Getting all your friends or family members on the same page about planning and paying for group travel has always been a hassle. But one company is trying to update the sector to suit the internet era.
This year Travefy, a start-up in Lincoln, Nebraska, has debuted tools that enable users to vote on trips, book hotels, and manage expenses.
Today the company announced that it has raised $320,000 in a round of seed financing. Its lead investors were equally Nebraska Angels (several prominent investors, in aggregate) and Columbia University's Lang Fund.
The round also included Nelnet, Company X, a subsidiary of Campus Evolution, and Nebraska Global.
Earlier this year (and separate from this round), Travefy received a $50,000 grant from the Nebraska Innovation Fund, as well as a $45,000 Angel investment from Linseed Capital. It also netted $21,500 in prize money from startup competitions.
Travefy, which has been operating in testing mode since the spring, requires no upfront fees to use its browser-based services. It earns revenue from three distinct sources – commissions from hotel bookings, fees for using its expense management tools, and charges to travel management providers who use its white-label tool.
Today Travefy releases a tool to track and settle group expenses, which was built with SlidePay, a platform that lets developers build functionality to accept mobile credit card payments with a card reader.
The company earns a fee for all expenses settled through it. The fee is charged to the person who is reimbursing friends and is for the convenience of settling up via credit card.
On the hotels side, Travefy earns a commission on all hotels booked through its OTA partners, Expedia Affiliate Network and HotelPlanner. (It has signed deals with 5 additional online travel agencies (OTAs).)
A B2B play, too
On the B2B side, Travefy earns a monthly license fee for a B2B white-label version. This fee will eventually be disaggregated into individual “pro” features that can be paid for and added onto an existing Travefy account (e.g., logo change, subdomain, etc.).
Last May Travefy went to the Home Based Travel Agent Forum, a gathering of 3,000 travel agents, to test the value proposition of its white-label B2B version for travel management providers.
It signed several contracts from interested parties, and it is working on meeting the deliverables. From that forum and other customer development, the founders say they learned the best ways to refine and iterate their B2B offering through “pro” features, to be released in the coming months.
In 2013 Travefy was been named one of the "15 most innovative products at DEMO Mobile" by Network World and won the top prize at the Columbia Engineering Venture Capital Competition and the Columbia Business School Weil Business Pitch Competition.
By the end of the year, the company plans to release an integrated metasearch option and a mobile companion tool.
Q&A with CEO David Chait:
Describe what your start-up does, what problem it solves (differently to what is already out there) and for whom?
Travefy solves the hassles of planning group travel. Travefy takes group trip planning off of disorganized email onto one simple platform.
Travefy is the most comprehensive group travel planner available and it allows users to invite friends to travel via social networks or email, collaborate on details through a private trip wall, discuss & book hotels from our integrated search engine, and manage & settle group expenses through our groundbreaking expense management platform.
Estimation of market size?
The travel market is HUGE with 1.6 billion per person leisure trips per year in the U.S.
Due to social invites Travefy has a natural viral factor. As such, we are initially targeting highly capturable segments on the consumer side, focusing on the Student Travel & Bachelor/ette Party markets. Based on data including 21.6 million post secondary students, 3.9 Gen-Y trips annually, 2.1 million weddings annually, and bachelor/ette party survey data, we estimate this target market to be 125.6 million per person trips per year.
On the B2B side we are focused on the 111 thousand travel management firms and vacation providers in the U.S. who seek new tools to help manage customer relationships and save time.
What is the strategy for raising awareness and getting customers/users?
As a part of our customer acquisition strategy we are focused on two key methods – influencers and advertising.
First, despite the general fragmentation of personal travel, we recognize that in many walks of travel planning there are key decision-makers that often initiate trips. This includes Fraternity & Sorority Social Chairs and Sport League among others. As such we are focused on direct marketing to these key decision makers. From these core users, the viral nature of our social invites will help us reach the larger market.
Second, we believe our strong value proposition can help us rise above advertising noise if highly targeted. As such, upon the release of our mobile application in October 2013, we will begin testing targeted Facebook advertisements.
How did your initial idea evolve?
In 2012, I was a business school student at Columbia University, and I had a grand vision of a group-travel planning product to assist the techno-savvy, globetrotting business-school students.
While I knew about the importance of having a "lean start-up mentality", it didn't hit me what "lean start-up mentality meant until I actually tried to build a product.
Originally, I imagined creating a multi-faceted tool that would allow for a flight and hotel booking engine to create a master itinerary, a car-sharing tool and a group expense-management platform.
