Most consumer tech startups try to make inexpensive services for a broad market – but a few take the opposite approach. JetSmarter, founded by CEO Sergey Petrossov, has reached a $1.5 billion valuation following that opposite path.
Often called “Uber” for private air travel, JetSmarter enables people to book on-demand flights around the world. Customers can choose private charters or share jets with other members. As you’ll soon see, Uber is a somewhat unfair comparison because JetSmarter offers more of a lifestyle than a traditional service.
In this Q&A, we learn how JetSmarter created all new marketplaces in private aviation by tapping unused flight hours. If you innovate in the luxury space, this interview can help you define your audience, build marketplaces and rev up word-of-mouth marketing.
Jayna: You have created a billion-dollar marketplace, which is hard to do because you essentially have two sets of “customers.” To start, how do you bring private planes into your marketplace?
Sergey: Let me give you some background. There was and is an existing market for airplanes that fly and fulfill charters. That market is estimated at $15 billion in the U.S. alone. When you look at the utilization, they’re only flying about 200 hours per year. At least one-third of their flight hours are completely empty of people. These planes can be used as much as 1,500 hours per year, and there are about 18,000 jets globally. Add all the prop planes, and you have millions of underutilized hours already paid for.
So, we created a marketplace by tapping those underutilized hours and turning them into different product lines. You can book JetSmarter on-demand or on a scheduled basis. You can do a whole airplane or go by the seat. We’re a market maker in the sense that we aggregate hours on these planes and then package them into the right service.
Jayna: What does your sales process look like for planes and charter companies?
Sergey: I’ll break it down like this: jet owners give hours to management companies, which, in turn, pilot and maintain the plane. Management companies look for third parties who can get these planes chartered. We can say hey, why don’t we become your distribution channel to help you put more charter on these planes? We need to know where your plane is located and keep it on a schedule. We’ve integrated over 3,000 planes around the world along those lines.
Now, we’ve taken that sales proposition ever further to build a new market. The conversation goes like this: hey, you have excess flight hours. We’d like to help you optimize that and guarantee some money. That’s an entirely new concept. We know the plane isn’t flying enough because the traditional charter and third-party market can’t fill a plane’s schedule. We can keep it operating on the X number of days when it’s not being used.
That all becomes incremental usage and revenue for the owner. Those sourcing mechanisms bring extra and underutilized capacity into our market. That’s part of why we’re so disruptive on the supply and demand side.
Jayna: When Hotels.com started, they’d go to Hyatt and say, we’ll take a block of 200 rooms for this date, and they got a great rate. Essentially, Hotels.com took the risk. Is that comparable? Does JetSmarter assume the risk?
Sergey: We take more or less risk depending on the type of booking. The first model is like a brokerage, and we’re just an additional distribution channel. We take some risk because instead of selling a particular car, I’m selling a “black car,” which is a white jet in my world. We set the price based on an algorithm. But we’re not buying out flight hours ahead of a customer.
For the second model, let’s use the hotel example, and let’s say the hotel manager tells me 35 percent of rooms are unused. I could buy that remaining capacity. That’s what we do for some carriers who wouldn’t fill the capacity otherwise.
The last way JetSmarter can add value is a bit different. Imagine if I went to the Miami Hyatt, and said hey, you have infrastructure and staff. If you had 100 additional rooms, that’d all be incremental earnings. In the airplane world, the pitch is that you could fly an extra 1,000 hours using existing staff and infrastructure. In that scenario, we do guarantee annual utilization. Or, we make them a partner and give them dibs on bookings, trips, etc.
Jayna: How do you go about finding consumers?
Sergey: We target two types of consumers. The first kind already fly private and are exposed to the cost breakdown. This about 150,000 to 200,000 people. The value to them is clear. They paid $150,000 for 20 hours of flying last year. For the same $150,000, we can offer 75 hours of flying. They share an airplane between hubs and save.
The second type of consumer flies business or first class normally. They can’t rationalize that $150,000 for 20 hours even if they’re millionaires. We’ll show how we’ve lowered the entry price by 7x or 10x. Yes, commercial is still cheaper, but JetSmarter is a better experience and more convenient. They save hours on each end of a flight, and time is money.
We’ll also explain that on shared jets, they’ll meet great people. The network is as valuable as the transportation. You fly with other entrepreneurs, disrupters and shakers-and-movers. Business transactions happen on practically every flight. We even have a social network for members. In other words, we’re selling a new lifestyle, not just a service. The hardest thing is educating customers that sharing is good.
Jayna: You mention the importance of word-of-mouth in your marketing. Why is JetSmarter exceptionally good at sparking word-of-mouth? Is their strategy behind it?
Sergey: Our business wouldn’t exist without word-of-mouth. We’re growing as a social network would. The hardest thing for a disruptive company is getting people to try it out. You’re asking me to spend that much money on experience I don’t understand? And you want me to try sharing a plane?
People trust friends. If a friend says JetSmarter is the best, the trust factor goes up. We spend a lot of time asking members to spread the word. And we rely on word-of-mouth to get past objections. For companies selling luxury experiences, the hardest piece of the puzzle is growing the demand side.
Jayna: Take us into the mind of a consumer category you’ve called the “mass affluent” – what do they really want? How do startups target this segment effectively?
Sergey: The mass affluent concept captures where luxury is going. So before, it was about brands. Today, in the tech age, luxury is transcending past brand to experience. It’s no longer about the brand, marketing and brand association. It’s about personalization and what I call predictive hospitality.
The mass affluent are looking for experiences tailored to them and the lifestyle they want to live. We follow customer behavioral patterns and ping their location daily to understand what they need. Based on those insights, we share opportunities to fly, to join an event, to access one of our 8,000 luxury homes and much more. We think about three pillars: how you get there, who you meet and where you go. Mass affluent want a one-stop-shop for all three, and that’s what we strive to offer.
This tailored approach seems to be working. Our average user visits JetSmarter 12 times daily.
Jayna: Tell us about your plans to democratize private flying. How are you doing it, and what are the obstacles?
Sergey: We’ve already lowered the entry-level price significantly. It used to be for the “.1 percent,” not the 1 percent. We’ve expanded to the 1 percent because the entry price is $5,000. That lets people dabble and grow into it.
Where we believe we can go further is in short-distance aviation with single engine airplanes. Their cost to operate is much lower, in part, because they use less fuel. They can fly about 250 to 300 miles, enough to go from Los Angeles to San Francisco.
We have pilot programs live in California, the Northeast and South Florida for short distances. We’re running these to prepare for next phase. You can think of it as our “UberX.” Ideally, we’d like to get the cost down to $1 per mile per person. In other words, that LA-SF flight would cost $250. We’d accompany this with a lower-cost membership and allow people to pay by the seat.
Jayna: If an entrepreneur was struggling with customer acquisition and came to you for advice, what questions would you ask? Where would you guide the conversation?
Sergey: I’d ask about the loyal customers, the ones that love the service. I’d advise the entrepreneur to look at KPIs [key performance indicators] around that – repeat business, retention, churn, dollars spent, etc. Always side towards the people who already love you, and make them ambassadors. Add flavor or services just for them. It doesn’t cost much to win more business and referrals from top customers.
So that’s the question for a struggling entrepreneur: what KPIs are most important for your best customers? Get them to do more and tell more people.
Learn more about JetSmarter at www.jetsmarter.com
