January has seen a flurry of financial investments for the corporate travel sector.
Several technology companies have revealed funding rounds this month, and rather than the cash propping them up to survive, they’re being regarded more as a vote of confidence in better times ahead.
While business travelers remain static, these startups are gearing up for recovery and ready to play a role in helping organizations lower their costs in the future.
At a Glance
On Wednesday, Barcelona-based startup TravelPerk announced it had acquired U.S. business travel platform NexTravel, signalling its intention to expand stateside.
Santa Monica-based NexTravel was founded in 2013 by Wen-Wen Lam and Alexey Pakhomov, and launched out of the Y Combinator accelerator program in 2015. It has 700 global clients, including Yelp, Stripe and Harry’s.
NexTravel is TravelPerk’s second, and largest, acquisition to date, following risk management startup Albatross in July 2020. With eyes on the relatively buoyant U.S. market, domestically speaking, it’s also signed a content deal with Southwest Airlines, which took several steps to up its business travel game last year.
Meanwhile, SalesTrip has just raised $1.4 million in seed funding, led by Floreat Group — a private investment group known more for its presence in the aircraft leasing sector. “We actively seek technology companies and platforms that have strong products with flexible and attractive business models,” said Karim Jallad, managing director at Floreat Principal Investing.
London-based expense management and booking platform SalesTrip has raised $3 million so far, including from founder Manoj Ganapathy, who sold his previous company to Steelbrick and subsequently Salesforce, with which SalesTrip integrates.
SalesTrip predicts growth ahead as expenditure comes under increased scrutiny due to the pandemic.
Pana also recently raised $3.6 million in funding, while Singapore’s Navisteps raised $1 million in pre-seed funding from angel investors. It also signed a deal with Southeast Asia travel app Traveloka to boost its flights and hotels content.
The expense side of travel management has picked up too, with Divvy raising $165 million from new and existing investors. This reportedly values the Utah-based startup at $1.6 billion. And on Wednesday, London’s Sweep revealed it hit its 2020 funding target, notching up $1.2 million in investments and grants.
Why Now?
It’s not uncommon to see clusters of announcements made in January, after deals are pushed through for a December sign-off before the end of the financial year. But there’s no coincidence with this underlying technology theme.
Despite the pandemic halting travel, many companies have used the downtime over the past 10 months to invest in new systems — not least airlines like British Airways and Lufthansa which are experimenting with retailing.
“We hear a lot that travel management companies have kept their technology teams on, even when everyone else is laid off or furloughed, because there’s a tech deficit that they’re looking to address during the downturn,” said Christopher Jones, managing director at global investment bank GCA Altium, which has advised on a number of agency deals, including Hillgate Travel’s acquisition by Reed & Mackay, and Travel Counsellors‘ private equity investment from Vitruvian Partners.
These technology platforms aim to make the booking process for corporate travel catch up with the leisure sector, and reflects an ongoing shift in travel management hierarchy. The fresh funding is the latest step in their bid to win over employees who are reluctant to use the software offered by some legacy agencies.
Rise of the Acqui-Hire Model
“It’s an incredibly fertile environment for fundraising, and now is a good time to build travel technology — when volumes are so low there is much less risk in implementing new tech,” added Jones. “There have also been a number of small acquisitions of technology businesses by corporates. These are often acqui-hires, where there’s a particular piece of technology that an agency or larger technology group thinks fits well, and that gets snapped up.”
The sums of money are small change compared with the billion-dollar bailouts for airlines and tour operators, but these venture capital firms spot an opportunity.
“Investors are putting money in where they see something with future growth potential, rather than facing a choice to either insert rescue funding only to emerge into an uncertain recovery, or see an asset disappear,” said Arthur Callaghan, director at GCA Altium. “These growth companies will continue to get the funding, even during this uncertain period — but if there’s little potential, it’s a lot harder.”
It’s a promising start to a new year, with more funding announcements likely on the horizon. But there’s a worrying echo to 2020, when the industry found itself repeatedly asking the same question: how long before travel restarts?
Photo Credit: Startups want to make the booking process for corporate travel feel as seamless as that of leisure travel. Robert Couse-Baker / Flickr
