VC’s & Investors hates Travel Startups !
I had my business plan ready with me and was looking for an Investor, just like everyone does, I also initiated my search via Linked-in and side by side applied on some other funding platforms.
One Evening i received a call from the office of renowned venture capitalist, the guy initiated very warmly and wanted to discuss on my application. I was very confident about my plan and explained him how the business model will work, how much i need & how the funds will be used.I kept on speaking for more than 10 minutes and he listened calmly.
I thought now he will put some questions next, but to my surprise the conversation just ended in next 2 lines 🙂 “Adit it is awesome talking to you and getting familiar with your business plan but unfortunately as per our latest policies we are not supporting travel companies for funding as of now”. At that time i should have asked “why” but some where in mind i already knew “why” !
As per the Crunchbase data analytics, there is a huge downfall in travel startups getting investment in 2021
Reasons why VC & Angles have started hating travel Start-ups
- Pandemic – Market at the moment has lost confidence in travel industry startups due to the huge impact of Covid 19 ! Once there was a time when it was predicted to be the fastest growing industry but table turned around due to the pandemic. People linked with hospitality industry are searching for new jobs in new fields, founders of renowned Travel start-up companies are exploring jobs and almost 60% of companies have lost their working capitals.Though post pandemic travel & Aviation is expected to see a V shaped growth but still at the moment angels & VC’s are wanting to be away from this non performing industry in the current scenario.
- Competition – Though every other sector is suffering with the heights of competition but level in hospitality is different, the competition here usually comes form unorganised sectors which are not even registered, which does not even exist on paper but is hugely killing the potential customers of organised sectors.
- Technology – Angels & VC’s usually invests in business that is totally dependent on online processes however in tourism industry, Except Airlines & Hotel Booking portals it is very difficult to be totally dependent on technology. It is the industry in which personal touch with customers value more than a technically equipped online booking portal. Moreover it is also very difficult for a startup to enter in Airlines & Hotels Booking portals and compete with the big bulls of the industry ie Make My trip, Booking.com, Expedia.
- Professionalism – At-least few south east Asian countries like Indonesia, India etc lacks professional co founders or employees for travel businesses.As the talent does not really enters into the industry there is no way investors are going to release funds for non professionals.
- Complex Revenue Cycles & Uncertainty – In todays world of Pandemic travel plans are getting cancelled more than it is getting booked. Say if a customer agrees to book a travel for a date 6 months ahead, there is no guarantee if travel will be accomplished or not.It means even if customer has paid a full amount of booking still it can’t be treated as revenue. This complex structure & Uncertainty is keeping Investors away from investing in the industry
Though the sector is hanging like a pendulum but we all should keep faith and prepare for the best. Pandemic is going to end sooner or later but industry will always be there, we will see customers coming, investors investing and IPO’s in making 🙂