Think about a tourism startup that more than two million travelers used its service since 2016, with a growth rate of over 10,000% in terms of the number of baskets in one year. Flightio is the story of friendship and three cofounders’ cooperation, whose initial experiences were not successful. However, in the end, it was those experiences and their friendship that led to a *200-billion Toman valuation, according to the cofounders.
Ali Kashfi, Ehsan Davoudi and Sasan Nayeb are Flightio’s cofounders. Ali and Ehsan are friends since elementary school. Sasan got in touch with Ali via Ehsan. However, the seeds of Flightio were planted in Ali’s failed attempts in two different businesses, once with Sasan in the tourism industry, and once with Ehsan in price comparison startup named Gheymat Yab. Such experiences can give a valuable vision to their readers.
In fact, Ali had worked in marketing and sales, Ehsan in programming and technical field and Sasan was the owner of Door Parvaz Tourism Agency. But it took years until finally these three friends’ life paths crossed and Flightio was born. The first part of this article discusses the valuable unsuccessful experiences which led to forming Flightio.
Ali Kashfi: From teaching language and computer to selling tar and scarves
Many of successful entrepreneurs have had a life full of ups and downs. Ali Kashfi, 34, is one of them. At the beginning of our talk, we asked him about the university he studied.
“I studied IT in Payam-e Noor. It was very tough because I got married when I was 18. Besides studying, I had to work to make a living and pay the rent,” he said. He comes from a middle-class family and his parents were teachers.
Ali talked about the tough times of the first 7-8 years after his marriage when he started teaching language and computer at institutions and Tehran Institute of Technology. In his free time, he used to work as a taxi driver to pay for his rent and meet the ends.
Stepping into the industry and producing vegetable oil
After a few years, he decided to change his field of work and started a career in vegetable oil production. He even started selling tar at some points. He was always enthusiastic about finishing a job he started and turning it into a big business. That is why he wasn’t afraid of trying new fields to find his own path of life.
Ali said he has also tried different selling channels like scarves. Jobs that might have not been his path at the time, but turned to experiences that helped him a lot in the sales and marketing and finding his own path.
Entering the Digital Field
Ali got interested in the digital world from his first encounters with the Internet and Facebook. He was eager to know how he could make money in the online world. His first experiences were in Envato market place and freelance web designing. But soon he found out that with Indian rivals, this is a tough field to work in.
A failed attempt in running an online platform for booking flights
In 2008, Ali started to work in an animation production company. But in 2009 at the age of 24, he decided to do his mandatory military service. In 2010, after finishing his military service, he rejoined the same company, but it was shutdown the same year. It was in 2011, when he and Sasan Nayeb, Flightio’s cofounder, decided to build a platform for selling foreign flight tickets. Sasan was already working in tourism, but the project failed due to the sanctions and lack of resources.
Entering the game industry and returning to flight booking platform
From 2012 to early 2014, Ali worked in the game industry, however, he didn’t achieve much in the field. Then, from 2014 to 2015, he joined Gheymat Yab, a project founded by his elementary school friend, Ehsan Davoudi, who had recently come back from abroad. Gheymat Yab was a price comparison platform. But this project was not a success either. It was exactly then, in 2015, when creating an online flight booking platform became a matter to discuss between him, Sasan Nayeb and Ehsan Davoudi.
Ali said his wife has been one of the main reasons for his success. Her patience, support and the fact that she believed in him helped him find his own path regardless of all the ebbs and flows. He thinks without his marriage, he might have not been where he is now.
Ehsan Davoudi: I fell in love with programming since the 9th grade
Ehsan, 34, got familiar with programming via one of his friends when he was in the 9th grade in 1997. Later he majored in telecommunication engineering from Islamic Azad University. By 2002, at the age of 19, when he was on the second year of college, he was so professional in programming that he started working for a credible software company. His perseverance made him a good option to be chosen as the supervisor of the informatics section of Iran’s Melli Bank brokerage.
3.5 days for work, 2.5 days for classes, 1 day for rest
Ehsan worked four years at the brokerage company. He used to work for 3.5 days a week during his college and attended his classes for 2.5 days, leaving him Fridays as the only day to rest. Ehsan had not spent his obligatory military service by then either.
Studying in London and working for a price comparison startup
A year after his college in 2007, he left Iran to study his masters in the computer at Greenwich London University. Upon graduation, Ehsan started to work at one of the price comparison startups in London for two years. It was there that he got to know startups and the concept of lean startup.
