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In this episode Johannes Reck, co-founder and CEO of GetYourGuide will share his knowledge, so you can make better decisions. Share this video or embed it on your website, so more people learn to become a better entrepreneur.
Martin: Hi, today we are in the office of GetYourGuide in Berlin and next to me is sitting one of the founders, Johannes who are you and what do you do?
Johannes: Well my name is Johannes and I’m the co-founder and CEO of GetYourGuide.
Martin: What did you do before you started this company?
Johannes: I was actually a biochemistry student originally, so I worked in the lab. I worked on learning and memory with mice – this was Federal Institute of Technology in Zurich and after that I had a brief stint as a management consultant for the Boston Consulting Group, before I actually went off and co-founded GetYourGuide along with a couple of fellow students at the university in Switzerland.
Martin: Was this your first contact with entrepreneurship?
Johannes: Well get GetYourGuide was already a student project during the time when I went to university, so I would say stuff like the prequel to GetYourGuide which was a slightly different platform to where we are today, which was a student project for already, I think a year or two before we literally went into creating GetYourGuide as we know it today, was my first contact on entrepreneurship. But before that, I had none and I was also still you know what GetYourGuide and GetYourGuide journey started, I was 24 – 25 years old.
Martin: And did you start this student initiative or just did you just join?
Johannes: No, I started it.
Martin: Oh, cool. Okay, how would you describe to the people out there how your typical business day looks like and how it changed from maybe the beginning of the company?
Johannes: The very beginnings of the company you know were pretty simple, so we had a small room you know which pretty much looked like a garage. It wasn’t a garage, but it was more or less I would say the equivalent. At the University, there are no air conditioning and there was just one single window and we had a little server standing in the same room and everyone was doing everything, everyone was coding, everyone was you know was doing design and everyone was doing customers service, everyone was doing sales, so there was no real division of labour yet. I would say it is very basic and it was a great time, we basically studied throughout the day and then at night time came together in this small room and stuff like coded through and hacked our way to the first prototype and you know fast forward four years, it’s significantly changed I would say my days today are mostly dominated by running the executive team and the strategy for GetYourGuide.
Investor relations is a big piece of it, I have to keep our shareholders aligned and our vision aligned and then finally I would say a lot of my time goes into a HR and Recruiting, so I talk a lot to the employees and try to figure out you know how we can improve the management of the company and I’m also very much involved in getting new talent on board which is pivotal for a start up at our stage it is really the most important thing that you know we have high calibre and new recruits and that’s something that I’m really excited about and also very involved in.
Martin: Okay and let’s talk about the business model of GetYourGuide. What is the current business model of GetYourGuide?
Johannes: Well GetYourGuide maybe just to explain it, GetYourGuide started off when I described the student project and the prototype. GetYourGuide started off as a peer-to-peer marketplace, so students could log in and become professional tour guides on our platform and sell their services to other travellers or other students, you know a little bit like a CouchSurf and AirBnB if you want for students and for sight-seeing. And that never really worked out, so we very much tanked that idea and within one-and-a-half or two years you know we realized that you know that it wasn’t going anywhere and what we decided to do then, was to take a second stab at the market because what we saw was that a lot of local professional sight-seeing tour and activity companies that exist all over the world you know cannot really market themselves very well on the web and there’s not a portal where you can just log in and where you create your content and then get distribution in the travel world, that just didn’t exist. And the traditional value chain was extremely fragmented, where only a few lucky ones got a favoured and got distribution, particularly the big landmarks like Eiffel Tower or maybe the big Broadway Musical, those kind of like highlights.
But you know the market, as we looked into it you know, it turned out to be extremely distributed and that’s a very big long tail of local travel activity supplies and just to give you an example, a local Berlin Segway Tour Company or the food tour through Paris, I know the interesting movie tour in LA you know just to name a few and there’s many, many others. All that hadn’t been brought together and we thought, hey you know what, how about turn our original peer to peer model that wasn’t working around and what about we create something new which is more of a professional marketplace for travel activities where we have a real extra net for suppliers to login and mention their inventory and their pricing and your management. And on the other hand have customers you know that have the opportunity to book all these great services and their destination and how the business model then turned out and you know it’s very naturally in that whenever a customer came to our website and found this great content and wanted to make a reservation, we would get a commission fee off of every booking that was made. And later on we also discovered that within the travel industry, there was a high demand for these sort of products for this sort of content and what we then did was that wrote an API for our platform where you know travel industry, agents or intermediaries or publishers could take our content and market it through their website and again take a commission in between. We would host the entire transaction would also get a fee that we would split with the publisher.
