News that Isango! was £4 million better off following its latest round of funding may fill travel start-ups out there with confidence. Sadly, it would probably be misplaced.
While there seems to be as many start-ups now as there was in the run up to the dot-com bubble bursting in 2000, the money situation has changed.
Big investors such as 3i have changed focus and no longer provide venture capital. There are few business angels out there and private investors are hard to get to.
Mobile Travel Technologies founder and executive director Gerry Samuels believes that aside from public funds, such as DTI initiatives or local business enterprise schemes, there is a lack of access to funding.
Samuels, who founder and partner of venture capital firm Travel Capital, says: “Trying to get to anything sort of institutional funding is hard. The problem in the UK is that the business angel network is a lot less developed than in the US where there are huge networks you can pitch to. It’s definitely a challenge and it holds back the entrepreneurial spirit.”
Most people wanting funds start with their own money and friends and family. Samuels adds investors are looking for a track record of people who have already exited successful start-ups and made money for investors.
Hugo Burge, co-founder of investment vehicle Howzat Media, says investments are being made if you have a great company and strong management team. “There is money to be had from a generation of successful Internet investors who have seen successful stories. Venture capitalists are much savvier now and the bar has been raised on what they will look at.”
Despite the fact that money is harder to come by, Burge argues it’s still a great time to build a business because companies that can weather the storm now will reap the benefits later on.
In addition, Jay Patel, executive director of SPARK Ventures, which led Isango!’s round of funding, says that although the appetite for start-ups is weak compared to 2000/01 travel is an attractive sector because of its size, past successes and the fragmented nature of the industry.
So, what do you do if you’ve got a great idea? Pitch it to BBC’s Dragon’s Den or make friends with the likes of Brent Hoberman and Hugo Burge.