This post is a prequel to Himanshu Mody's post on Times Treaty hosted yesterday . After all, if George Lucas can make Star Wars backwards, why cant a Rodinhood post a blog backwards?!!
Essentially, a lot of 'value' in the real world 'expires' in short periods of time - like perishable commodities.
So, think of a Hotel Room that lies vacant at night since no one has checked into it. Or the seats in an Airplane that remain unoccupied the minute the cabin of the aircraft gets shut.
The biggest perishable commodity of course is MEDIA - ads that remain unsold in Newspapers and in TV channels etc.
So, how do owners of such perishable goods try and monetize that value in the best possible way?
The large Media Groups like Times of India have created business units that 'barter' their ads space in their various media products (print/tv/online) for equity in small yet promising companies that may become very valuable in the future.
So, think of it simply - Times 'gives' away say Rs 100 worth of ads inventory in exchange for a Company that is say valued at Rs 1000. So, Times get 10% of that company in exchange.
Now, that Company uses the Times of India ads and creates more business for itself.
After say a few years, 3 possibilities exist:
- The company get sold for Rs 3000 - so Times makes Rs 300 on its investment of Rs 100
- The company gets sold for Rs 1000 - so Times recovers its money
- The company goes under - Times recovers zero.
In any which way, since the media was UNSOLD, Times Group loses nothing.
The reason I post this is to wonder WHY Airlines and Hotels dont offer their wares to start up's like us?? I mean the offer should be fly for free and stay for free in exchange for a few % points in our Companies?
ONE OF MY MOST FAVORITE HOTELS IN THE WORLD - THE GEORGIAN SANTA MONICA - SIGH ....CAN I STAY HERE FOR BARTER?
Himanshu's post and the discussion on it will explain the viability of such barters. Check it out and wonder if your business is ready for such an exchange??
What can Rodinhoods do to promote this phenomenon in segments other than media esp technology, travel and stay facilities which are areas start-ups typically need to spend on in the early stages?
Hi Alok, You have made very interesting points. However, in case of hotels and airlines the unutilized capacity is probably not known ahead of time. Bookings can happen till the very end. So how would they commit guaranteed bookings to startups ahead of time. And anyone even though its a startup would require sometime to plan the travel - schedule meetings, etc.
Based on the past data points of capacity utilization, can hotels and airlines predict underutilized days (time slots too in case of airlines) with decent accuracy and allocate those for startups in lieu of small equity.....
In case of media, probably they always have some excess ad inventory in print in the non prime ad spots... but for prime ad spots or prime time slots (for tv/radio)...even the media has to incur some opportunity cost if the startup wants those spots/slots for sure.
Also, they need a team to scout for opportunities and understand some/most aspects of valuations.
The mandate of the PE division needs to be clear.... is it only to max. out the capacity utilization of that industry or can they have complete independence and soar their wings and keep investing in good startup opportunities...... giving travel credits instead of cash...... At some stage once max. capacity utilization has occurred, it will start biting into their revenue.....
I have wondered about similar arrangements many a times, but thought that there must be some strong reasons (i couldnt make out what they may be) of companies not following such.
similarly, why dont airlines just auction their last minute seats (if not equity thing, but plain cash for bottom scrapers :) or bargain-hunters )
if they are doing say 70% about 1 day before departure, then they should open up tatkal :P but at lower prices. May be they dont want this trend to follow and loose some of the actual 70% passengers also to this kind of hunting.
But how many travel at short notices. whoever has to travel by air will pay up market price anyway. But certainly the 2 AC train traveler (tatkal guys) can be attracted to air by this.