The 10-year journey of one online travel startup
2011 — Birth
In April 2011, Stas and Alex who recently left McKinsey to start doing their own business met in Starlite diner on Mayakovskaya and decided to join forces.
On May 16 Alex registered the domain Travelata.ru
The name Travelata came up in Alex’s mind pretty fast. It has “Travel” in it and it sounded familiar to people who had never heard it before.
Alex was a bit concerned at first that the name resonated with La Traviata — the famous opera that translates as “the fallen woman” but Stas reassured that the vast majority of our target audience would not know that. He turned out right. ))
It was not easy to fundraise for the package tours idea. Most investors never traveled using packages themselves and made “a logical” assumption that “if I never used it — there is no market for it”. A few went a step further and asked us — what US-based business you are cloning. We were cloning a business model that is popular in Europe which turned out to be another hurdle on the way to fundraise since if you are going the cloning path — you’d better clone something really big and well known among investors.
November 2011 — we raised the first $20K of external funding from Bas Godska.
2012 — From “Groupon for package tours” to “Amazon for package tours”
Our first MVP was focused on pre-selected package deals. We realized very soon that this approach did not fly and we had to start developing the product from scratch but we ran out of cash to pay to programmers.
We were lucky though. We managed to launch our first White Label with Malina loyalty card that had over 1M subscribers at the time. That’s how we got our initial traction despite the shitty product.
Altair VC and MCI capital through their portfolio company Invia.cz invested $500K by the end of the year.
2013 — “Show us the hockey stick”
With $500K we revamped the product and the operating model from selected deals to aggregator by the beginning of 2013 and started pumping money into paid marketing.
We raised $3M from MCI.
After the summer season, our y-o-y growth was >10x.
The overall travel market was booming too.
The losses were staggering. From a bootstrapping startup, we switched to burning cash like crazy before actually finding a strong Product-Market-Fit.
Kids don’t try this at home. The landing can be painful. ))
2014 — “First 2 crises — from hyper-growth to sustainable growth”
Crazy growth attracts investors. By summer 2014 we raised $7M from MCI and EBRD and kept investing in marketing and expanding our call center to show another year of exponential growth.
But then, over the course of July-August more than 10 touroperators went bankrupt. People panicked and changed their vacation plans — the summer season was ruined.
We started rebuilding our sales and customer support processes. We shut down our call center in Moscow on Tverskaya st. (yeah, crazy, I know), let go 30 people in Moscow and moved all the sellers in Volgograd from an outsourced call center in-house to have better control and efficiency.
Then, came November when RUB depreciated 2 times and all international package sales dropped to zero for a couple of weeks.
We realized that the times of blitzscaling at any cost are over. Now, it’s time to invest in sustainable growth.
We launched our first MVP for the iOS mobile app shortly after.
2015 — “Crisis #3 and #4”
The overall package market fell 20% due to the Ruble weakening.
We invested heavily in building the SEO infrastructure for Russian destinations (with a focus on Sochi). Launched the Android mobile app after realizing that customers loved the iOS app even though it did not even have the book button.
Another market blow from external events — Egypt and Turkey shut down in November (70% of the GMV of the whole package tours market ).
We raised an internal convertible round of 3M USD in 2 tranches from existing shareholders to guarantee the Company survives.
Decided to go offline too — started opening the first franchising offices across Russia.
In December of 2015, Transaero goes bankrupt. 20% of all charter flights at the market were operated by this airline. The biggest touropertor Biblioglobus was close to going down after Transaero but it survived.
2016 — “From call center sales to fully online experience”
The demand shifted from Turkey and Egypt to Russia, Greece, Cyprus and Tunisia. Managed to grow 2x despite the closure of Turkey and Egypt.
Revamped our operating model again: from call center, heavy service switched to online sales model. We made a huge investment in direct integrations with tour-operators and price accuracy and availability. By 2019, 80% of sales were pure online — no human assistance before purchase.
Experiment with expanding to Kazakhstan with launching Travelata.kz — but shut down after 3 months to remain focused. Doubled down on investments into SEO structure — paid off big time down the road.
Experiment with “hotels only” offers from tour-operators — did not get enough traction. Shut down after a year.
Became a Skolkovo resident.
2017 — “Mini crisis #5 — all major tour-operators cut commissions by 30%”
Transformed marketing to operate under Contribution margin profitable at the level of each campaign paradigm. Took total focus on profitable growth despite the loss of 30% revenue. First-year when we showed profitability over the summer months.
Experiment with launching a separate discounter brand — Mnogo.travel (everything at 10% discount) — moderate success. Kept it but stopped investing in it. Steadily generates profits up to these days.
Terminated Malina travel White label that helped Travelata raise first investment. It was emotional. The end of an era.
Launched tour hunter and lowest price calendar.
Launched concierge service.
Built an efficient A/B testing machine.
Overall, significantly improved profitability.
2018 — “First profitable year”
Became profitable for the whole year for the first time.
Product innovation: Introduced advance payments, showing final prices on SERP that include all surcharges, VIP tour lottery and many more.
Launched White Label with Tinkoff-bank.
2019 — “Profitable growth and laying the foundation for the 10x growth in the next 5 years”
Switched to product teams from functional teams.
Invested in the growth of franchising network (from 29 to 100+) in order to boost brand awareness and trust.
Launched our own virtual tour-operator platform.
Finished the year with 7 bln RUB GMV, 600mln RUB revenue, and 70mln RUB of profit while kept growing 90% y-o-y.
2020 — “Crisis #6 — surviving COVID19”
By the end of January, we signed a term sheet for 6mln USD with two large PE funds and went into the DD process.
In March, we realized that this virus from China is going viral globally and Russia will not be excluded.
The deal with new funds fell apart.
We begin negotiation with our existing shareholders on emergency funding.
The world goes into lockdowns. Travel is forbidden.
In April our sales dropped from 1bln RUB to 0 RUB.
We are running out of cash and ask all employees via Zoom call to take a voluntary vacation in April. Almost all 300 employees agree. Thank you, my dear people. I love you.
We managed to repay the April salary by the end of 2020.
The internal round is successfully agreed on by May. We manage to keep 90% of the team.
We froze all new projects till the end of summer to focus all resources on
a) customer service to support refunds and rebookings for thousands of Travelata customers whose travel plans were disrupted by the lockdowns. I apologize to all our customers who might have had hard times getting the support they deserve because our contact center was overwhelmed.
b) extracting as much profit as possible from the summer sales that reopened in July. We are lucky Russia is #1 in travel recovery in the world. Domestic travel and travel to Turkey reopened by July. We manage to make nice profits in August and September.
We decided to revive our Virtual tour-operator project which was relaunched in December with a new partner — MyAgent.
2021 — “New beginnings and recovery”
By March we already grew +30% to March 2019 and made nice profits.
However, in April Turkey is closed again till further notice. It’s pretty funny that re-closing Turkey is not qualified as a Crisis anymore. Just another day in the office. ))
Egypt, Greece, Tunisia, and many more announced that they are ready to reopen to Russian tourists.
We expand the VTO product to international destinations as well.
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This is where my storytelling ends and the current leaders of Travelata will keep writing this story.