So it’s very much a B to C or B to B to C model and where we always control the transaction and get a commission fee for every transaction that’s made, which is a great proposition because at the end of the day we are only billing our suppliers for bookings that actually happened we don’t book them for listing or things and we don’t book them – we don’t bill them for clicks.
Martin: Yeah like the performance marketing agency.
Johannes: Very traditional performance marketing, that’s the way how the travel industry as a broader industry also works. So and the hotel reservations base which has gotten extremely big over the past ten years on the web, it’s exactly the same model.
Johannes: For flight booking, it’s the same model.
Martin: When you started this kind of business or had this business idea, was this business idea related to the student initiative or was it just that you got some idea in the student initiative and then took it and founded your company?
Johannes: No, it was – it was a more traditional you know start-up in the sense that we had this idea and then we actually attended university classes in order to learn you know how you can found a company and the legal structure behind it and what the financial frameworks are and but we had this idea of digitizing exciting things to do and destinations and making them accessible on the web, that was the basic idea that we’ve been following for the past 6 years.
Martin: And what have been your major assumptions when you had to decide whether you would like to pursue this kind of idea and how did you test this assumptions?
Johannes: To be honest, looking back I think we didn’t have many assumptions and I think we didn’t have much of a clue, so I would say I’m a lucky guy who stumbled into something great, like most great companies by the way. But we – the only thing that, the only assumption that I think we made from the very beginning is that we thought that the market opportunity was very big and that you know that the turnover generated in travel activities worldwide and in each destination is very big and goes into the hundreds of millions and millions and that we validated through talking to local suppliers. But that’s about the only thing that we really validated I would say, we didn’t really look into much more than that.
Martin: Okay and what have been the major challenges for you for reaching your first million visitors per sample?
Johannes: It’s always hard to pinpoint you know the specific challenges but I think the key challenge that every entrepreneur goes through in the holidays is insufficient resources and a huge endeavour. I think that’s the key point you know, you only have so much time to get some traction and show that your model is working to a certain degree before you run out of funds, you can’t finance it yourself and the way how we dealt with that was, that in the beginning we just didn’t spend money and everything we did, we did ourselves. So we had a totally do-it-yourself mentality, where we were hosting our own servers and I’m writing all the code for the server hosting ourselves, we didn’t do anything externally with that.
Johannes: As I said we had a server in that little tiny room, you know we built the code ourselves, we didn’t had any employees, we weren’t paying ourselves any salary, as much as we needed to, you know get the daily soup and in a way we are extremely self sufficient, you know we were burning very, very little money. I mean, I think all the way through to the company turning over you know millions and millions of dollars already, we had burned through you know tiny amounts of funding, obviously as we then scaled, we put a lot of our funds to work but in the early days it was pretty self sufficient.
Martin: And did you bootstrap company or was this…and to which point?
Johannes: I was – it was semi bootstrapped, so we were lucky that we actually put the founders put in money themselves in the very beginning, which you know I guess I’ll call bootstrapping and we were living off of these funds.
Johannes: But additionally we got some money from a very early angel who had built Travel.ca which is Switzerland’s biggest travel agency.
Johannes: And from the local cantonal bank which is a historically interesting thing, but back in 2009 – 2010 when the company was founded, there was a lot of liquidity in the Swiss banking market.
Martin: A grant or a loan equity?
Johannes: No, it was actually equity investment.
Johannes: It’s a very, very bizarre, I mean today I think banks won’t do that anymore but back then it was the historic thing that they did it and you know we got lucky and got some investment, so but it was – the majority of the money came out of the founders pocket, so we were boot-strapping that way.
Martin: Okay, good. Let’s talk about the corporate strategy of GetYourGuide, what you think is the competitive advantage of your company over the competitors and how do you try to maintain it or grow this competitive advantage?
Johannes: I think competitive advantage for a marketplace model like ours is fairly easy, you have two pieces to the equation, one is demand and the other is supply and you build up the supply and then you build up the demand and then you match the two. And the more liquidity you get on each side, you know the more you drive your marketplace, the more valuable the asset becomes and I think everything that we’ve been focused around at the end of the day was to increase liquidity in our marketplace from the first day on and I think we’ve already come a very long way. You know a lot of the businesses on our marketplace today actually make their living off it.
