Rocketmiles, a travel site created in Chicago, only came out of beta last April. Yet as the company's pace of growth has quickened, so has its funding schedule.
In an announcement on Wednesday, Rocketmiles said it had raised $6.5 million in Series A financing. The round was led by August Capital, with participation from existing investors. New investors included Chicago Ventures and Sam Yagan, CEO at Match.com.
The money is in addition to a seed round last spring, in which Atlas Venture, Peterson Ventures, and Link Ventures invested $2 million collectively, in exchange for convertible notes. This Series A means a return on investment for the firms ahead of schedule.
There is now no majority investor, but August Capital is now the largest one.
Going after a premium market positioning, not discounting
Rocketmiles lets consumers -- mainly, American business travelers -- earn airline miles by booking a curated set of hotels (such as only about 35 in a major city like London). The company says customers typically earn about 7,000 miles per booking, which means for an average two-and-half-night stay. (See the Tnooz company profile here.)
Hotel brand managers and revenue managers apparently like Rocketmiles because it allows them to fill distressed inventory without tarnishing their brand's premium positioning or breaking rate parity across channels.
The startup also brings in business travelers who tend to spend more than leisure travelers on ancillaries (i.e., extra amenities such as room service).
Rocketmiles cofounder Jay Hoffman told Tnooz by phone that the money will help speed up its addition of international airline partners. The company launched its first frequent flier rewards program with a non-US carrier -- Etihad Airways -- last quarter.
It plans to add two or three more non-US airlines in February.
Hoffman claims a 25%-a-month growth rate in the dollar volume of bookings being facilitated. He says the startup has served more than 100,000 users in its first year.
What we've learned in first months of running is that it's a sticky product. People who become customers tend to become repeat customers.
Biz travelers is our focus, and they tend to move in packs. We have a lot of word-of-mouth referrals. We grease the skids with some incentives for sharing.
No one who knows better than the airlines if someone might be in the market for a hotel since flights often get booked before hotel stays. We can target customers after they've made a flight booking.
If you're looking for hotels in London or New York, you're not going to see all of them. We have 35 hotels in London, for instance. Part of the competitive moat we're building up around our product is brand reputation for picking reliable hotels. That's part of the secret sauce.
Hoffman says his company has taken the lead against competitors because it hasn't become distracted by fancy pricing schemes or lateral projects.
We always offer an incentive. What I learned when working at Groupon is that you don't want to be 15% better than what a customer can get otherwise -- you want to be five times better.
Rocketmiles has also added new members to its board: August Capital partner Tripp Jones and TripIt cofounder Scott Hintz. Previously just Bjorn, a co-founder, and Jay Hoffman. The company has also filed for patent protection for some of its technologies.
EARLIER: Tnooz TLabs on Rocketmiles