get the most-likely-to-succeed entrepreneurs applying for their programs.
In 2014, there were three travel-specific incubators and accelerators globally. Since then, enough travel tech incubators and accelerators have opened that there is a lively competition among them to see whose model works best.
These programs — the pioneers and the newcomers — include Airbus’s BizLab, Amadeus Next, Booking.com’s Booster, Cockpit Innovation Hub, Founder’s Factory’s travel practice, JetBlue Technology Ventures, Flight Centre’s Little Argas, International Airlines Group’s Hangar 51, Lufthansa’s Innovation Hub, Marriott’s Test Bed, Plug n’ Play’s travel practice, SOSA (South of Salame) and InnoVel’s Travel Tech Innovation Zone, Travelport Labs, and Travel Startups Incubator.
It’s still early days, but the companies say they have already learned a few things.
Plug and Play
Amir Amidi, managing partner at the travel and hospitality center of innovation at Plug and Play Tech Center, says, “We started investing in travel in 2015, and we expected to find so many good companies every year. But what we’ve discovered is that the larger corporations have not been incentivized to work with newer players. They get away with not being innovative. So we’ve had to be much more patient about helping good startups gain traction.”
JetBlue Technology Ventures
This thought was echoed somewhat by Bonny Simi, head of JetBlue Technology Ventures:
“For us, the focused learning is that B2B (business to business), engineering-heavy startups have the greatest potential for us but we’ve also found that it’s harder for them to sell than B2C (business to consumer) companies. They typically haven’t hired their VP of sales yet or VP of marketing. The founders are better at building than at actually telling their story very well. In a B2B situation, that can be a problem.
“We have to do a better job of selling the startup internally and helping them through that because it delays the implementation to a major travel company’s enterprise mothership, if you will. We’re getting a lot better at that. But I didn’t realize how difficult it would be to be the translator.
“It’s frustrating if you invested an early startup and mentor them and get them right to that point where they’re ready to implement into systems and then you experience a collision with an IT department’s priorities.
“Imagine a startup that whose incremental contribution will be $2 million to revenue. Getting attention for that at a, say, $6 billion or larger company is hard, especially when it’s going to take a ton of IT effort. Once it’s in, the startup can do so much more. But getting in is a bigger challenge than we expected.
“And we haven’t been perfect at mastering that challenge yet. But we will be successful through actually deploying these startups. We have to.
“It’s great that we’re investing together but if I don’t get one of these startups deployed then other great startups are not going to want to come to me. Because what the startups want out of me is access to enterprise customers, something they’re too small to easily get on their own.”
Amadeus IT Group
Bart Bellers, senior advisor for corporate strategy for Amadeus IT Group, agrees, via email interview:
“In light of our “regional successes in Asia Pacific and North America, we are currently determining how to roll this learning into the planned expansion of a global program to serve the startup community. Since 2015 in Asia Pacific, we have worked with more than 30 startups. We want to do more worldwide.”
Travel Startups Incubator
The incubators and accelerators could do more to be truly globally representative some admit. Matt Zito, managing partner at Travel Startups Incubator, says:
“The travel industry from a global perspective is much bigger than we originally thought. Over half of the applications for funding we’ve received have been from outside North America and Europe. Asia Pacific, including India, is massive and still very under-exploited in terms of capital investment as an opportunity.”
Zito says there have been early patterns that have become clear. Even better than having more than one co-founder is having at least one founder with a solid technical background.
“Our best seed investments out of 19 to date have been with technical founders, that are working full time on their startup, not working part-time/consulting or working on a couple of businesses at the same time,” Zito says.
Zito has drawn some other lessons:
“B2B travel tech startups have been easier to gain traction as there is a limited marketing spend that needs to be made. Example: You don’t need to run Google AdWords if you have software that you are trying to get hotels to buy.”
“Test-and-learn,” applied to incubators
Bellers of Amadeus IT Group acknowledges more interaction between the startups and Amadeus itself needs to happen, for mutual benefit.
“An important thing that we learned with our startup initiatives is that to really help startups, you need to think like a startup and act like one,” he adds. “And when you do that, ‘working like a startup’ has the power to rejuvenate the internal culture of a large organization.”
Zito says incubators like his still have to do a better job of making their case to potential external investors who aren’t familiar with travel.
“Some investors still look down upon the travel industry because there is limited knowledge,” Zito says. “Many don’t understand how it works. For instance, some think that if you’re a travel company you’ll never be able to beat Expedia or Priceline — even if you’re building a B2B company and you’ll never most likely ever compete with the conglomerates.”
Amidi’s changed focus at Plug and Play is to look now for companies that are less disruptive and more incremental and with tangible, near-term revenue gains, because corporations, such as Daimler and Uber, are going to be open to those manageable projects.
An example of this kind of incremental approach might be seen in International Airlines Group’s Hangar 51, which graduated Vchain last year. IAG has subsequently invested in Vchain and plans to incorporate its services into its operations.
Vchain‘s technology helps with the processing of passengers. Around one out of every two passengers make mistakes when sharing their personal details with airlines before their flights. Vchain detects many of these mistakes in advance, sparing the airline from having to make manual corrections.
The tech is being expanded into a full commercial product for IAG.
The dozen or so incubators and accelerators that have popped up share one trait that Paul Graham identified in seed firms a decade ago. “The one defining quality seems to be that you work in their space…. They seem to vary a great deal in other respects.”
It’s still early days. Until one of these programs produces a clear success story will they have a compelling, objective sense of what really works.