Johannes: I think this will only go up. I think ultimately we will become more and more important as a revenue stream for other businesses on our platform and then we also will make the entire market bigger because a lot of people that previously weren’t even into sightseeing, or doing things when they were travelling, now find it very easy and accessible. They find that it’s a much better way to travel. I think we’ll make the market bigger and we will increase the liquidity of the existing monetary streams that now come increasingly through mobile and through the web and I think the more liquidity we can drive, the more competitive advantage we will have towards any competitor, because competitors always need to build up the same thing and marketplace are very difficult to replicate in a way that you have to get the supply and you have to become relevant to them. And I would say if you would found GetYourGuide again today or if I you know had the task to compete against our own company with that everything that I know and I would know that is very, very difficult because I would need to create the same dynamic…
Johannes: That this company already has which today would mean spending a lot of money on marketing, on supply and to ramp it up to the same degree is extremely difficult because there’s so many small pieces to it and ultimately you know I could name you from the marketing and the customers service and sales, etc. etc. like so many small competitive advantages but I think it all boils down to the concept of you know how big the liquidity is between the two pieces and you know you need all these small pieces to build it up.
Martin: Let’s talk a little about the market for travelling, how do you perceive the past development in terms of the market size, market growth, and profitability maybe in some specific segments and what would be your focus for the future?
Johannes: Well I think the travel market is a very interesting market, when we started it was actually already written off as more or less done online. Now we see a lot of investment coming back into the online travel market because there are a couple of fantastic outcomes for investors in the travel market in the past 3-4 years. Companies Kayak or Trivago from Germany.
I would say generally we’re still very early days, with the technology. The travelling market is ripe for disruption, to put it mildly, particularly in your traditional airline and also the hotel pieces, our market is a little bit of an ignored area and the sort of travel that has no technology and which is also great because it allows us a lot of room to build technology into that piece of the market.
I think generally the travel market is notorious for being a very, very, very big market. I think it’s next to probably health care, oil and gas and banking and finance are probably one of the top three for biggest markets in the world. It has on average very low margins and a lot of distribution in it and cross distribution. I think consolidation and that fragmented distribution market, through the distribution itself but also the technology that enables any sort of consolidation there, will happen over time and will be very interesting for investors and also new entrants.
Martin: How do you think in this kind of market set up that you described, how should oneself position in it to for example, I mean as you talk about the value chain you could position yourself may be in a slot where the margins are higher?
Johannes: That’s right, but it’s always, I mean you always have to think about you know margins versus volume. You know, flights in the travel market are notorious for low margins. I’ve seen a couple of fantastic businesses set up on flights for instance Sky Scanner out the UK, great business lives off of flights, Kayak in the US is also great business. On the flipside, you can go into niche markets. I would say more upscale travel market where margins are higher. It really always depends on the business model and how you can get this scale. I think at the end of the day and travel you know whatever you do, you have to have a very, very solid grasp of your unit economics and of how you scale a company, it’s very easy in travel to scale losses because the margins are lower.
Johannes: And the repeated behaviour of customers are more difficult because customers don’t repeat as often because they know you travel once a year or twice a year, so you have to have a very, very good sense of the unit economics and how you scale the company. I think that’s the key in travel.
Martin: So this would mean I would have to earn money on the first company on the first customer who comes and not building on the belief that a customer would come repeatedly?
Johannes: I think ultimately you have to get the customer to come repeatedly and that’s something that everyone works on but from my understanding and from what I’ve seen is that most or all successful travel companies makes money on the first transaction.
Martin: Okay, that’s it. As we from Entrepreneurs Insights, we try to help young entrepreneurs and give them some advice from more senior entrepreneurs, what would be your advice for bootstrapping in a very good and efficient way, because you have some experience in this?
Johannes: I think for bootstrapping, the most important thing about bootstrapping is, I think that you have a very clear objective where you want to go because a lot of entrepreneurs make the mistake that they bootstrap for too long and I always find that you have to know exactly what you want to do and then you have to go after it and you also have to be ready to pull the plug if you see that it isn’t working.
So I think creating clear objectives and outcomes is something that I find is very important and that isn’t done enough by people who do bootstrap. Particularly around her in Berlin, your standard of living is very cheap, you can bootstrap for years but I think that isn’t any productive.
I think bootstrapping should just be a way to get started into the company and get your initial proof and you should have very clear objectives around that.
I think another thing that I would say besides objectives is to that you know when you’re bootstrapping; you’re typically working with a few other people that believe in the project and the vision. I would think the right incentive structure for all these people that are on board, equity options and thinking that through as an entrepreneur, I think is very important. And also thinking about this already very long-term of how that’s going to turn on 4 to 8 years and how are decisions being made in my company and what’s the shareholders structure is, also new angels or VCs that are coming.
Think that’s another thing that I would really think about, there is a lot of literature about that on the web these days, not as much when I started but today there is a lot of literature on it and I think that’s something I would really pay very close attention to.
Martin: So thank you very much Johannes and maybe we can visit GetYourGuide next time.
Johannes: Absolutely, I would be delighted.