(I am writing this from a cottage in Quebec with 5% battery left, so no perfect formatting…)
FLIO is in process to be sold to SOS Travel SPA in Italy.
If you are a user of FLIO, this means that you get to continue to use the most used airport app in the world.
For me as founder, this is the first business in my career where I have lost money, as have our investors. As I spend most of my time these days mentoring startup founders and investing in early stage deep tech and AI startups, I would like to share a couple of learnings.
The opportunity. “The golden hour on the sixth continent”
This was an article in The Economist which prompted me to to move into the airport space. Passengers are confused and stressed at airport, at the same time, the “trinity” of airports, retailers and travel brands make a lot of money with them. And they are all very far from being digital. And the industry is huge, global and seems forever growing.The business logic was to build something that is useful enough for passengers to find mass adoption, then charge the industry for advertising on it.
Most of my VC friends passed on FLIO. The ones who I respect most now gave me one reason: A oligopoly in supply is not a good bases for a marketplace.
I was not held back. There are more than 300 commercially relevant airport in the world. So we got started at the very end of 2014.
Here is a rough chronology how we evolved FLIO:
Phase 1. 2015 FREE WIFI AT AIRPORTS
In its first incarnation in 2015 we built a hack to log people into the varying free wifi without having to fill the often stupid questions airports asked before they let you in. This worked often. But we could not get past the Boingo portals, which are most used in the US. Worse: whenever we successfully logged a user into the Wifi, passengers complained that the Wifi was slow and buggy. we could never fix poor airport Wifi, and they were very poor in 2014.
So while our customer acquisition was flying, we did not have a great product then. Many people are surprised when we tell them today that Flio is not about airports wifi anymore.
Phase 2. 2016-2017 FIND WHAT YOU WANT AND GET A DISCOUNT
In a pivot, we worked with some of the largest food & beverage companies to provide discounts, maps and directories. The logic was that very often you don’t find what you want, and both airports and retailers have no way to personalise and experience. We we were thrilled to have very positive feedback from some of the largest duty free retailers (did you know that the largest airport retailer has more than 40% market share globally?).
We had lots of discussions, and also sold some advertising campaigns to top brands. Yes, airports are the most expensive environment to advertise in, so why not extend this into our app.
There were several problems in this phase:
We were not that exciting for passengers (discounts?), and while we had a good liquidity in our market place in some pockets like the UK, we were far from having a global footprint.
While our cost to acquire customers was super low, they just did not stay. Our user numbers did not develop as fast as we need them to grow in order to justify continued interest from advertisers.
Most importantly, even though some of the very largest retailers scheduled meeting after meeting with us, it took us too long to realise: Retailers were not prepared to pay us any money. They did like to work with us to show to the airports how digital they were. But retailers did not need us in 2017. The way the industry works is: Retailers bid long term contracts with airports. Nearly all of the profits go to the airport, hence the profit margin of a well run airport is very high. The profit margin of even the best run retailers is extremely small. While we were always able to generate some extra margin, we did not move the needle for them.
If you are a founder of a startup depending on industry buy in, always ask yourself if they take a meeting to look good internally or if they genuinely need you.
Phase 3: 2018: The best flight tracker
In order to overcome FLIOs problem with not enough repeat users, we built a very very good flight tracker. You connect your calendar to FLIO and FLIO updates you on late departures, gate changes etc. We worked with generally available data sources, large airports and airlines directly, and were able to build a really good flight tracker which fixed the problem of repeat usage. That however pushed us away from our original USP.
Phase 4: 2019: Predicting what happens at the airport.
Based on my work as a mentor in the Creative Destruction Lab in Toronto, I finally had the realisation that we had to offer true innovation for passengers to be truly useful. To put it bluntly, we realised that the industry would never pay us and we had to make passengers love us.
We built two, I believe amazing products:
- FLOW measures how passengers progress through airports and predict security waiting times. This went live for Hamburg airport in June and can be scaled out to any airport.
- DEPART predicts when your flight will actually leave depending on when your plane comes in.
Both are super useful, and nobody else offers these tools to passengers. Also both were technically not possible even 12 months earlier as phone accuracy was not enough and the databases were not available to use for the second problem.
In Phase 4, this year, I was truly excited in the potential of FLIO again. We finally had discussions with VCs again despite being on the market for so long. We spoke to strategic investors which looked promising.
As you can guess by now, these four iterations meant that we lost too much time. We were never able to raise a lot of money for FLIO, our investor from Phase 2 lost patience with us through Phase 3 and had no interest in Phase 4.
In June, it became clear that we would not get fresh money quickly. We had taken too long and were stuck with a capable that did not look great for new money coming in.
So now, FLIO GmbH, the German subsidiary which actually runs operations, as well as the assets from FLIO Ltd, a UK company have been sold on to SOS Travel who already have a model to make consumers pay. The parent company, FLIO Ltd UK has been put into administration as the lead investor, who gave the latest investor as a loan, did elect not to convert this investment loan into equity.
Most staff of FLIO have long found other opportunities. If you read through the above you can guess that we’ve found and kept excellent tech guys who were able to excel at any new challenge once we finally gave them to them. As for the sales people: Anyone who has worked selling something successful that was always „too early“ must have been stellar. So I am hugely grateful too anyone who had devoted their energy to making airports less confusing and less stressful.
For me, this means finally freeing up valuable time and being able to focus on working with deep tech which does excite me massively. One of the startups I work with can help people get the best treatment for cancer. One can help aircraft engines save fuel. One will help monitor global methane emissions. Lots to do.
As a mentor to startups after 6 successful startups and now one partial failure, I am more sensitive to the following topics:
- If it is a marketplace: Make sure the key players need you.
- If all your VC friends say no. Could they have another reason than “not getting it”.?
- Is your investor flexible enough to go the next pivot?
- Convertible loans sound nice, but what happens if the next round doesn’t happen?
- Always decide who your customer is. And love them.
- Make sure your USP is crystal clear. A new USP sometimes justifies a new brand. It is hard to sell a „Swiss army knife“ for x.