Startups and
innovation more broadly are critical across the travel industry, spurring
advancements that often tap into emerging technologies to create better
experiences for travelers or to enhance efficiency and operations for suppliers
and stakeholders.

Each November
PhocusWire publishes its selection of the 25 travel startups poised to stand
out in the coming year. There have been 150 companies recognized through the
Hot 25 dating back to November 2018 and collectively those startups have raised
nearly $2.5 billion dollars.

Funding is but
one measure of the health of the travel startup ecosystem and investor
confidence, but it is a meaningful indicator.

PhocusWire’s sister brand, Phocuswright, tracks this
data in Phocuswright’s Travel Startups
Interactive Database, which includes more than 4,600 companies
that have generated more than 8,500 funding rounds totaling over $200 billion
from almost 8,400 investors since 2005.

The data shows that travel funding totaled $5.3 billion in 2023, down significantly from $12 billion in 2022, and that 2024 is at about the same pace with $3.1 billion raised through late June.

The slowdown in
travel funding correlates with a broader slowdown in the activity of venture
capital firms. According to a March 2024 Business Insider article containing an
analysis of Pitchbook data, “The number
of active traditional VCs in venture capital deals in the United States peaked
at 18,504 in 2021. … That fell to 15,985 in 2022 and to 9,966 last year.”

And yet, while the current macroeconomic environment is challenging, some travel startups have raised significant rounds already this year, notably TravelPerk’s $104 million Series D-1 extension in January, Mews’ $110 Series D in March and Guesty’s $130 million Series F in April.

The list

To bring more
transparency to travel investors’ activity and strategies, PhocusWire last year began
publishing a list of the top investors in travel technology.

The list is based
on analysis by Phocuswright senior manager of research and innovation, Mike
Coletta.

Similar to last
year, the analysis highlights the investors that are most active or are
contributing the most non-debt funding to the ecosystem. Since the specific
amounts of contributions by each investor in each funding round is generally
not publicly available, the analysis zeroed in on those who invested in at
least three travel companies between May 2023 and May 2024 and/or have a
specific focus on travel and stated plans to invest more.

Based on those
criteria, following is the list of top travel tech investors and a sample of
the companies they have invested in during the specified time period, with
links to our coverage of the startups’ funding as applicable.

“Considering
the recent drastic downturn in funding, and even with signs of softening demand
on the horizon, it’s fantastic to see investors continuing
to bet on travel, from stalwarts like Thayer, JetBlue Ventures and Plug and
Play to newcomers like Antler and Gaingels,” Coletta said.

• Thayer
  Ventures/Derive Ventures – 13 investments including Mews, Point.me, Canary,
  Directo
• Antler – 7
  investments including Airalo, Unravel and TravelTail
• JetBlue
  Ventures – 6 investments including Avnos, NLX and Tomorrow.io
• Plug and Play
  Tech Center – 6 investments including Neoke, Point.me and Sherpa
• TechStars – 4 investments
  including NaviSavi, SquadTrip and TripSlip
• Gaingels – 4 investments
  including Anyplace, Point.me and Summer
• FJ Labs – 3 investments:
  Dharma, Fairlyne and FlyFlat
• SpeedInvest – 3
  investments: Fairlyne, Raus and Smiler

Honorable
mentions:

Investor
insights

We also reached
out to the companies on this list to gather insights about their investment
strategies, how they work with their portfolio companies, where they see
opportunities for innovation and their take on the hype around artificial
intelligence. Here are some of those responses, in some cases edited for
brevity.

What are the
key criteria you consider when evaluating an investment opportunity?

Kristi Choi, early
stage investor at Plug and Play Tech Center: While various factors go into our
investment decision-making process, as early-stage investors, strong conviction
in the founder(s) is fundamental. Companies will go through various stages and,
in many cases, product iterations. In the end, we’re looking
for founder(s) who are focused and decisive, have superior execution skills and
know when to make the right turns at the right time. We also ask ourselves if
this is the right person to be solving this exact problem. The answers to these
questions should be an easy yes across the board.

Jeroen Arts,
partner in the marketplaces and consumer investment team at SpeedInvest: We
pride ourselves with being the first institutional backer in most of our
portfolio companies. When you are investing at such an early stage, the most
important criteria we invest in are the people who are building the product and
service. In the seed-phase of a company, 99% of the journey is still ahead of
the company and, as such, we rate the team and their ability to execute as the
most important.

