TripIt’s Short Trip to a $120M Exit: A Travelogue from CEO Gregg Brockway
San Francisco-based TripIt has some very happy investors right now. As I wrote yesterday, Redmond, WA-based travel management software company Concur (NASDAQ: CNQR) has agreed to buy TripIt for $82 million in cash and stock plus up to $38 million in contingent payments between now and 2013; the startup had raised less than $13 million in venture cash.
Back in November, well before the acquisition news, I visited TripIt’s Mission District offices and had a long conversation with co-founder and CEO Gregg Brockway about how the company found its niche within the notoriously competitive—but potentially lucrative—travel business. Travel is actually the largest single commerce sector or “vertical” on the entire Internet, and Brockway has gotten pretty good at scouting out the opportunities within it: he founded the discount hotel and airfare site Hotwire in 1999 and sold it to InterActive Corp (IAC) four years later for $665 million in cash.
But like all entrepreneurs, Brockway and his TripIt co-founders Scott Hintz and Andy Denmark have had to adapt their initial business strategies to the realities of the market. Brockway told me the company originally thought that TripIt’s service, which gives travelers an easy way to create mobile-accessible master itineraries for each trip they take, would make money through lead generation—i.e., selling targeted ads to hotels or rental-car agencies in travelers’ destination cities. But then came the 2008 economic collapse, which forced the company to come up with what Brockway calls a “Plan B”: selling a premium, subscription-based service that, among other things, helps members take advantage of drops in airfares.
In the edited interview transcript below, Brockway tells the story of that pivot and of some of the other lessons the startup has learned on its four-year journey. He also speaks about the need for—and the barriers to—ongoing innovation in the travel industry.
Xconomy: What’s your elevator-pitch version of TripIt’s business?
Gregg Brockway: TripIt helps people organize and manage their travel information no matter where they book it. Few people book everything in one place—they book a hotel here, a hotel there, a rental car from Hertz.com, and a dinner reservation on OpenTable. It’s a very fragmented space. Bringing that all together in one place, we thought, would address a very real pain point for travelers, which is how do you keep track of it all. Most people still use the old manila travel folder, and we thought there was a better way. So at its core, TripIt is a travel organizer.
X: How does personal travel information get into TripIt—and what happens then?
GB: Most people get their information into TripIt simply by forwarding their purchase confirmation from United or JetBlue or wherever to us. You don’t have to manually enter information. But the real magic happens once you bind the information together, because then we can start to understand you and your trip and do things for you to make the travel experience easier, whether it’s adding maps or weather or directions from the airport to your hotel. Or maybe it’s automatically adding information to your calendar, or getting it onto your mobile phone so you always have access to the latest updated information, with flight delays and cancellations. Part of our premium service is that we monitor your flights for refunds. If airline prices drop below what you paid, we let you know. People are saving $100 on one out of every 10 flights. So there’s a value proposition there.
It comes back to taking all of the information we can glean about you and your travel and putting it to work in ways that make travel easier. The more you travel, the more you appreciate how these little things make a difference, like simply having your confirmation code when they can’t find your hotel room at check-in. A lot of people, in the old days, had personal assistants to do this work for them. In today’s economy, people are working more independently, and TripIt can act in many ways as a personal assistant to do all of this for you. It saves time and money and just makes the travel experience better.
X: How much does today’s TripIt resemble what you set out to build in 2006, and in what ways has your business model changed as we’ve gone through this economic upheaval?
GB: It’s more or less the same idea. There have been twists and turns along the way. The original idea was that there are lots of places for people to book travel, but really no place that helps you after you book. For most places that would just be a cost center, a customer-service expense, since after the customer has bought something there’s no way to make any additional money on them.
When we started off, we weren’t sure if this was going to be more of a business service or a leisure-travel service. It’s become very clear that it’s for business travelers. It should have been obvious in retrospect, but they’re 80 percent of our customers today. It wasn’t clear at the time, four years ago, how incredibly important mobile platforms and mobile apps were going to be for our success. The iPhone didn’t exist then—it was a watershed event for pretty much everybody. Also, when we started this, we had a lot of ideas around how we might make money, and we narrowed the focus to two or three. So our business model has evolved quite a bit.
X: How so?
GB: When we started TripIt, the business model was going to be, someone sends us an airline ticket, and we will try to pick the perfect hotel for that person. There was a lot of money in hotel lead generation, so we wanted it to be a lead-generation and advertising-driven business. And there is money there. But the scale you need to get to become profitable and was so large—and this was the end of 2008, when the world was falling apart—that we thought we’d better have a Plan B.
We figured out that if we could just get a couple percent of our users to pay us some money, we would have a profitable business and could survive whatever the economy was going to throw at us. So we pivoted the revenue model to launch a premium subscription service, which has been very successful, and today accounts for more of our revenue than advertising and lead generation. It was in large part driven out of necessity, which is always a great way to focus the mind.
X: What else have you learned along the way?
