Located at LAB Ventures in Miami's vibrant creative neighborhood of Wynwood, The Future of Travel Summit kicked off with a panel of industry investment heavyweights from Boeing HorizonX, JetBlue Ventures, and VC firm Highgate.
While Boeing's HorizonX is relatively new to the corporate investment tech ecosystem, it has already made 11 investments. JetBlue Technology Ventures has been quite active, building out its portfolio to include companies like Mozio and Recharge. Highgate focuses on seed and early-stage investments in companies such as LodgIQ.
Here are some tips and wisdom for travel startups from JetBlue's Raj Singh, Boeing's Sara Jones, and Highgate's Jacob Kurien. The panel was one of the most forthright of recent memory when it comes to advice for startups -- as well as framing the trend towards corporate VC investment arms.
Audio only below, followed by curated highlights.
'Optionality:' Why big companies are acquiring companies and investing in VC
JetBlue's Raj Singh:
"I have no complaints with my R&D people. They are doing exactly what I am asking them to do, which is to innovate in the current business. What I don't expect them to do is to try and kill my business. That's what startups do. They come out there and see a pain point and try to kill your business. That's how it should be. A startup has no legacy. If you take a $20 billion company and tell it to focus now on one digital channel, it doesn't make sense."
"What we want is optionality. We want people who are developing things we ourselves aren't developing, they can make an impact that is complimentary to what we are doing internally."
"As a large company, we're interested in investing and buying companies because they are building things we ourselves couldn't build just because of the sheer economics of being a large company."
Craft deals that work for your unique business situation
Highgate's Jacob Kurien:
"The way these guys [at Plug and Play] came about is that they were Iranians. They had a carpet business. At some point in time, they decided to lease one part of the office to a tech startup. Instead of rent, they asked for equity in the startup. And that startup was PayPal."
"So that was a very innovative way of saying, I don't need cash, but instead gave them the space. Look at the beauty of how deals get done."
"Its not about pre-seed, seed, Series A. It's about business. What makes the most sense. The guys who had a carpet store and extra space, and they made money. It's all about business. It's about how you connect. "
On the investment objectives of their firms
JetBue's Raj Singh:
"Our goal is to invest in companies where we can be helpful. So that's the strategic part."
Boeing's Sara Jones:
"We focus on a variety of investment areas, from AI to disruptive mobility. Even though we launched in April, we've already made eleven investments. We look to be that strategic partner in the investments we do make."
"We have a strategic mandate. It's different than being a VC firm with a financial mandate. When you're talking to other corporate venture funds, be aware that there is some flexibility there."
"It does come down to the time factor: because we are part of a larger enterprise, we do move quickly for that type of environment. But probably not as quick as you might see at venture firms. We have been able to do some deals in six to eight weeks, which is pretty good for us."
Highgate's Jacob Kurien:
"We're focused on tech. We have a sandbox and we get these travel startups to work in this sandbox. If the startups are successful, then we can scale them up very quickly."
Where to look for investment money
JetBlue's Raj Singh:
"Today it is a very broad landscape in terms of attracting capital. The largest number, in the terms of deals, is 500 Startups and Plug and Play. Even those these guys aren't focused on travel, there are so many travel deals out there that they can do many deals at the very early stage."
"And now what we're seeing are the ICOs. Now people are essentially selling tokens as a way of generating capital. That might be a faster way and a way to raise money at an earlier stage than you might through a VC. It also might not be a legal way, but I don't know how that works and I'm not a lawyer."
Boeing's Sara Jones:
"I find it interesting to see investments from players that you don't typically see in the travel space, whether it's Intel or others that are starting to make some investments. Really, it's about how they are bringing capabilities to what was an adjacent market. And now is a big opportunity."
"So from the OEM, airplane manufacturer perspective, what's fascinating is seeing these companies that are digitally native drive the dialog and conversation and investment in things like drones. We're going to continue to see more and more of that as industries converge and take advantage of those adjacencies."