Returning to Iran and starting Gheymat-Yab, serving military service
Due to the mandatory military service and visa problems, Ehsan returned to the country in 2011. By the time, it was about ten years that Ehsan had worked in all IT fields. He decided to establish Gheymat Yab and to use his London experience in the price comparison startup. However, he had to spend his military service. So, Gheymat Yab was paused.
Founding a software company and reviving Gheymat Yab
After his military term in 2014, Ehsan did what he liked to do for a long time: He founded a software company. Besides, he worked on reviving Gheymat Yab. It was where Ali started to work with Ehsan in Gheymat Yab project by focusing on the product and marketing section. Ehsan realized that Ali’s expertise in other fields can compliment his work.
Sasan the third cofounder
Ehsan got to know Sasan via Ali. Sasan was born in 1987 and had been working in tourism since he was 15. Sasan had majored in tourism and established Door Parvaz Travel Agency in 2014. Ehsan made a website for Door Parvaz. Ehsan was going to revive Gheymat Yab by the revenue of the software company, but he couldn’t focus on either, so things didn’t work out. Gheymat Yab was closed in 2017.
The three cofounders joined together to tap the 10-to-12 thousand billion Toman foreign flight market
In 2015, Ali had a marketing company, Ehsan, a software company, and Sasan had Door Parvaz Travel Agency. This is when the idea of creating an online flight booking platform was raised again, but this time, it was about booking international flights. The international flight was a big market, nearly 10-to-12 thousand billion Toman that no one had seriously touched yet.
In February 2016, after purchasing and preparing Amadeus web service, a first in Iran, Flightio’s MVP was launched, a platform to get connected to the international flights’ sales system.
Flightio was established with only 20 million Toman seed money from the cofounders, but with years of human resources experience.
The MVP was prepared in five months with a capital of less than 20 million Toman. After launching the MVP launch and placing ads on Google Adwords, they started getting serious traction. The initial team of Flightio consisted of three cofounders, two programmers and three call-center staff.
10,000% growth rate in one year
The first version of Flightio was launched in June 2016, which is still the core of what its users access today. The first version worked so well that from June 2016 to the same period in the following year, the number of purchased baskets witnessed 10,000% growth rate.
“The main point in our success was the difference in backgrounds and the trust and friendship between us for starting a new business. We might have not achieved this success if we had ventured with people with the same background,” said Ehsan Davoudi.
But what is the foundation of Flightio? Why did it succeed?
Solving a problem and seizing an opportunity
As mentioned, foreign flights have a market of about 10 to 12 thousand billion Toman in Iran. In 2016, no startup was selling foreign flight tickets online. The closest businesses were agencies which were focused on the offline market but also had a website.
On the other hand, people had slowly started to trust in online shopping. There were even a few websites working on domestic charter flights. But, it could be foreseen that due to high prices, this market would rapidly move toward the online market.
At the time, people had to physically go to travel agencies, where there was no chance to see aggregated flight prices transparently; as no agency had access to all flights. Customers could not make sure that other agencies would offer the same price either.
As a first step, Flightio’s team started to negotiate with Amadeus representative to get its latest web service in Iran as it is one of the biggest Global Distribution Systems in the world. This web service, enabled Flightio to work as a real startup and serve its customers by connecting them to all foreign flights.
Besides, Flightio added domestic flights to its services to provide a full package service. To this aim, having access to all domestic flights, it had to get connected to 20 web services. They were all gradually added to Flightio.
In order to provide more services, Flightio got connected to three train services and launched its train ticket section. In the latest move, two web services for foreign hotel booking were added to Flightio in 2017 and 2018.
They have recently added a service for purchasing train tickets in Europe, China and Canada.
One of the main values Flightio created is removing the necessity of customers’ physical presence at agencies and encouraging them to shop online either for airplane tickets, train or for hotels. Moreover, customers are enabled to directly see and compare the prices offered by all providers which brings about transparency. By removing intermediaries, the bigger number of sales and smaller profit margin, prices become more competitive. In the end, customers access services with lower prices.
Unlike travel agencies which only work on specific days, Flightio’s users can access services at any given time. Services are provided 24/7. The user experience has improved a lot comparing to travel agencies. 24/7 support and attempts to provide better services to develop a network of loyal users are of the other values Flightio created. For example, refunding is almost instant -within a few hours-, while in the traditional method it might take days.
Flightio’s business model
The airline ticket sales’ business model in Iran is mostly commission-based. It means that airliners define the ticket price, the commission and the number of available tickets. But, these days, the markup model is common in the world. In this model, instead of getting the commission from the sale which is defined by the main provider, the provider defines a net price. Sellers access tickets with the net price and set their profit margin themselves.
