It all started in January 2017. I remember as if it was yesterday, tears dripping down my face while I said goodbye to my best friend. I was waiting for my cab to pick me up, leaving Rio De Janeiro to fly back to Paris, when my flight got cancelled.
This was amazing news for me, another 24h with my friend and one more day of holidays. After a quick Google, I was thrilled to discover that I was eligible for €600 cash compensation, more than the cost of the actual ticket.
“How cool is that EC 261 regulation?” I remember telling myself.
Fast forward 3 months and I finally received my compensation. The process of claiming was long and painful. I remember my astonishment when the airline representative asked me to send my paper boarding pass (which I was never issued) in order to get compensated.
This got me thinking about how many people must give-up their claims in the middle of the process because of its complexity.
I decided to launch a start-up that would help eligible passengers claim compensation from airlines. “Oui Reward” was born.
We started with nothing, Leo my co-founder and myself, working all day from my living room. We managed to reach 10K customers within the first 6 months with 0 employees.
That was a great start for us.
The False Good Idea
Unfortunately, we quickly realised 2 major issues:
- Competition was fierce: With almost no barriers to entry, the market has become flooded, with new competitors popping up almost every day. At the same time, it is almost impossible to differentiate ourselves from others in a meaningful way.
- Cash Flow: To be honest with you the numbers just didn’t add up. We managed to get an ROI of 4, meaning that €40 spent on acquisition could generate €160 of commission. Sounds good right? However, when you take into account…
- Out of 100 claims, 30 won’t be eligible because of extraordinary circumstances.
- Out of 100 claims, 30 will never be completed with all required documents.
- Out of 100 claims, 10 will directly be paid to our customer and we will never make a penny.
This meant that we could only earn commission on 30 out of every 100 claims we worked on. So even with a 100% success rate on those claims, ROI is no longer 4 but becomes 1.2.
Less sexy right?
And that is before you start paying staff, legal costs etc. I let you imagine what happens next.
Exploring the “claims company” market enabled us to understand the different players.
We noticed 3 major issues:
- EC 261 regulation is very unfair to European airlines and costs them 4 billion euros every year, 6% of their operating costs. Is a €250 compensation for 3 hours delay fair when your ticket costs €20?
- Airlines were our enemies, and we were the enemy of the airlines. No sustainable relationship can be built on hate. So we started thinking about long term strategies that could help the airlines as well as travellers.
- Last but not least, it takes forever to receive your compensation. Even for specialised claim companies, it takes on average 9 months to get paid. This is mostly due to never-ending mandatory legal processes.
So, did we want to scale that model?
Upon reflection, we decided no, we could do better!
A Brighter Future for the whole industry.
As I love telling myself if we are planning on colonising Mars and building fully automated cars, I am sure we can find a solution to fix this problem (Yes, I am a Musk fan, and yes, I do have his flame thrower!).
Our original vision was to help take care of customers when a flight was disrupted. We went back to founding principles and cooked up a way that we could make everyone, the whole ecosystem, happy.
This is why we created Koala.
Koala is a Paris-based Insurtech, building tailor-made insurance products for the travel and mobility industry.
Our vision has now evolved:
“We want to reinvent travel insurance with data-driven products which proactively alert travelers to any disruption and pay-out instantly.”
If you read this, share our vision and are driven to change the status quo, we want to talk to you.
We have many plans for Koala and are growing at Falcon-9 speed but this story is for another article.
From ? with ❤️
If you see yourself in Ugo’s story, but never took the leap from idea to founder, the Gateway might be able to help your dreams transform into reality. Please get in touch to chat though your bonkers or brilliant idea.