Travo Start-Up Summit: Angel investors remain keen on travel disruptors

Panel of experts said the sector faces competition from other sectors and reduced valuations from 'mad' per-COVID levels, but appetite for travel is still strong

Travel start-ups have their work cut out competing with other ‘hot sectors’ to attract funding but early-stage innovators are able to find angel seed investment. 

Investment experts discussed the current appetite for backing early-stage travel companies following the COVID pandemic and its impact on the sector.

The panel agreed that multiples to give company valuations have come down, but from “mad” levels seen in 2021.

Anthony Rose, founder and chief executive of Seedlegals, said the pandemic will put some investors off travel until they see for themselves how many people are still travelling.

“So, you’re a founder out there looking for investment, so what’s changed in 2022? Some of it is travel specific and some generic.

“Everyone’s seen the drop in travel numbers and so some investors are keeping away and then when they next go to Heathrow and see people are travelling they are coming back again. 

“But you have to compete with other sectors and fintech at the moment is hot, edtech is hot. 

“And I’m not sure that travel and retail is that hot at the moment, so you’ve got your work cut out there.”

And Rose added one of the interesting things that has happened in the investor market is valuations have plummeted compared to last year. 

“Once you are a revenue making business investors may have valued you in the eight to 15 times annual revenue as a multiple, that might be more like six to nine times today, are we are hearing maybe even less.

“There is a pattern, at least for later stage companies, where they are often perceived to be fundraising because they have to and investors low ball on valuations and companies where business is good and maybe don’t need to raise right now are waiting a bit longer.”

Kolvin Stone, partner at travel specialist law firm Fox Williams, said early stage start-ups are able to take advantage of an active angel investor eco-system backed by the UK government. 

“Travel is ripe for disruption and we are seeing a lot of innovation in the industry. The demand for travel will not abate in the long term, it’s not a luxury item anymore it’s something people expect.

“There is a different market in terms of investing. At the early stage the money is generally there.” 

Stone said the technology eco-system is more developed than a decade ago and founders that have exited are now investing in multiple start-ups. He added he knows one who has 50 such angel investments. 

“That did not exist a couple of years ago,” Stone said. “They’re not funding based on metrics which happens at A, B and C stages. For earlier stage companies looking to realty disrupt and innovate in travel I think they will still get funding.

“It gets more difficult at this moment in time at later A, B or C rounds because investors are looking for metrics and that’s quite challenging for some companies.” 

Charles Hardwick, principal at Vitruvian Partners, a Series C and upwards investor, said, it is a “massive believer” in travel and “very much open for business” looking to invest.

“Travel is incredibly complex and there are many problems that should have been solved 40 years ago…and the capital flows where people are solving problems, where people are innovating, genuinely creating value not just shareholder value.

“Obviously, we can’t just ignore what’s happened in the last few years and what may happen in the next year or two but we have also learned that people talk about travel as being discretionary.

“I think we are going to be a new category of pseudo-discretionary where obviously you are going to eat before you travel so in that respect it is still discretionary but almost every country in the world tried to open up for summer holidays to allow their populations to travel.

“This is something that has become innate and as we talk about Gen Z and younger generations this is something that people just demand. I think there are still some amazing buy signals for you to keep investing.

“Yes, it’s got harder to become a start-up, to go raise your series A and B you now have to prove things that you did not have to prove until you were Series C or D. 

“Valuations have changed but I think everyone has acknowledged that 2021 was mad from a valuation perspective. But the fact things have changed does not make investment impossible.”