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From Startup to Going Public to Doing it Over Again With Jim Hornthal Triporati Founder

by Jason -- April 12, 2011

If you take a look at Jim’s biography, you’ll quickly wonder if he even has time to sleep. He’s a founder (Triporati), partner at a venture capital firm (CMEA), investor, advisor, and is involved with a few philanthropic organizations to top it off. In fact, Jim’s first company actually handed out flyers that said “sleep is for sissies.”

In today’s interview Jim discusses his first company, Preview Travel. Preview began in 1985 (not a typo), went public in 1997 and ended up merging with Travelocity to create the 3rd largest site on the Internet at the time (only behind Amazon and Ebay). We also discuss the many changes that Preview went through before eventually being one of the first companies to sell travel online through a small partner called America Online.

We also discuss his latest travel startup, Triporati.com. Triporati is helping people discover what travel destinations to choose based on their interests. It’s been called the “vacation genome project”. This wasn’t just an idea he thought about one day and started building the next. His team spent 9 months thinking through the idea and bouncing it off of dozens and dozens of people. They went to potential distribution partners, customers and industry experts and asked them, “why is this the dumbest thing you have ever heard?”.

You can listen to the mp3 of the interview by downloading it (right-click on the link and choose “Save As…”), using the player below to listen to it, or reading the transcript below.

Jim Hornthal Triporati Interview (Click to listen)

If you have any additional questions for Jim or feedback on the interview, let me know by leaving a comment below.

Jason: Welcome to the Life After Cubes travel and entrepreneurship podcast. This is Jason Demant and today I’m joined by Jim Hornthal. Jim was the founder of Preview Travel, one of the first online travel booking companies. After going public in 1997, Preview merged with Travelocity in 2000. At the time, this merger created the third largest site on the internet. Only behind Amazon and Ebay. Travelocity was ultimately reacquired in 2002 by Sabre Holdings.

Today, Jim works on both sides of the table. He’s a partner at the venture capital firm SMEA capital, and he’s also the founder of Triporati.com. Triporati is helping people discover what travel destinations to go to based on their interests. It’s been called the “Vacation Genome Project.”

Jim is also an active investor, active angel investor, with investments in Hipmunk, Via.com, Glekko, among many others. Finally, Jim is also involved with a few philanthropic causes, trying to make the world a smaller place by bridging the widening gaps between conflicting regions and nations.

Thanks very much for taking the time to join me Jim.

Jim: It’s a pleasure to be here Jason.

Jason: First question, how did I do with my introduction?

Jim: Wow, I think it was mostly OK, CMEA is the venture firm.

Jason: CMEA, oh I’m sorry.

Jim: That’s OK, so that’s one little typo but not a big deal, and for the rest of it, at least some of it must be true. I don’t know.

Jason: When I started doing some research into you I was, I got a little concerned how I’m going to cover so many different things in twenty to thirty minutes. Next Question, do you sleep?

Jim: There was a great button that we printed up for a conference in the early days of Preview that we handed out, it said “Sleep is for Sissies.” The answer is yeah, I think there’s an article in the Wall Street Journal last week, I don’t need that much sleep but I’d like more. And I think that sleeping is a good thing. I ‘m all for sleep.

Jason: Great, so I’ve contacted a number of people about doing interviews and you were the very first person to shoot me a follow up email after we failed to connect. You’re obviously a very busy guy, I’m curious, why did you do that?

Jim: Well, part of it’s guilt, and I think part of it is also the love of the entrepreneurial spirit. I’m an entrepreneur addict. I feel like if there was an EA entrepreneurs anonymous I would go, I would confess my sins every week. But I think you’re trying to do something new and innovative and it’s great when the ecosystem can support innovation and creativity.

Jason: Yes, thank you, I definitely appreciate it. I was caught off guard when you sent me the follow up email. That was great. So what I’d like to focus on for this interview is both Preview Travel and Triporati, and talk about how they got started and off the ground and we’ll wrap up by talking about what kind of advice you have for other entrepreneurs interested in the travel space.

Jim: OK

Jason: Great, so lets start with Preview Travel, when did you start Preview?

