At just past the 11 minute mark Scoble asks, “Is it too early to pitch a company just for these wearable computers, Google’s Project Glass?”
Considering that the Glass product might now ship till 2014 Shawn Carolan responds, “Here’s what you don’t want to count on: is if the only place to make any money and build intellectual property is once the glasses start to ship. That’s a way’s off. However, you start to think there’s a lot of apps that very clearly can find some market in mobile and then the market will explode when you get to the glasses. You’ll be interacting with it 24/7 rather than when just open up your phone.”
Founded by Joss Mandryk and Becky Hayes, two expats living in Buenos Aires, this company is much more than the typical expat starts a walking tour business that you see everywhere. Foto Ruta is prepping to go international with franchises in New York and Santiago, Chile in the works. Plus, they planning an iPhone app.
The founders’ backgrounds are visible in the success of the company. Joss is a graphic designer and photographer, and Becky comes from a career as a Marketing and PR Director. That combination is evident in their extremely well design marketing materials:
To gain a better sense of what drives Foto Ruta, I talked with co-founder Becky Hayes.
What was the spark that gave you the incentive to start this specific company?
We’re both expats living in Buenos Aires and started off as tourists. We fell in love with Buenos Aires but found that tourists who were here for only a few days often missed out on what was great about the city. People who’d heard so much about the city, arrived, spent a few days visiting the main tourist sites and then went away bemused as to why Buenos Aires got such rave reviews from travellers. In other words, it’s a city that requires a bit of time to really appreciate.
We wanted to offer a way to show tourists the greatness of Buenos Aires, such as the crumbling architecture, secret restaurants, passage ways, street art, quirky street life. As photographers we are both aware of the way photography can be a great way of seeing a place and hunting out the unexpected. And so we came up with a concept that would fuse the two…tourism and photography!
Foto Ruta has a solid momentum going, which is hard to achieve in a young company. What was a challenge that you had to overcome to get the company on course?
I’d say as with most start-ups the biggest challenges were financial. We started Foto Ruta with a miniscule pot of money with the hope of growing organically, so we had to work really hard to prioritise expenditure. With our combination of skills we were able to launch the company without having to make huge investments in design/programming and marketing. Foto Ruta managed to get a momentum going fairly quickly towards the end of 2011, which was great but it meant that we grew quite quickly, and what we planned was originally going to be a part time set up, became a full time job (while we were both still having to juggle other full time jobs!). The balance between growing a new company and making it profitable whilst also earning a living is a tough one to manage.
You have a good mix of products that are well defined at varying price points. Do you have any suggestions for other entrepreneurs on creating a slate of products that offer value to different customer segments, AKA product market fit?
It’s definitely been a bit of a process of trial and error. We began with our lead product Foto Ruta Weekly, a clue based tour that explores a different neighborhood each week. It was this product that we felt had a real unique selling proposition. It was totally unique to us, and, as it’s a tour that supports large groups. We rely on volume, so we can offer it at a very low price. This means it appeals to every type of traveller, and we find due to its uniqueness, it appeals to pretty much every customer segment from budget traveller through to the top end of the market. We also find due to the low price and the explorative/fun nature of the events, it appeals to photographers and non-photographers alike.
As Foto Ruta Weekly began to grow we were getting to know our customers and their needs more and more, and realised there was genuine demand for longer, more intense photo experiences. So we launched the full day Academia tour. The idea behind that tour was to take Foto Ruta to the next level by focusing more on technical and practical aspects of photography and showing people some amazing places in Buenos Aires that otherwise they would never get to see. The price point was higher which made the product more niche, i.e. for people who were either photography enthusiasts, or those for whatever reason, were willing to pay a bit more for their experience.
As time has gone on, we’ve realised there is also a middle ground in between those products, so we created the 1/2 day Academia as a more mass market version of the full day. In addition to creating products to fit market, we’ve also created products we feel are relevant and push the boundaries creatively and professionally. e.g. Labs (Photoshop Lightroom course) and iPhoneography.
I can only offer advice to service providing entrepreneurs..and my advice would be:
Know your market and stay nimble. As long as you know your market and have a good solid product, you can tweak everything to adapt to the market as you go. Nimbleness and constant awareness of your market is crucial as its a continuously evolving beast.
Did you always plan to expand beyond Buenos Aires? Or at some point did Joss & you say, “Oh, we’re on to something.” Or did expansion simply come about through opportunity with someone proposing to work together in a different city?
