There is no denying that 2023 has been another tough year for travel startups.
The more cautious approach from investors seen in 2022 tipped into 2023. Just a quarter into the year, total investment (including autonomous vehicle companies) stood at $421 million, a 95% drop from Q1 2022’s figure of $8.9 billion, according to Phocuswright research. The year end's total funding at around $3.6 billion for travel startups is quite a distance from the roughly $14 billion invested in 2022.
Uncertainty in financial markets, amid rising interest rates and job cuts across the wider technology industry, was intensified by the collapse of Silicon Valley Bank.
In a recent LinkedIn post, Lawrence Leuschner, CEO of Tier Mobility, announced it was shedding 22% of its workforce. Summing up the climate for travel startups, he said, “It has been an incredibly hard year for the majority of entrepreneurs, start-ups and scale-ups. This also applies to us at Tier Mobility. High inflation and the cost of living crisis have dominated the news in 2023, and the knock-on impacts of reduced consumer demand and confidence makes for a difficult business environment. Nearly every business that was previously focused on growth and expansion has written or spoken about the sharp pivot we've had to make to focus on profitability.”
That said, many startups have attracted investment in the past year, and the top investors in travel technology from January 2022 to the end of the first quarter of 2022 committed tens of millions to the sector. Investors mainly cited total addressable market as the reason for making an investment.
Fast forward to mid-December and many startups have weathered the storm and demonstrated if not actual profit, then at least a path to profitability. This is most true in hospitality-focused companies where the market continues to be seen as having huge potential for growth.
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Hotel and rentals tech focus
Hospitality and property technology companies ranging from startups offering tech-driven stays and real estate investment companies to mixed-use developments and B2B tech players continue to attract investors. Kasa Living, Placemakr and Fractal Homes attracted $70 million, $65 million and $30 million, respectively, while Outsite raised $300 million to invest in real estate. Meanwhile, Numa raised $59 million and Habyt raised $40 million for its co-living concept.
Home-swapping platforms were also in the spotlight, with Kindred and Holiday Swap both securing $15 million in funding.
Also worth watching are startups from current and former Airbnb employees, including Samara, which raised $41 million for its pre-fabricated houses concept, and Summer, the rent-to-own startup, which raised $18 million plus a $50 million debt facility.
On the vacation rental technology front, Hostaway secured $175 million with an eye on acquisitions, and property management technology company Missafir landed $26 million. And Operto, which specializes in automation technology for hotels and rentals, added $25 million to its war chest.
Hotel technology players also made headlines with Hyperguest securing $23 million in July, while Stayntouch, a specialist in property management technology, recently received a $48 million investment.
Not all startups in the hospitality category fared well, however, with Casai calling it quits in July, with founder and CEO Nico Barawid citing “an investment drought with a model no longer favored by VC [venture capital] investors to produce venture returns,” among reasons for the company’s demise.
Experience everything
Earlier this month tours and activities provider Klook announced $210 in funding and said it had achieved overall profitability. Meanwhile, GetYourGuide attracted $194 million in funding in June and said in September it had turned a profit in the quarter.
And with such significant sums being invested in late rounds, some have questioned whether a public listing or acquisition might be on the cards in 2024.
With a slightly different focus than the above companies, Fever, which enables the discovery and booking of events in cities, secured $110 million funding. And map-based platform Atly, which helps users find places to go and things to do, raised $18 million.
A number of B2C online travel players also attracted investment: Worldia, €25 million, WeRoad, €18 million, and Traveligo (now called Gother), $25 million.
Expense management
Corporate travel startups did not attract the levels of investment of previous years with the notable exception of corporate spend management startup Ramp, which had a $300 million round. Onfly, a business travel booking and expense management startup, attracted $16 million, while BizAway, which is also focused on corporate travel management, secured €10 million. More recently, Center, also working to drive efficiency in expense management, landed $30 million.
Startups often rolled under the fintech banner also piqued investor appetite, with payments provider Terrapay landing $100 million early in the year, and Southeast Asia’s YouTrip adding $50 million to its coffers more recently. Providers straddling travel and finance, including credit card startup Yonder and Utu, a company helping travelers with duty-free shopping, raised £62.5 million and $33 million, respectively.
Land and sky
Mobility companies, including emerging electric vertical take-off and landing startups and autonomous vehicles, also piqued investor interest over the course of 2023. Archer secured $215 million in August for its eVTOL development, while Lilium landed $192 million and avoided being delisted from the Nasdaq. Didi Autonomous Driving attracted a $149 million investment, while Cabify looked to electrify its fleet with $110 million in funding. India-based bus technology platform Chalo raised $57 million and transit tech specialist Via raised $110.
Although there have been cutbacks at autonomous vehicle companies in recent weeks, more investment in the area in 2024 can be expected. Other developments to watch out for will be all things artificial intelligence, although that could be more on the mergers and acquisitions side, as with recent deals by Airbnb and Mondee.
2024 trends
Merger and acquisition activity is worth keeping an eye on in 2024. A recent M&A tracker launched by Cambon Partners noted a post-pandemic increase in deals compared with pre-pandemic acquisitions.
Investment in sustainability startups, including sustainable aviation fuel startups such as Metafuels, which just landed $8 million in funding, will continue. A recent study from Amadeus revealed that almost half of companies believe they will invest more in environmental, social and governance initiatives in 2024. Companies like Chooose, which raised $15 million at the beginning of 2023 and helps travel businesses find the best carbon footprint reducing options, will also get attention. Chooose is one of a handful of the PhocusWire Hot 25 startups in 2023 that secured funding.
At The Phocuswright Conference 2023 investors from Inovia, JetBlue Ventures and Highgate Ventures provided insight on whether the boom is dead. The investors discussed the impact of factors such as high inflation and travel demand on startup funding. They also touched on more realistic valuations, how many startups are turning to internal rounds and convertible notes as well as the potential for greater M&A activity in 2024.
Watch the full session moderated by Mike Coletta, Phocuswright manager of research and innovation, below.
The Boom is Dead. Long Live the Boom! Investors - The Phocuswright Conference 2023