Jim: It’s funny, the company actually began in 1985 and when we were preparing our filing to go public in 1997, the underwriters were convinced that we must have had a typo, that we must have really started in 1995 and we assured them no, we spent ten years wandering aimlessly in the desert. But we actually began life doing the same kinds of things which is giving consumers the information and resources that they would need to plan and book travel but we were doing it on different platforms. In the mid 80’s the new emerging media were things that we take for granted and have already been, frankly, overtaken. VCR penetration was 20 percent and growing, and cable t.v. penetration was less than 20 percent and growing and we began as a company that was going to create and distribute content for travel, for those emerging platforms. And we did a number of things in the syndicated news programing, weekly half hour shows, we had a daily half hour show on the Discovery Channel. At the peak we were in 110 countries around the world and over 100 cities in the U.S., creating television programming on leisure travel. And at its peak we’d built a library of 5000 hours of broadcast quality video on over 2000 destinations around the world, and as the world evolved, we began trying to sell travel on TV. and found that the spikes of demand for an infomercial overwhelmed any call center we could ever staff.

 

But one of our early board members and investors, Ted Leonsis, had sold his company to America Online in ’94, and that was a company, at that time, that had 800,000 subscribers, it was number three behind Prodigy and Compuserve. We looked at AOL as kind of a television station that didn’t have a huge audience, which was good, because we could manage the demand much more linearly, and we had to take our video and pull little frames, little pictures, we had a billion frames of information, and pick the ones that were the most provocative, the most illustrative of these destinations, and over a low bandwidth, dumb down the images so they could go through the narrow pipes and paint the story of what these places offered and meant, and began with asynchronous email communication with people that wanted to book travel.

We used that as an excuse to build a booking engine, and then we held out for dear life as AOL carpet bombed America with free disks and went from $2.95 an hour where we would actually get revenue on connect time, to unlimited, where we actually had to pay AOL for the privilege of connecting to their members. Business models were in flux, we were, to use the words of 2011, we were iterating and pivoting like crazy but didn’t have the vocabulary to describe what we were doing.

Jason: Wow, that’s an incredible story.

Jim: Yeah, many near-death experiences.

Jason: It sounds like you had pretty good traction in the TV market, did you kind of drop that and just pursue the AOL area?

Jim: In 1991, ancient history for most, a law was passed in the United States, prior to that the longest a commercial could run on television was two minutes. 1991, they allowed what they called program-length commercials, what we now call infomercials, and one of our biggest television partners back then was NBC. They own stations in New York, LA, Chicago, Miami, Denver, and we were talking to them about what are you going to do with this new freedom on weekends, when you’ve got, you know, football and basketball and baseball, but you have these half hour and hour slots, and they were very fearful of selling the time to programs that would make the audience potentially go away, and then when they were over, where’s the audience for the shows that they needed them to be there for to sell advertising to? They all were running our show that we had back then called Weekend Travel Update, which was a summary of the news information resources of travel, in a news magazine format, and we came up with an idea to experiment with them on a show we called Preview Vacation Bargains. We would do four destination profiles, each with a specific offer, but digital editing was just coming into play, we would have a different price on the package. You know, everyone might have London, but we would price it out of Washington or New York or Chicago. There’d be a weekend getaway that would be relevant to the place we were talking about, and we had really a different show in each city but some commonality in editorial.

That way they could keep the audience, the ratings were strong, the demographics were great, it was counterprogramming to sports. Together we learned how we could monetize their time, they contribute the time, we contribute the production, and we’d share in the transaction. They got us into the idea of using media to sell travel, not just to inform. The problem was literally when the show was on, and the 800 number would come on, we just didn’t have enough operators to handle the spike, but when the show was off, no one would call, because no one knew the number to call. These huge spikes in demand proved over 18 months of experimentation to be just unmanageable, it would either be a desert or a tsunami, followed by a desert, followed by a tsunami. All we wanted was a consistent flow of water.

With AOL we had that opportunity, to really program into a much more manageable audience, and then build technology that would scale, unlike call centers which don’t particularly scale very well. That’s how we kind of pivoted at that time.

Jason: How many cofounders and what were their roles at the beginning of the company?

