Writing a new industrial intelligence playbook for investors

Phocuswire readers don’t need to be told that the travel tech industry is accelerating and finally adopting new models of innovation or that we’re currently seeing disruption and dislocation at an unprecedented scale. These are the raw materials that get us up in the morning! 

But it’s worth pointing out that the investment community, venture capital (VC) in particular, is also facing an era of disruption and dislocation, which is driving a need to recalibrate and to find ways to innovate, to preempt and to respond to travel and hospitality-specific dynamics. This means forging new ways of thinking to find use cases and synergies for horizontal tech advances such as payments and digital identity while managing whatever macroeconomic shocks have materialized overnight.

Meanwhile, travel suppliers and legacy players are changing how they integrate into the startup story. Perhaps it’s always been this way, but in my view, the C-suite’s post-COVID realization that tech requires investment, along with the ongoing impact of generative artificial intelligence (AI), is leading to a new, collaborative form of industrial intelligence. The paradigm shifts emerging from these changed market conditions are incredibly exciting.

A hybrid, ecosystem-centric structure is an emerging trend that is already thriving in travel tech. This new structure positions the VC as a catalyst—completely independent yet connected—with a clear commercial model. This template benefits everyone in the value chain: the startups and entrepreneurs, the VC firms supporting them, the enterprise players engaging at the digital edge and the strategic investors and limited partners contributing to the VCs’ funds. The value created is a collaborative output that elevates all participants and helps mitigate the zero-sum game dynamic that has historically cast a shadow over traditional VC.  

Adjacent spaces

Thayer’s travel tech industrial intelligence model has been developing since our launch in 2009. As a serial founder, I have always placed the entrepreneur at the center of the story and sought ways to put real wood behind the concept of a “value-added” investor. I recognized early that accomplishing that mission required more than contacts; it required forging a true, collaborative partnership with both sides of the trade: the entrepreneur and the user. To that end, we cultivate direct economic relationships with the world’s largest travel companies, many of which are strategic investors in our funds. However, sustaining the power of those partnerships requires a double-bottom line approach. Returns are not enough; we must bring more to the table.

One of the ways we create value is by extending our reach beyond pure-play travel startups and committing significantly to tracking horizontal tech trends, both enterprise and consumer-facing—such as fintech, generative AI and the rise of social commerce. While not classified as “travel tech,” these trends are deeply intertwined with innovation in our sector.

This cross-functional approach has sharpened our ability to see how developments in adjacent spaces can be aligned with what is needed in travel. Recognizing the existence of overlapping circles of travel tech and general tech becomes a true differentiator when the value of this network effect is embedded in how investors and entrepreneurs collaborate. It involves a deep understanding of how to bring the best ideas from elsewhere and apply them to travel.

For example, NLX, a Thayer portfolio company, is an agnostic no-code conversational AI platform that Cara Whitehill from the Thayer team identified as interesting and relevant for travel companies. She understood what set NLX apart from the other conversational AI platforms we looked at, and we looked at a lot—I mean a lot—of companies in travel and general tech. Cara’s operational background and collaboration with our key strategic investors allowed us to act swiftly on a competitive financing, close the deal and start delivering value to our partners by connecting the dots. 

It's important to note that this model is not a substitute for corporate venture capital (CVC) but rather an integrated component of the story. For some corporate venture funds, a holistic approach to adjacent spaces conflicts with the demands of their mothership; airline/hospitality CVCs are incentivized to focus on specific airline/hospitality tech and often don’t have the skill set or mandate to look beyond their domain, making it difficult to connect with these adjacent opportunities in a meaningful way. 

Identifying winners

While these insights are valuable to strategic investors, the returns for all limited partners are the cornerstone of success for any fund. I referred to the strategic VC as having a clear commercial model, and the truth is, it's simple. If we are not distributing a reasonable multiple of what we are taking in, we will not raise our next fund. Therefore, the VC running the fund needs to be fully committed to ensuring that investments deliver those returns, which can only happen if the VC is dedicated to helping entrepreneurs build great companies by giving startups access to their network. 

That purity of purpose adds a level of integrity to the larger narrative. Investors seek returns, entrepreneurs desire capital, connections and a shot on goal, while strategic limited partners (LPs) look for unique insights that can’t be bought from a consultant. There's no better way to fulfill that promise than by emphasizing portfolio quality. 

Deeper connections

Strategic VCs situated at the intersection of an industry and investment ecosystem also provide CVCs access to companies they might struggle to connect with directly.

So, if I’m a startup confident in my killer app for hotels to personalize images at various stages in the intent/discovery phase, I may be concerned about receiving investment directly from a brand because it might hinder my ability to negotiate commercial deals with other competitive brands in the future—many good companies prefer not to have corporates on their cap table because they want to sell to everyone. There needs to be a layer between the two interests, and that’s precisely what strategic VCs are there for.

Takeaway

The net result is that a new industrial intelligence playbook is emerging, centered around the importance of networks for investors to identify, operationalize and scale truly great companies in travel and hospitality tech. With disruption and dislocation defining the current landscape, entrepreneurs and investors—strategic and corporate VCs—need to leverage their strengths and create a team that is stronger than the sum of its parts.

The primary motivation for investors and LPs in any fund is to achieve a financial return, which remains constant amidst change. Venture capital requires reevaluation, and there is a sweet spot at the intersection of domain expertise, deep technical knowledge, a commitment to supporting startups and a belief in the power of ecosystems. This is the realm where strategic VCs operate.