Updated: Jan 31, 2019
“Finding good people is not easy. Even if you don’t have an open position and you’re talking to somebody great, try to build the organization around that person, and don’t be function-oriented.” - Quote of the founder, Torben Antretter.
In this episode Torben Antretter shares the story of his legaltech startup RightNow, a company that - among other things - helps airline passengers get their money back for unused tickets. The company recently finished another round of financing, adding EUR 25 Mio. to their bank, but not everything has always been as good as it seemed.
In this episode you’ll learn:
How Torben managed to finish his PhD and grow his venture into what it is today
How a startup can fight in the big leagues, e.g. against RyanAir (spoiler: it has to do with law!)
How the team turned a threat into an opportunity and got out of it stronger than before
How lower margins forced the startup to automate their business
Why the team has to be good at predicting price sensitivity of their potential customers
Why Torben tries to build the organization around great people, and not the other way around
Why he’s hopeful for the future of their business (spoiler: it involves new product launches!)
The whole concept around the startups of the RightNow Group are based on a consumer-factoring idea. Every time a consumer makes a contract with a big corporation, they have certain rights, but have a hard time pursuing those rights. They buy consumers' claims and build automated processes to pursue those claims in courts. Geld-für-Flug is one product for airplane tickets: upload your unused flight ticket on their websit. They buy the claim for up to 70% of the original ticket price. And that's it! Users don’t have to take care of anything else and gets the money within 24 hours.
The start of his entrepreneurial journey
The first entrepreneurial thing Torben did was selling wine with a friend. It didn’t work out though because they didn’t own the technology. So the margins were way too thin. He learned from it and started his new venture. But before he did that he developed a catalogue of things that the next business should have. It came down to two major attributes:
and more attractive margins.
Starting a business whild doing a PhD
Time management was very crucial for Torben when working on the startup and writing his PhD. He was haunted by the thought of quitting his PhD many times, but finishing his studies was a personal goal that he wanted to pursue. So he worked late nights and on the weekends in the beginning phase. As soon as business angels got involved it shifted into a phase where he did both things at the same time. He explains how it got very messy and people were disappointed and not satisfied anymore. He then started waking up at 4:30 in the morning to have 2-3h in the morning to do some quality writing for his thesis. His recommendation is to find time to focus, separate things as good as you can and don't do more than one thing at a time. In the end he learned from it and got really good at prioritizing. He learnt to say 'no’ to many people.
"You can’t be everybody’s darling." - Torben Antretter.
So some people were disappointed. But he always asked himself if something is important and urgent. If it was both of it then he does it right away - if not he postpones it.
They bought the first batch of tickets themselves for about 10k per team member. Filing a claim end to end can take 6-12 months, so they had a long proof of concept phase. The law and precedent cases were very clear though about what would happen. So there was not a big risk there for them. They talked to lawyers who did that for more than 20 years and got prove that it works. What they learned and added to the practice of these lawyers was the scaling of it. Doing thousands of claims per day and thereby finding out how the other side reacts to these class actions.
Troubles in dealing with big corporations
Ryanair was one very stubborn defendant to deal with. There were cases where they had to go to the airport with a prosecutor because they hadn’t paid. In the end the larger the company is (and we are talking about the biggest ones like Lufthansa), the more resources they invest in fighting what we do. But since they know they can’t win, they start arguing about ridiculous things (e.g. saying that we’re not a real legal company). These arguments are meant to make it unattractive for us to fight them.
When half of your margin suddenly gets cut off...
The biggest challenge for them was when half of their margins suddenly got cut off. Their business model worked perfectly for the first year. They could legally pursue up to 95% of the flight price, so also including the net fare of the ticket price. In march 2018 the highest court in germany ruled that the airline can keep that proportion of the ticket. And that is exactly where they focused on: high priced and long haul flight tickets because the margins there were so attractive. From one day to the other half of our margin was cut away and they had just raised a financing round a couple of weeks before. Severe articles in the biggest german newspaper were published, talking about how this new legal situation makes it unprofitable for our customers. There was a lot of doubt in that moment. And lots of anger based on the question why they didn't see that coming.
"But one thing you learn over time is that the process of disappointment and anger gets shorter and shorter." - Torben Antretter.
The first time you’re disappointed for three days and you think about stopping the whole thing. The next time it’s three hours and then three minutes. You learn how to cope with setbacks. In the end they were at a good stage at that time and even profited from this critical situation. They had a conference call with the founding team and some managers. Then they notified their investors about the situation late in the evening and they all started brainstorming with them and developed a new positioning which we could quickly communicate. And that is how they got rid of the negative media wave. They had to decide either to get under the radar, or ride the wave and use that attention. So they published an article two days later. They tried to show that they have never stumbled and they are still a service that helps passengers in that situation. That wave helped them a lot! Traction on website increased a lot. Lastly, but almost more importantly, they also benefited from a business model perspective. Due to this new regulation they pivoted to deal with low cost flights and were forced to automate their processes much more because our margins were much lower. So they had to do 3-5 times the number of claims for the same revenue. And now they are running much more scalable than before!
That is why he is very hopeful for the future of their business model, and very excited for other products, e.g. train tickets (https://www.bahn-buddy.de). They want to quickly build new products in a plug and play manner. So a third product will launch in December for car damage refunds based on the idea to get cash instead of the car repairing.
Pricing strategy for a high conversion rate
Pricing is and has always been a crucial aspect of their business model. What do consumers want our of their sale and how much to they take for their services. Torben explains that it depends on the situation. They’re trying to find out what the price sensitivity of the client is. This depends on things like when the flight was bought, is the flight scheduled in the future or past and even if the client is male or female. So in the end they are trying to maximize the margin (like any other business), without risking a bounce rate that is too high - that is keeping the conversion rate high.
His biggest learnings
Overall Torben wouldn’t change anything because he is supper happy where they are now. From an entrepreneurial perspective though he would change some things. He would for example take care of necessary things like bookkeeping and accounting much earlier, because it really hits you when you don’t do that correctly from early on. And on top of that he claims one more very important learning: Finding good people is not easy! So keep hiring constantly and look out for good people. So even if you don’t have an open position and you talk to somebody great, try to build the organization around this person. Don’t be function-oriented, try to build the organization around great people.
Links to the startups of the RightNow group:
Weekly book recommendation:
Deep Work, from Cal Newport got Torben to delete most of his social media profiles. He deleted Facebook and Instagram because he recognized that it really distracted him from his goals. He is now focused on the relationships that are important to him, and calls people instead of giving out ‘likes’. His relationships have gotten much more intense, and he has gotten much more focused on his work.