Jim: At the very beginning, I think I was the only guy in the life raft looking for wind. At different phases, there were more different critical people that were near-founders or certainly critical to our success, whereas in the television production business we had a team from TV that knew that industry better than I ever would. As we started to get into online travel, we had to bring in experts in engineering, and distribution and marketing.

And so, depending on what phase – Harvard Business School wrote a case study on Preview Travel and it’s kind of like reliving your nightmare. Every time the course is taught I go into Stanford or Berkley or Harvard when they teach it, and I feel like the piñata at the end of the classes that everyone is beating it with a stick for all of the sometimes foolish and sometimes innovative mistakes that we were able to make at the time.

Jason: Do you know if that’s available online, the Harvard case study?

Jim: Well, Harvard doesn’t give away anything. They sell they case and it’s through HBR reprints but it’s a very painful book. It’s well written and it’s nicely done but it’s not something that is in the public domain.

Jason: What was then your inspiration for your original idea?

Jim: Well I think the, back, going back in time, ancient history. My first job after business school was working with the Boston Consulting Group and my main client was United Airlines. And at the time the US Airline industry was just becoming deregulated and I had the privilege of learning from a lot of smart people about route planning, pricing and distribution in a deregulated Europe. And I was fascinated by the industry, the size, the dynamics, the economics, the distribution channels.

And I was equally in love with media. I ran the college radio station and had a lot of interest in motion picture production distribution and so on and was contemplating the emerging platforms of cable and home video and was looking at ways to program into those platforms.

The problem with travel production, if you can imagine, with broadcast standards, being expensive equipment back then and difficult, is it’s really costly and I ran some analysis of what it would take to program original travel for those markets and it was really stupid. Everyone with a VCR would have to buy five copies of every tape to break even or something equally stupid.

And I forgot about it until I ran into a producer of a documentary in San Francisco and we were having a glass of wine and he mentioned that he just finished this documentary where the Pope was coming to the U.S. and he was producing it and in order to finish the documentary he had to go and purchase five seconds of The Vatican. And that was a phrase I’d never heard before and I said, I don’t understand, you call the Pope, you download over a modem, and what do you mean you do you mean you bought five seconds of The Vatican?

And he said, “Well there’s a company in Sacramento called News Travel Network”. And they had production crews all over the world and they were doing this for local television news and they’d been to The Vatican and they had footage of the Pope doing that little Pope wave thing that the Pope does and he paid them a modest fee to repurpose that content for his documentary.

And the law of least regret requires a phone call; Sacramento is only 90 miles from San Francisco, called them on Monday met them on Tuesday and found five incredibly talented television people with a closetful of really wonderful videotape and all they wanted to do was provide it to broadcast affiliates around the U.S..

And so I pulled out that old business model and erased field production and it became a pretty interesting deal to license the non-broadcast rights to that asset to try and do what I thought made sense and then a year later wound up acquiring the parent company and had to help them navigate some challenges in their own distribution strategy and through that strengthen the broadcast properties, the distribution channels, domestically and internationally. We did in-flight programming for Northwest Airlines as well and built this huge content asset through the video and it reinforced the belief that people really needed help to know where to go.

It’s a question that was just as true then as it is now and really was the unanswered question for Triporati because even back in the early nineties, 70% of people don’t know where they’re going to go on vacation three to four months before they actually book.

I was lucky with the News Travel Network producers, is I could sit down in a room with them and ask them where I should go and ask me, “Well, who’s going? Are you going with your wife? Are you going with your kids? What do you like to do?”And then they would go back into the video vault and bring me three or four tapes and say, “You’re going to love any of these places”.  And so when the industry, we as one of the players in the industry, we call it Web 1.0, Travel 1.0, what we really did was we took the travel agent’s screen and we turned it around to the consumer and cleaned it up. In the process though, the collateral damage is we put out of business many many many thousands of talented travel agents that have really relevant useful experience to share and what Triporati is doing is reanimating some of that expertise in the form of an expert recommendation engine.

