The last 18 months may be considered a write-off when it comes to comparative analysis of the travel startup landscape.
Companies of all shapes, sizes and ages have faced enormous challenges as their markets have disappeared overnight and any return to some sense of business as usual has been lukewarm at best for many.
In 2020, Phocuswright's annual State of Startups Report, which has tracked the digital travel startup landscape since 2009, expected about half the amount of funding to come the way of startups during the year when compared to 2019.
Pre-pandemic 2019 saw $7.4 billion of investment go into travel startups.
Travel funding may have hit a low in 2020 but there were some signs of a recovery emerging in early 2021, with a string of big checks being the sent the way of Travelperk, Getaway, EasyMile, GoSharing and Momenta, among others.
But the sad reality is that travel startups, during any period of time, without a global pandemic to contend with, experience vast challenges to get them competing alongside existing and (sometimes) profitable companies.
Barriers to entry and often considered low but the failure rates of new businesses are inexplicably high (upwards of 75%, depending on the measurement) - for many reasons.
Business intelligence service CBInsights recently produced a report to unravel the causes behind some members of the wider startup community's inability to survive.
What are the top reasons that startups fail?
CBInsight's analysis of more than 110 failed businesses came up with a list of the top 12 causes:
- Ran out of cash/failed to raise new capital - 38%
- No market need - 35%
- Got outcompeted - 20%
- Flawed business model - 19%
- Regulatory/legal challenges - 18%
- Pricing/cost issues - 15%
- Not the right team - 14%
- Product mistimed - 10%
- Poor product - 8%
- Disharmony among team/investors - 7%
- Pivot gone bad - 6%
- Burned out/lacked passion - 5%
CBInsights says the percentages exceeded 100% as many businesses offered multiple reasons for a failure.
The top two causes are particularly pertinent to the travel industy, given its competitive nature and a vast array of companies often doing the same thing.
This is compounded by a long-held belief that despite the barriers to entry being low, as mentioned previously, working within existing technology frameworks can often hinder growth and the ability to raise further capital to challenge the status quo.
Burning through capital is easily done and, therefore, immediately raises a question mark from investors as to whether additional funds will be enough to break through.
The lack of market need for a product or service is equally damaging to travel startups and extends beyond the obvious and numerous examples cited around social trip planning businesses.
At the consumer-facing end of the starup spectrum, there are only so many online travel agencies or alternative accommodation platforms that the market can no support, for example - with perhaps a few exceptions when product supply can be established on an exclusive basis.
Increasingly, technology startups that support the industry now face similar isssues, as the digitalization of the sector has advanced rapidly over the last 5-10 years.
This is to be welcomed but it has, conversely, established a ecosystem where many startups have found themselves providing a service that is simply another feature from an existing provider.