A year ago, I sold my business for a new idea, and with this project, I got into Y Combinator. In this blog post, I want to share how I validated whether the market needed it. Our experience can be applied to other B2B startups at the idea stage.Airlines need simple and convenient software to work with. In April 2020, I finally decided to explore this hypothesis in more detail; I had been unable to shake this idea from my mind for a year. You know that feeling when an idea comes to your head and you can’t sleep, can’t think about anything else. I had built three businesses before, and they all started with this. It was a strong, positive signal for me, but still not enough to feel completely obsessed with starting a new business.Previously, I wanted to figure out: what if my hypothesis is just my misconception? What if airlines are comfortable with the current software or are so used to conservative solutions that they are afraid to change anything? I thought: “Okay, I can allocate some time to validate the idea.” My current business at that time was also in the traveltech industry. We were a large online travel agency in Kazakhstan and interacted directly with aviation software.What is the initial problem? There are only a few players in the airline software market, such as Amadeus and Sabre, which essentially control the market. The problem is that their software was created a very long time ago and is objectively outdated. Yes, companies develop new features, but they are based on an old core that has not changed for several decades. This can be compared to the automotive industry. Despite the fact that internal combustion engines currently dominate the market and manufacturers are still investing in their updates, it is obvious that this is already an outdated technology and the future belongs to electric drives.What are the other inconveniences? For example, these solutions have a command-line interface.
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command-line console[/caption]That is, to perform even the simplest actions, you must know a special syntax and enter hundreds of commands. And this is in the era of intuitive web interfaces! For comparison: previously, to create even a simple website, you had to know the HTML language, but now you can make a site using a builder by moving blocks around. Moreover, the current software is not a cloud service; a separate configuration is made for each client and then supported. For comparison: previously, if a business needed computing resources, it was necessary to buy servers and build infrastructure for their operation, which was extremely expensive and time-consuming. Today, AWS has freed us from this.Another problem: it is extremely difficult for airlines, especially small ones, to get software manufacturers to develop any solutions. For example, why can’t you return a ticket as easily as you buy it — just by pressing one button? Today, returning or exchanging an airline ticket is a manual process for most airlines. And there is almost no alternative to the current software. Essentially, the market is oligopolistic, and airlines have almost no voice; you also need to maintain good relationships with suppliers, otherwise, there is a risk of receiving unfavorable commercial terms in the next contract. It turns out to be a closed loop.Another simple example is check-in.
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check-in[/caption]Why does an airline never offer you your favorite seat on board? Instead, you manually enter your data and choose the same seat every time. I have been doing this for 15 years and cannot imagine when this might change. Today, airlines are more e-commerce companies than transport companies. Internet technologies for airlines are more important than the planes themselves. We have seen companies disappear even with super-modern fleets, but failing to adapt to modern user requirements, not passenger requirements.The aviation industry needs significant changes. Shopify managed to completely change the process of creating and managing an online store. Why not try to do the same with airlines and create a convenient, modern service for them? A vertical SaaS platform specifically designed for the needs of airlines.Having the above understanding of the industry, I decided to additionally validate the hypothesis. How to check the viability of the idea? Correctly, ask the airlines themselves. On LinkedIn, I started writing to people from airlines to tell them about my idea and learn their opinion. The first message was like this:
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linkedin conversation[/caption]Although there are no details in this message, surprisingly, in about 30% of cases, I received a response with a willingness to discuss. And among them were many C-level managers who were ready to discuss my idea. For example, I received a response from the CEO of AirAsia India (at that time), Amar Abrol, who is now developing a fintech startup in Singapore.Surprisingly, top managers were ready to discuss aviation software for hours. They told me what was wrong with the current systems, why it didn’t work, and what needed to be fixed. They complained that they lacked customer power to achieve any changes. I touched on a very important topic for them. It was felt that they were very dissatisfied with the current situation. If I had come to them with an offer for in-flight meals, I am sure only a few would have responded. The reaction was different. Someone was immediately impressed by the idea, started asking questions, and sharing their thoughts. Someone was skeptical — they didn’t believe that it was possible to defeat the giants. In any case, there was interest in the idea, which means it is in demand by the market.Despite the fact that I was already sure that the idea was worth dedicating the next 10 years of my life to, I lacked a magical push. At that moment, I had an existing, quite large business, and I really love working focused on one thing. I also had a long-standing dream of getting into Y Combinator. And I decided that this was the perfect opportunity to get additional validation. It was incredibly interesting to get their opinion. I submitted an application and was able to distract myself for a while. Ten days later, I received a response and was invited to an interview, and two weeks later, I was accepted into the batch.
