Travel companies are increasingly looking to crowdfunding as a source of finance as opposed to the more traditional private equity route.
Mr & Mrs Smith, the boutique hotel specialist, is the most recent to raise funds via the medium with the company hitting its target of £1 million in just 12 hours.
The company launched it’s campaign on Crowdcube at the beginning of September with funds raised now at around £2.4 million according to co‐founder Tamara Heber‐Percy.
Subscribe to our newsletter below
She says the company decided to seek additional funding for three reasons. Mr & Mrs Smith wants to tackle the U.S market it has been growing organically, invest in its technology to bring hotels onboard more quickly and increase the experiences side of the business following its purchase of Side Story earlier this year.
Whilst private equity could have been a route, Heber‐Percy says the team looked at the business and decided it was already doing some of the things the P.E way would have required such as strengthening the board and management team.
In addition, Mr & Mrs Smith had raised £2.5 million through a crowdfunding campaign in 2012.
“We learned we could raise money and have advocates for the brand. On balance we were already making good headway on all the things a private equity company would want us to do, but crowdfunding gives us amazing connections to consumers who become advocates of our brand and it’s a good way to tell the story again.”
Thinking differently
Much Better Adventures co‐founder Sam Bruce agrees that crowdfunding is a great way to grow a brand and believes larger travel companies will use the medium in the future.
His company, which offers adventure holidays and unique experiences, set out to raise £750,0000 late last year and hit the target within 24 hours.
The startup then capped the funding at £1.25 million. Bruce says the company was quite specific on the type of funding it was seeking having already been backed by Seedcamp and angel investors.
“We didn’t just want people for the sake of having money; we wanted to add something to it as well to give us money and crowdfunding gives you that and then some. It gives you brand evangelists for ever more. It’s also the type of funding that if you get it right once, you can repeat it.”
He adds that the company watched brands such as Brewdog turn “their customers into sales people” and that it’s an exciting way to attract funding.
REGISTER NOW! Benchmark Capital, Altimeter Capital and others speak at The Phocuswright Conference 2018
Bruce also acknowledges the challenges of crowdfunding stressing the amount of preparation required. “You have to have the deck, the numbers, the brand. It’s not an easy platform; it’s very complicated, but if you’ve got the right mix, it’s a viable option.
"You have to be okay with sharing your laundry. You are putting everything about you out there so if you’re in a very competitive market and you think it will give others a competitive advantage, then that’s a consideration.”
The upside seems to outweigh any pitfalls, however, as Bruce adds that its 729 new investors now also act as a network of experienced professionals to call on for advice.
A number of other travel companies have seen similar success with crowdfunding campaigns. Rentivo also used Crowdcube for its funding in late 2016 and ended its campaign with £341,000, while WeSwap ended with £2.4 million, also in late 2016, through a campaign on Seedrs.