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James Sherman is a serial internet entrepreneur, and an active angel investor in New York startups. He sits on the board of HBS Alumni Angels of New York, and is[…]

A conversation with the founder and CEO of Sherman’s Travel Media.

Question: How did you turn your idea for Sherman’s Travel into reality?

James Sherman:  Well, it is interesting that it never started as a pure business plan, a 20 or 30-page business plan.  It really came about through happenstance when I was taking a trip to go to Whistler Ski Week and I had booked the ticket, the air flight, on Orbitz.  And Orbitz did not send me any information on the destination.  And I'm very much a travel enthusiast; I've traveled all my life, having lived or worked overseas on many different occasions.  And I thought that it was strange that there was no information provided by the online travel agency, so actually decided to get into this business initially by publishing a series of online travel guides.  And we started out by partnering with an airline, America West Airlines, with the thought of adding on additional partnerships over time.  Eventually, by stepping in with the online guides, that led to my exploring other areas of opportunity in the travel industry, particularly with travel deals publishing, which really is our core business these days.  So we migrated from being a publisher of pure online travel guides to being one of being a rather large publisher of travel deals today.

Question: How is the company different from traditional online travel agencies?

James Sherman: is a publisher of travel deals and destination advice.  We're very different from the OTAs, the online travel agencies like Expedia, Priceline and Travelocity and Orbitz.  In fact, many of those are clients of ours.  But we are a pure publisher, so we're advertising-supported.  We publish thousands of deals, and they're hand-picked by our editors every day and published on the Web site as well as through our e-mail products.  We have our Sherman's Top 25 Travel Deals newsletter that comes out every Wednesday.  That is received by over four million subscribers.  The Web site has a host of other resources, including over 300 travel guides, videos, 101s, slide shows -- a lot of great resources there.  Hotel reviews, of course, and a travel search tool.  We also publish a magazine which is more upscale.  While the Web site is more mass-market, reaching the broad audience of leisure travelers, the magazine skews more upscale, and it's positioned around what we call smart luxury.  So it's a combination of luxury, but still a good value.  And our brand positioning overall is about value, whether it's on the lower end, what we call a smart bargain, or the higher end in terms of a smart luxury.

The magazine does cover some deals.  We have a section there called the Luxe List, which is the best values of the season that are the best in four and five-star vacations.  But the magazine is not necessarily always looking for a deal per se.  The magazine will cover destinations and talk about places to stay that are upscale but are worth the money.  So we may talk about an $800-a-night resort in St. Bart's, but at the same time we'll highlight one that's $300 or $400, that's less expensive; it's still luxury, but it's going to be a little more affordable for what we view as a significant portion of the population; that is, those that we call the mass affluent.  Not necessarily the ultra rich that are willing to pay any price, which may be .01 percent of the population, but rather a larger segment that want a more affordable but still a luxurious experience.

Question: How does your company fit in during the recession?

James Sherman:  Well, certainly anyone that is in the deals business is in a good position these days, given the recession that we’re in.  And that is true both on the high end, in terms of our luxury value positioning with the magazine, as well as for the Web site and our e-mail products that provide great overall deals and bargains.  So we do find that a lot of suppliers are price-cutting; there’s no doubt about that.  Hotels need to do that to fill up their rooms and to decrease their vacancy rates.  The same with the airlines.  So it’s a great time as a traveler to find amazing deals out there.  Unfortunately for us as a business, though, the suppliers and the agencies, because they’re making less money, means they have less money to spend on advertising.  So the ad budgets have been certainly very tight this year.

Question: What are some hot-spot vacations during the economic downturn?

James Sherman:  In terms of hot-spot vacations, certainly for American travelers, the Caribbean is doing incredibly well.  I think that may be because people have been a little bit scared off of Mexico, given the flu and then crime and some other issues there.  So I know a number of travelers have changed plans, have shifted perhaps to the Caribbean.  In terms of other hot spots, certainly Americans are going to any value destinations, London, for example.  Visit Britain's been doing an amazing job in promoting London as a destination.  It's always been relatively low-cost to get to in terms of the airfare, but now the hotels are quite affordable as well.  There's been a lot of price competition there.  There are also great values in terms of sort of second-tier destinations, places like Budapest, for example, or even Ljubljana -- some other destinations in central and Eastern Europe that are very affordable for travelers these days.

Question: What mistakes have you made as an entrepreneur?

