We recently released our latest report in the Skift Trends series, Venture Investment Trends in the Travel Industry 2015.
Below is an extract. Get the full report here to get ahead of this trend.
Brent Handler concedes he had something of an advantage when he co-founded Inspirato in 2011: Nearly a decade earlier, he and two partners (including his brother) founded the destination club Exclusive Resorts, selling majority ownership to AOL co-founder Steve Case just two years later and staying on as president until 2009.
But that didn’t mean that getting a second company off the ground would be easy. Investors weren’t exactly tripping over themselves to back Inspirato, which grants members who pay a one-time initiation fee and annual dues access to luxury properties.
“We got a lot of ‘no’s’ at the door,” Handler said of his first pitches for Inspirato, which is based in Denver. There was zero interest because venture capitalists don’t like the luxury segment; they don’t like the operational complexity. A lot of people just said no.”
Not that Inspirato’s business model is typical for a startup in the travel industry. Rather than serving as an online travel agency, hotel-room distributor or clearinghouse for stays at private residences, Inspirato rents its properties, employs housecleaners and other staff; it also books stays through its own distribution platform.
“Most people that are starting a company whose goal is to get venture-backed would not start a company like ours,” Handler said. “Ours is too capital-intensive. Most VCs don’t fund companies like ours.”
But persistence – and some early success in the marketplace – paid off. Inspirato has raised nearly $80 million through five rounds through eight investors, including a $20 million Series C round last year led by W Capital Partners and including existing investors Institutional Venture Partners and Millennial Technology Value Partners.
“We worked very hard to find investors, partners, folks on our board we thought were good cultural fits for us,” Handler explained. “We were able to do that. It just comes down to process.”
That strategy seems to be paying off for Inspirato. The company “is very, very close to cash-flow break-even,” Handler said, but it’s focused more on growth than on turning a profit. Inspirato isn’t actively seeking another round of funding, but may at some point to expand and market the business. And because Inspirato is still growing, he said, the company isn’t currently hunting for a deep-pocketed buyer or preparing for an IPO.
Handler knows his company’s path to success in raising capital isn’t one that can be easily duplicated: Not every founder already has one success story under his or her belt, and building a network of vacation homes isn’t something that can easily be bootstrapped. He also acknowledges that finding an angel or seed investor in an increasingly crowded market is likely more difficult now than it was when he began raising funds for Inspirato in 2010.
One key for startups, according to Handler, is to find an unserved or underserved market, then convince potential investors that you can tap that market better than anyone else. Even if that requires knocking on their doors more than once.
“My philosophy is that you can’t let no’s get in your way and slow you down,” Handler advised. “You have to point out the firms you think would be helpful, then you have to relentlessly stay in touch with them and make them understand why your business is important and valuable and growing.”