Joss and myself are both quite ambitious and passionate about what we do. As soon as Foto Ruta took off we knew it was always going to be more than just a hobby business. Since the start, we’ve had participants coming us to say ‘oh you must do a Foto Ruta Philippines’ or ‘FR Istambul!’ so we’ve definitely had international ambitions and a ‘hit-list’ of cities we’d love to run Foto Ruta in. New York City was the first overseas pop up we’ve done, it seemed the logical next step because we have contacts over there who were keen to get involved and help us set it up. We’re now also in the process of planning to launch Foto Ruta in Santiago very soon.
What’s the vision for the company? How do you envision Foto Ruta growing over the next few years?
Our vision is to continue growing our Foto Ruta roots in Buenos Aires, whilst gradually expanding into new territories and seeing how they go. Our challenges will most likely be, managing the financial unstable environment that exists in Argentina and in terms of expansion, dealing with the huge physical distance between territories!
What’s the business model for expanding internationally?
We’re considering a number of options for expansion. The first being licensing to partners in new territories and the second, franchising the product to franchisees in new territories. We favor the first option initially as we’re keen to maintain control of our product and brand in the early stages of growth. One of our key strengths is service. We pride ourselves on offering a personal, friendly service and a great customer experience. So at this stage it’s really important we have a tight hold of the reins. However, in order to achieve our future expansion goals, we will look to use the franchise model, and look forward to getting that off the ground within the next year.
What’s one tip you would give to entrepreneurs who do not have a marketing background?
The most important thing is to know your customer, get into their mindset. For example for a tourist product like ours, I’d ask the following questions: Where are they coming from? What are they reading? Who is influencing their holiday activity decisions? What are their deciding factors for them when booking a tour? Where are they drinking coffee/eating?
It’s all about maximising opportunities to reach them in their environment.
Perhaps we learn more when things go wrong….this post also could be titled, How to keep your startup from turning into a hobby.
I learned a tremendous amount in 2010 – 2011 about iOS development, but I learned even more about what to avoid the next time I form a startup. Towards the beginning of 2010 a friend and I formed the idea for a startup around a topic we both really enjoyed and know a lot about: travel. Specifically, we wanted to create in-depth guides that enriched the experience of travel beyond the checklist of tourist sites listed in most guidebooks. Our slogan: destinations in context.
My business partner was a domain expert: a highly experienced tour guide who had extensive contact over the years with customers. I had a deep background in technology and management experience in a non-profit environment. We made mistakes by not understanding the unique nature of a startup.
None of this is a list of regrets or complaints. This is not a lament, “If we had only done that, then…” No, this is all about learning for next time.
I do believe that my business partner and I shared a vision of our products and what the company could accomplish. We were very excited and motivated by that. But I realized too late that we did not share an understanding of the process to grow the business.
We had a vague idea of our business model but didn’t put the effort into really thinking through the elements that comprise a business model.
Too much initial attention to branding. We placed enormous effort in devising a brand name. Months (!) of conversations across two continents resulted in brainstorming of nearly a hundred domain names. Finally, I simply gave in and agreed to one of my partner’s suggestions. I didn’t love the name but it worked fine. (So would have about a dozen others that were discarded, but that’s my view.) Somewhere there’s a classic statement, “Your brand is not your logo.” (Or something like that.) Your domain name is also not your brand. It’s an important element but there are so many more things that need deep thought when creating a startup.
Too narrow of a niche requires scaling to many destinations. The problem with travel content is that once you acquire a loyal customer then that customer is not likely to travel again for another year. And then they’re most likely to go to a different destination and probably not to the one other city we were writing about. See a post I wrote, “leisures travelers don’t scale“. We knew we needed to cover other destinations but we both didn’t grasp that the only way to sustain the business was by generating a significant number of guides to many different cities. That simply cannot be done with one or two people writing content, especially if the content is well researched and extensive. We did not understand the need to scale and the resources required. Mainly, we ignored scalability. Of course our startup failed.
Thought we knew the customer. We created a product that we ourselves wanted as travelers and assumed that there would be plenty of others like us that would want the same. I don’t think the product concept is bad even today, but we didn’t explore the product market fit adequately. This also links back to the narrow niche, the urgency to scale, and resources for doing so. We should have examined the possible customer segments and identified if there were products more easily scalable to a broader segment. “But that’s not what we want to do”, is a common phrase when a business is very focused on its product idea and not willing to see whether it really fits the market in a way that can work for the business.
In other words, we were not willing to pivot in our search for a business model.
