MilesBuzz! - Another new online travel agency ...

From a Venture Capital mailing list:

DEAL OF THE DAY: SAVVIO.COM, $14M
Perhaps the most surprising facet of Savvio.com's funding is that it raised any money at all. For all the lip service about how B2C is dead, VCs continue to pour money into the space. In this case, some brand name firms put up $14 million for an online discount travel service. Other VCs pumped a combined $48.5 million into three other B2C deals.

With the shakeout going on in the B2C space, Savvio.com faces steep hurdles to find a ticket to paradise. CEO Karen Ha strives to distinguish her Cupertino, California company from the myriad discount travel entities by offering a "declining" approach for airline and cruise tickets. That is, prices decline "as the date of departure grows."

But Yahoo and Travelocity have added similar features to their sites and they receive millions of hits a day. There's also the proliferation of mom-and-pops vying for a piece of the pie. Savvio.com's Web site promises that it will not limit itself only to travel tickets, and that it plans to offer perishable goods in the future. Savvio has 30 employees and a heavy burn-rate: more than $1 million a month. Yet the optimistic Ms. Ha says "that if you really look at us, we offer significant cost savings without forcing the consumer to give up control." We'll see.

INVESTORS: Pyramid Tech Ventures (lead); Athena Tech Ventures; Charter Venture Capital; and Draper Richards (Tim
Draper's dad).



[This message has been edited by Beckles (edited 07-10-2000).]

From what I understand the way this will work is the closer you get to the date of travel the less expensive the tickets will get ... HAH! I can't believe airlines would buy into this! The only reason Priceline works is because consumers have no control over airline/time, which is an acceptable compromise for the airlines I think for providing cheap tickets without advance notice, but this site says that they will allow to select carriers and flights ... I just don't see the airlines participating in this to any great extent ... those last minute outrageous fares are their bread and butter!

I've been approached many times with venture proposals by dot-com heads about "declining price 'business models.'"

Quite frankly, it is nauseating and frightening to me how little knowledge is possessed of the realities of business economics by most of these what really amount to get-rich-quick schemers.

What these "declining price" modelers in particular fail to understand is that no matter how much the internet phenomenon has created a bane of new investors who have artificially and unsustainably driven up prices of stock in their sector, the new "paradigm" that e-business marketers would like us to believe has been engendered does not and will not change the fundamental premise of business which, in short-hand goes something like, "Businesses are in business to make and grow - not lose - money over time."

The "declining price" business model is a no-brainer to attract end-customers (hence Ms. Ha's and all of the others' giddy excitement), but it is unsustainable exactly because it contradicts the tenet for businesses to always improve their profit margins, and in so doing, discourages vendors to sell all but their remnant products or services at ever-increasing discounts. In the end, are customers really better off with the type of products and/or services received from this venue?

Why sell your best product for a nickel when you can get a dime for it, when you can sell it right away, and sell it in at least as much volume? Why wait, hold inventory, incur additional operating costs, only to sell for less?

And, as Beckles pointed out, to transform the pricing mechanics of an industry as stodgy as the airlines, particularly when it's being spurred by a potential competitor, is the detergent superconcentrate of hogwash.

While I neither dispute the impact nor deny personal benefit from the aforementioned phenomenon, we can not blindly drive our economy into what I'll call "sustained unsustainability" for the sake of indulging short-term greed which in the big picture really benefits only a few misguided individuals.

I have not yet received what I find an acceptable response when I challenge prospective dot-commers with the above. Most of this is due to the fact that long-term perspectives simply aren't part of the vision, let alone the business plan, which is fundamentally concerning to me as a potential investor or partner.

While I don't discourage innovation and creativity, it should be well thought-out, particularly when it relates to a sector that has as much impact the worldwide economy as the internet.

Also, the investors listed there are hardly brand name firms, IMO.