Eric Gnock Fah still remembers the day he presented at the WiT Startup Pitch in Tokyo in June 2015. It was barely a year after he and co-founder Ethan Lin had started Klook, their “discover and book fun-things-to-do at exclusive prices” business, in Hong Kong.
“We were nervous but we thought the first pitch (at the semi-finals) went well. But the second pitch (at the Grand Finals) was not as good as we had thought it could be,” said Gnock Fah, speaking to me the day after the news that Klook had raised another $200 million in Series D funding, bringing its total financing to date to US$300 million.
Eric Gnock Fah (left) and Ethan Lin pitching at the Grand Finals at WiT in Tokyo, 2015: “We wanted to be perfectionists and so maybe we were even more nervous in the finals.”
Recalled Gnock Fah, “I remember we sat down with your coaches and overnight, we redid the whole deck. We wanted to be perfectionists and so maybe we were even more nervous in the finals.”
Nevertheless, they went on to win the prize that year. “You picked us out and everything started from there,” he said.
“It was the first travel event we had participated in and after we won, many of the industry players who were there reached out and helped us establish networks in the industry. We weren’t the first in the space and so we also learnt how other players had done it and learnt from their experiences.
“Ethan and I had zero experience in travel or tech – so it was the right event at the right time for us. We are so thankful to WiT.”
What’s striking looking at the deck they presented in 2015 and comparing it to now is their mission has remained the same. Their tagline “Yours To Explore” remains the same. The word “fun (things)” has been replaced by “amazing” but essentially they have stuck to the promise that they would offer pre-departure and in-destination services and products, and change the way people travel. In their deck, there was a slide that said that even though over 80% of travellers research online before travelling, there was only 8% online booking for travel activities. And another that said over 60% of travel activities bookings happen in-destination.
Klook’s promise has remained the same since 2015 – Yours To Explore. It wants to follow to customer – “from the day they want to go somewhere, depart their house, to airport, out of airport, to hotel, and what they do in-destination.”
Lessons from WiT – how two fundamental changes were made
Their experience at WiT did help them to finetune their idea and model further though, said Fah. “To start with, we initially wanted to do most of it on desktop but WiT showed us we needed to quickly shift to mobile and because mobile development required a bigger investment than we had allocated, we raised an angel round to fund the app development. (In February 2015, it closed $1.5m in seed funding).
“The second change was we shifted from P2P tour guides and niche products when we learnt how hard that was to scale. Even tours & activities is so niche, this is why we now offer the full range of in-destination services.
“We knew we needed to go multi-category to scale – it may not sound so sexy but we extended to wifi connectivity, transfer, rail for which there is huge demand, attractions. Our thinking is, we will follow the customer – from the day they want to go somewhere, depart their house, to airport, out of airport, to hotel, and what they do in-destination.” (For example in Singapore, travellers headed for Japan have the option of renting a SIM card from Klook which delivers it to your house. That way, it hopes to capture you from the point of departure to return.)
Having made the decision to go multi-category and to focus on the Klook app, it was just ruthless and relentless execution from the start, he said.
“Multi-category is hard to roll out. If you do flights, that’s easier, just one category. We also didn’t realise travel was so traditional – both from the big distribution players and supply side.
“Companies like SMRT (Singapore), MTR (Hong Kong) to Disneyland and Universal Studios – they are huge companies and as a startup, it was hard to get them to collaborate with us. The hardest part was knocking on doors.”
Island guy with the underdog mentality – “you just have to step it up”
One thing Gnock Fah had going for him was his “underdog” mentality and fighting spirit. Born on the island of Mauritius, he knows what it’s like to be an outsider. “Yes, I am an island guy. When you come from a place where you are the minority – Chinese only form 2% of the population – the instinct is just to work hard to step it up.”
For his further studies, he also chose a different path. While most of his schoolmates chose the UK, he picked an “underdog” school, a liberal arts college called Franklin & Marshall in Amish country in Philadelphia, US. “I was even more of a minority there, and I had to step it up as well.”
“When you come from a place where you are the minority – Chinese only form 2% of the population – the instinct is just to work hard to step it up.”
His first task after college was to get a job that paid well and he ended up in investment banking in Hong Kong with Morgan Stanley. After seven years in the sector, he and Lin decided to give up their investment banking jobs to become entrepreneurs.
“We wanted to do something big. We looked at all the different industries and it always came back to travel. We looked at the pain points and itinerary planning kept coming up.
“We also wanted to start from Hong Kong and if you do a local business here, it’s hard to scale while travel is very scalable.
“We also looked at our own strengths, we were not 100% from China and we didn’t want to go into China. What we were good at is cross-border bridging, I come from an island in the middle of nowhere, studied in a school in the middle of nowhere and we are used to bridging places and cultures.”
And if you think his and his co-founder’s investment banking background helped them in the early days to secure the funding that Klook raised in its early years, think again. In fact, Fah said if anything, it worked against them.
