There’s no doubting that the world of business is changing. The traditional model of large international corporations functioning in a singular, closed-door fashion is fast disappearing, with companies now open to collaboration or outsourcing. While previously big corporates, protected by expensive barriers of entry, were responsible for all “business problems” in-house, technology has now made it possible for many of these issues to be outsourced.
Enter the entrepreneur. The last few years have seen an unprecedented rise in the number of startups globally, not least in Asia where there are over 47,000 startup companies listed on angel.co. Many of these startups are capitalizing on the fact that big businesses need them and are working to tackle these business problems outside the company’s domain. And what’s in it for the startup? Well, depending on the level of success, they may find themselves targets for acquisition by the very companies they work for. While this might mean that becoming a unicorn IPO is less likely, startups do have the chance of securing a trade sale exit at lower, but still enticing, multiples.
However, despite these attractive opportunities, many startups, particularly in their early days, fall into the trap of trying to create a company with mass appeal. The next Airbnb, Line or Grab perhaps. Such companies have wide appeal and their brilliant simplicity is attractive to budding entrepreneurs who dream of similar success. However, these ‘unicorn’ triumphs are rare (hence the name), and entrepreneurs would be wise to consider an alternative route on their quest for startup success.
While it is true that many B2C startups bring great ideas, technology, and solutions to the travel industry, for many it can be very difficult to get off the ground, particularly for first-time entrepreneurs. From the get-go, B2C startups must be alert to many things, including having a strong marketing strategy in place that stands up against the big names already dominating the B2C travel industry. You have to compete for a potential travelers’ attention against the massive marketing budgets, years of brand exposure and known services of the likes of TripAdvisor, MakeMyTrip, Expedia or Ctrip, amongst others. Most well established travel brands have a solid funnel of customers and it’s hard to take those customers (and their loyalty) away.
The reality is that many B2C startups we see aren’t favorable to investors, many of whom prefer to fund B2B businesses in a bid to establish more stable earnings. It may sound glamorous to launch a B2C startup, but according to CB insights, in 2016 there were only 25 unicorn “births” globally, 68% less than in 2015.
Starting a B2B company, on the other hand, can come with many advantages. For one, there are now lower barriers of entry to working with large corporations. Technology has opened up and barriers have come down, enabling businesses to look outside their own walls to external partners, in this case startups, who can help take on certain responsibilities.
For large travel companies (including Amadeus), there’s always a long list of problems or challenges, of varying levels of priorities, which we’d love to focus on. However, more often than not, there isn’t the time or resources to do it all. Most companies have limited capacity to implement every change and advancement that they want to. While at any one time they may be focused on the top 20, 50 or 100 problems, there are always projects that get pushed down the to-do list. It’s those non-urgent tasks – the 21st, 51st or even 101st business problems that could be the real sweet spot for a startup. This is a great advantage for entrepreneurs. Rather than the stress of worrying about sales figures (which should generally be consistent) or spending time marketing to attract new customers, the startup can instead focus on serving that one customer with that one product.
Take a hotel, for example. Maybe they want to cut their laundry bill or determine how rooms can be cleaned in a more efficient way to offer early check-ins, accommodate late check-outs, offer an awesome guest experience and drive loyalty. It could even be how to improve internal efficiencies or manage their supply chain better. If a startup can offer a solution to these types of problems, they become a valuable match for corporations and far more likely to succeed.
As the number of startups has risen, accelerator programs have also multiplied throughout the region, leading to an understanding that innovation is best achieved through partnership with experts. Not an accelerator or an incubator, Amadeus Next (part of Amadeus) is a community, nimble and flexible, just like a startup itself, which leverages the technology and expertise of our experts to provide support to travel technology startups in Asia Pacific. We currently work with more than 30 startups, and surprisingly over 70% of these companies have some form of B2B (business-to-business) component, and almost 55% are purely B2B.
So the next time I see a budding Asian startup trying to make it in travel, this would be my advice; don’t get fixated on becoming an industry disruptor on the scale of AirBnB, instead explore how your technology can provide a B2B solution that a company really needs. While it may not be their current priority, or one which their R&D team is focusing on, by helping to solve that problem, you could make a huge difference to a company’s business, and hopefully the chance of success for your startup.
Originally published on the Amadeus corporate blog.