Wednesday, May 22, 2024

Travel & Tourism startup Funding Report 2019

$6.13 billion

Startup Funding

387

Number of deals
( total deals)

$22.9 million

Avg Deal Size
(disclosed)

Travel & Tourism startup Funding in 2019 by HexGn

According to HexGn Travel & Tourism startup funding report for 2019, till November 2019, before the world was hit by the pandemic, travel & tourism was one of the fastest growing industries in the global startup ecosystem. The segment comprises of all products and services which innovated the various phases of travelling – from booking to luggage storage to hotel management tools.  The travel & tourism industry gained a lot of momentum as social media technologies that promoted the industry also came into the picture. The industry accumulated $10 billion in funding over the last two years.

According to HexGn Travel & Tourism startup funding report for 2019, the funding in 2019 grew to $6.13 billion, 51% higher than what startups in the industry raised in 2019.  Asia has commanded a majority of this total investments with $3.18 billion, growing by 52%. This was followed by the regions of North America and Europe which raised $1.8 billion and $1 billion respectively. Oceania and South America witnessed a dip in the investments last year and were the only regions to experience lesser investments in 2019.

OYO, a budget hotels-chain startup, raised $1.5 billion in its Series F round last year, making it the highest amount raised in a single deal in 2019. This single round held almost 50% of the value of the total investments made in Asia. This was followed by German startup GetYourGuide which got $484 million in it’s Series E round. The other startups in the top five ranking for highest funded startups were Traveloka from Indonesia, Vacasa from the US, and Mafengwo from China.

Despite stunning investment rounds at the Asian continent and funding round-level, US still manages to maintain its position as the top nation for travel & tourism startups with total investments of $1.8 bilion, followed closely by India which picked up $1.78 billion. These were followed by Germany, Indonesia & China.

According to HexGn Travel & Tourism startup funding report for 2019, the sub-segments that saw the highest amounts of investments within the travel & tourism industry in 2019 were the hotel marketplaces, travel bookings, and holidays & tours sub-segments. Each of the sub-segments raised over a billion dollars.

When it came to ranking the cities according to the funding received, Delhi NCR captured the highest funding with $1.76 billion. San Francisco Bay Area came second with $929 million, followed by Berlin, Jakarta, and New York.

E-commerce Startup Funding Across Regions In 2019

According to E-commerce, Startups Funding Report-2019 by HexGn, the region which saw the most funding in 2019 was Asia, which garnered a total of $12 billion compared to $33 billion in 2018, a fall of 64%. The number of deals only fell by about 17% which meant that the average deal size fell from $63 million to 27 million dollars. It is to be noted that the average in size in Asia is way above the global average.

However, the gap seems to be narrowing, in 2018 the average deal size was two ad a half times that of the global average, in 2019 it dropped to one and half times the global average.

 E-commerce, Startups Funding Report-2019 by HexGn, funding also fell in North America, in 2019 total funding was $6 billion, this is a fall of 48% compared to 2018 when the sector attracted $12 billion the number of deals too fell by 30% and the average deal size dropped from $14 million to $12 million. It is worthwhile to point out that in North America E-Tail, Marketplaces & Portals sector was the ninth largest in terms of funding.

 E-commerce, Startups Funding Report-2019 by HexGn, Europe saw a different scenario with funding increasing by 94% to reach $6 billion compared to $3 billion in 2018. The total number of deals dropped by 28%, which shot up the average deal size $18 million from $6 million a year ago. Europe saw a few large fund raises by a few companies despite a fall in the number of deals which led to funding surge despite a drop in deals.

The grouping comprising Oceania, South America and Africa saw a funding of $1.4 billion in 2019 compared to $1 billion in 2018. This is an increase of 41% over the previous year.

However, the number of deals in this grouping decreased by 22%. Here too the average deal size went up to $17 million from $8 million.

While in North America and Asia this sector has a number of incumbents and therefore saw a drop in funding, in the case of Europe and the group consisting of ocean in South America and Africa, the emergence of local players was the key takeaway. We should see an increase in Mergers and acquisitions in the near future in Europe and the rest of the regions as the big global players look to enter these markets and it might be easier to buy your way in rather than spend years building the business.

2019 Startup Funding Size and Stages

For simplicity we have categorized deals with average size less than $3 million as going into startup formation and validation of business ideas or Seed/Angel funding. 

Categories falling between $3 million and $30 million are categorized as early stage funding and we have surmised goes into growth and customer acquisition. Any category above where the average deal size exceeds $30 million is categorized as late stage and is for market expansion or Pre-IPO preparations. While there are exceptions in each category, the purpose is to provide trends rather than hard numbers for reporting.

 E-commerce, Startups Funding Report-2019 by HexGn, funding and deals across all stages fell in 2019, the fall in Seed/Angel stage was 6%, the early stage funding fell by 26% and late stage funding fell by 56%. The number of deals in the stages said by 21% 29% and 30% respectively.

In terms of the absolute value, Seed/Angel funding reduced by $62 million, early stage funding decreased by $3 billion and late stage funding cell by $21 Billion. Seed/Angel stage attracted approximately $1.1 billion in both 2018 and 2019, early stages saw funding to the tune of $9 billion invested in 2019 compared to $12 billion in 2018.

Late stage deals saw funding drop to $16 billion from a high of $37 billion. The only notable change in different categories of the funding was a sharp increase in debt financing debt financing, where the amount grew by $1.6 billion to reach $2.3 billion in 2019 an increase of 213%.

 E-commerce, Startups Funding Report-2019 by HexGn, whether expected or not the drastic change in funding for the E-Tail, Marketplaces & Portals sector points to a definite saturation in the sector, enabled by massive investment in the previous years.

The emergence of many strong players in each market and very little differentiation available to new entrants meant a lack of investor confidence in growth of new companies. The only space available was in niche and specialized categories.

We do not foresee any change in this trend for this sector as it is difficult for new entrants to raise enough funds to compete with established players. We will continue to see varying levels of interest in unexplored and underserved markets.

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