James Sherman:  There are many mistakes, and I think every entrepreneur would say that they've had a lot of mistakes to manage through.  And hopefully you dodge the big mistakes, and the big ones don't sink the ship, and hopefully it's just a bunch of small ones that you're able to learn from.  And there's no doubt in my mind that you learn more from your mistakes than from all the things that you do right.  In terms of mistakes in our case, I would say -- I think I alluded to this earlier -- I think raising a larger round would have made sense at the time.  We did a round of financing in 2007, Series B, and we did have the opportunity to bump that round up.  And I wish we had done it for a couple million dollars more.  So -- but you know, I don't think anyone was anticipating some of the other hurdles we would face coming up.  But -- so that, I think, is one mistake that I would have done things a little bit differently.

Another is, certainly in the case of our magazine we are an online business; 90 percent of our business is online.  We did something very unusual in launching a print product, both because we believe it will be profitable -- it has a great opportunity to be a solid, profitable business -- but it also reinforces our overall brand and the positioning of our brand.  However, if I were to do things differently, I would not have launched in the middle of 2006.  I would have had us do a prototype for it rather than actual printing of the magazine.  We ended up burning through some cash with actual manufacturing and production of that magazine, and I think we should have done a prototype first and then launched a little bit later.  Which brings me to a general lesson, which is:  think very hard about where you're investing your money, and if you can figure out ways to take smaller steps that are lest costly to prove a concept, do it.  Definitely, you know, consider -- even if you have a large amount of money on hand, treat it as if you didn't have a large amount of money on hand, and see about ways in which to minimize your risk exposure and the use of cash, because if you're going to make a bad -- if you're going to take a bad turn, then it's better to lose a little bit of money on that rather than a lot.

Question: What are the challenges of being a gay entrepreneur?

James Sherman:  In terms of being a gay entrepreneur, I can't say that it's been a hindrance in any way.  You know, especially in my case, I've worked in the media business for 20 years or so, and I think that in many respects certainly that industry is very open and a lot of openly gay people in it, both on the business side and the creative side.  So I don't believe that it's been a hindrance at all.  Prior to the company that I started recently, Sherman's Travel, I had started an Internet strategy consulting firm, West End New Media, doing Internet strategy consulting during the boom years of the '90s.  And being gay actually was an asset, because I was able to contact a lot of other gay people that were in senior positions, and we were able to do some terrific projects with them.  So I don't think that it's been a hindrance at all as being an entrepreneur in my case.

Question: In your industry, are there advantages to being gay?

James Sherman:  In terms of advantages, I think aside from the fact that gay people in general tend to be more creative, and I think therefore by surrounding oneself with other gay people you're more likely to be surrounded by other creative people -- is a positive, especially when launching a new business.  I think that talking with your friends, getting their input, helping you with some of your own little research with friends and family -- that's very important early on when trying to start a company.  And I think gay people do have a lot to say, and I think we tend to think very creatively.  And so I think that is an asset in general.  And then, of course, organizations like this -- StartOut, of course.  It's great for networking.  There's the gay MBA organization as well, and so I think these are excellent networking organizations to tap into.  Certainly I would say that being gay does have perhaps one downside, which is that one is less likely to be playing golf, you know, with the buddies, or joining a country club or really being in the circles where a lot of other straight senior executive types -- where you might find them.  So I think in that sense there could be a little bit of a negative aspect there.  But I think the other gay organizations can counterbalance that.

Question: Who is your favorite gay business icon?

James Sherman:  In terms of a gay icon in business, that's a tough question.  I would say probably an executive, a senior executive who I admire very much, David Stewart -- he was the COO at Martha Stewart Living.  He actually brought me over to launch the Internet business for Martha Stewart, which is where I really got my big start in online.  I think David's amazing, and both as a leader of mature businesses, but also having been involved with a number of startups.  So I think that he is someone I do admire greatly, and he clearly has amazing talents both in launching new ventures as well as managing large existing ones.  Those that are not gay, I would say that I admire -- Steve Jobs, for example, I think with Apple has done an amazing job on multiple occasions in terms of reinventing that company and competing very well in the marketplace, in particular because he in the early years was up against IBM.  And Apple has had a much lower R&D budget, but they've been able to spend it much more wisely, clearly have better product directors, and are able to innovate in the most amazing ways.

Recorded on October 30, 2009