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Read the following first then answer the question below:
In January 2013 – during my IMBA at IE – I was accepted to Venture Lab – IE’s startup incubator.
My idea aimed to solve the problem of inefficiencies in the live events ticketing industry.
In my eyes – empty seats at an event is lost revenue for the venue, as well as sold-out events, where tickets sell on the black market for more than double or triple their face value – again – lost potential revenue for the venues.
In Venture Lab, I teamed up with a classmate with a technical background, and we formed our team. For the next 5 months, quickly gaining industry knowledge, we sought out to validate a solution which could potentially solve this problem. These were our main takeaways from months of research and validation:
Pricing: We defined the main issue as a pricing problem. In live events, seat prices are usually static (the price remains fixed regardless of whether the customer bought early or late). The main problem with static pricing (in all industries) is that it will never maximize revenue, due to the notion that every person who bought the item (was not priced out), could have potentially paid more.
With static pricing, the seller defines a border, where consumers are either priced out (too expensive for them), or underpriced (could have potentially paid more).
With time-based events (travel, concerts, sports), the static problem is amplified, since the value of the item fluctuates according to supply and demand and proximity to event.
Go-to-market: As we were defining our solution, we started looking into potential penetration markets, and zeroed in on Spanish football for the following reasons
The sheer size of the problem – as I showed you in class – 19 million Euros in unsold tickets every weekend in the Spanish first division alone.
At the time – the majority of Spanish football clubs were in debt (still are) and looking for additional revenue channels.
Studies show that the Spanish consumer is on the high-end of price sensitivity, meaning, they will be looking for bargains.
Spain was one of the top 5 countries globally in smart-phone penetration.
Credit Card/PayPal transactions were the most common payment methods for football tickets.
(And of course there were many problems we had overlooked and only ran into at a much later stage)
After carefully defining our problem and go-to-market, we dove deeper into our research and validation of possible solutions – Here’s a brief outline of our proposed solution:
Consumer side app:
Users would pick their match and sector where they’d like to sit.
They would have an indication of the face value of the ticket in that sector, and they’d input how much they’d like to pay, and the amount of tickets.
They would guarantee their bid with a credit-card or Paypal
Approx. 24 hours before the match, the user would be notified (email+sms) whether they managed to obtain the ticket. In the case of a yes, the credit card would be charged and tickets emailed. In the case of a no, no charge would be made.
Venue side dashboard:
The dashboard we’d provide the venues’ ticketing managers was the real magic in the idea:
Our system was to integrate with their existing ticketing channels.
It would display how sales were progressing in each sector (via their other sales channels), and how many bids were being placed and at which prices in the various sectors.
They’d be able to play around with setting the minimum winning price for each sector, and they would see how much additional revenue they’d generate depending on the price they’d select.
Once a winning price was set, all users who bid that amount or more would win, credit cards would be charged, and tickets emailed.
In order for our system to pull it off, It would have to know how to allocate bid winners to available seats, and create valid tickets for them at the prices they’d bid.
The system would also take into account the bid amount when determining the quality of the seats.
After defining this solution, we’d put together an ugly html based demo of both the consumer and venue side applications, and started meeting potential clients.
Venture Lab ended when we graduated in May. We ended the project as one of the finalists among 30+ teams, we had the demo we’d put together, and by that point, we had spoken to a few football clubs in Spain who showed interest, and we were discussing several alternative business models with them.
At that point, I had to make a decision between entering a career in consulting, or pursuing “People Sports” (soon to be rebranded to “Never Empty”).
Deciding to pursue Never Empty, I set out to raise $500,000 from angel investors based in Israel and the USA.
4 months later (Sep. 2013) – we had the full amount secured, and were more than happy to start spending it.
In September 2013 we had closed our initial round of funding. At the time we were working with several agencies in order to build our network within the local football and ticketing industry.
Technology-wise, we had a simple demo of our envisioned product, but were miles away from a market-ready platform.
My co-founder’s technical experience was mainly around integration of software and hardware, he had the ability to design the platform architecture, but lacked the expertise needed to code the front and back ends (customer facing app and venue facing dashboard/control panel).
We had defined January as the month when we’d like to launch our first test-market, and were debating whether to start building our in-house team, or rather outsource development of the platform’s first version.
What would you do? You can talk about the pros and cons of in-house vs. outsourcing in early stage ventures, or any other related idea or topic.
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