Late yesterday morning, I grabbed coffee with Hipmunk cofounder Adam Goldstein. Hipmunk is a 10-month-old, 10-person, San Francisco-based startup whose travel search has won it the respect of the tech cognoscenti. They also comprise most of its users at this point. Hipmunk doesn’t release user numbers, but Goldstein said the service – which only recently began to experiment with paid advertising and has otherwise relied on viral growth — gets “hundreds of thousands” of unique visitors each month.
The company has attracted a meaningful amount of funding for so young a startup — $5.2 million, much of it from Ignition Partners, along with SV Angel and numerous high-profile angel investors. The appeal? It essentially boils down Hipmunk’s comparatively easy interface. While much bigger competitors like Kayak had seemingly cornered the travel search market, Kayak’s success has also translated into an advertising-rich, and, Goldstein argues, confusing, environment. Hipmunk has meanwhile eschewed a text-heavy approach for simple color-coded bars that make it easy to see travel time and layover duration among other things. (Hipmunk also doesn’t run ads on the site – yet.)
Something seems to be working, at least for an enviable demographic that the company will invariably have to sell against. Goldstein said that comparative data suggests that Hipmunk’s users “skew much younger, and are much higher educated, compared with Kayak. Our users have way more graduate degrees.”
Goldstein is himself a bright guy, the kind who other smart people begin identifying as someone worth knowing, regardless of age. New York Times tech columnist David Pogue, for example, had Goldstein proofing some of his copy for accuracy when Goldstein was fourteen years old. (Pogue hired him after Goldstein began emailing Pogue about errors he’d found in one of his books.)
As a high school student, Goldstein was invited to Foo Camp, an invitation-only event for hackers that’s sponsored by O’Reilly Media and attended by the likes of talent Wikipedia’s Jimmy Wales and Y Combinator’s Paul Graham. (Hipmunk went on to become a Y Combinator company last summer, right after Goldstein graduated from M.I.T.)
Here’s another clue: despite that Goldstein’s co-founder is 27-year-old Steve Huffman, who has already cofounded and sold one company (the social news Website Reddit, which sold to Conde Nast Digital in 2006), the decision was made to make 23-year-old Goldstein Hipmunk’s CEO. He says he largely runs business development, while Huffman manages the engineering side of things.
As we were meeting yesterday, Goldstein spoke openly about some of Hipmunk’s challenges, including the need to establish many more relationships with airlines and hotel providers in order to provide their data directly to users. And inking agreements with airline industry players is no easy feat. Hipmunk, which receives a commission every time someone clicks through the site to make a purchase, has been working on some deals since last summer.
Another shortcoming is its inability to show users the cheapest-price tickets to any destination, a feature that would likely appeal to its user base. Goldstein calls it “a limitation of technology. Most of the big sites pay [a data provider] every time a person does a search. If [users were allowed] to search for [flights from] San Francisco to 100 [different] destinations, it wouldn’t be [economically] practical.” Google wants to develop a lower-cost solution but says Goldstein: “Maybe they’ll share it and maybe they won’t.”
We also talked at some length about whether Goldstein and his founder friends see as much froth in Silicon Valley, or if they think talk of a bubble is nonsense. He said that he and Huffman made it out of Y Combinator “just before the feeding frenzy really started. There were three pitching sessions and all were packed to the gills, but it wasn’t like we got [numerous] convertible notes immediately afterwards.”
But he most definitely credits the current environment for Hipmunk’s very quick fundraises. Indeed, just three months after announcing a reportedly “hypercompetitive” $1 million seed , Hipmunk landed a $4.2 million Series A round, and Goldstein says it’s because “we had [Ignition Partners] in our angel round and they liked what we were doing. And they said, ‘Have you thought about a Series A?’ And we were like, ‘Hmmm.’”
Goldstein argues that it made sense to stick with Ignition for reasons beyond its fast offer. “They really know online travel. They’re super tied in with the so-called Expedia mafia, people who know online travel like the back of their hand. Erik Blachford [Expedia’s former CEO], [Expedia founder] Rich Barton, Simon Breakwell [a former Expedia exec who is now the COO of Travelpost] – Ignition brought them all in.”
He also seems to consider that investor interest in early-stage startups has grown out of hand – and so do his founder friends.
“I wasn’t here for the first bubble, but I was reading about it [from his native New Jersey], and when you see companies like [social sharing mobile app] Color [raise $41 million in venture funding before launching a product], it’s hard not to think this is another bubble. It depends on whether there’s been growth in the number of opportunities for startups, or just growth in the number of startups. Startups are a lot cheaper to run than ever before, but are the opportunities [that exist now] many times bigger [than in previous years]? I don’t think so,” he said.
“There’s definitely talk about striking while the iron is hot, because who knows what the future will bring.”