How to build a travel industry giant in 3 years: 8 lessons from GetYourGuide
GetYourGuide recently signed for ‘the biggest Series A round in Europe’: a very sizable $ 14 million. In barely 3 years time, the online platform for booking guided tours became a bona fide travel industry giant, doing more than $ 10 million in revenue in 2012 and offering 18100 things to do at 1780 destinations worldwide. This week, it launched a French, Spanish and Italian site.
GetYourGuide followed a trajectory of pure growth, and it’s not letting up, says CEO Johannes Reck in an interview with Whiteboard. “We’re still in hypergrowth mode”.
The story starts in 2008, when five students from the Swiss Federal Institute of Technology in Zürich launched a peer-to-peer platform where students could sell guided tours around the city where they lived. Anyone could host an activity and other people could book these activities. In a word, they started Gidsy (or Viable). Only it was called GetYourGuide, and it didn’t work very well, says Johannes Reck, one of the founders.
“We had tremendous difficulty scaling it. The web was also a lot less open than it is today. It was 2008: the social networks like Facebook and Twitter weren’t as strong in Europe as they are now. We just couldn’t make it work.”
1. When the market gives you lemons, make lemonade
But GetYourGuide noticed another thing: a gigantic gap in the market of attractions, activities and sightseeing. “Professional vendors of activities were not very well equipped when it came to reservations – they didn’t have proper reservation systems, and they had no booking capabilities.”
“So what we did: we took our extranet – the peer-to-peer marketplace – and upgraded it to a fully fledged reservation system where these vendors could upload their content and manage everything: from availability to pricing. And next, we built a B2C platform on top of it. We released it in January 2010, and it took off very quickly.”
2. Don’t scale before you have a proof of concept
“Our entire first year we survived with a team of five on less than 200k. We ate ramen soup every day. We didn’t have much money for advertising, so we just rolled up our sleeves and started selling to these merchants. We did the sales, the business development, the engineering, everything. It was real bootstrapping, and it came very natural – you have to if you don’t have a big name or reputation. Also, I think it’s good to start out this way, because there’s still so much about the product to figure out. If you start to spend before you have a real proof of concept, it will kill you.”
3. Push the flywheel until it begins to turn by itself
The point that they wanted to reach early on was 30 bookings per day, says Reck. “To reach that point, we sold to a lot of small merchants, and really listened to them. We still have a close bond with them, we invite them to office parties. We knew that that relationship was crucial, so we invested a lot in it. There’s a theory that says if you reach a 1000 fans of the product – in our case: suppliers – then a viral loop kicks in. And that’s what happened actually. So what you need to do, is push that flywheel every day, until one day, it begins to turn by itself. It’s very hard work, but it was critical to our success.”
4. “Don’t dream about scale. Instead, draw a clear path to profitability”
All that first year of ramen soup, the founders of GetYourGuide had a simple target: to get to those thirty bookings per day. “As a founder, you should have a very clear feeling for the unit economics of your product and your margins. You should draw a clear path towards profitability, a path that is realistic and that you feel good about.”
“The myth in the startup world is all about scale. But I’m not a big beleiver in that. I believe in a real business: this is how we will make money. It’s no use dreaming about a big company: dream about reaching that first milestone. When we got to a point where we could all afford our ramen soup every day, we started thinking: okay, and what if we would like to go to a restaurant once in a while (laughs).”
5. Focus on the channels that drive conversion
Asked if there was a big breakthrough moment, Reck says no, there wasn’t. “An e-commerce platform is different from social or consumer applications. They seldom have a lot of virality, but you have to focus on the channels that drive conversions. We always focused on the conversion rate. So there wasn’t a single moment, but rather a lot of different instances, where we tweaked small things that made us better at converting users. Things like restructuring the product detail page, testing things, moving to agile development. So many things made a difference that it’s hard to point to just one.”
“What we did evolve to, was agile development, with very fast iterations. We’re now 80 people, but we try to have every team iterate fast and learn very fast.”
6. Learn people management and hire slow
Reck says that managing these 80 people is probably the biggest challenge of the company at this time. “It’s very difficult, especially because we have three offices – in Zürich, Berlin and Las Vegas, which adds to the complexity. So as a founder, you have to learn quite a bit about people management. But that’s also part of the fun, right? It’s part of the learning curve. And I personally think that startups make or break it with their team. So over time, we realised the importance of hiring only very good people, and executed against that. You have to build a great culture, with A players who really love their job.”
“And we keep looking for good team members. Recently, someone from Orbit joined our team. This calibre of people get trashed with job offers every day. Someone who’s a project manager at Google is tied up in very, very lucrative contracts. So you have to wait for the right moment to recruit. And take your time. I think every one of our top hires is the result of a relationship that we fostered for six months to two years. And it never started with the question: do you want to work here. Rather, it’s: do you have some input on this or that?”
The same goes for the board of directors. GetYourGuide managed to attract board members from big names in the industry like Booking.com and Kayak. “We have some of the best people in the industry. I think they are attracted to three things: the notion that the market for this is big and exciting. I mean: we could be the next billion dollar company. Second: we have a great team. That’s what people look at: does this team of management and c-level have a shot at this opportunity?”
7. Solving a chicken-and-egg problem is hard, but very, very good business
When asked whether he thinks GetYourGuide is in such great shape because it profited from a first mover advantage, Reck says not quite. “We were first in that market, which helped, but it’s not our main competitive edge. We have the advantage of a marketplace, and that’s even stronger. The difficulty of establishing a marketplace is that you need both supply and demand. If you have too much supply but no demand, people go elsewhere. And the other way around too.”
“But when you manage to grow a real marketplace, you have tremendous lockin. Because suppliers will choose the marketplace with the most customers, and customers will go to the place with the best prices and the most choice. Any competitor has to work against marketplace mechanics, and you can’t suddenly drum up a lot of demand. It’s very, very tough to compete. Take Ebay: I think they’ve done a shitty job lately, but no one can gain market share against them – because they own the marketplace.”
8. Don’t think of an exit
Looking at the board of GetYourGuide, you might get the impression that it’s already working towards an acquisition by a big player like Kayak, or Booking.com, or any other. But here’s some advice, says Reck: don’t think about that stuff. “Of course, you have to follow a strategy and investors will want a multiple at some point. But I focus on building a great company that scales, which in e-commerce means: build massive revenue.”
“You will find someone to acquire you or if you’re big enough, you can IPO. But building for an acquisition seems like a recipe for disaster to me. Because you’ll shape your company with that in mind, and you become dependent on a few players. I spend very little time thinking about who acquires us. Instead, I think about growing the top and bottom line.” It’s not the kind of growth that apps show, he says – we don’t necessarily grow in users much, but in revenues. “We still more than double revenue every year.” (**)
In 2012, GetYourGuide pulled in $ 10 million in revenue, he says. The $ 14 million Series A round will be used to “go aggressively to a number of markets and improve the product.” Meanwhile, he says: “We continue to feel the traction. I can’t tell you the number, but it’s still hypergrowth.”
*updated to correct a typo: an earlier version said GetYourGuide launched in ‘January 2012′ instead of 2010.
** updated for clarity: earlier version said ‘We’re beyond stuff like doubling revenues’
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