Earlier this month, in a new annual feature, we spoke to the top investors in travel technology to gauge their views on the market and what they’re looking for.
It’s widely acknowledged that the climate is tough for industry newbies when it comes to investment, and Phocuswright’s recent State of Travel Startups report provides a deeper analysis on the situation.
While there’s less money around and investors are even more risk adverse, pockets of optimism remain, and some sectors continue to pique investor interest.
GetYourGuide and Hostaway are just two of the recent success stories.
An investor panel at last week’s Phocuswright Europe 2023 also sounded a positive note with Bobby Demri, managing partner of Roch Ventures, saying investors “should open the gate,” while Christoph Schuh, a partner at Lakestar, adding that we’re “near the turning curve” in terms of investment coming back.
But we wanted to get a view from some of the startups that have recently landed funding. Below, we hear their advice for fellow founders on attracting investment, how to choose who to work with and what they’ve learned along the way.
Startups speak out
We reached out to several companies to get a range of views from across the travel industry. Here are some of the responses, edited for brevity in some cases.
How do you pick which investors to work with - what is important to you?
@hotel/Konrad Waliszewski, co-founder and CEO: Selecting investors is akin to hiring a key employee or co-founder - a decision not to be taken lightly. I ensure complete alignment with our business vision and prioritize those who will bring unique value to our company. Equally crucial is that they are someone I trust to be my first call when times are hard, knowing they'll readily join me in the trenches.
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Cruisebound/Pierre-Olivier Lepage, co-founder and CEO: When looking for investors, we're searching for partners to help us grow the business. A good partnership with an investor is a relationship where both parties have aligned incentives and goals. Specifically, we want to ensure that our vision for the business is aligned, and that our business is at the right stage for the investor's portfolio. We also need to agree on the future, including milestones, rate of growth and any exit strategy. Finally, we are looking for investors who are knowledgeable about our industry and business model.
GetYourGuide/Nils Chrestin, chief financial officer: We are digitizing a traditionally offline category: travel experiences. It is an incredibly complex business, but one filled with opportunity. Our investors understand that there is a fundamental cultural shift in consumption in progress: consumers are spending less on retail and day-to-day expenses but are increasingly prioritizing experiences. Making memories. However, realizing our $300 billion market opportunity will take time. Our best partners are able to take a long-term view, have a deep understanding of what it takes operationally to grow a global marketplace and the associated upfront investment and the attractive unit economics we are unlocking.
Kyte/Nikolaus Volk, co-founder: For us, it's critical that investors are smart and we like to work with them, have appreciation for the intrinsic complexities of a bits and atoms business, and share our vision and ambition level. A personality matchup is obvious – it’s key we like people in the room which have a lot of intellectual horsepower, and given building a business is incredibly hard, we want to want to spend time together. Having appreciation for the business’ complexities means that we want investors who align with ours. We like to work with people who see the full opportunity and the vision what Kyte can become and are behind in building a category defining company.
Chooose/Andreas Sletvoll, CEO: Our target from day one has been to identify investors that bring something more than money to the table. What this "more" consists of varies, but examples can be sector knowledge we do not possess, technical knowledge that accelerates us, network, commercial opportunities, and so on.
Allfly/Kenny Totten, co-founder and chief operating officer: Fundraising is hard and becomes a full-time job. It is best to be organized and run a process. We also started to build relationships prior to raising, which turned out to pay dividends.
What have you learned from your fundraising efforts?
Cruisebound/Lepage: The main lesson I learned is that your relationship with investors is not transactional. It’s a partnership. Investors invest in founders, team and product. Your success is their success. Make sure to give investors frequent updates about your business, even when you're not actively seeking financing or assistance. Make time for one-on-one conversations that might spark a winning idea or lead to an important introduction that propels the business to the next level.
Kyte/Volk: Each fundraise makes you better in telling and articulating the story if you do it right, which means you have to stay humble and hungry throughout the process. You have to be able to learn and adapt the story, given your business is evolving and the group of investors you are pitching is evolving as well. For example, a pitch that resonates with a a seed tech investor is very different than a pitch delivered to a pre-IPO crossover investor highly active in public markets. Pitching in early 2022 verusu late 2022 was very different, and the focus areas for investors dramatically changed.
GetYourGuide/Chrestin: The fundraising and general capital market environment have significantly shifted over the last 12-18 months. There is a lot of caution in the market - which I think is healthy. But if you can combine and showcase highly attractive growth in a large addressable market and, importantly, can show this is done with very attractive unit economics, doors can and will remain open.
Canary/Harman Singh Narula, co-founder: Fundraising is about mutual fit. Just as investors take time to get to know founders and businesses and run their diligence process, it is critical for founders to do the same. This is someone you’re going to be working with for a long time, and so it's wise to really get to know folks and run your own diligence process.
Holidu/Johannes Siebers, CEO: It’s important to be very clear in what you want to build. Also, which proof points do you need to build it. We have recently raised our Series E. This was very much about concrete KPIs. For us, this was customer retention as well as customer success, continued growth and healthy profitability metrics in our mature markets as well as showing the ability to scale across many markets.
Hostaway/Marcus Rader, co-founder and CEO: The winner takes it all. It's really that simple. When times are tough, the money just doesn't disappear. Instead, it concentrates towards the best businesses around.
What advice do you have for other founders?
Allfly/Totten: If you have existing investors, be sure to send monthly updates. Your existing investors, angels and advisers can sometimes open doors for you. Know your numbers and have all of your decks, data rooms and resources organized. It makes the entire process more efficient.
@hotel/Waliszewski: Travel is not an easy industry for raising venture capital. Too many investors have been burned. Prepare for a longer, more demanding fundraising process and anticipate the need for stronger traction compared to other industries. But don't give up, it's a massive, outdated and lucrative market with so much opportunity for disruption for those that make it past these initial hurdles.
Canary/Narula: Being able to articulate your company’s story and vision is one of, if not the, most critical part of fundraising. At the end of the day, businesses with strong fundamentals will continue to be able to raise capital, regardless of the "hot" category or the market conditions. Of course, the macro factors matter as well, and at times it may be more difficult to raise capital, but oftentimes those things are out of your control. Focusing on delivering value to your customers and building a strong company are the best things you can do to set yourself up to raise capital.
Chooose/Sletvoll: You know your business best and what moves the needle. Many investors have a specific focus they care about, but that might be plain wrong to your business. Then it's well worth the time to educate and explain, rather than pivoting to fit into their mold. That said, understanding metrics that matter and being an active listener often also gives you great insights into which data and metrics you might need to highlight.
Hostaway/Rader: If you can postpone or not raise at all, especially when you're below $10M ARR, please postpone. It'll be worth it.
Holidu/Siebers: You should also evaluate your investors. A great way to do this is to speak to founders of portfolio companies. It's the best source of reference.