Seatfrog, an app-focussed rail and airline upgrade technology specialist, has confirmed a £4.5 million Series A funding round, led by Octopus Ventures.
Existing investors, including HOWZAT Partners, also participated in the round. HOWZAT backed a £650,000 seed round back in May 2016.
Seatfrog's co-founder and CEO Iain Griffin told tnooz that the injection would be used to build its team, with data science, product and engineering talent top of its wishlist. He expects more than 20 new roles to be created as a result of the funding.
Seatfrog has offices in London, Sydney and Tokyo.
The business came to prominence last September when it linked up with Virgin Trains in the UK, allowing passengers who has bought a ticket direct with the operator the chance to bid for an upgrade on certain routes. Virgin has since rebranded to LNER, with LNER taking over the relationship with Seatfrog.
In the ten months since going live, Seatfrog has seen a 130% month-on-month increase in revenues. Its commercial model is performance-based, sharing any additional revenues it generates from the upgrades with the supplier.
The statement also talked about “a 56% conversion rate” and Griffin explained that “this was one of the figures that really piqued the interest when we were talking to potential investors.”
When someone books a ticket direct on specified routes, the passenger receives an email from Seatfrog telling them that they can bid for an upgrade. “The 56% conversion rate figure refers to the number of people who open the email, register with us and follow through to make an actual bid,” he explained.
Seatfrog connects into LNER’s reservation system and has a set of proprietary algorithms which it uses to identify which routes and services are likely to get the highest bids, and then also works out the optimum number of seats to make available for an auction. “So it’s not about selling lots of really cheap upgrades, its about maximising the auctions we do carry out, to keep an eye on yield integrity".
He also said that its core auction product is also an upsell channel. “We know that if someone has been outbid on a seat upgrade, we can sell them access to the first-class lounge before departure via a push notification. These are straight sales rather than an auction, but we have the Seatfrog data to work out the propensity of specific cohorts to convert.”
The technology can also work with airlines, and while Virgin/LNER is its only live client, Griffin said there would be five or six new clients live “in the coming months”.
HOWZAT’s co-founder and partner David Soskin, who is on the Seatfrog advisory board, noted that “ancillary revenue strategies across the travel industry are fragmented and there is a lot of untapped potential, particularly in relation to the same-day upgrade process.”
Seatfrog’s internal research outlines the scale of the opportunity in air and rail. It believes that more than 37 million premium seats fly empty annually across the top 30 airlines. And across the top seven European rail providers, that number is 480 million.