Made in SA

Starting up

A relatively unknown outfit is rapidly becoming one of the biggest web businesses in South Africa.

1 July 2010
Travelstart founder and CEO Stephan Ekbergh believes his in-house development team is as good as the one he had in Sweden, maybe better.

The offices with gleaming metal and glass everywhere would not look out of place in Silicon Valley. Stephan Ekbergh, CEO and founder of online travel comparison engine Travelstart, smiles as he plays the role of guide around an entire floor of prime real estate in Cape Town’s Long Street.

“We moved into this office in 2008,” he says. Climbing up a fire escape, he walks around a half-completed floor, with an in-house restaurant in one corner. The topmost floor is completely barren.

“We took these floors about a month ago. A year or two from now, this will all be full.”

But what made a Swede move to Cape Town over five years ago to build a business? By his own admission, 50-year-old Ekbergh “loves telling the story”.

In the middle of the ‘90s, he began to experiment with some novel ideas, and “one of them was to use CD-ROMs to display travel information and guides”.

He also started a service called “Finalcall” where travel data and latest offers were stored and accessible using touch-tone telephones.

Then came the Netscape browser.

“The natural evolution was to do the same thing on the internet.”

Ekbergh started the first online travel company in Scandinavia, called “Mr Jet”. He obtained funding and launched in 1998, after six months of development.

“After a year, I was fired from that,” he says matter-of-factly. “Long-term, I thought online travel agencies maybe weren’t going to be such a big hit – perhaps people would want to directly interface with airlines.”

Ekbergh wanted to figure out a way to do that.

“Of course, I didn’t have any money and I couldn’t find any investors for this foggy idea I had. So instead, I decided to start a ‘Mr Jet-killer’.”

And that’s what he’s doing to this day.

He speaks about the connection he felt to South Africa since his first visit in 1989. Four or five years into Travelstart (when it was still a Scandinavia-only business), he wanted a “bit of adventure”.

“I was tired of what I was doing; there was no real challenge any longer. I wanted a change; my family wanted a change.”

Ekbergh relocated to Cape Town, all the while calculating the risk: “It might be the start of something new or everything will go to hell, and almost did!”

The South African business launched in late 2006 and gained traction by mid-2007.

“I felt less and less interested in the Scandinavian market. I was intrigued by emerging markets,” Ekbergh says.

The team scouted around India but eventually shelved plans for the subcontinent.

“We can change more here than what we could in Europe,” he explains. “What we do can benefit customers for the next five, ten years.”

Ekbergh went all in earlier this year and sold the brand in Europe.

He offers a personal account on his blog: “Looking back at old business plans, I see that we had set out to have a ten percent online market share in the Nordics and we achieved 11 percent, according to Phocuswright. I am NEVER going to make that kind of stupid plan again. If we can’t have 70 percent, I’m not even going to bother going into a new market.”

Now the focus is squarely on South Africa, Africa and the Middle East.

No easy ride

But it hasn’t been plain sailing. Ekbergh highlights the issue around Reserve Bank approval and exchange controls.

“We’re also missing some large blue-chip companies whose role is to mentor the whole industry,” he adds. “In Sweden we have Ericsson, Finland has Nokia. Here, as soon as someone is good, they run overseas.”

South Africa also lacks credit card penetration, as well as quality broadband.

“I don’t know what comes first. Broadband or credit card penetration or good services… It’ll come.

“Three, four years ago, our experience with the internet down here was terrible,” he says. In the company’s first office, the internet “was so bad we basically couldn’t work”.

Ekbergh had to send his 15 employees out to “internet cafes, coffee shops, anywhere with WiFi to work. You send the whole team all over town just to work. That was bloody discouraging.”

The situation is much better now, he admits. Dealing with the South African culture is also really tough, he explains.

“In Scandinavia, a handshake is good. But here, we had people just suddenly not showing up for work.”

He admits he somewhat naively believed in trust. The result was contractors not delivering, and suppliers trying to screw the company.

But, once Ekbergh found good South African managers, they taught him how things are done locally.

Development is all done “in-house” by a South African team. The group is busy building a new platform which will go live in the third quarter.

“The development team we have upstairs is as good as the one we had in Sweden, maybe better,” he says.

He finds developers are “triggered by doing something fun”. With financial services companies locally, developers have “really, really boring jobs. They just want their stuff to work and are not willing to invest in innovation. The culture in Scandinavia is really around innovation. In South Africa, they’re really good at innovating new fees,” he jokes.

Mobile definitely has a role to play in the business, and the development team will start on that in the third quarter.

Ekbergh acknowledges that this online business is “one of a few at this scale. We’re battling to find good role models on the internet side”. But, he says, there are “an astounding amount of clever people in South Africa.”

Travelstart is doing well in the South African market. About half its transactions are for domestic travel and half international, with 40 percent business travel and 60 percent leisure.

The business is still mainly focused on providing a comparison service for airfares.

“There’s so much to be done in that space, especially now, with the low-cost carriers,” he says. “We want to be really good at showing customers what the best alternative is for their particular trip. The airlines absolutely understand what we’re doing,” says Ekbergh. But that “wasn’t the case three, four years ago”.

“As soon as you show some volume, they’re always interested!”

The plan is to expand throughout Africa and the Middle East.

“Certain countries we’ll do ourselves, some through licence agreements, some through joint ventures,” says Ekbergh. “We’re going to grow 20 times over the next five, six years. And we’re going to run it all from here. I’ve done my bit of travelling,” he laughs. “I’ll let the younger people do that. I want to be involved in adding value, my flavour to the whole thing.”

And once those markets are conquered?

“I’m not thinking about that,” he says. “I’ll do it as long as it’s fun, and I don’t plan to retire. Conquering Africa and the Middle East will really be fun. Most economies are much more open than South Africa.”

Customer service, a mainstay of the operation, is not just a problem in SA.

“Service is not sexy, and it’s a global problem. You can’t go to a venture capitalist and say, ‘I’ve got this great service company I want to start.’ They’ll ask, ‘What’s your edge?’ You can’t say, ‘Oh, great service’.”