Raising $185 million in hotel tech at all, especially in this economic climate, is an endorsement of the product Mews has built — but more importantly shows the potential investors see in modernizing the market at this precise time.
The hotel tech startup Mews has raised $185 million, a number high above typical venture capital fundraises in that industry.
The highest hotel tech fundraise in recent years was by Cloudbeds, which raised $150 million in 2021.
The fundraise — led by Kinnevik and Goldman Sachs Asset Management — sets the valuation for Mews at $860 million, said founder Richard Valtr, a number that may have been higher in what experts agree was an inflated market over the past couple of years. Now, raising money is harder because of uncertain economic conditions.
“It’s pretty brutal,” Valtr said. Regardless, the valuation is 4.5 times higher than what it was when the company raised $33 million in 2019..
“I think that most people were kind of expecting us to be way over a unicorn at this stage. But I think it reflects basically where valuations are in the market,” Valtr said. “I think that what you see now is, basically, the companies that raised in ‘20 or ‘21, they’ll have a hard time growing into those valuations.”
The company did have final valuation offers of around $1.3 billion or so, but he went with the lower number.
“It would have meant mortgaging the company to things that are really, really difficult to actually predict,” Valtr said.
Many startups tend not to share the valuation of their companies, but Valtr did so when asked in the name of transparency, he said, as he looks toward a potential IPO in the future. The company is not sharing specific revenue numbers at the moment, but that may change after the company hits certain milestones, he said.
As part of the round, about 10 percent of existing employees are receiving some money.
“It’s something that you definitely see in other companies, but usually, it’s the founders that take that for themselves. And we were really, really wanting to share that to as many people within the company as possible.”
Why Now and Why Mews
Kinnevik invests to form long-term relations with a smaller portfolio of high-growth companies in a number of industries, said Akhil Chainwala, investment director of Kinnevik.
With Kinnevik’s hands in several industries, the firm can see how tech adoption in the hotel industry compares others, said Chainwala, who is joining the Mews board.
“I think if there’s one takeaway from this, it’s a bet on product,” Chainwala said. “When you take a closer look at that and see cloud adoption rates — and frankly, even technology adoption, let alone cloud — they are lagging quite far behind what we see in many other sectors.”
On top of a general effort to modernize that was accelerated by the pandemic, wage inflation and labor shortages are compelling owners to automate more of their operations. That’s what Max Starkov, a hotel tech consultant and industry veteran, is seeing with his clients.
Housekeeping management software is one of the most common pieces of new software that hotels are adding to their property management systems right now, he said.
“If you do it smart, then you eliminate the need for half of your housekeepers. Not that you’re firing half of your housekeepers — you simply cannot hire them to begin with. That’s the sad truth.”
Mews offers a wide variety of cloud-based solutions for hotels, including property management, guest management, housekeeping, and a new payments system.
But the biggest differentiator, in Valtr’s opinion, is the system’s open application programming interface, which basically allows other hotel software products to easily connect with the main Mews platform. That’s important because each hotel has unique needs, and many often have to use software solutions from multiple vendors of the highly fragmented hotel tech industry.
“We’ve always thought about it as the iPhone: You have the operating system, you have a number of generic, good apps that people like to use,” Valtr said.
“This is one of the most diverse industries, and so there is no one-stop shop or all-in-one solution that is possible. That’s really why we created the open API, and that’s why we have such a large marketplace in terms of the amount of connections that we have [with other software platforms.]
That is not the approach the older hotel tech systems — and many of the new ones, as well — have taken, he said. Instead, many of them offer a closed system meant to encourage exclusive use of their own product.
That open approach is also part of the reason Kinnevik saw an interest in Mews, Chainwala said.
“That is part of what I include in having a product-led approach. It’s not common in this industry, but to us, it is quite a common characteristic of many winning products in other sectors,” Chainwala said.
“At the end of the day, it’s led by customers. If you care about your customers and if you want to offer the best possible experience to your customers, you need to be humble enough and open enough to accept that one-size-fits-all platform is not going to do that.”
What Is Next for Mews
Over the past couple of years, Mews has been working toward scaling its focus from independent hotels with 50-100 rooms to the mid-market segment of 300 rooms or more, Valtr said.
The plan is to continue focusing on Western Europe as well as expand geographically. About 12 percent of the company’s revenue comes from the U.S., and he would like to push that to 25 percent in the next two years or so. He also sees opportunity in the Asia-Pacific region.
The company grew revenue 174 percent in 2022 year-over-year, with a goal to double revenue each year as possible through organic growth.
Mews also plans to continue acquiring other hotel tech companies to help expand its reach and further innovation in the industry. Mews has acquired five companies over the last three years, and there are two more in the pipeline.
The startup has nearly 700 employees, with more coming on very soon. More than half of them are focused on research and development, primarily to ensure the products are helping clients maximize efficiency as much as possible, something he does not expect to see from the incumbent players.
Between the open system and the research, Valtr said the goal is to continue moving the wider industry forward. He said a number of startups have been able to raise their own venture capital because they were able to scale through a partnership with Mews.
“That’s what we’re known for, and that’s what we want to keep doing to drive that innovation forward for this industry,” Valtr said.
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Photo credit: Bush Hotel Farnham (pictured) in the southern U.K. is a client of Mews. Wikimedia Commons