Travel investors on the funding dynamics in 2024

With funding for travel startups hitting an eight-year low in 2023, it won’t take much for 2024 to be better.

Some travel companies feel more optimistic about the months to come and who might be best placed to attract funding.

Ziv Gafni, president and general manager of new markets at Fetcherr, believes the industry is still in recovery mode from the pandemic but said, “I believe venture capital as an industry will rebound in 2024 thanks to positive economic signals and a much healthier appetite combined with business acumen and improved scrutiny earned in 2022-2023.”

The airline pricing intelligence company, a PhocusWire Hot 25 Travel Startup for 2023, announced $12.5 million in funding in April 2023.

Gafni added that crises also tend to create opportunity.

“Companies who create value and impact for their clients, which rely on unique and advanced technologies with sound business models, are ripe for hyper scaling precisely in such times. Such companies are less likely to face hardships in attracting prominent smart capital.”

Others are not so positive and feel startups in the sector could continue to feel the squeeze in 2024.

Charaf El Mansouri, chief executive of Dharma, which plans and sells trips hosted by well known people and brands, believes 2024 will continue to be tough.

“It’s still unclear which way interest rates will go, especially after the continued strength of the U.S. job market. Both LPs [limited partners] and VCs [venture capitalists] are understandably very cautious with their investments because of macro uncertainty but also because I think many of them are still unclear on where their portfolio really stands and just how much exposure they really have from the down rounds and post-free money era. How many of their startups will get wiped out? How many will have a soft landing? Ultimately, those are still investments that are playing out.”

In terms of what size rounds might be more prevalent, El Mansouri pointed to data from Carta’s Peter Walker and added, “The two key insights I take from this are that early stage is less impacted by size round and valuation, and that AI (artificial intelligence) is skewing the data up.”

Dharma, a Hot 25 Travel Startup for 2024, announced pre-Series A funding of $4.7 million in October 2023.

El Mansouri also pointed out that displaying “growth and as well as a clear path to profitability” continue to be basic requirements from investors, echoing sentiment expressed by travel startup investors that spoke to PhocusWire at The Phocuswright Conference.

Mike Scott, managing partner at Derive Ventures, said, “There’s just gravitation to more fundamental analysis right now. What is the path to profitability? What is your cost structure? Are you getting to unit economics that are sustainable for an attractive business? And sometimes that might not exist yet, but what is the founders vision at the early stage to get there? Articulating that story is important.”

Scott was joined by Mia Morisset, a principal at Inovia, with both sharing insights on how 2024 might play out for travel startups.

The broad ranging discussion also touched on potential deal sizes, where investment opportunities lie, the likelihood of merger and acquisition activity and the role of AI.

Morisset shared that Inovia’s advice to startups in its portfolio is to “have a defensive AI strategy. You need to know what’s going on, you need to know what’s table stakes.”

See below for the full discussion between the investors and PhocusWire senior reporter Linda Fox.

The Phocuswright Conference 2023 Executive Interview: Startup funding trends and challenges

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