Highgate's Jacob Kurien:
"I would say, defintiely start with friends and family. It's the best way. When you pitch the idea, you really don't want to lose their money. You might be ok losing venture capitalists' money. But you don't want to lose their money. So most likely you will refine, and get your idea really perfect."
How to think about pitching investors -- before you pitch
JetBlue's Raj Singh:
"What do you think the company will look like? You're going to make all kinds of assumptions and they're going to be wrong. It doesn't matter. Do the math, understand the ranges that people will invest in."
"And then the next thing you do is to think about those points where you might get funding. Think about the milestones. And be very careful here. What can you achieve between the milestones? Because as an investor that's what I'm looking for."
"Which milestones did you reach that are fundable events, that I will say to myself, these guys have made progress, they have cracked some issues, they showed the model is working? If you do that, your chances of funding are going to go up."
Highgate's Jacob Kurien:
"It's all about business. Its about how you connect and the right fit for your company. Attend these startup events in the travel space, and then people notice you quickly. White papers are also a strong [approach]. Hoteliers want to read more and more intelligent stuff. They like that."
"You have to do two things: either succeed very fast or fail very fast. Show that it works. If you're somewhere in the middle, you're likely going to miss the boat and not going to get the funding."
JetBlue's Raj Singh:
"From the startup side, what can you do? First, do your planning. How do venture capitalists think about how they invest? Well, usually, you start from the other end. The exit. So I look at what a company needs to get to, in terms of valuation, for me to make my targets."
"Then I work backwards from that."
"Today, what am I prepared to invest in this company at what percentage ownership in order for me to get to the other end -- assuming these things happen: a couple more fun dings, these guys are successful, the market is about the same, etc etc. I do the math when I think about how and if I want to invest. You should do that as well."
On the funding gap
Highgate's Jacon Kurien:
"Raise capital from Raj at Jet Blue Ventures! He's a tough guy. He's got a very principled approach -- after the pre-seed, he gets into the 500 to 2 million range. We are agnostic. We don't care. We will invest if we like the business. We are clearly about business and if it makes sense. If we see something that will be beneficial to business, we will put money in."
Boeing HorizonX's Sara Jones:
"It very much is about the value that we see in the startup, agnostic of the round. And how we look at tailoring the right investment at the right time for that startup.
We will want to make sure that they are capable of growing, we take a minority position because we want other investors come to the table."
"The corporate venture space is an opportunity to bridge that funding gap. And with some of the changes we've seen in the tax code recently, I think we're going to see more growth in corporate venture capital. And hopefully fill the series A gap."
JetBlue's Raj Singh:
"The reason we have this gap is that there's so much money chasing venture today. Companies have made money and they want to put that capital to work. Some of that money they have made, they allocate for private equity and venture. That number is in the billions. The Problem with VC is that they tend to be partnerships."
"So you've got 4 or 5 white dudes, usually...They've got all this money and only a few partners. And scaling partnerships is very hard. Everybody has to agree on the new person, like a marriage. They don't take on many new partners and each partner only has so much bandwidth."
"So if they are going to do 5 deals and they have $50 or $100 million dollars to invest, they do bigger deals. And so those smaller deals get missed out on. This is why you see the gap."
Boeing's Sara Jones:
"The milestones point is so important. If we invest externally, we often get pushback, saying that we could do it internally. But the cost is the barrier. Being able to architect milestones, means that we can report back to the powers that be: With this startup, this is the progress we made. We want to help our startups and having milestones helps."
Emerging technologies: What's working? What's not?
Highgate's Jacob Kurien:
"We are seeing all of these buzzwords which seem to have a little effect on the hotel side. On the hotel side, we are not even close, as far as integrating emerging tech. Even with Amazon Echo in the rooms, it's feel good but there are privacy issues there."
"One of the companies we are working with uses machine learning to figure out better forecasting and revenue management. We have used it and we are seeing the impact of using it in hospitality. And I think it's powerful."
"There are opportunities for startups to jump in and show hoteliers the proof points. Show the difference, what does machine learning do, what does AI do, what does a chatbot do...it increases their efficiency, it reduces cost, it increases revenue...if you can translate that to people, they will notice."
