Reaching for the stars - can Russian travel startups make a mark?NewsBy Viewpoints | December 20, 2013Share This article was originally published on In a talk I gave at E-Travel 2013 in Moscow last month, I tried to compare some figures from the Russian and international travel startups market and came to some conclusions that seem interesting to me.If you’re interested in Russian market you may also look at my article from last year.NB: This is an analysis from Valentin Dombrovsky, vice president of innovation at Excursiopedia.Online travel startups in Russia and abroadThe Facebook group Travel Startups allows us to make some assumptions about the number of online travel projects in Russia.We have more than 2,000 participants in the group – not all of them represent online travel projects and according to our calculations there are representatives of about 150 online travel companies.I think we can easily say that this is an approximate number of online travel projects founded by Russian language speakers.If we look at AngelList statistics, there’s about 1300 projects in the online travel category.The online travel market is estimated at about $300 billion globally by PhocusWright, Russia's online travel segment is about $8.3bn according to the latest report from research company Rutramarin.So having about a 3 % share of the global online travel market, the Russian market also has about 10 % of online travel projects.At the same time the online segment is forecasted to be only 18 % of the total Russian travel market according to Rutramarin. This data is further proof of the big growth potential the Russian market has.Investments in online travel projects in Russia and abroadOf course, American and European startups have more opportunities to get investment.Online travel investments were about $1.3 billion between 2006 and 2011 according to PhoCusWright. Almost two-thirds of investments were made in the US and 31% in European online travel projects.Post-2011, there has continued to be investment in online travel. The largest funding was raised by Airbnb ($326m total including $200m in the latest round in 2013 - that's more than total investments in Russian online travel).Other notable projects include HotelTonight ($80m total, $45m in the latest round), Room77 ($43m) and a bunch of projects that received about $20m in funding – Gogobot, Hipmunk, Hopper.And there’s also “a long tail” of deals with investments of between $1m and $5m – news of such deals emerges almost weekly.Meanwhile, in Russia the leader in terms of investment raised is Ostrovok ($38m total including $25m in latest round).It is followed by Oktogo ($26m), Onetwotrip ($25m), Hipway and Hipclub ($10m), Travelata (more than $5m). Most of these investments were raised in 2013 demonstrating the good market dynamics.Success in Online Travel Projects in Russia and AbroadWhen we speak about startups in the context of venture capital we see their success in some kind of exit making a ton of money for founders and investors. This can be via sale or IPO.The Russian venture market in general has not seen many exits recently and the online travel market also doesn’t have much to boast about.The only notable deal on the Russian online travel market is DealAngel's sale to OneTwoTrip in a deal estimated at between $10m and $15m.DealAngel was founded by Roman Peskin, an entrepreneur of Russian origin but it’s hard to call it a Russian project – it started in America and was funded by American investors. However, it also received some funding from Russian venture funds, Foresight Ventures and Bright Capital, so it’s kind of mixed case.There was also Travel.ru's sale to Oktogo with sources valuing the deal at about $2m.Excursiopedia was an active player within the M&A market but it bought projects that were very early stage – RangeUp and last week, Travelatus (this author's former company). These acquisitions looked more like “acquihires”.The online travel segment in general has seen much more M&A activity and some IPOs.I won’t make special mention of deals – I’ll only note that some companies such as Expedia, Priceline or Tripadvisor see big potential for growth via mergers and acquisitions.Priceline owns Booking.com and Agoda accounting for the lion’s share of its revenue and Priceline made its biggest acquisition in online travel when it bought Kayak for $1.8bn just over a year ago.This means that American and European travel startups have bigger chances to make a successful exit while perhaps major players in the M&A sphere, don't know enough yet about the Russian market.In addition, venture capitalists often comment on how hard it is to make an exit, not just in travel but generally.However, once major players start paying more attention, we will see some interesting deals here. And, it looks like some Russian projects are already preparing for that.In general we see the year was rather "hot" – both for the Russian online travel market and online travel in general.Russian projects play a small role on a global scale but we, Russian online travel entrepreneurs, hope this will change soon and are doing our best to make it happen.And all this only reminds us about the fact that there’s still time to jump on the train of Russian online travel market. There’s still some space for new services here and the market is growing, but major market players are putting a lot of effort in to take a bigger share of the market, so this time may end soon.There’s still the need for some other services besides traditional OTAs selling airline tickets or offering hotel booking. As we look at some trends from the US and European markets, we think that it’s about time for mobile travel as well as big data projects to appear on a larger scale.We also think that we’ll see more global players coming to the market after Booking.com, Tripadvisor and Kayak. So interesting and hot times are ahead for the Russian online travel market.NB: This is an analysis from Valentin Dombrovsky, vice president of innovation at Exursiopedia.NB2: Thanks to Leonid Pustov, CEO at Rutramarin, and Yuri Shabunin, organizer of E-travel 2013 conference for helping me to prepare my original talk and this article.NB3: Travel Startups Facebook group is a for Russian-speaking members while Travel Startups Intl. is for everyone in the world who’s interested in online travel issues.NB4: Reach for the stars image via Shutterstock.