TLabs Showcase focus on startups featuring Oregon, US-based OptionIt.
Who and what are you (including personnel and backgrounds)?
OptionIt is a web-based service that uses patented technology and proprietary business processes to provide rights-holders with significant new revenue opportunities through the creation of a fundamentally new product, an option on goods and services (eg, sports tickets, plane tickets, consumer products, etc).
From a consumer perspective, OptionIt offers the ability to lock-in a price without the obligation to purchase. This provides unprecedented convenience and flexibility in making decisions today for something consumers may be unsure about committing to.
What financial support did you have to launch the business?
- Founded by two successful options traders from the Chicago Board of Trade, patent portfolio applied for in May 2000 and formally issued in December 2007
- Incorporated (Delaware) in 2008.
- Headquartered in Portland, OR.
- Officially launched on July 27, 2009 with a particular emphasis on sports & entertainment vertical.
- Sports partnerships include: Boston Celtics, Silicon Valley Sports & Entertainment (San Jose Sharks), Washington Capitals, Baltimore Ravens, University of Miami, US Soccer.
- Strategic alliance with Creative Artists Agency.
- Executive team in place, including Mark Mastalir, CEO, and Michael Proman, VP of marketing partnerships and development strategies, both of whom are experienced marketing executives.
- Board of advisors is comprised of executives across the sports & entertainment industry with a focus on the client, agency and “rights-holder” communities.
OptionIt is owned by private investors and management, which includes $2.5 million through an initial round of fundraising.
What problem are you trying to solve?
The travel industry is under constant pressure to increase revenue to offset rising operating costs in addition to competing within a crowded industry.
However, economic and competitive obstacles make it difficult to create incremental and ancillary revenue streams that do not foster an environment in which consumers feel they are been gouged for services that were once assumed to be included in the ticket price (eg, checked luggage, blankets, exit-row seating, etc).
An option acts as a genuine value-add to the consumer by way of providing convenience and flexibility while giving the rights-holder a dynamic marketing vehicle that creates a point of differentiation in a crowded industry (if offered on an exclusive basis).
Lastly, OptionIt creates consumer “stickiness” and loyalty for rights-holders, in which consumers will be more apt to “follow-through” with their option purchase given the initial, yet non-binding commitment they elected to make.
For consumers, OptionIt provides consumers a new alternative in the way they purchase.
By having the ability to secure access without the obligation to purchase (in some cases, before inventory is even available to be purchased), consumers are able to dictate what they want and when they want it, thus, providing an “on-demand” solution to consumption habits.
In addition to empowering and protecting consumers, OptionIt’s technology platform enables consumers the following services:
Guarantee that inventory will be available at a specific time and at a stated price—OptionIt permits consumers to lock in a low price, reserve an item and make a purchase at a later date
Change their minds about or defer the decision-making process—there is no obligation to purchase which helps eliminate buyer’s remorse and removes the pressure of having to buy so that "I don’t miss out on a particular price”.
Use a locked in price to comparison shop and negotiate—the consumer has locked in a below market price, and the pressure is then on an alternative seller to increase the discount; consumers can publicize their options and try to do better elsewhere, potentially soliciting bids from other merchants eager for their business
Early bird shop before the item exits in a material form (eg, tickets are printed, go on sale, etc.)
Shop now and come up with the money later—economic uncertainties abound regarding potential bonuses and future employment; thus, if consumers don’t have the money yet (or unsure if they will), they can still secure access at desirable prices without obligation
Describe the business, core products and services?
OptionIt currently hosts an options marketplace for sports and entertainment tickets via http://optionit.com. Through this proprietary platform, fans have the ability to Reserve Now & Decide Later on face-value tickets to high-profile events. OptionIt only sells options, as all ticket transactions are conducted in accordance with team/event relationships with their primary ticketing partners.
With respect to OptionIt’s entry into the travel and leisure vertical, we would see this working best as an exclusive, white-labeled application - not OptionIt branded - that is licensed directly to the rights-holder and hosted on their website.
This also ensures that it is fully complementary to existing rev-management models. Customers could also redeem miles in lieu of cash as well to hold reservations.
Who are your key customers and users at launch?
Travelers on select routes/destinations that are particularly conducive to leisure itineraries (e.g., Las Vegas, Orlando, Hawaii, etc).
