5 Travel Startups Saved by Funding in a Nick of Time Just Before the Crisis

The coronavirus pandemic slammed travel tech startups, forcing some to shut down or pivot. Yet some young companies had the happy luck of landing an investment before the crisis struck. These have ridden out the storm better than most. Other promising businesses retooled their operations or products to adapt to new conditions.

Skift checked in on a handful of venture capital-backed companies to see how they’ve been faring. We looked at companies that are still maturing and don’t usually get the media spotlight.

“Given how many startups have up-front costs but haven’t yet figured out the flywheel on recurring revenue, having secured funding before the pandemic definitely gave companies a leg up,” said Jen O’Neal, a partner at JCJ Capital in San Francisco and an entrepreneur who co-founded Tripping.com after building startups from the ground up in the Bay Area, London, New Zealand, and Costa Rica.

The founders who Skift spoke to expressed humility, noting that the timing was pure chance. They said they’re trying to make the most of the situation while also supporting the industry.

Oaky, a service that helps hotels upsell guests before they arrive, announced a $9.5 million Series A round led by Peakspan in late February. Weeks later, the founders had to make a stressful call to their investors.

“We warned them that, in the worst-case, we might not generate a single euro of revenue for a year-and-a-half,” said Erik Tengen, co-founder.

“Our investors didn’t panic,” Tengen said. “We agreed, let’s strategize on how to support our industry, maintain our current customer base, and make Oaky available to new customers for free now that will convert into paying customers later.”

Since March, it’s seen its number of hotel clients rise by 40 percent. Oaky could afford to take over office space in central Amsterdam and afford to hire for technical talent and avoid layoffs.

For existing customers, it offered a revenue guarantee.

“We said, ‘If we don’t at least double the value of the subscription fee in upsell revenue, you won’t have to pay us the subscription fee’,” Tengen said. “For hoteliers that had to pause operations, this meant they avoided paying a fee. For those that could maintain business, they could make sure their spending counted.”

For new customers, Oaky aimed to remove the financial and operational friction of using the solution.

During the crisis, hoteliers didn’t have time for the work of implementing upselling campaigns and offering creative deals. So Oaky came up with a digital library where it put together ready-made content of best-selling deals based on its data set of about 8,000 deals, paying for stock imagery and had marketing copy translated into 25 languages. That simplified and sped up the onboarding process for hotel companies.

“By virtue of being lucky enough to close the funding right before the crisis and by having transparent and supportive investors, we had all the cards in the deck face up,” Tengen said.

Software for Hotels and Vacation Rentals

Hotel software services provider Cloudbeds, which closed an $82 million Series C round ten days before U.S. President Donald Trump declared a national emergency. The funding round led by Viking Global Investors allowed the San Diego startup to stay the course while managing its long-term recovery plans.

“Given the timing of the funding, we were in a unique position,” said CEO Adam Harris. “Our board reinforced management’s position was that we didn’t need to make significant changes to our course. It allowed us to do things we wanted to do, such as investing deeper in supporting the industry and investing in our technology and customer success processes.”

When health workers and cities needed access to beds to manage the crisis in March and April, Cloudbeds worked with RateGain, Sabre, and other industry partners to create a non-profit that matched 55,000 beds to people who needed them.

The funding also enabled the startup to avoid furloughing staffers. It added 65 roles, particularly for engineering and customer service.

The startup fine-tuned its operations, too. Its client mix was about three-quarters independent hospitality companies. The crisis starved many of these small hospitality companies of resources. So Cloudbeds shortened how long it took customers to get up and running on its system.

“Implementation and onboarding is faster now than before Covid-19,” said CEO Adam Harris. “End-to-end onboarding time is down about 25 percent.”

The sales team saw growth shift this year from urban hotels to vacation rentals in remote regions, with one customer Loge Camps, seeing nearly full occupancy in August.

The growth enabled Cloudbeds to add more than 300 properties a month in recent months.

“We had to do two main things: help support the industry and invest heavily in building a better platform,” said Harris. “The funding allows us to play a long game looking at 2022.”

Business Travel Heartache

Business travel has had a rough year, with many companies not comfortable sending their employees on trips. That’s been a strong headwind for NexTravel, a corporate travel booking service that went into the crisis with about 700 customers.

Opportunely, the Santa Monica-based company raised $2.4 million in Series A funding in late February.

“We took money from Quest Venture Partners and Pipeline Capital, and they’ve been incredibly supportive,” said CEO Wen-Wen Lam. “They have understood that this has been a difficult time for the sector. We evaluated a pivot out of travel, but it didn’t make sense.”

