travel-vc

How Venture Capital Has Changed Online Travel Agencies and Travel-tech Start-ups

Venture Capital and Travel-tech Start-ups

For the last decade, investment in Online Travel Agencies and Travel-tech start-ups from Venture Capital has been on the rise. The main driving factor behind this transition towards OTA’s has been the rise of the smartphone. The computing power of smartphones has increased exponentially over the last few years, with Wired even predicting in 2015 that, by the end of this year, we could be using our smartphones as our only computer. While that still seems a way off the prediction explains the mass investment in Travel-tech start-ups, especially those who focus on a mobile platform.

Atlas Venture’s Jeff Fagnan commented that “the major driver is how easy it is, the device factor has changed travel in itself,” – noting that the ease of booking has been the central reason for the shift towards mobile devices. Consumers now have the ability to book a last minute flight, a hotel, and an Uber to and from the airport in a matter of minutes on their smartphone – a trend which is only accelerating.

Travel-tech Start-ups

Investors have rapidly moved beyond mobile digital models of traditional travel services like booking a hotel room or a flight, towards more innovative and abstract businesses and ideas. FlyteNow the private plane ride-sharing service, Fishfishme a worldwide fishing charter booking platform, and Sailogy the on-demand yacht chartering service all raised new rounds of investment at the beginning of 2014.

This onslaught of investment can also be attributed to the fact that travel is typically one of the first markets to monetize online in emerging markets. Brian O’Malley of Accel argued that the lower physical barriers in terms of established consumer base and target markets, mean that there is much more opportunity to successfully monetize traffic.

The market today for Travel-tech start-up investment is not as pretty a picture as it was 2 years previous. However, total worldwide travel start-up investment in Q3 2016 has been estimated by venture capital research firm CB Insights, to reach $3 billion – a significant drop from the record breaking $4.5 billion raised in funding in 2015. However, it has to be noted that these figures do exclude Uber, who have now raised $15 billion in equity and debt, following an injection of cash from Saudi Arabia’s Public Investment Fund.

The drop off in funding (if you can call it that) was somewhat unexpected, but a record breaking year is rarely followed by a subsequent record breaking year.

Katherine BarrMany investors are waiting a bit longer to see more traction in companies before they invest,” said Katherine Barr, an investor and founding partner at Wildcat Venture Partners in a July 2016 interview with Skift. She postulated that many VC firms were simply adopting a “wait and see” approach in an attempt to moderate the highly optimistic company valuations of 2015.

Matt Keezer of Momentum Ventures has long been a believer in a more marked approach to VC investment, more like the investment market we have today. Although VC investment has begun to move towards Travel-tech start-ups and away from Online Travel Agencies, there is still huge potential for profit when investments are more cautiously managed. Skyscanner, has recently been valued at £1.4 billion when VC firm Scottish Equity Partners sold one third of it’s stake to a Chinese firm for £465 million – a massive return on their 2007 investment of £9 million.

Matt Keezer has helped to invest in, and grow, Flight Hub and Justfly, two hugely successful OTA’s through smart investment and a cautious approach to investment. That said he is in the minority as Travel-tech investment has begun to move over-seas in the past few years, to emerging markets in Asia and Africa.

Venture Capital Investment and the rise to prominence of the smartphone as a booking platform, pushed investment in Online Travel Agencies and Travel-tech start-ups to incredible heights in 2015. Yet, with emerging markets becoming increasingly more stable and thus lucrative, especially in terms of travel-based investment, VC investment in the US has declined and begun to move towards these emerging markets. Investment in Online Travel Agencies and Travel-tech is unlikely to hit the wild heights of 2015 in North America again, but markets in China, Singapore, Africa, and other emerging nations, is unlikely to peak anytime soon.

By Josh Hamilton

Josh Hamilton

​Josh Hamilton ​is an aspiring journalist and writer who has written for a number of publications​ involving Cloud computing, Fintech and Legaltech​. ​Josh has a Bachelor’s Degree in Political Law​ from ​Queen's University in Belfast​​.
Studies included, Politics of Sustainable Development, European Law, Modern Political Theory and Law of Ethics​.

View Website
The Cloud Has Your Data (Whether You Like It Or Not)

The Cloud Has Your Data (Whether You Like It Or Not)

Cloud Cleanup Anyone? Following on where we left off from my last two articles now we shift focus to what this data collection means to you and me and some impending regulations that presumably give ...
Matthew Cleaver

Dispelling the Myths of Cloud Solutions for the Small Business

Dispelling the Myths of Cloud Solutions As a business leader, migrating to the cloud can be overwhelming due to the large number of cloud solutions available, and the services they offer. Finding the right fit ...
ThreatMetrix Quarterly Fintech Cybercrime Report 2017

ThreatMetrix Quarterly Fintech Cybercrime Report 2017

Fintech Cybercrime Report 2017 ThreatMetrix has released its latest quarterly cybercrime report based on cybercrime attacks from October to December 2016, detailing trends across financial services and eCommerce, with a global study of traffic patterns ...
RSA Conference: FUD-free or filled?

RSA Conference: FUD-free or filled?

IoT 15 Billion Units By 2021 At the annual RSA conference, there were plenty of discussions and presentations on the evolving cybersecurity threat landscape, including application security issues, the internet of things (IoT) and data ...
Six Major Data Breach Trends From 2017

Six Major Data Breach Trends From 2017

Major Data Breach Trends It seems like the moment the security industry collectively comes to grips with the latest publicly disclosed data breach, another bigger and badder security incident surfaces to shake it up, prompting ...
The Lighter Side Of The Cloud - Passwords
The Lighter Side Of The Cloud - The Dating Game
The Lighter Side Of The Cloud - Virtual Office Space
The Lighter Side Of The Cloud - Machine Learning
The Lighter Side Of The Cloud - Once A Year
Comic
CloudTweaks Comic
The Lighter Side Of The Cloud - Turmoil
Star Wars IoT CES

CLOUDBUZZ NEWS

Researchers combine wearable technology and AI to predict the onset of health problems

Researchers combine wearable technology and AI to predict the onset of health problems

A team of Waterloo researchers found that applying artificial intelligence to the right combination of data retrieved from wearable technology may detect whether your health is failing. The study, which involved researchers from Waterloo’s Faculties ...
Worldwide Services Revenue Posts Steady Year-Over-Year Growth in the Second Half of 2017, According to IDC

Worldwide Services Revenue Posts Steady Year-Over-Year Growth in the Second Half of 2017, According to IDC

FRAMINGHAM, Mass. May 15, 2018 – Worldwide revenues for IT Services and Business Services totaled $502 billion in the second half of 2017 (2H17), an increase of 3.6% year over year (in constant currency), according to ...
Rackspace Launches Kubernetes-as-a-Service with Fully Managed Operations

Rackspace Launches Kubernetes-as-a-Service with Fully Managed Operations

SAN ANTONIO – May 16, 2018 – Rackspace today announced Rackspace Kubernetes-as-a-Service, a highly-available managed service that transforms the way enterprises can utilize new container technologies, accelerating their digital transformation. Rackspace is focused on delivering true transformation ...