Reality set in quickly, though, once he put together a team to build the product. It's instead released its feature one a time, starting with a group scheduling tool based on social voting of dates and locations. Although not monetized in any way, the team wanted to test that there really were coordination issues among groups.
Before each feature, the founders developed users stories based on feedback from customers, particularly ones at four US colleges: Rutgers, NYU, UNL, and Columbia. The theory was that if students would use this rough and one-dimensional product to solve their coordination needs we would have validated the need for coordination tools.
Travefy has evolved significantly since the idea was hatched in 2012. A big change for us was to move away from flights, which was essential to our original vision. Nonetheless, from customer discovery conversations we learned early on that groups tend to still think of flights individualistically (e.g., What’s my best deal?) whereas hotels are thought of purely from a group perspective.
The beauty of Travefy is that in addition to our wonderful integrated solution, we have several stand-alone products including a full hotel metasearch as well as a group expense management tool. If our original business fails (which we don’t anticipate), these products provide powerful pivots.
I was introduced to my co-founder Chris by a mutual friend, Wayne Ting, who was both a Columbia College classmate and McKinsey colleague of mine. Wayne grew up in Lincoln with Chris.
After coming up with the idea for Travefy, I was searching for the right technical partner who could not only execute my specs, but be a visionary who would be a true thought partner. From my time at the Small Business Administration working with emerging entrepreneurial hubs, I was excited by the prospect of looking beyond Silicon Valley or NYC.
That’s when I was introduced to Chris, who has become the best partner one could imagine.
A bit of background on Wayne, who was actually my thought partner when first designing Travefy. Wayne and I were both in business school at the same time at Harvard and Columbia respectively and constantly brainstormed ideas. In the end in 2012, Wayne was offered his dream job at the White House National Economic Council, which legally precluded him from working on any startup.
Where do you see yourselves in 3 years time?
In three years time I see Travefy doing to same thing we are today, which is identifying issues faced by groups and working through innovative solutions. Everything we have done to date has come from our commitment to listening to users and I suspect that over time our product offerings will continue to grow and will reflect the myriad of issues faced by groups.
What is wrong with the travel, tourism and hospitality industry that requires another startup to help it out?
We are at an exciting time in Travel Tech where the U.S. is truly a mature online travel market with 65% of all bookings made online. This means that the next wave of innovation for niche travel segments like group travel is at hand.
The current travel, tourism, and hospitality industry, like most industries, is made up of larger established companies who are naturally slower to pivot or innovate for new markets.
Having worked as consultant to Fortune 500 companies and with startups, this isn’t a critique of these companies, rather a prudent business practice in which they are better served working in partnership with nimble startups (like us) to test out new innovations.
Tnooz view:
Travefy is off to a good start when it comes to showing that you can get funding, customers, and awards without basing your travel start-up in a tech corridor like Silicon Valley.
But it enters a crowded space. Companies that offer overlapping services include TripOrama, Tripobox, Tripshare (see Tnooz profile), Flights with Friends, and Gatherball (see Tnooz profile), among others.
On the B2B side, there are Groupize (which is well funded and last week launched a hotel booking service) and -- potentially, though not currently -- HotelPlanner.
Yet Travefy may rise to the top. With the exception of TripORrama and HotelPlanner, all of these solutions are young with no clear market leader and true room to out-innovate.
Travefy will attempt to distinguish itself with the breadth of its offering, including a hotel booking suite integrated with an expense management tool that handles settlement.
It's good that Travefy has kept lean, with only two full-time employees, with CTO Chris Davis starting full-time in March 2013 and CEO Chait starting full time in June 2013 upon graduation from business school.
In its controlled beta since the spring, Travefy says it has about 2,000 active users. User acquisition will be a big issue, and following advice from Brian Balfour might help. (So might following tips on creating better product promotion videos.)
The release of its expense management tool this week represents Travefy's full product beta and its transition from a pure “build” mode to a marketing and customer acquisition mode. It'll be interesting to see if the inherently social nature of its group travel product carries over into word-of-mouth marketing. This is a worry point.
As noted, Travefy has received $436,500 in capital. That will allow it to bring on two more full-time employees: Matt Posvar (lead developer) and Scott Rutz (designer and marketing chief), who have been assisting Travefy intermittently until now.
As the company grows, ensuring steady communication between non-technical and technical team members will be important. So will learning how to handle meetings and other start-up admin.
Looking ahead, talent acquisition will be as important as user acquisition. We're reminded of what Paul English said about the most important advice he'd give young entrepreneurs: "No matter how hard you think you work at recruiting, work much harder." Finding the right employee, which is hard to do, can pay massive dividends.
NB:TLabs Showcase is part of the wider TLabs project from Tnooz.