HomeAcquisitionsBuild, buy or license? A founder’s guide to an adaptable growth strategy

Build, buy or license? A founder’s guide to an adaptable growth strategy

When it comes to building a startup, ultimately what you’re looking for is one thing: growth. There’s no magic formula or secret recipe that can tell you how to do that. But normally, it comes down to making a decision between building, buying, or using third-party partners.

Sure, that seems relatively straightforward—but it’s actually more complex. Why? There are many nuances to making this decision and figuring out whether it’s right for your business. Buying or merging a product can be extremely difficult, and not necessarily compatible with what you’re doing. When you buy, you’re actually buying people and skills more so than the product itself. You have to make sure all of that fits with your culture and core values. Figuring out what to build versus what to outsource also comes with a myriad of questions. Is what you’re building part of your core capabilities? Is it going to enrich your value proposition? Or is it something peripheral to your business?

You have to think about all of these questions and more when developing an adaptable growth strategy.

TravelPerk’s growth path

2021 has, so far at least, been a great year for TravelPerk. From starting the year off with our acquisition of NexTravel in the US, to partnering with Skyscanner, to raising $160 million in our Series D funding round, and now to welcoming the UK’s Click Travel to the TravelPerk Group — we’ve really been full-steam ahead.

At the heart of that growth lies our commitment to maintaining our culture and protecting our core values. Everything we’ve done this year, and of course in years prior, has been driven by who we are as a company and as a team.

2020 and the global COVID-19 health crisis presented us with a unique opportunity to position ourselves as a leader in business travel. We like to say that we turned lemons into lemonade during and after such a difficult year by using this time to understand what the future of business travel would be like going forward. We asked ourselves what our customers’ needs would be, and we built a strong product and growth strategy to make sure we could provide them with that. That’s pretty much how we got to where we are today.

How to know when to acquire

Reaching the point where you can start thinking about buying something, whether that’s a product or a company, is ultimately something to celebrate. Getting to this position can be a challenging, bumpy road and requires real due diligence. So, what do you need to think about before you make a decision that will determine the future of your business?

How big is the company you’re looking to buy? How does their size compare to yours? Just think about it. Integrating 3 people into a 3000-person strong team is easier than bringing 30 newbies into a company of 30 people. You have to look at the culture that they’ve built and make sure that they’re the right cultural fit, or they could potentially clash. We decided to acquire Click Travel specifically for many reasons, but chief among them was their outstanding work culture. We’re the perfect fit, and we passed on several other acquisition opportunities because that cultural fit just wasn’t there.

What exactly are you buying? Think carefully about what it is you’re buying. Is it a product? A team? Access to customers? Patents? Product mergers rarely work, and it’s often much easier to buy a team than getting a full product to merge with yours. Be aware of what you’re buying and build an integration plan that maximizes the likelihood of success based on what you paid for. Think about how much integration is required, and be firm in dropping the elements you don’t need in the acquired company. For example, if you bought the company for its talented employees or customer base, do you really need to keep their product? This was the case with our NexTravel acquisition. We acquired them for their US market expertise, extensive inventory, and customer base. We didn’t need the product, so we integrated all of these other things with TravelPerk’s.

How to know when to build or when to use a 3rd party partner

At TravelPerk, we always say you should focus on impact over effort. If something is going to take a huge amount of time and effort without yielding great results, then why bother? This is something you should think about when deciding whether you build something internally or use a third-party partner. Here are a few things to consider:

Is what you need a commodity or a unique offering? Let’s use a really simple example from TravelPerk’s history, Customer Support. Is handling customer emails a commodity? Can you achieve the desired results through Zendesk, for example? If you can, why would you build your own customer support backend?

Is it core or peripheral to your offering? You should always build core elements of your offering in-house. For us, for example, the connectivity to flights and hotels should be done in-house as much as possible, whereas we use Looker for its business intelligence product instead of building our own.

How does the cost change as you scale? There are some solutions that are cheaper to build than to buy at the stage you’re at right now. But is that going to last? Will building in-house remain cheaper as you scale?

Is building in-house a competitive advantage? How is building what you need internally going to give you a competitive edge? Going back to our customer support tool example—handling tickets is easy and a commodity. Just use Zendesk, you don’t need to build a full-on service because it won’t set you apart from your competitors.

However, we have discovered that building our own chat tool to provide chat-based support from our mobile app can be used as a huge competitive advantage. We have built a TravelPerk-specific chat tool that makes our customer care agents 10 times more efficient. For example, they can cancel or change your flight directly from the chat interface they are using to speak with the traveller. A unique product that makes your end user experience 10x better is probably worth the investment to build inhouse.

My final thoughts

The decision of whether to build, buy or license is one that can determine the future of your company and should not be taken lightly. But you should also always seize opportunities when they come, if they make sense for your business. Being too cautious is just as bad as being too reckless, so finding a balanced approach based on information and knowledge is key. No matter what you do, never forget your core values and culture, as they’re often what’s going to determine your next step. Always stay true to who you are as a company, and make measured and considered decisions before you act.

Avi Meir
Avi Meir
Avi Meir is CEO and co-founder of TravelPerk, one of largest global travel management platforms. Avi is a travel technology veteran, with nearly two decades of experience in the industry. He sold his first company, Hotel Ninjas, to Booking.com and then founded TravelPerk in Barcelona in 2015. He believes in continued product innovation and excellent customer care to meet the changing needs of travelers in the environment of uncertainty created by the pandemic.

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