Chris Hemmeter, managing
director at Thayer Ventures: We focus on five things specifically: market
dynamics, unit economics, go-to-market engine, progress and people.
Specifically, we are looking for large addressable markets or smaller segments
that are expanding fast, strong unit economics that promise capital efficiency,
a repeatable go-to-market motion that is consistent with the former
characteristics and revenues typically above $2 million to $5 million. People, however,
is by far the most important. We are looking for special leaders who can
inspire.

Lorenzo Thione,
managing director of Gaingels: We look at the business opportunity to create a
large sustainable company, in a large enough market to drive substantial
returns. This also relies on evaluating the company’s competitive advantages
either rooted in technology, product or team, and its unit economics. Finally,
and probably the most important element we consider is the founding team. Co-investors and valuation come into play too, but they are less central to our
investment decisions.

Jeff Weinstein,
partner at FJ Labs: Our favorite startup to invest in is one that is showing
early semblances of product market fit, but is not yet at scale. We like our
capital to be used for scaling businesses quickly with working unit economics.

How do you
like to work with your portfolio companies?

Plug and Play/Choi: We
place a lot of trust on the founders that we bet on, and we strive to add value
by leveraging our extensive global network to connect our portfolio companies
with potential customers, partners and industry experts. Plug and Play works
closely with over 600 corporations globally across 20+ industries, and we are
constantly identifying business development opportunities for our portfolio
with the goal of shortening sales cycles. Our job is to be master matchmakers.
For the earlier stage companies, our model can significantly help with
achieving and fine-tuning product market fit.

Gaingels/Thione:
We work much like a traditional minority investor that doesn’t take board
seats. Because we have a large portfolio we tend to be more reactive rather
than proactive, but we can step in to support our companies whenever they need.
Our large portfolio and network of investing members make Gaingels a
particularly valuable and supportive investor for companies seeking
introductions to potential business partners, customers and/or other investors.
We also help our portfolio companies by bringing diverse capital on their cap table
and making room for underrepresented investors, helping them with developing
their boards of director and advisory, by sourcing and recommending candidates
from underrepresented backgrounds and supporting them in their recruiting
efforts by helping them tap into pools of diverse talent they may not have
access to.

Thayer/Hemmeter:
We consider ourselves a strategic investor and like to say that we work with
our companies between board meetings, not just at board meetings. We try to
serve as their business development, sales and strategy partner and focus on
opening doors and driving action. I personally spent the bulk of my career
building businesses and understand that helping entrepreneurs connect with
potential customers is the primary definition of “value
add.”

Where do you
see the biggest opportunity for innovation today in travel?

Plug and Play/Choi: We’re currently having many conversations
about convergence in the travel industry with increasingly integrated vertical
software. There’s been heightened demand from consumers
and agents for a one-stop shop, yet the industry remains fragmented, causing
friction. We’ve been seeing more of this convergence
happening lately, especially on the corporate travel side, with significant
activity in fintech, expense management and travel booking. We’re keeping a close eye on other
sub-sectors to identify similar trends and patterns.

Thayer/Hemmeter:
The accommodations tech stack, vertical software and services, activities and
experiences, related payments solutions, loyalty and consumer are some of the
areas where we are concentrating. We are also very interested in AI but only as it
pertains to the application layer and how it solves interesting problems in the
travel space.

SpeedInvest/Arts:
On the consumer side, we see a clear shift toward a highly personalized and
seamless travel booking experience. Rather than providing customers with “information,” we see platforms leveraging AI and data
to offer highly tailored travel itineraries. Additionally, with the rapid buildup of infrastructure and capabilities of AI, there is a clear path to
autonomous travel agents that will eventually take care of the tedious process
of booking your trip.

In a similar
vein, yet less obvious, we see AI also being a big agent for change on the B2B
side. There are a lot of new technologies coming online that will allow us to
run leaner and smarter travel operations. Whether it’s at
airports, in hotels or somewhere along the way of your journey, we believe
there will be a new set of travel startups to start to resolve some of the
current inefficiencies.

How are you
seeing the hype around AI impact the travel startup landscape?

