So you’ve got an incredible, game-changing idea for a travel startup and now you’re trying to figure out how to fund the business.
If you’re an avid reader of Tnooz, TechCrunch, Mashable, and the other media sites that showcase technology startups, you’re probably thinking that your ticket to gold is an investment from a movie star, big name venture capitalist, or well connected angel investor.
The reality, however, is that you’ll probably be bootstrapping your travel startup.
If you believe the hype, you may be living under the false assumption that in order to be successful you have to take on multiple rounds of funding.
Over the last 14 years, I’ve bootstrapped three different technology businesses, all of them with varying levels of success.
My most recent business, Rezgo, is now six years old, has been by far my most successful and, I’m proud to say, built without taking any outside investment.
Here are just some of the things I have learned over the years that may help you bootstrap your travel technology business.
1. Build something that people actually need or want
The road to success is littered with the carcases of startups who built cool but totally irrelevant applications.
If you want to avoid being one of those desiccated corpses, do yourself a favour and do some product and market research. If you rely on third party research, take the time to read the full report in detail, instead of just quoting the highlights.
If you BS your way through the research, you’re only hurting yourself because you’ll be basing your entire business on false assumptions.
When we first developed Rezgo, we based the original system on the needs of an actual customer, a business that, as we soon discovered, had similar needs to many other businesses in the sector.
But in addition to this, we did a lot of market research to determine the size and composition of the market. It was a lot of work, but it meant we were building a system that was based on facts rather than anecdotal information.
We worked closely with that first customer to help build the Alpha. Once we launched in beta we went out to many of our early customers and worked with them to refine the system.
The result is a system that had immediate utility and, therefore, customer value.
2. Do what you have to do... in order to pay the bills
We developed Rezgo over a two-year period before we launched the system officially. It took a year to develop the beta and then we ran the beta for a full year before we started asking customers to pay.
That seems like a long time and a huge expense, but we did that by doing application development work for other travel-related customers.
We dedicated a portion of our time and resources to internal development (ie. Rezgo) and managed it just like any other client project, except that the client was, in this case, ourselves.
Although it took longer to develop the system, it taught us to focus the time we did have on the most important features and to build the system right from the start.
It also gave us a longer window to collect usage patterns and booking data.
3. Failing Often and Failing Fast is great (when it’s other people’s money)
Trust me, when it’s your money on the table, the idea of failing is not an option.
That’s not to say that you won’t make mistakes, but it also means that instead of quickly building out some wonderful idea that you really didn’t research well, failing at it, and then pivoting, you’ll probably be spending most of your time optimizing and tweaking your product.
We discovered during the beta period that it was going to be double the work to support both tours & activities and accommodations in the same system.
We looked at the competitive landscape and decided that tours and activities, as a sector, was the way to go. We also changed other aspects of the model over the years but the core business has remained the same with no pivots.
That’s not to say we haven’t been tempted to dabble in other forms of bookings like general scheduling for spas or doctors appointments, or cabin rentals, or even launching a B2C tour and activity marketplace, but the bottom line is that we’ve learned that to be successful at something, you have to be focused and specialize at it.
It’s important to know what you’re good at.
4. A billion dollar business, really?
Seriously, is your idea really going to be worth a billion dollars? Remember that Kayak was sold for $1.8 billion but it took nine years and a proven, profitable track record before it was bought by Priceline.
Not every business is destined to be worth a billion dollars and that’s okay, there are a lot of travel businesses out there that are not worth a billion dollars and are still very successful and quite profitable.
So go ahead and dream about a billion dollars but when you wake up, focus on attaining goals that are realistically achievable for your business.
5. Reinvest in your business
As you start to make money with your business, you might be tempted to take money out. Don’t do it. That profit can go back into the business to help the business grow and develop.
When you start you may find that budget for certain items is trim, as your revenues increase, increase your budgets for key areas like marketing and development.
When we first launched Rezgo we put every dollar we made back into the business so that we could continue to spend time developing the system without worrying about running out of cash.
6. Be customer value driven
There is a common myth among startups that if you drive a ton of traffic to your system or site, you’ll get customers. The reason why it’s a myth is because, in my experience anyway, it’s not true.
Increasing the traffic to your site might get you more eyeballs, but whether or not those eyeballs convert into a customer is dependent on whether or not those eyeballs are relevant.
It’s easy to spend a lot of money on marketing campaigns that don’t yield any results. The more you understand about why your customers use your system, the more you can increase the likelihood that future customers will use your system as well.
We learned very early on that certain types of marketing and sales techniques just didn’t work with tour and activity suppliers. As soon as we saw that a campaign wasn’t working we pulled it and moved on.
7. Measure everything
The last and one of the most important things I recommend doing is measuring everything. Data will be your guide when it comes to making good decisions that affect your business.
In the early days we had very little data in order to make decisions about what we should be focusing on next from a development standpoint.
It’s easy to make decisions based on who barks the loudest or what the latest trend is, but in reality, if you have good metrics in place that can provide accurate reporting, you will be able to back up your decisions with data.
The WAG (Wild Ass Guess) might work for some things, but when it comes to making critical business decisions, nothing beats cold hard impersonal data.
8. You're not alone
Whether you are part of a specific vertical such as tours & activities or work across verticals, it’s important for you to find out who the players are in your space and how best to find your place.
If you are looking to "disrupt" the space, then you may not make any friends in your space. At the same time, "disruption" usually equals "expensive" since you’ll be trying to take market share from existing players.
In either case, no one likes a smart ass. In my experience, although travel is one of the largest industries in world, it is also one of the smallest when it comes to community and relationships.
A lot of your success will be based on the relationships that you build with other travel companies.
Do your homework, get to know people, build good relationships, and be a respectful member of the community and you’ll give your startup a greater chance of being a success.
NB:Boot image via Shutterstock.