Dan Pierson was always the confidant that friends came to for frequent flyer mileage advice.
From ordering $50,000 in gold coins in the United States mint to flying back and forth seven straight days from Boston to San Francisco, Pierson would go to great lengths to earn loyalty points.
“I was really obsessed with that whole universe,” says Pierson.
With his background working for travel technology companies such as Airbnb and Lyft, Pierson believed that there had to be a way to monetize his knowledge of obtaining loyalty points.
In early 2016, Pierson launched SlingShot, a startup aimed at simplifying frequent flyer travel.
“We were trying to build technology around frequent flyer points and bring some clarity to that very opaque and obfuscated system of hotel points, airline miles and credit card points,” he says.
Pierson quickly learned that without the cooperation or support of hotels, airlines, banks or credit card companies, developing a loyalty startup would be challenging.
What was SlingShot?
SlingShot calculated dozens of data points for a user - including credit score, where they lived, frequent flyer balances, travel goals and spending patterns - to find the best financial products to fit their needs and develop a customizable plan to help them get the most out of travel points.
When a user signed up for a credit card, SlingShot would earn revenue. The compensation varied per credit card, but it was usually a few hundred bucks per signup.
Although there was some technology behind this credit card recommendation engine, it was still a manual-based process.
Pierson was able to raise a minimal amount of funds from friends and family for his bootstrapping startup.
He worked full time on SlingShot; there was also a co-founder and other employees who worked part time.
Throughout 2016, SlingShot received some positive press coverage and started to generate more revenue each month.
What went wrong?
To grow, the company needed to scale the ad spend and improve the sales funnel.
“It turns out it's actually extremely difficult to get enough people through the funnel when you don't have many visitors coming to your site organically through social media or SEO,” says Pierson.
The online travel loyalty space is overshadowed by numerous competing websites - including several well-known personal finance blogs - which dominate the search engines and have large social media audiences.
We started with perhaps grander ambitions and somewhat of a naive approach to it - thinking that we'd be able to work directly with those companies.
New websites such as SlingShot are dependent on paid advertising, which can be expensive.
SlingShot followed an affiliate business model. Pierson says this is very challenging because “it’s basically just a black box where were had no insight into which customers were converting.”
“The way that those affiliates work, you need hundreds - if not thousands - of successful applications per month to get to deal directly with the companies, and it turns out it is very hard to get somebody to sign up for credit cards,” says Pierson.
For SlingShot to survive, it needed to secure several direct deals with hotels, airlines and banks - the gatekeepers of travel points.
But Pierson says that “these companies are typically uninterested in working to help the customers better understand these very convoluted systems.
“We started with perhaps grander ambitions and somewhat of a naive approach to it - thinking that we'd be able to work directly with those companies,” he says. “We were never going to get there with any of the airlines, any of the hotels, any of the banks or credit card companies.
Pierson adds: “It's not in their favor to make these systems less opaque. I think really in all honesty, a lot of these business models depend on keeping the systems opaque.”
Around mid-2017, Pierson reached the tough decision to close SlingShot.
“Seeing the hill we were going to have to climb, we objectively looked at this and realized that it isn't really going anywhere."
The travel loyalty space
Launching a travel startup in the loyalty space can be grueling – especially if it involves airlines.
Of the 11 air or airport loyalty startups identified in Phocuswright’s State of Travel Startups database, five of them unsuccessfully closed.
Michael Coletta, manager of research and innovation for Phocuswright, says that these startups “have a long road because it can be a slow and difficult process to work with airlines.”
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“So much air data is locked behind closed doors, especially loyalty data,” he says. “Many startups simply run out of runway while trying to build their solution and gain traction with clients and customers.”
Pierson, who says that two of his friends have launched new loyalty startups, offers a warning to entrepreneurs who want to enter this space.
“You run into so much complexity and learn how really hard it is to get people to sign up for credit cards,” he says. “That seems like an easy thing to do, but in reality, it's an extremely hard thing to do.”
A few months after the demise of SlingShot, Pierson launched a new travel startup: Bolt.
Aimed at the growing group travel sector, Bolt is building a community of like-minded travelers who pool their money together in order to unlock unique experiences.
Members are vetted through Bolt’s discovery process, pay a $300 one-time fee and interact with each other through video chats before each trip.
Pierson has grown Bolt’s revenue and says that the startup is sustainable even without funding.
Compared to the loyalty space, the group travel sector allows Pierson to focus more on innovation and growth.
“One nice thing is that we're not dependent on other organizations to run our company,” says Pierson. “I don't need data from some airline or from some hotel while I build the product. I can do that all on my own.”
Looking back at his days with SlingShot, Pierson says he put too much attention on getting press and trying to raise money.
Now, he’s focused on building products that people want and achieving profitability.
“I think the biggest difference is just knowing the right things to focus on,” says Pierson. “You need to focus on the fundamentals.”