“A lot of people think that our funding play is related to our background but they are wrong. Investment bankers deal with large companies – no one back then would look at such a venture as ours. Ethan and I went to China and we had doors close in our faces. Once they learnt we were investment bankers and that we knew how to pitch, they didn’t want to listen to us. So if anything, our background became a burden.
“It’s only now, four years on, that we hope our background can start adding value.”
Before it raised the latest $200 million round, it had raised a total of $100 million in three rounds. “These funds came from our track record, our execution and results. Once you prove you can show results, investors come after you.”
And so they have. Since the last round in October, Klook’s turned down investors. In Series D, there was not enough allocation, according to Gnock Fah.
“Fast fish eat slow fish” – it’s a winner takes all
“They all believe that travel is a global business. The bigger you are, the higher the barrier to entry – it’s winner takes all. Booking is a $100B company, Airbnb is technically in a different category and there’s no meaningful challenger. Investors see this as winner takes all.”
Asked if $300 million in three years could be considered too much money for a startup, he said, “We’ve heard of the saying, big fish eat small fish but it’s actually fast fish eat slow fish. There are only two ways to be fast fish – the right team, the right funding.
“Of course we can grow the business steadily and we can be profitable overnight, but we wanted not just to be in HK or Asia but globally. It’s a race against time and only team, execution and money can forge that.”
Asked if he was a believer in the “unprofitable growth” philosophy, he said, “I believe in profitable growth. Unprofitable growth leads nowhere. As a big platform with multi-category products, this is a balance we have to strike. There are pockets making money but we are also chasing growth in Europe and the US where we are in investment phase.
“Parts of the business are profitable – we are comfortable and in control of the wheel. We are comfortable with the scaling, now it’s a question of where to put our resources and will be aggressively investing in new markets.”
No reason why Asia cannot produce the next Uber or Booking.com
Asia-based brands though have faced challenges going global. Even Agoda has talked about the challenges of exporting its name beyond Asia. MakeMyTrip remains an India-play. Ctrip is making attempts to expand globally. Can Klook lead the way in blazing this trail?
“In the last 10-20 years, money was a problem. Most of it was sitting in Silicon Valley. Now the deepest pockets are in Asia, so things have changed,” he Fah.
“We are used to diversity. I am African outside, Chinese inside. The US has done a phenomenal job in diversity but in the last few years, the brain drain is coming back to Asia. Now Asia has people and capital, I cannot see a reason why we cannot build the next Uber or Booking.com.”
Asked if there was anything he’d have done differently in the early years of Klook, Gnock Fah said, “Perhaps building the structure earlier. As first time entrepreneurs, we’d never worked in a corporate organization. Finance is a very merit-driven environment, very individualistic. We kind of ignored the team building and processes part.
“Now we have set up a company structure, with HR and other divisions – we have 600 staff now – and are bringing in more and more people who have previous experience and are willing to innovate in ways they couldn’t with their other companies.”
And despite it now being the travel startup that’s raised the most funding in three years, Fah maintains “we are still the underdog. It doesn’t matter what people say or think – we focus on what we do and do it well.”
Of course, there’s been the sacrifice to his personal life. “I get quite a lot of complaints from the family, and we don’t travel much anymore. For most of the people who built the company the last two to three years, family has taken a back seat – now we start to care about everyone’s development, personal life and how to balance that with business. We want to get better at mentoring and coaching people – building teams and growing them.”
Keeping an eye on AI.com
In terms of product, Klook is keeping its eye on AI although he confesses “it’s not full speed”.
“I believe it will make a fundamental and structural change to the ecosystem. We had Internet.com, then mobile.com and there will be Ai.com. Since the last Series C funding, we have built a data and machine learning team to understand it, we don’t want to be left out.
“How can we better recommend, personalise? There are so many different cultures, countries – everything is in data and we are lucky we have a data mine in the amount of transactions we have done.”
He sees Google and Facebook as more of channels than competitors. “In the last 10 years, Google was the biggest channel. Now it’s shifting towards Facebook. Could it be Alexa next? Channels will continue to shift with tech development. One thing that doesn’t change is on the supply chain, to upgrade, consolidate and make transactions seamless – that’s where work has to be done, that’s where the need is.”
As for blockchain, he said, “To be honest, I haven’t had the time to look into it. It’s probably too early to see it commercialised into everyday lives yet. Maybe yes, maybe no. We do what we do best and focus on the fundamentals. We’ve proven a lot of people wrong. Even in the industry, there were lots of articles that said how big the offline industry was and how people would not book pre-departure.
“The $1B of bookings we will hit this year is not just a representation of Klook’s scale but proof that this industry is viable.”
As for an eventual exit, he said, “Our goal is to stay independent. We are probably the only online travel company that’s independent. We enjoy that independence, backed by powerful investors. Maybe we may go IPO and continue to be independent.
“But if any opportunity comes along where we see synergy where we can grow together, we won’t rule that out either.”
Note: Eric Gnock Fah will be speaking at WiT Singapore 2018, Oct 15-17. Early bird rates end in a few hours, so book now.