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Why online travel assistant Nomadly pivoted to become a messaging solutions developer

27 June, 2017

NuVentures-backed travel startup Nomadly, which helped users book customised plans over chat, has discontinued that business and pivoted to become a messaging channel developer, its co-founder Sharath Ramesh Iyengar told VCCircle.

Nomadly, run by Chronosphere Technologies Pvt. Ltd, was founded in 2014 by Iyengar and Rohan Prabhu. It raised an undisclosed amount from early-stage investor NuVentures in March 2015. Exactly a year later, the startup raised a bridge round from a fresh set of investors.

Speed bumps
Between June and November 2015, Nomadly clocked around Rs 40 lakh in gross merchandise volume (GMV).

“[But] from December 2015 to May 2016, we saw a lot of challenges on pricing because of extreme discounting by large players…It was hard to get the numbers the giants were clocking because they were willing to lose money…They were burning money for customer acquisition,” Iyengar said.

Besides, in hindsight, Nomadly did not target the right niche, Iyengar added.

“We went behind the wrong segment—the young, technology-savvy segment between 21 and 28 that will spend 30 more minutes and check out four other sites for a better deal. And we realised we should have targeted the 28-35 segment, which won’t mind paying more for value-added services…But it was too late to pivot again,” he said.

Funding crunch
To succeed in the travel segment at that time, the company would have had to build its artificial intelligence (AI) and machine learning (ML) capabilities, a task that would have been both capital-intensive and time-consuming, explained Iyengar.

“For something like ML and AI, you need a war chest, and at least three years to perfect the technology. Else, a bigger player will outrun you. The only way we could crack ML and AI was with data and capital, which was difficult to get last year,” he said.

Iyengar claimed the company was making money on every transaction on an operational basis, but the model was difficult to scale. He admitted that Nomadly would have been able to raise funds had it integrated ML and AI in its business last year, but decided to not take that path as it saw little chances of survival.

“If we had to scale, the number of people we would have had to hire would never make sense. We had a ratio of 80/20; 80 done by humans, rest by the system. To swap that ratio, I would have needed millions of dollars and at least three years. And only then would the operational expenditure make sense,” he explained.

The pivot
The co-founders believed that even if they tweaked their focus or market, the chances of success in the travel segment were low. Hence, they decided to build Mitter.io, a messaging channel developer, instead. In layman’s terms, Mitter helps businesses build web and mobile messaging solutions. For example, it can create a customised version of WhatsApp for service support, sales and feedback, among other things, in a few weeks’ time.

“We build chat technology, which is difficult to create. We saw major players like Twilio in the US doing well, and those will be the shifts that will anyway happen here as well. Moreover, it made sense because it is scalable. We would be making money from day one,” Iyengar said.

Travel segment: A mixed bag
Last year, in the biggest-ever consolidation move in the online travel space in India, NASDAQ-listed MakeMyTrip Ltd agreed to buy ibibo Group, which was co-owned by South African technology group Naspers Ltd and Chinese investment firm Tencent, in an all-stock deal.

Yatra had also entered into a reverse-merger agreement with US-based special purpose acquisition company Terrapin, paving the way for a back-door listing of the second Indian online travel agency in the US, after peer MakeMyTrip. In December 2016, Yatra listed its shares on the NASDAQ at $10 apiece.

Some travel-tech startups that have recently raised funding include Ithaka, TravelTriangle, Goomo, ExploreLifeTraveling.

The segment has also seen multiple casualties. Most recently, HotelsAroundYou, an online platform that allowed last-minute room bookings, ceased operations as it could not raise follow-on funding.

In February this year, Stayzilla, which raised close to $30 million from investors such as Nexus Venture Partners and Matrix Partners, had said that it was halting operations and pivoting to a business-to-business model.

In March, VCCircle had reported that RoomsTonite, which had raised $1.5 million, had shut shop following a failed fundraising bid.

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Why online travel assistant Nomadly pivoted to become a messaging solutions developer

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