JetBlue's Raj Singh:
"I would say that almost none of the emerging technologies are moving the needle right now. The reality is that travel is one of the oldest industries out there. There's a huge stack of technology, and not just computers. The way people do things is institutionalized. The point is this: the industry has been around a long time."
"Things like augmented reality and virtual reality, we haven't seen the progress in our space. That's into say it couldn't have been elsewhere. The one thing that has changed for us is autonomous."
Follow up: Thoughts on the impact of autonomous
JetBlue's Raj Singh
"In our space, the concept of autonomous vehicles, both on the ground and in the air, is becoming real. We have invested in a company called Joby, that does flying taxis. The point is that these autonomous systems are making it easier for things to happen."
"So how do we run an airline with one pilot, or no pilots, or one pilot that's on the ground running multiple airplanes at the same time. Things change in the industry. If you want to get into the airline or hotel industry, look for those inflection points. They're all over the place. Labor markets change, technologies change. Where's that point that you can help?"
Boeing's Sara Jones:
"Technology is a means to an end. We really think about the end-to-end passenger journey as being really important. We look at the disruption that we think could happen to our industry, whether that's disruption to our short-haul business due to autonomous cars, and we think about how we ensure the end-to-end passenger journey is a good one."
"When I look forward into the future, I need to see all of that automated. When we're done with urban air taxis, I need a whole autonomous environment they can operate it. And that all starts on the back end."
Not just PaxEx: Areas ripe for investment/disruption by startups
Boeing's Sara Jones:
"There's a lot of sexiness going after the consumer, and there's a lot going on with personalization. When we look at how you deliver an experience in air travel, there's so much more work to be done in terms of how you create seamless operations."
"We all know there are elements of air travel that suck. There are a lot of opportunities to look at how you change the operational side of the business. And that's really hard. I see a lot of startups going after what I would call the superficial level of passenger engagement."
"The airlines want help on the operational side, it's not an easy task because a lot of times you're dealing with legacy systems. We're starting to see these middleware companies emerging to help tie up these very siloed architectures."
JetBlue's Raj Singh:
"Forty percent of the deals we see are in that passenger experience. And I don't diss that, there are very valuable things to be doing there. And they come from the fact that we all travel and have those pain points. For me, it's like an iceberg. Passenger experience is what we see above the water. Below the water is how you operate a huge travel provider."
"And frankly, if you could save me a quarter of a percent of my cost of running my airline, I'll put up a statue to you. Because that's huge. The margins in our business are pretty damn thin. So think about the operational side of how you run this thing to make a difference. If you get that right, the passenger experience will improve."
Boeing's Sara Jones:
"And also to come up with innovative business models that bring different stakeholders together. If you look at airports, different ground services, and also the airlines. How can you make it easier for them to work together?"
"It's not just about being that interface with the passenger, but it's really about going behind the scenes and seeing how to alleviate pain points in the industry to provide better experiences. If we only focus on that last layer, we're going to hit a limit to how far we can impact that passenger journey."
What do I need to do in order to get my tech into a hotel?
Highgate's Jacob Kurien:
"Hoteliers get bombarded with a number of stuff. Like a dozen different ways to do communications in the hotel. Ten startups on how to improve front office operations or keyless check in. There's so many. All these hoteliers want is to make the guest happy. They don't know how to figure out whether you are the right person. They have no idea."
"What we did, we said we will invest, partner, or incubate to test it, say in five hotels. If its successful, we expand it across 50. Then we see it working and we start propagating, we jump in, put money in because it's working so well."
"So it's a symbiotic relationship. It helps our hotels, it helps investment, and we help the company scale. And we would absolutely do this for any company we know makes a true difference to e hotels, as well as that we think is going to be there for the long term."
The number one way to get funding
JetBlue's Raj Singh:
"By the way, the number one way to get funding is revenue. If you don't want any VCs telling you what to do in your company, get revenue. Best way to fund a company ever."
"It took me ten years to become an overnight success. You have to keep at this stuff. The reality is, that until you show a few proof points, people are loathe to invest. That's not always the case, but you have to keep at it."