Gharage Ventures launched its €40 million Fund I back in early March looking to back early-stage startups in the travel and retail sectors.
The Berlin and Singapore-based company evolved into an independent investment vehicle out of an entity with the same name first launched by Gebr. Heinemann in 2020. In its previous incarnation, Gharage made investments in luggage storage company Bounce and online travel company GoZayaan.
Now, it has announced a first investment since launching the new fund through its participation in a seed round for Lemrock, a company providing the infrastructure for agentic commerce.
In an interview with PhocusWire, founding partner Lennard Niemann and general partner Darren Soh discussed their thesis-driven approach, the ideal investment and why now is a good time to launch the fund.
Answers have been edited for brevity.
Talk me through your thesis-driven investment approach.
Niemann: While most investors are rather opportunity driven, we build investment theses around technological hypotheses in evolving markets and then actively search for targets within them. We see a lot of industry-agnostic funds, which invest in technology ventures but also make investments driven by ecosystem, by understanding a little about the disruptive potential of industries.
We evolved out of a corporate venture capital (CVC) vehicle; we really know what operations need and what startups can deliver. Using that knowledge and combining it with the disruptive potential of technology, e.g., artificial intelligence, leads to these papers on where a market is developing or where potentially relatively new markets are evolving such as agentic commerce.
Soh: About 50% of our deal flow is inbound and opportunistic. The other 50% is laser-focused—we identify a market, publish a research paper to signal our interest, then proactively hunt for startups in that space. We identified a market around agentic commerce and we also identified the travel memory space—how do people book and see travel inspiration they have looked up on TikTok or Instagram. When you look at videos from influencers, you feel inspired and you probably send to a friend, I probably click save. That’s not detectible today by ChatGPT, Gemini or OpenAI. Nobody allows you to go back and search all the videos you have saved in the past and, based on them, tells you a certain set of things you'd like to do. We very specifically went out to hunt for startups in this space.
Compared to when you were part of the CVC—how much has changed in terms of what you're looking for? Are you going wider or staying focused?
Niemann: We've always stuck to our focus. When it comes to these massive operations, such as airports or retailers at airports, there is so much technology out there which can be helpful. We are investing in business models which we see playing a role in those operations.
Do you have a fixed check size and a target number of investments per year? And B2B or B2C companies?
Soh: The check size is €250,000 to €500,000. We invest at seed stage to Series A. We're not opposed to larger but the idea is to partner with a more financially-driven investor. We want to make about 30 investments over the next couple of years and our small team won’t have the capacity to give each company the kind of support and governance it needs.
The physical traveler experience from departure to arrival has not changed throughout the last technology cycle.
Lennard Niemann - Gharage Ventures
Niemann: We're not limited to either (B2B or B2C). When we look at travel and trade, we see the very dominant role of trade-related startups. This might be due to geopolitical circumstances which are probably not the best breeding ground for travel startups. The disruptive potential of AI is influencing trade even more than travel. We do see B2C as still relevant but ultimately, the investment focus is a bit bigger on B2B.
Startup funding in travel is at an all-time low, why is now a good time to launch a fund and how do you see the market shifting in the next few months?
Soh: We see passenger numbers have increased and continue to increase—so the macroeconomic factors are there to support the market. There is growth to be had and innovation to be had. Unfortunately travel companies have not received the love or VC funding over the past couple of years for a multitude of reasons. It is traditionally very dominated by the OTAs, but now, especially with the rise of AI and how consumers are changing how they consume content, we think distribution is going to be more democratized. Power is shifting slightly away from the big OTAs. And, as a result travel memory will also be very interesting.
The second piece is that now going forward there will be a wave of startups that leverage AI to capture new markets. We don’t know how, it’s a bit too early, but there are companies such as YGO Trips, which diverted its business model from B2C to B2B and grew very quickly.
Niemann: The physical traveler experience from departure to arrival has not changed throughout the last technology cycle. Everything before and after has changed, once you arrive at the airport your experience is as it was 30, 40 years ago. What we see in the current technology cycle is new technologies, with high disruptive potential, which will influence this physical traveler journey at airports. We also see radical, new consumer behavior. We see Gen Z or Gen Alpha driven by the thought of care, care in a volatile world. They do not want these airport experiences. The paradox is that airports make money having people there, who show up and consume, but they don’t actually want to be there. Technology enables them to be not there anymore.
We will see a radical reduction of security time spent through AI. We will see less downtime of planes through AI, we will see, through biometrics, different shopping experiences, etc. So now is the right time to invest in travel and retail technologies because the current technology cycle will have the biggest impact by far on these two industries and particularly on the travel journey in the airport ecosystem.
How do you see AI hype versus reality and the fact that AI seems to be making defensible moats harder?
Niemann: It’s a big discussion about whether we should invest in SaaS models, as there is almost no defensibility or the risk, at least, is very big. You also need to understand your investment focus—what kind of AI are you investing in and what your sweet spot is. We’re definitely not the right investors for large language models, it needs way too much money to play a relevant role and it’s not our focus. We see other AI models, from an investment perspective, which are super interesting and are solving a small pain point. They most probably won’t get to the $100M valuations, but if you’re early in and early to exit can be still very profitable.
With AI investments you can cut the shotgun and shoot into a dark forest and hope something falls. For us it’s about defining our thesis on where we believe we can build AI models which we, potentially, get access to early and even see exits early. We’ll definitely also see consolidation in AI.
Describe your ideal investment in travel.
Soh: Solving a very specific problem with a specific niche and backing a founding team that can demonstrate they understand that niche very well. Travel has not seen the investment compared to other sectors in the venture scene as a lot of the market—very open, generic market—is dominated by big OTAs. One of our investments, GoZayaan, is a good example. It's a company we backed from a pure travel perspective, and it was interesting to us because it solved a niche specific to Bangladesh around credit card payments. People are still paying cash for travel outside Bangladesh. The founder is Bangladeshi, understands the market deeply and has scaled exponentially by serving that specific target group.
Niemann: We also want to invest in founders who are able to pivot, able to change their business model and product. What we’ve seen in Bangladesh, and that whole region, is there was no single year with the expected outcome. Every year there was a better outcome because the founder was reacting to market challenges. We don’t believe the travel ecosystem and startups will face a constant, it will face further geopolitical crises and challenges. There are so many influential factors on travel that the ability to pivot is highly important.