Before the Collison brothers founded Stripe in 2009 – a relative age ago in startup land – software developers would have to build complex integrations with payments providers like Visa, Mastercard and PayPal if they wanted to sell anything on their app or website. Now, the cofounders of London-based travel tech startup Duffel are looking to build the "Stripe for travel" and allow any developer to offer native direct travel booking.
We sat down with the Duffel CEO Steve Domin in a cafe around the corner from the startup's fairly typical Shoreditch office, which it has already outgrown, as evidenced by the lack of meeting rooms available for the CEO.
Dressed in a uniform of grey Duffel jumper and black jeans, the Brittany-born software engineer explained where the idea originated, back in 2015, while he was still the head of platform engineering at the London-based fintech company GoCardless and working on a side project to build a weekend getaway generator.
"The first part was you need to get some kind of algorithm based on a few criteria and build a recommendation engine for cities," he explained. "The other side was pulling in content from airlines and hotels and packaging that together to present three options.
"When we started, I felt the first part was going to be the hardest and the second part would just be an API somewhere we can plug in, give the destination and get all of the content that we need. It turns out, as you probably guessed now, I was really, really wrong."
After leaving GoCardless in 2016 he revisited the project and expected someone to have "built the Stripe of travel" by then, but no one had, so he teamed up with his old GoCardless colleague Tom Bates to build it.
The relationship is broken
To understand Duffel's proposition requires some understanding of the Byzantine and quickly changing world of global travel booking systems, specifically the fraught relationship between airlines and the global distribution systems (GDS), especially the big three providers Amadeus, Sabre and Travelport.
These middle systems have long allowed travel agencies and metasearch engines like Expedia and Kayak to access, bundle and book fares with airlines, hotels and car rental companies. Then, in 2012, the International Air Transport Association (IATA) introduced what it called the New Distribution Capability (NDC).
"The NDC will create a set of open XML standards to modernise airline retailing by enabling innovation in the way airline products are distributed, and making possible personalised offers to passengers who will have access to all airline products and services regardless of distribution channel," a press release from IATA at the time explained.
What this essentially allows is for airlines to build direct digital pipes to provide fares, personalised offers and ancillary services like baggage, seat selection and upgrades, just as customers would see if they visited that airline's own website.
As Domin put it: "The relationship between the GDS' and airlines has been broken."
The airlines increasingly want to be able to package up their various products and sell them direct via a variety of channels without having to go through the GDS and pay their fees. "They want to become Amazon, they want to have a product and put it on shelves," Domin said.
This is where Duffel comes in, as the startup is building these direct digital connections for the airlines that can be plugged into any digital channel with a simple integration and a single API.
This approach also allows Duffel to bring new players into the travel market, aside from existing online travel agents. For example, Domin envisions ticket sellers or festival organisers being able to offer flight options natively on their website or apps in the future when someone books a ticket for these events.
One of the airlines pushing for greater usage of NDC is American Airlines, which turned to Duffel in 2017 to test its ability to provide these direct links to travel agencies.
The pitch from Duffel was simple: "We're going to build this thing that's going to be super easy to integrate, make it very easy for new sellers to come on the travel marketplace and I think they bought that," Domin said.
Over the last year, Duffel has accumulated 18 airline ‘partners’ that offer direct connect APIs such as American Airlines, Air France, Singapore Airlines and British Airways. At the moment the airlines pay a small 'transaction fee' – which has not been publicly disclosed – on each booking that flows through the Duffel API.
It is still early days for Duffel, and the startup is having to develop trust with these legacy organisations, but the prospect of being able to offer their products direct through more channels, with a better margin to top it all off, is proving sweet enough to at least make them try.
"They just are not used to working with a 17 person-startup, for them that is a bit alien," Domin said of his early interactions with the world's biggest airlines.
"We really have to build trust and show them that even though we're small, we can still move fast and we know what we're doing. Then the second thing is around reliability and security," he added - big focus areas for the company's engineers over the past year or so.
The natural question to ask next is: why would the major GDS companies that have billions of dollars in revenue each year and armies of skilled engineers, not build their own direct solution?
"They will," Domin admitted. "They've been trying to integrate NDC content into their existing product lines. They have the resources, they have been driving the standard as well, they've been part of the the discussion and understanding... The biggest hurdle for them is the commercial model." In short: NDC is something of an existential threat to these global distribution businesses.
And what is to stop the likes of Amadeus from coming knocking with an acquisition offer tomorrow? "Nothing really, we just don't want to," Domin said. "The moment they will come to the door, we know that means we've probably done something right."
Investment and future plans
The comparison with Stripe is an important one, as Domin has clearly been inspired by the fintech success story, which has built momentum primarily by appealing directly to developers, rather than senior management with access to big budgets.
"The whole product is geared around developers: documentation, the guides, the management interface for the APIs, it is so easy to integrate," Domin said of the Duffel proposition.
It is a similar model to that of the communications specialist Twilio, which has seen similar success with the bottom-up sales model, and the similarities could be a core reason why venture capitalists have been so keen on the Duffel proposition.
"When we got into Y Combinator, I thought if we raised $500,000 from a couple of angel investors that would be great," Domin said.
Then, since leaving the famed Silicon Valley accelerator – of which Stripe is arguably the most famous alumni – in the summer of 2018, Duffel has raised $50 million across two investment rounds, led by venture capital heavyweights Index Ventures and Benchmark Capital, as well as a seed round from newcomer London-based fund Blossom Capital, which was launched last year by former-Index principal Ophelia Brown.
Brown told Techworld she helped launched the fund in part "to find those founders who are defining industries; founders with audacious plans and sky-high ambitions and that's exactly what we found with Steve and his team at Duffel."
The investment has been earmarked by Domin for growing the engineering team as he plans to go from 17 people today to 60 by the end of the year.
"That's one of the constraints that we have, we just can't do all the airline integration that we could do potentially," he explained. As each airline's system is different, and probably built on a legacy technology stack, the initial API development and integration work is hands on and engineering-heavy, and Domin wants to grow this team so that he can eventually link to the hundreds of commercial airlines that operate globally.
"There are around 465 airlines to integrate, which is still a pretty big number, but it feels achievable," he said. Right now, the sky's the limit for Duffel.