GB: We’ve discovered a lot of things. In focusing on solving problems for individual business people, we essentially stumbled on a really neat opportunity to solve problems for companies. So today, we have TripIt and TripIt Pro for individuals but we’re in the process of launching a service called TripIt for Business. The first couple pieces are live. It’s a really unique way to help businesses understand where their travelers are and what they’re spending. I’m guessing that two or three years out, the enterprise side of TripIt will be as big or bigger than the consumer-facing side. [Author’s reminder: this was all before the Concur acquisition.]
X: Backing up even more—can you talk about how you founded the business, and what the fundraising process was like for you?
GB: I’ve been doing travel-related projects for over 10 years. I was a co-founder of a discount travel site, Hotwire, that we started at the end of 1999. It was very successful and got acquired by an IAC company, Expedia, and it’s still doing great as one of the brands in the Expedia network. I stayed with Expedia for a few years after the acquisition ran another company they acquired in the luxury travel space. But I am a product person, and I like thinking about people and what they actually do on a daily basis and how technology can solve problems. [TripIt] all started as a casual conversation between two friends, myself and Scott Hintz, who was also an early person at Hotwire. We got excited about trying to solve some of the problems in travel, but neither one of us is an engineer; we came across our third co-founder, Andy Denmark, who is an incredibly bright engineer and helped us understand how to take this opportunity and turn it into a prototype.
Once we proved that you could actually extract meaning from e-mail and use it in an interesting way, we decided to make it a full-time thing. We self-funded for the first six or seven months, at which point we raised some money from a local early-stage venture firm, Tim O’Reilly’s AlphaTech. We have raised three rounds of funding now, not quite $13 million total.
The neat thing about our product is, people understand it. It’s never been a very hard sell, in terms of bringing people on board. It’s one of those things where they look at our product and say, ‘Wow, I can see myself using that.’
X: It seems like there was a big change in the travel industry back in the initial dot-com wave, when it became possible to book everything yourself online, but then that’s where it stopped—there wasn’t a lot of innovation, in terms of the actual mechanics of travel planning, after that. Today things are perhaps even more confusing than before.
GB: I totally agree. There was this initial wave of innovation, which was really empowering for people. They could do what previously they had to rely on a travel agent to do. But then the choices multiplied and became overwhelming. There is this interesting theory about the paradox of choice, which says a little choice is a good thing but too much actually makes people unhappy. We have gone through the happy phase and we’re on the back side of the curve, where there is too much information and too many places [to shop for travel deals] and none of them have the level of trust and competence you’d like, so nobody is happy about the state of online travel. There was an interesting article in USA Today just today about how people seem to be going back to travel agents, because they help simplify choices.
X: So is there still a place for travel agents?
GB: Travel agents excel when it’s a more complicated trip—not when you need to fly from San Francisco to Boston but when you’re planning a 10-day trip to Southeast Asia. They can add a lot of value and save you a ton of time and money. We are not trying to take the travel agent out of the equation—we are trying to help people keep track of all that information, and our hope is that whether you have a travel agent or not, the travel profile that you create with us will make your travel experience better.
If Hyatt or Hilton could know that you are a frequent-stay person, and that you like fruit instead of chocolates and king beds instead of doubles, that could all be in your profile, and rather than having to share that every time you interact with a supplier, they could simply tap into that profile. We think about our service as an open platform. We help travelers pull their information into one place, but we also make it very easy for third parties to access that data through our API [application programming interface]. The traveler controls the data—we are not sharing it without their permission. But there are over 700 companies and developers building services that interact with TripIt, and that’s a big part of what we think makes TripIt unique.
X: It’s interesting to hear you talk about an open platform, because travel is an area where it seems that there’s still a lot of competition over proprietary data. Just look at the way travel companies are lining up to oppose Google’s proposed acquisition of ITA, which aggregates airline fare data. It seems like you’ve found a way around all that, by getting consumers to share their travel data with you directly.
GB: That is the huge challenge—it’s an enormous industry that for a variety of historical reasons is structurally very fragmented. Everyone hoards their data. So figuring out how to pull that together on travelers’ behalf has been a challenge. But that’s why we got excited initially, when we realized that all the data travelers carry flows through their e-mail inbox at one point or another. So if we could figure out how to tap into that, we could eliminate the need to negotiate commercial deals with everyone who owns the data.
The value of bringing the data together was obvious to everyone. The question was how do you do that in startup time and get something up and running. To prime the pump, we focused on e-mail as a way of sharing data between services. Now we are building out more and more live connections with all sorts of different services.
But yeah, there’s ‘what can the technology do?’ and there’s ‘What makes business sense for an industry?’ and those two are often at odds. As you note, we’re seeing a really interesting example of that with the airlines having a big fight with the GDS’s [global distribution systems—i.e., computerized reservation systems] over who has the right to their data, and who has the right to price the data, and who gets to interface with the customer. That’s a whole other conversation, but ownership of data has the ability to dramatically reinvent or reshape industries.
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