Perfecting & perfecting a 1.0 release. Our first product, an iPhone app that provided a guided tour of a prominent historic & cultural attraction in a major city, took almost a year to produce. As the actual developer of that app I can testify that it could have been completed in less than 2 months. I wanted to get a good enough app out on the market and improve it with incremental development while we continued pushing out other products. This was not the kind of app that was going to sell thousands or hundreds of copies in the first few months. Instead, we tweaked the design, the content, and functionality for months. My business partner, who was supposed to be focused on content, couldn’t restrain himself from adjusting every aspect of the design even though we had a professional graphic designer working with us. I ended up having to mediate conflicts with the designer (who was also my spouse). There was a need to create the perfect app, perhaps even the best iPhone travel app ever designed. Really, did we need to do that? In a bootstrapped startup did we need to spend all our resources in this manner? We were too focused on perfecting the launch release rather than getting it out into the hands of customers, listening to customers and evolving the business strategy. The argument for the extensive 1.0 release ran like this, “If it’s not great, then people won’t buy anything else from us. I wouldn’t.” How did we come to that conclusion? Potential customers didn’t tell us that. It was an assumption without validation.
Admittedly, during the year of developing this product I didn’t work on it full-time, but about 80% of the time. Had to pay the bills with freelance work, plus I had a newborn child. And one month I stopped work completely on the product in order to earn an additional income; that was when the product was 5 months behind schedule. My spouse encouraged me to abandon it completely, but I wanted to finish at least this initial app.
A 50/50 partnership leads to no clear decision-making. We needed a CEO to make decisions, but probably neither of us would have worked for the other. The company would have dissolved within a week. Maybe that would have been the real test of the partnership and how well we would have worked together. But someone needed to guide the business, make decisions, and keep things moving ahead. A startup with 50/50 decision making does not work.
Ultimately, the money ran out. We had made the decision early on to bootstrap this startup and not seek external funding. (No one would have given us funding anyway with this business model.) In the last few months I had prepared spreadsheets with financial projections that would be needed to sustain the business and estimated the volume of sales required to meet those finances. After our first product launched (with sales far under expectations) we immediately moved into developing the next product. We did recognize the need to get multiple products on the market but we just didn’t examine if we had the right product or not.
Just before the end I invited my business partner to discuss a new strategy for the business, a pivot (if you will, though I didn’t call it that). After more than a year and a half of devoting the majority of my time to this business I had no more money left to put in. For me to continue I needed funding. We needed a strategy to continue and that meant a serious rethinking of our business and how we moved forward, particularly how we continued to finance the operation. Rather than rethinking the business my partner suggested that I take a job, save money and come back to work with him once I had a savings. The next week I took another job.
I learned a lot from that experience. A lot was my fault in not assertively pursuing strategies that I knew would be better for the company, but would those have survived the 50/50 decision-making? Unfortunately, this startup ruined a friendship. My former business partner is still hard at work pursuing the same business. Maybe it’s working for him, but in hindsight, it’s clear that the strategy we employed could only support one person with a very modest residual income. That isn’t a startup, it’s a hobby.
The quote “leisure travelers don’t scale” is from an interview with Rafat Ali (founder of paidcontent) at the Next Big Thing. (At the 6:35 mark in the video if you want to skip over him talking about his new venture Skift, though if you’re interested in the travel industry then you should become familiar with Skift.)
Skift also aims at informing the business traveler rather than the leisure traveler. The business person might travel several times a month. Anyone involved in a travel startup knows that it’s difficult to scale a business around consumers traveling to specific destinations. How many times does a person travel for leisure. Ali says “once, twice, thrice a year”. How many times does a person travel internationally? Only a few people do so even once a year.
Even if you build a loyal customer with your superb guide to the basket weaving of the Peruvian highlands, it’s going to be another year or more (if ever) before that fan buys your insightful, one-of-a-kind guide to the public sculpture of Odessa. Okay, that example is an extreme niche but it’s hard to grow a business by selling content to leisure travelers. You need content to dozens, if not a hundred or more, destinations if your travel content business is to sustain a staff of more than one based on revenue alone.
A core requirement in forming a startup is to spend time reflecting on the product you’re developing and, particularly, what problems are people buying that product to solve? Are there enough customers to actually build a business that can grow, or is the business so narrowly defined that it’s potential is little more than a supplementary income for one person? The latter is not a startup.
In the interview with Ali the moderator Scott Kurnit (found of about.com) asked a wonderful question, “Twenty years into the Internet, why do we get to do something new…why hasn’t it all been done…why wasn’t this done 5 years ago?”
As Kurnit suggests, it’s often because technology has changed (particularly with regards to mobile) or consumers have changed. Ali goes a step further and reveals the forumla behind his successful strategy, “I love businesses that are a layer on top of existing businesses.”
For those of us who lovel travel, Ali offers a vision at the 8.33 mark in the video as to why travel is important: “travel is a lens that can bring understanding to the world”.
The challenge is creating a livelihood through a travel startup.