Ortharize

Companies, especially large ones, often have problems they are not aware of. The lightbulb moment only comes when the problem is highlighted, often by an outsider. Staff overspending on travel is probably one of these problems. Staff wasting excessive time making travel arrangements is a second, but related, problem.

Most companies accept the status quo of travel expenditure and time wastage on making travel arrangements because of the perception that nothing can be done about it. To the credit of the founders of Ortharize, they recognised the importance of the problem, and more impressively, have developed a technical solution to address the problem.

The Ortharize platform has been built to make business travel operations more efficient. According to the company, business travellers spend up to 40% less on travel costs when using their platform and regain countless hours booking and reconciling travel over a dozen customisable reports, including CO2 emission tracking. For companies with substantial travel bills the savings therefore clearly warrant a cost/benefit exercise into the merits of adopting the Ortharize platform.

Whether a company wants to save costs, increase employee engagement or reduce its carbon footprint, the business case for a service offered by Ortharize is self-evident. But, what about the investment case for buying shares in the company?

Evidence of Demand
Let’s start with the evidence of demand for the service, or ‘proof of concept’ for those with a predisposition for VC vernacular. Ortharize generates its revenues from hotel and airline commissions – an attractive revenue model for both parties to the transaction as it is ‘activity’ based, as opposed to a flat monthly subscription. It’s all very well for technology companies having the ‘certainty’ of SAAS based monthly subscriptions, but the reality is that most SAAS based contracts have short-dated exit clauses which enables the client to cancel at short notice when things are bad, such as during Covid, but that same client will only pay a fixed (i.e. capped) amount in the good times with a monthly subscription model. Ortharize is in a position to maximise revenues over the life of a relationship if it’s upside is a function of activity and is uncapped.

Last year, Ortharize generated revenues of £117,000. While this is not earth-shattering it is more than sufficient to demonstrate demand for the service and the ability of Ortharize to provide a service (and generate revenues) in response to the demand. Getting from ‘zero to one’ is the most difficult challenge for any start-up and Ortharize can validly argue that they have got to ‘one’. (Sidenote: ‘Zero to One: Notes on Startups, or How to Build the Future’ by Peter Thiel, the co-founder of Paypal, is well worth a read.)

Calibre of the Team
The next area to focus on is the team. The important questions to answer here are:
1. How much domain expertise do the founders have?
2. How much general commercial acumen do the founders have?
3. Who are the external advisors and what value do they add?

By extension, age is relevant here, and I’d always favour an ‘older’ founder over a college drop-out, contrary to what the media likes to glamorise. How many Mark Zuckerberg’s are there? I’d take experience over enthusiasm any day.

In the case of Ortharize, we have 3 co-founders, which is always preferable to one or two. All 3 have lengthy track records and substantial domain expertise.

The CEO, Gary Wardrope, has 40 years’ experience in the travel management industry, including 14 years running his own travel company, before a successful exit. The Chairman, Jon Madison, is a former Managing Director of a £60m expenses software business and has had two previous successful exits. Head of Operations, Chris Flynn, has held commercial and product development leadership roles across cyber security, software and telecoms roles over the past decade.

Supported in advisory roles by Will Shuckburgh, Managing Director, Nectar, Ted Wham, VP of Travel Industry Solutions, Oracle, and Jon Ghazi, CEO of Annalect, EMEA, that is the sort of team an investor would be minded to back.

It is also worth highlighting that over 80% of staff at Ortharize have either been regular business travellers or worked in the travel industry before joining the Ortharize team.

Size of the Opportunity
When you’re operating in an industry (global travel) that is worth in excess of $1 trillion you don’t spend much time figuring out TAMs, SAMs or SAMs. Suffice to say that the Total Available Market, the Serviceable Available Market and the Serviceable Obtainable Market are all more than large enough for the company’s life span, especially for a technology product that travels quickly and easily. In the UK alone, there are 263,000 companies with between 10 and 750 employees, which is the company’s target market. That figure rises to 3.1 million companies across Europe and the US.

Another important factor here is the ease with which Ortharize can identify and communicate with its target market, both on the supply side and the demand side. Customer acquisition costs should therefore be a lot lower than with your average SAAS business.

Other Comments
Crowdfunding Campaign Content
The calibre of the crowdfunding campaign content on the Crowdcube website is very high. While this is what you would ordinarily expect from a company seeking to attract hard-earned cash from private investors it’s not always the case that the campaign material is up to scratch. You can judge the professionalism of a team by the way in which they present their campaign content.

I would, however, find fault with one slide in their deck, and, ironically, it is the most important slide of all. According to the ‘Why Invest?’ slide, these are the reasons given as to why someone should invest:
1. Exploit gap in market
2. We don’t charge fees
Seriously?!! No prizes for whoever came up with those as the reasons to invest!

In the ‘Positives’ section below, I highlight all of the reasons why someone should invest in Ortharize, but the key reasons that should be on the ‘Why Invest?’ slide are:
1. Performance to date
2. Experience of the Management Team
3. Proprietary technology
4. Market size
5. Tax rebate on investment
6. Attractive pre-money valuation

This is what would excite me as an investor – not that the company doesn’t charge fees. In circumstances where you never meet investors and your Slide Deck is your shop front, it’s important to get these things right first time.

Approach to Costs
I note from an answer to a question posed by an interested investor that the CEO is on a salary of less than £40,000. If this is reflective of the company’s approach to the management of costs then it should be of great comfort to investors. It shouldn’t need to be stated that costs in a loss-making start-up should be kept to an absolute minimum, especially when growth is being funded by external investors, but not every company shares this attitude to cost control. I’m not interested in paying for a founder’s lifestyle and I want him/her to prioritise the share price above everything else.