And we have done for destinations, it’s actually the destination genome project, what Pandora has done for music. They have musicologists, they’ve rated 800,000 songs, they break the songs down into 400 elements. The elements are individually scored on a taxonomy or vocabulary that we usually don’t have. If I ask you, “Why do you like that song?”, you’re probably not going to tell me, “Because it’s on 4, 4 meter, in b flat minor, with certain types of vocal harmonies. You’re going to say, “I just like that song”. Well, in travel, we’ve got 62 attributes that define vacations. And our 77 experts have written over 650 guidebooks. So they’ve written Frommer’s and Fodor’s and Lonely Planet, Rough Guide books. They have similarly ranked and rated these 62 attributes along 2,100 destinations around the world. So when you share with us your interest graph, what it is you like and the priorities and importance of that, our algorithm will actually generate an expert based recommendation engine of places we think you might want to consider and explore and know more of. So we’re really putting on line some of the luxury and privilege I had of these great producers and their decades of experience. But we’re putting it in a way that’s democratizing access to that knowledge base.

Jason: Got you. And I do want to spend some time on Triporati. Just a couple more questions on Preview and then we will move on to Triporati. You mentioned that you purchased this company in Sacramento?

Jim: It seems like a complicated transaction but we ended hiring all the people and taking over all the assets as well.

Jason: Did you do that with investors? How did you go about with that process?

Jim: Yes, we were constantly, we were either, my wife described that period of time as we were always between financings. As soon as we closed a round, we’d always be looking for the next round. And fortunately, we had a group of very patient investors who were willing to pivot with us and did not view our evolving business models as a liability. So that trade off  with an entrepreneur between focus and peripheral vision, you know, absolutely no focus can be horrible but too much focus can be just as bad, and we found a healthy balance between what we felt we needed to do and what the market was telling us we had to do. So they were very supportive all the way, and fortunately were handsomely rewarded for their patience.

Jason: Great. I know you eventually went public, can you tell me a little about that experience? I guess it was 12 years of work, and finally getting to that point. What was that experience like?

Jim: Our early investors joked that they had to carbon date their stock certificate they had. It was a great celebration of an incredibly talented team that was able to navigate the waters, because ‘97 was not a great time to go public, it was a really challenging time in the market. In fact, no one did well on the 4th quarter. The good news is we started the year down from our public offering price but we ended the 1st quarter of ‘98 as the number one performing stock on the Nasdaq.

And that allowed us to do a secondary offering in April, which provided great liquidity for some of our investors as well as putting more money in the bank for the company. So we had a great team in finance, in marketing, in sales, in distribution, in engineering.

My goal in building a team has and always has been to try and be the dumbest person in the room and find people better than you in everything possible because they’re out there, you just are too lazy to find them. So this was a case where the success was completely attributed to having really a great group of professionals, many of whom, are back in the Triporati team. We joke that Triporati is actually the Preview Travel reunion tour. Our CEO Chris McAndrews joined before our IPO at Preview. Our engineering team, Pat Middleton, Patrick McEaver, our Chief Product Officer Sharlene Wong, all are veterans and former teammates at Preview Travel, and so now, they’re doing it again.

Jason: That’s great. So, perfect segway, I know there’s plenty more to talk about Preview but I do want to get to Triporati.

Jim: I think we’ve exhausted that.

Jason: When did you found Triporati?

Jim:  So the group came together as a concept the more of a sort of cocktail party conversation late o six early o seven, we started just started white boarding what this might be and we spent about nine months casually but thoughtfully thinking about the ontology, how the data world be to be organized and the taxonomy of what would you call these attributes and interests and we prototyped few things because weren’t sure that this is worth doing.

The one thing is, and I just had a meeting today with some talented entrepreneurs, from another country, you know, just because you can do something doesn’t mean you should and would this be the highest and best use of our time and our talent not just money, so we had to convince ourselves and once we became convinced that there was a real purpose here and it had great value to consumers, as well as partners, and we sort of socialized it with some potential distribution partners. Then I made the financial commitment to really put some more resources behind it and build an engineering product and an alpha and a beta version, so they can take it in the market place and see if it was as good as we thought it could be.

Jason: This is great; can you tell me more about how you went through your vetting process with this initial idea?

