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I'd love to hear a review from anyone on HN who has first-hand experience with this outfit.
And so would I, you can also chat with us on the site.
Doesn't this ...

> However, there is a flip side. Although startups (and some incumbents) are working hard to bring the whole travel decision funnel online, most group travel still happens through travel agents — much of it offline.

contradict the very next sentence?

> A recent survey conducted by Travel Weekly and TravelAge West found that nearly 80 percent of travel agents booked 10 or fewer groups in 2010. So, all in all, groups account for a relatively small portion of bookings.

I think it is missing mentioning that these are home-based travel agents so that they have very few bookings in total for the year, but that there are many home-based travel agents.
No. The second sentence indicates that althrough most group travel happens primarily offline through agents, it still represents a small portion overall of each travel agent's business. Non-group travel represents the bulk of most travel agent's business but Flights with Friends doesn't target that market, probably because it would then be in competition with sites like Kayak, Orbitz, Expedia, etc.
I have to say, between FlightFox and AirBNB (both sites I learned about through HN) I've been an incredibly happy camper planning a recent group trip. FlightFox agents found us a ridiculously low airfare for our group -- in fact I don't think I'll ever buy a ticket myself again without checking with FF... and searching for places on AirBNB has been a blast.

I'm not sure what exactly the "pain" is in group trip planning because half the fun is convincing people to join, throwing around ideas, & getting excited for the trip. Really my only pain point has been the cash shuffle, which is ameliorated by having honest friends.

One of the benefits of Flights With Friends is that no one person has to pay for the tickets. Each member of the trip can buy their own and the cash shuffle doesn't even have to happen.
Out of curiosity, how much of a Finder's Fee do you typically offer on FlightFox? Would you use it for shorter trips, say LA to SF, or does it really only become worth it on longer, more complicated trips?
FlightFox was really an eye opener for me when I learned about that 6-continents trip that some agent had planned for $1730 (originally linked off HN)... I basically realized these guys have so many tricks up their sleeves that the more flexibility/variables you introduce the wittier they can get with their planning...

So yea, with simpler itinerary they probably have less wiggle room to find some loophole or deal, but my hunch (haven't tried it yet) is that if I said "I want to go to LA sometime in June" that the time flexibility would be enough to give them room to find a great deal. I'm sure one of them could comment more on this.

As far as finder fee I just used the default one since I never used the site and our trip was fairly simple, but would likely adjust based on how complex I felt the trip planning would be...

The biggest annoyance of FF is you have to carefully follow directions to book but the potential savings is worth it.

This is a niche market and Flights with Friends does not address the primary pain point of group traveling: getting everyone to commit to the trip and pay. Organizing what to do and where to stay is the easy part.
We've found that once people join the trip on Flights With Friends and one person books the others book as well. We notify the other members of the trip as soon as anyone books.
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What is your target demo?
We focus on groups of 2-9 people. Any less, and it's not a group, any more and a travel agent might be able to get you better prices.

Our initial marketing campaign is targeted at people getting married and their friends. We figure we can make payroll just with bachelor(ette) parties in Vegas.

Interesting! Well best of luck.

(If you ever want to market to a small travel community of 18-35s, let me know...)