This is a more practical method and makes the market more competitive. Because, if a salesperson keeps its benefit high, no one would buy from them. Also, the quality of services matters a lot in this model. The other point to consider is that unlike Iranian airliners, international airliners are in real competition with sales platforms which keep prices in a lower range.
How much is Flightio’s commission?
Following is Flightio’s commission fee for selling airline tickets, train tickets and hotel reservations:
- The average commission fee for selling domestic and international flights is 5%. To be more accurate, the commission fee for domestic flights ranges from 4% to 7% and for international flights from 2% to 9%.
- The revenue model for international hotel reservation is based on the commission that is set by Flightio. The average commission is around 10%. This number for domestic hotels is 5%.
- There is almost no competition for train tickets, as the price is set by the government-owned Raja Company. The point is that the commission for travel agencies is 5% while online platforms get only 1.8% commission of the sales. In fact, most of the train tickets are sold by Raja itself -about 50% to 60%- therefore, there is not much of competition in this market.
Flightio is planning to add domestic bus tickets and hotels to its services. For now, Flightio uses SnappTrip services for domestic hotels, and SnappTrip uses Flightio’s services for its flights.
A breakdown of Iran’s tourism market
Lack of accurate data about the size of the market is one of the problems in most industries in Iran. As one of the biggest players of the country’s airline ticket market, Flightio has estimated the size of Iran’s tourism market by studying airliners’ statistics and overviewing news and pressers. Following is their estimation:
- The market for international flight ticket sales is about 10 to 12 thousand billion Toman annually. Online sales make up 20% of this market. Flightio ranks the first in international flight sales.
- The annual domestic flight sales market is around 5 to 6 thousand billion Toman, 40% of which goes through the online market. Flightio has 10% of the online sales section.
- The market for the domestic train ticket sales is around 1,500 billion Toman per year. From 70% to 80% of it is done online.
- Bus ticket market is about 3,000 billion. Flightio has not entered this market yet.
- Domestic hotel annual market is about four to 5 thousand billion Toman. Flightio has not entered this market yet.
- Due to the scattered statistics, no accurate figure can be estimated for the international hotel reservations. However, considering the size of the domestic hotel market and the fact that the basket size of international hotels is larger, this market might be more than 1,000 billion Toman per year.
- Iran’s ecotourism market is as big as about 2,000 billion Toman. Flightio has not entered this market.
- Based on the international statistics of the World Travel & Tourism Council, the size of Iran’s tourism market is about 50 to 60 thousand billion Toman. It is estimated that this market will double by 2025.
Loyalty rate: 60%
Although customers are usually very sensitive about the price of buying flights and booking hotels, Flightio’s loyalty rate is 60%. One of the main reasons for such a high loyalty rate is the service quality. Prices can be reduced to some specific level, but from some point on, it is the quality of the service which determines loyalty.
Flightio’s marketing method
Like many other startups, Flightio also uses social networks, billboards, and CPC to reach out to its audience and do branding. But the main marketing channel this startup has been using is Google AdWords. Constant efforts in SEO is also another important aspect of Flightio’s marketing. About 60% of their marketing budget is allocated to Google AdWords expenses. Marketing is the biggest expenditure for this company.
One can list Flightio’s main strengths from the close relationship between the cofounders, and the agile team, to the all in one solution in the website and in the application, and to bootstrapping Flightio.
Flightio reached financial breakeven in the first phases. Then, it reached its growth phase and its expenses grew and provided by Door Parvaz Travel Agency. Flightio again reached the breakeven point in August 2018.
In fact, without Door Parvaz Agency, Flightio could not get sales permission, because, unlike other countries, Iran does not issue work permits for online tourism agencies.
Flightio’s achievements in its first three years:
- Flightio had reached financial breakeven in the first phases. By reaching to the growth phase and consequently growing its expenses, it again reached the breakeven in August 2018.
- Flightio is the biggest international flight ticket seller in Iran.
- Flightio has 10% of the domestic flight sales market.
- Flightio’s number of purchased baskets witnessed 10,000% growth rate from June 2016 to June 2017.
- More than two million people have used Flightio’s services.
- Today, 130 people work at Flightio, while in 2017 it had less than 10 staff.
Flightio is proceeding to gain 10% of the 20 thousand billion Toman market of domestic and international flights and train ticket market.
With the first round of the investment it needs, which is between 25 to 30 billion Toman, Flightio will respectively focus on the followings:
- Developing its product and services to include domestic hotel reservation and bus tickets
- Stepping in to attract international tourists to Iran
- Development in international markets.
*Since the value of the dollar is not stable in Iran, we have used Toman instead.
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