Jim:  We kept trying to find the people we respected who would be honest with us, that would tell us why this was the dumbest thing they had ever heard. And we would position it pretty much that way because it is not about salesmanship at that point, it is really about trying to figure out if this is going to be again a good return on the effort not on the capital and we were very skeptical, you know, we went in their saying someone else must be doing something this, why aren’t they, maybe it is because it is elusive zero billion market that no one cares about.

Just because some isn’t doing it doesn’t mean you should, maybe it is because maybe it shouldn’t be done. And, and so we went in very skeptically, we saw people try to do this with the wisdom of crowd, we saw people trying to do this with semantic search and in certain areas where we think the time and or the money at risk is material, those are poor excuses for experts, and if you are looking for expert wisdom in certain decisions you are going to make – we think in health and finance and travel. There is a strong role for the expert defining alternatives and options. For friends to be your validation engine and for crowds sort of at the very end that the collaboration tool and a corroboration tool really.

Jason: So when you say you are going in and talking with people you are talking with friends and families?

Jim:  No, no, no, friends and families will never be honest with you. We went to talk to the hostile elements in the industry. People that we had known, that we respected and we went in saying, you know, I really don’t want to sell you I want to ask you what you think, is this something that, you know, is fulfilling your need from the supplier view from the distribution channel view from the customer view and, and we continue to ask those questions today. I think that the way Preview started, the website needed to and constantly did evolve and look very different then it started and that’s appropriate and I think that is the same is true for any successful venture including Triporati, we are constantly challenging the user interface the distribution channels the brand proposition and so on until we are not until forever, it will keep evolving.

Jason: How many people do you think you spoke with about the idea before you said let’s do it?

Jim: Dozens and dozens and they weren’t people on the street they were people, you know in the industry that had a reference point on which we could weigh their opinion heavily.

Jason: So you mentioned your unbelievable team of travel expert and I looked at the page and, it’s a pretty impressive list, how did you go about recruiting seventy seven of these amazing travel experts?

Jim: By recruiting a world class editor in chief, whose life is spent in that space, who knew many of these people and could network within their network to find the people to fill in the geographic holes that we would need to fill in.

Jason:  Got you.  I don’t know if you feel comfortable talking about this. How are you compensating the travel experts?

Jim:  Yeah, no, we pay them for their professional time and effort.  We pay them to both learn our system as well as input data into the system.  We pay them real money via PayPal.  I’ve met only a handful of the 77.  For those who are really thinking about themselves as a brand and are tweeting and are blogging, it’s great because we can drive traffic back to their other platforms for monetization, but travel writers deserve to be paid for their time.  So it’s not free contribution and hope for a backend.  It’s a fair compensation for the effort and work they put in, which is significant.

Jason:  Yeah, that’s great.  So switching to the other side, how did you find your first 100 customers for Triporati?

Jim:  Well, our distribution strategy is with partners.  As a partner, we’re working with a number of the AAA clubs, the American Automobile Association.  I think that the number of clubs we’re working with now under contract serve over 10 million members.  Much like AOL was the way you found Preview and frankly, early on with Travelocity, you found Travelocity through Yahoo!, we think that when you stand on the shoulders of giants, that’s a good thing, because the view is much better up there.  We like that playbook.  It’s not the only playbook to execute, but we think it’s got a lot of leverage for us and our partners to learn with and from each other.  We don’t have 100 partners, but we do have a lot of customers coming from the partners that we do have.

Jason:  What made you go the AAA route?  Yeah, what made you decide to try them as partners first?

Jim:  They actually found us.

Jason:  Wow.

Jim:  Yeah, exactly.  They stumbled upon us.  I think it actually came through Philip Wolf at PhoCusWright.  We told Philip what we were doing early on, because we respect him a lot.  I think Philip and I have been in the industry – We joke that the first booking in online travel that we made was at Kitty Hawk with the Wright Brothers.  It was a one-way ticket.  It didn’t go very far.  But Philip has been similarly around in travel.  We think his first innovation he saw was the wheel where he suggested they just round the corners and it might go somewhere.

And so we ran this by Philip.  He’s one of the early folks where we said, “Here’s what we’re doing.  What do you think?  This is where we think it can go.”  I think Phillip was giving a talk to some AAA marketing people and was berating the state of some of their technology and said they needed to do things more innovative, for example, some of the stuff Triporati’s doing.

