During a roundtable discussion of investors at The Phocuswright Conference, Bob Kaufman, founder and CEO of ConnexPay, made a bold and interesting statement.
Travel companies go in the same category as adult entertainment or gambling, because of fraud risks, Kaufman claims.
And even though startup travel tech venture investments have been at their fourth-consecutive high this year, disruptive forces are threatening their reign at the top, and that gives investors cause to pause.
Travel companies go in the same category as adult entertainment or gambling, because of fraud risks.
Bob Kaufman
“When you think about the whole journey of a business, you realize the risk. We’re no longer startup guys – we’re guys that invest in companies that have already proved out that there’s a market,” says Woody Marshall, general partner of Technology Crossover Ventures, at the roundtable.
Kaufman explains that travel tech is such a risky investment because the technology itself is so mutable and, therefore, seen as “unstable” in terms of dollars and cents.
And even established companies that have done what Marshall suggests – that have “proved out” that they have a market – can find themselves feeling a downturn in their bottom line if something should shift, technology-wise.
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And there’s more: according to a research brief by CB Insights, the so-called Big Four in online travel – Expedia, CTrip, TripAdvisor and Priceline – have stated that they’re going to consolidate their collective efforts and focus on “new growth areas” in travel tech, even though the marketplace is experiencing some headwinds in recent weeks from the investor community.
"A lot of times, you expect a market to flip," says Marshall, in explaining why travel tech is viewed as risky by investors. “And sometimes, it takes a lot longer. [This is especially true] in markets that have a lot of legacy players – investors will say, ‘Wow! This is better, faster, cheaper! Why doesn’t the market go to it now?’ And sometimes, it doesn’t even happen at all.”