Plug and Play/Choi: There
was a lot of noise to sift through in the earlier months. I think some of that
noise has died down, and we’re now starting to see impactful
applications develop that are hyper-focused on reducing costs and improving
service quality in travel. There is a ton of potential, and the travel startup
landscape will reflect that. However, like in many other industries, there is
currently a significant gap in corporate adoption of generative AI applications, so it’ll take some time.

FJ Labs/Weinstein:
AI is seismically shifting the playing field for startups, so we think a lot
about defensibility (see the excellent strategy book 7 Powers by Hamilton Helmer for a framework
that we think about sustainable value creation). For many AI startups, we
worry that they are running on an increasingly accelerating treadmill,
consuming massive amounts of capital just to stay in place. So we prefer
to focus on narrow applications of AI within existing workflows or software
tools that benefit from AI, rather than AI itself.

Thayer/Hemmeter:
AI for travel startups is a tool, not a solution in and of itself. What’s most interesting is the business
problem being solved — in other words, how the tool is being leveraged in the
application. It’s an important and exciting new toolbox, to be sure, and many startups are figuring out how to solve problems in new
ways. That said, integrating AI into a bad idea doesn’t get very
far. It’s also important to note that unlike
past innovations that caught incumbent players flat-footed, AI has been a
central part of their work for many years, and they have the power to maintain
leadership. It’s unlikely that any startup will “out-AI” the big guys, while that wasn’t true for mobile, for example.

Gaingels/Thione:
While there are a subset of companies that attract headlines, investors and
attention and therefore are able to raise at inflated valuation, the true
economic impact of AI in the long term is unlikely to be hyped. There is an
enormous amount of VC spending that is ahead of the value unlock chain because
it’s funding compute deployment, and some of that capital may be at risk of
being devalued by future improvements on the hardware side, but the true unlock
of value from a productivity and staffing point of view for the small and
medium enterprise, especially in traditional/boring industries is yet to be
seen.

What is your
outlook for startup funding generally across the travel industry for the next
few years?

SpeedInvest/Arts: While travel has picked up considerably since the end of the pandemic, as people are happy to be back exploring the world, VC investment in the travel industry has – somewhat counterintuitively – traveled the opposite direction (see chart below from Dealroom). We see less travel startups being funded (across all stages), and the lower amount of total invested capital in travel startups is getting more concentrated in a smaller group of “winners.” I do believe that this strong bifurcation in the market will ease a bit in the coming 12-24 months; however, fundraising for startups in general, and travel startups specifically, has changed 180 degrees vs. its peak year of 2021.

 

Plug and Play/Choi: We are
optimistic. There’s still a lot of work to be done and
lots of opportunities to build meaningful technology across the travel
industry.

Thayer/Hemmeter:
I am bullish, but not from a “number of
deals” and “total
dollars deployed” perspective. I am bullish about the quality of startups in
travel and the dislocation and disruption happening across the $10 trillion
value chain. In my view, looking at total number of deals and absolute dollars
deployed says more about venture capital than startups. Too many
shoot-for-the-moon ideas got funded when cash was free, and VCs were eager to
deploy. At the same time, round sized grew too large as VCs looked to fully invest
in order to get back to their LPs with the next Roman numeral fund. The result
was a great deal of noise in the market that, ironically, generated headwinds for
the best companies and too much cash that harmed the teams that took it on. We
are, thankfully, living in different times and are back to quality, efficiency
and grit. That this is happening against a dynamic global industry like travel
is very exciting. I think we will continue to see great companies born during
this period, and disciplined funding will certainly be there to support them.

Gaingels/Thione:
People are back to traveling to equal or higher than pre-pandemic levels. They
are also finding ways to do more with less because of rising inflation, so
wherever technology can help with identifying travel opportunities while
reducing cost, maximizing utilization and inventory management, removing
intermediary inefficiencies that increase costs and renewing a focus on
experiential rather than luxury travel, will be a space ripe for investment and
value creation across the travel value chain.

FJ Labs/Weinstein:
One of my favorite trends right now is investing in startups that dramatically
improve productivity within existing communication workflows. This means that
people can become customers without requiring massive behavior changes.
For example, we invested in FlyFlat, which is a business-class flight booking
service where the entire UI/UX lives within Whatsapp/SMS/your messenger of
choice.