Here you can read a detailed article about how I applied to Y Combinator and how I prepared for the interview.
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yc email[/caption]During the preparation for the Y Combinator interview, I found a buyer for my existing business (
article about this) and by the time the batch started, I could fully focus on Farel. I think this is almost the ideal format for how startups should start — idea, validation, Y Combinator. In my case, it was also a successful exit. For the first time, I couldn’t believe that it was real and happening to me.After receiving the first investment from YC, I didn’t immediately start building the software; my first employee joined me, and we continued communicating with airlines. We needed to figure out where to start. When you are a startup, it is better to be a needle than a hammer. Hearing this phrase at one of the YC events, it struck me that we should not make a solution for everyone, but first focus on small, regional airlines. They do not have complex operations like large airlines, so it is easier for us to develop our solution. Such airlines have a number of features. For example, there is no separate person responsible for strategy and planning the company’s development for 5-10 years; they are faster in making decisions. Often, the business of small airlines is held together by 3-4 top managers. They do not have as many resources. And such airlines live in their isolated world, not particularly fearing competition from large airlines — due to their fleet structure, it is simply unprofitable for them to compete on regional routes.It seemed that working with small airlines would be difficult. But in reality, it is not so — this segment is neglected. Amadeus and Sabre focus on large airlines. We managed to “sell” our vision to seven airlines, and they became our contribution partners. At first, we communicated a lot with airlines from the CIS. This market is historically closer to us. Now we communicate with companies from the USA, Latin America, Asia, and Africa. We want to have 1-2 partners in each local market. The problems are basically the same for everyone, but there is specificity. The main difficulty is to find a person within the company who is interested in innovation. This is the person who will become your guide in the account and organize your work with the necessary departments.Partner companies have quite actively engaged in our work. The cooperation is built like this: we take some block — for example, creating flight schedules, people in the company tell us how their processes are structured, what the pain points are. We make this block as we see it, and they comment and correct. About once a month, we release new functionality and ask for feedback.Why are airlines helping so actively? First of all, they are interested in changes. Second, we work closely with those employees who work with software in airlines. They are interested in seeing something new and participating in the creation process. And another important factor is progress. When they see progress every month that exceeds their expectations, the interest becomes even greater.Now our service can cover about 70% of the needs of small airlines. During the summer, we plan to cover the rest and move to active implementation. But we already have clear evidence that airlines need a simple and convenient cloud service. But most importantly, with such a service, the time-to-market will be a week, not several months as it is now.We were lucky — the initial idea fit the market perfectly and found potential customers. But many entrepreneurs are also confident in their ideas, throw themselves headfirst into development, spend money, bring the product to the market, and the product turns out to be useless to anyone. Spend time at the very beginning to validate your idea with people from the industry you are targeting. Perhaps you are thinking in the right direction, but communication with the industry will help you understand the market better. Moreover, you will get additional motivation and find partners who will help you develop your project. Try applying to Y Combinator and other top accelerators; this is the best way to start transforming an idea into a business. Of course, during development and deeper immersion in the problem, your idea will undergo changes, you will prove its viability with traction, check a bunch of hypotheses, but this is a separate topic, perhaps for the next post.Thank you very much :)Ashat
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