The funding plus the government’s loan program helped the company endure a few months’ dry spell.

“We were running lean for a long time before Covid, so it was probably an easier adjustment for us since we were used to operating with a pretty small team,” Lam said. “Our approach was that we should keep the minimum team to keep the business operating as we learn to live, and travel with, coronavirus.”

One task has been adapting to shifting customer patterns.

“We used to have a lot of mid-market customers traveling,” Lam said. “Now it’s smaller companies in specific sectors.”

Investor confidence is starting to bear fruit as companies are planning to travel again.

“Our renewal rate was upwards of 70 percent for annual contracts for the past two quarters,” she said. “Overall, in terms of volume, we’ve seen a little bit of recovery over the past three months. This month is looking significantly better than all past months by a significant margin.”

Latin America’s Reopening

Colombia-based Ayenda, a budget hotel chain, has faced challenges. Colombia stopped all commercial flights during the pandemic, and air travel only resumed at the start of September.

From a performance perspective, April was the cruelest month. Ayenda received only 5 percent of the daily reservations that it had processed in February.

“We were fortunate on the raise that we did in October last year,” said CEO Andrés Sarrazola. “By the time pandemic hit, we had more than 70 percent of the round still in the bank. That raise helped us maintain 100 percent of our workforce, even though management and all the employees lowered their salary to get the runway we needed.”

Ayenda’s leading investor was Kaszek in Argentina. That helped because Kaszek is run by former entrepreneurs who had grown and sold digital businesses in Latin America. These investors had known stormy economic times before.

The investors pushed the startup to understand more of business “from the unit economics perspective” during this time. Even though the company is unprofitable now, the founders studied how to make sure each customer will be profitable after the crisis ebbs.

“The raise also enabled us to give more leeway to hotel owners, not charging them any fee for five months given the understanding of low demand,” Sarrazola said.

August was better, closing with a 20 percent recovery, and September seems much better because of the quarantine ending in Colombia. The company also has operations in Peru, which has resumed growing, though slowly.

“We expect to recover by April 2021 on all segments, but surprisingly our corporate segment, meaning companies with a signed agreement with us, is now fully recovered,” he said.

Experiences Sector Has a Tough Experience

Checkfront, based in Victoria, British Columbia, Canada, provides software that helps more than 5,000 sightseeing-and-experience operators run their businesses.

But social distancing norms have crushed the businesses of most of these operators.

Checkfront had closed a $6.7 million ($9.3 million Canadian) Series A investment round led by Framework Venture Partners announced its raise on the same day that Canada announced its first death related to Covid-19.

When asked how has Checkfront been doing in the crisis, CEO Jason Morehouse responded: “This is a difficult question to answer.”

“From a business perspective, we are strong and healthy,” Morehouse said.

Checkfront has a subscription-based software business model and a diverse mix among its customers in verticals and geographies. Those factors spared it from some of the impacts felt by others.

It hasn’t been easy for Checkfront’s team to watch the effects of this pandemic on the sector.

“Some of the stories we’ve heard from operators have been tough to digest, despite many of the ways we’ve tried to help many of them through this difficult time,” Morehouse said.

At the peak of the shutdown in North America, the startup saw a year-over-year decline of about 85 percent of its booking volume. But today its volumes have returned to levels above the year-ago period.

Checkfront reports growth of more than 125 percent year-over-year right now.

It helped to have raised funding right before the crisis, but the pandemic still dented the company’s dreams.

“Having extra cash flow will always make certain decisions easier,” Morehouse said. “The timing was undeniably good, but we raised funds to invest in continued product innovation and accelerating our growth in general, not to get us through a pandemic.”

The funding helped the company try to assist its customers in modest ways. The company provided account credits and flexible payment terms. It also moved customers from its paid subscription plans to its commission-based program or let them to go into hibernation mode.

“We have provided more than $80,000 [$100,000 Canadian] in discounts since March for our operators who experienced the unprecedented effects of a complete shutdown of their business,” Morehouse said. “The timing of our funding certainly made this decision easy for us.”

While funding has helped several startups endure this year’s events, some experts caution that the crisis isn’t over. Winter in the northern hemisphere, ordinarily a low revenue time for many sectors, may see even more depressed volumes than usual given the pandemic’s uncertain course.

“I do think that there is quite a bit of opportunity during this period to roll up distressed assets,” Lam said. “We’ll see more consolidation in the space as time goes on.”