Did you have customers validate your idea before investors?
OptionIt’s business model has been validated through its initial entry into the sports and entertainment vertical and has utilized 3rd party research to further evaluate opportunities in the travel and leisure space.
What is the business AND revenue model, strategy for profitability?
Providing consumers access-on-demand and access-without-obligation, the option purchase is complementary to existing revenue models but acts as an incremental purchase.
In other words, consumers pay an option premium above the published price for the right to purchase at that price at a later date.
This incremental revenue represents no hard costs to the rights-holder, as all the consumer has purchased is the intangible asset of convenience and flexibility.
As such, the option premium is pure profit for the right-holder and OptionIt, who receives a percentage of all option sales. Based on OptionIt’s platform, extended penetration into sports & entertainment, and exclusive licensing arrangements in the travel and leisure and consumer products verticals, respectively, profitability will be achieved in a relatively short period of time.
SWOT analysis - strengths, weaknesses, opportunities and threats?
Primary Threats & OptionIt’s Response Plan:
- Like any innovative technology platform, gaining acceptance across the rights-holder and travel and leisure communities will be a gradual process. In order to address these concerns and gain acceptance, OptionIt has developed a strategy that places a particular emphasis on solidifying initial partnerships with rights-holders that are on the forefront of innovation and adoption of new technology. This “pull strategy” will create interest among those who traditionally tend to be more conservative/risk-averse in embracing new trends.
- Management of OptionIt believes that OptionIt holds the necessary patent rights to conduct its business by virtue of its ownership of US Pat No. 7,313,539 entitled “Method and System for Reserving Future Purchases of Goods or Services,” and that certain competitors which may have offerings similar to those of OptionIt might face exposure for patent infringement of OptionIt’s patent rights.
- OptionIt’s focus remains on differentiating ourselves by way of delivering exceptional service to partners in the rights-holder community, and additional constituents across the industry. As we remain focused on this task, management believes that the competition will either need to seek a license of OptionIt’s patent or elect to refocus their respective business models outside the boundaries of our rights.
Current Economic Conditions:
- Turmoil in the global financial markets, a challenging job market, and other uncertainties has called into question people’s desires of making full upfront financial commitments to purchasing. At the same time, consumers understand that securing access at a date closer to the event or date of departure (when one has more financial certainty) can often be more expensive and risky, without certainty of actually being able to procure the ticket.
- Hence, OptionIt offers a compelling proposition for consumers to secure access—in most cases for a fraction of the face-value price—without making a full commitment. This model could be further adapted to the corporate travel community, and revolutionize the way in which corporations. OptionIt presents a creative and flexible solution that could enable companies (and their employees) to defer a decision about a trip until there is clarity on schedules, etc.
- Lastly, OptionIt offers a customized solution to help rights-holders remain economically-viable when demand is low. Practical applications such as “space-available upgrade options” would generate incremental revenue and enable consumers in less-desirable seats to automatically “upgrade” to a higher class of service should space be available. This model is already employed successfully in the airline industry, whereby customers are able to pay for an “upgrade” to “Economy Plus” when they purchase their ticket.
First Mover Advantage:
Who advised you your idea isn't going to be successful and why didn't you listen to them?
- Given OptionIt’s intellectual property, initial partners will have a competitive advantage in further differentiating themselves in a crowded market—generating countless opportunities from a marketing and PR perspective to reinforce the “exclusive” value that their brand has over competitors.
Options have been utilized in financial markets for over 40 years - providing traders added convenience and flexibility in times of volatility and uncertainty.
These themes are analogous to OptionIt’s business model and approach: everyone’s lives are imbedded with uncertainty and volatility, and because of these realities, consumers procrastinate and ultimately end up paying more (or greatly reduce their options).
OptionIt’s innovative solution is a true win-win for rights-holders and consumers.
What is your success metric 12 months from now?
- Extend business operations in sports & entertainment.
- Prove and license the model across key areas in the travel & leisure vertical (eg, airline, hotel, cruise, rental car, etc).
- Formulate initial-stage discussions with consumer products retailers (eg, Best Buy, Amazon, Wal-Mart, etc).
TLabs Showcase is part of the wider TLabs project from Tnooz.