We were still in like alpha.  So we got a couple of calls from these folks saying, “How did you find us?”  And they said, “Well, Phllip Wolf said we should know what you’re doing.”  We showed some of these early pioneers what we were all about figuring that these are big organizations.  They take a long time to make a decision.  We won’t live long enough to see them do something.  They surprised us.  What they wanted to do, what they saw their members needing matched very well with our approach and our technology and our content and our output, which is personalized recommendations.

It went together much quicker than anyone had thought.  We modified our development to be more responsive to their needs.  We kind of hit that fortunate seam of mutual opportunity and needing, that serendipity moment if you will. Philip and his contacts definitely get a very strong assist on that goal.

Jason:  What was your initial distribution strategy before?  It seems like they kind of changed the game for you guys?

Jim:  Well, we did a little experimentation with SEM and SEO and anyone can model what it takes to drive traffic and what the click-throughs will be.  I’m a strong disbeliever in click arbitrage.  I don’t think you can build a sustainable business that’s going to assume you buy traffic over time for less than the traffic is worth.  The efficient markets suggest that people will bid up the value of those clicks to a point where the margin is little to none.  But we did some experimentation, drive people to the site, UI testing.  Were they bouncing off?  Why are they bouncing off?

We were still feeling out the different channels and opportunities and had talked to some very large suppliers about doing a cobranded version that would be a subset of the world that would fit into their distribution or serve as delivery platforms and had some traction there.  Frankly, we were going to go forth on some of those partnerships until the AAA thing came up.  It was a healthy distraction to get us back to a broader-based solution.

Jason: I will just try to wrap up here with just a couple more questions.  What was the biggest assumption that you made about Triporati that has turned out to be wrong?

Jim: What was the biggest assumption? Well, there are so many.  I don’t think there’s one biggest I think we’re still learning where… we are really a discovery platform and as a discovery platform we are building interest graphs of consumers and we are working with partners to monetize that interest graph as they plan and book travel.  And there’s a lot of forks in that road of other places this asset might take you or might lead you, and we continue to not use a lot of quick drying cement as we plow our way through the evolution of any business.  And are strong believers in that lean startup model of prototyping, iterating and getting a lot of customer development and feedback.  I’d say that the biggest assumptions that were wrong are the ones we’re still making and will continue to make.

Jason: Switching gears again.  What advice would you give to a new entrepreneur that’s interested in the travel space?

Jim:  I just read that Expedia is spinning off Tripadvisor.

Jason: Wow interesting.

Jim:  Yeah, Expedia stock jumps 14% after announcing that it will spin off TripAdvisor, so this just in.  The advice is to.. it’s not can you, it’s should you?  I mean, there’s a lot of I don’t know want to say they’re grade B but they’re certainly not grade A innovations that take just as much time.  I think that the thing  would be that good is the enemy of great and make sure that if you are going to throw your time, effort, career, and attention of resources into a project then at least in least your opinion as the innovator and entrepreneur that you think it can be really great.  And I think a lot of time is spent and cycles expended chasing down opportunities that in hindsight maybe shouldn’t have made the grade but the grade might have been compromised early on because the people that made the decisions just wanted to get something done versus getting something great done.

Jason: That’s great advice.

Jim: No one ever listens to it but I’m going to keep offering it.

Jason:  It’s very fitting with how you started Triporati too which is a great theme.  Last two questions here.  What’s coming next for Triporati?

Jim: Well, we got some contracts we’ve signed but we’re not going to announce them until we launch, which will in be a few months, that we think are pretty exciting and hoping the partners we’re working with will agree.  We’re actually having some conversations about doing a foreign language and regional version with a partner that is also not yet announced cause we think that it’s a universal problem to figure out where to go and how to get there.

We are excited about the things that are in the corp dev and biz dev realm, but none of which we’re not talking about until they’re live and real.

Jason: Other than Triporati, anything coming next for Jim Hornthal?

Jim:  Well, there are a couple of other start-ups that I’m having a lot of fun with a young team.. two teams.  One in particular that I’m real excited about what they’re doing, but again if I talk more about it they’d shoot me. But it’s not in travel.

Jason: Gotcha.  No problem I think that will do it.


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