Skift Take
Venture capital investment in the travel industry has decreased substantially in recent years.
The travel industry only registered $2.9 billion of venture capital investment last year, the lowest level in a decade. Head of Research Seth Borko discussed that and other travel funding trends with Travel Technology Reporter Justin Dawes and Senior Research Analyst Pranavi Agarwal in this episode of the Skift Travel Podcast.
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Key Points
Significant Decline in Venture Capital Funding: The travel industry saw a decade low in venture capital funding in 2023, with only $2.9 billion invested, a significant drop from the $9 billion in 2019. This decline followed an initial drop in 2020, a recovery in 2021, and consistent decreases since then.
Data Collection and Analysis: Pranavi’s research utilized a large, proprietary database from Crunchbase, analyzing travel-related companies by sector and region over many years. This detailed methodology revealed key trends and included over 20 charts for in-depth analysis.
Macro-Economic Factors Affecting Investment: High interest rates, inflation, macroeconomic uncertainty, and volatile valuation levels have contributed to the overall decline in venture capital investment, affecting not just the travel industry but the broader market as well.
Shift Towards Late-Stage Funding: In recent years, there has been a shift towards late-stage funding for more mature companies. In 2023, funding for early-stage startups decreased, while series F funding for mature companies, like Get Your Guide, saw significant investment.
Impact of Past Investment Trends: The surge in early-stage funding during the pandemic led to many startups raising large amounts of money, some without solid business models. As these companies struggled post-pandemic, VCs became more cautious, preferring to invest in safer, more mature companies.
Episode Summary
In this podcast, the focus is on venture capital trends in the travel industry, featuring insights from Pranavi Agarwal and Justin Dawes. Pranavi recently published a comprehensive research report, “Venture Investment Trends in Travel 2024,” which highlights a significant decline in venture capital funding in the travel sector, hitting a decade low of $2.9 billion in 2023, compared to $9 billion in 2019. Justin, a travel technology reporter, confirms this trend through his weekly updates on travel startups and venture trends, noting a tough funding environment echoed by industry insiders.
Both Pranavi and Justin attribute this decline to macroeconomic factors such as high interest rates, inflation, and overall market volatility, affecting not just travel but the entire venture capital market. They also discuss how during the pandemic, many travel startups raised substantial funds, but some have struggled to sustain their business models post-pandemic, leading to shutdowns and acquisitions. The conversation touches on the shift in investor focus towards later-stage, mature companies as a safer investment, exemplified by companies like Get Your Guide. Despite current challenges, they express cautious optimism for future funding as economic conditions stabilize.