We help inspire, fund, advise and connect travel startups.

The Black Fish

The Black Fish

by Matt Zito, Managing Partner Travel Startups Incubator

I grew up fishing for Steelhead in the Lake Erie tributaries. Every Fall around Thanksgiving we would break out our fly rods, tie up sucker spawn flies, and hit the streams. We were fishing to the Steelhead that were swimming upstream to spawn (lay their eggs). For every hundred eggs laid, only a few will survive and become a fingerling rainbow trout that will then work its way back down the river to the lake. I think about those fingerlings often in my daily conversations with travel startups and investors.

Most incubators like ourselves which focus on the Pre-Seed/Angel stage typically invest cash of $50K or less per deal to get companies off the ground. We refer to ourselves as “upstream” investors since we sit at the top of the river where the eggs hatch and the fingerlings start their life, making small investments to help companies get off the ground. We also provide the advisory, mentoring and nurturing that is required for our fingerlings to go from idea to full-fledged product launch and begin their journey downstream.

Since we launched Travel Startups Incubator in August of 2014, we have met or spoken with hundreds of investors who have previously invested in or expressed an interest in travel technology. Around 150 of them have joined our investor network on the TSI Platform. These investors sit “downstream” of Travel Startups Incubator (TSI), seeking investment opportunities in travel startups that come out of the incubator which we have helped nurture upstream.

Downstream investors focus on later-stage companies which are raising Seed, or Series A, B, C, D rounds. They wait for the current to carry our fingerlings to them downstream once they are fat with traction and producing positive KPIs. Downstream investors don’t stray from their swimming lanes unless they see something floating toward them that resembles a sure catch. This is of course an effort to reduce risk in their investments.

At TSI, we believe we are true drivers of innovation in travel by investing upstream. Here, we swim in less crowded waters in the global investment pool, seeking out and supporting the fingerlings that represent game-changing products and services solving travel industry problems.

TSI is the Black Fish, that one oddity in the $7.5T global travel industry.

Unlike the overwhelming majority of downstream investors, we swim upstream, sourcing the most innovative ideas and entrepreneurs globally. We provide funding and mentoring at a critical point in their early development to ensure that their innovation makes it downstream to the fast-moving waters of the global online travel industry.

Why do we invest upstream?

  • The pool of investment opportunities is much greater upstream where there is little to no competition.
  • Angel return on investments are historically comparable to Venture Capital returns.
  • The majority of startups are acquired prior to receiving Venture and Institutional investment.

Limited Competition Upstream
Below is a chart showing where we sit upstream compared with most investments in travel technology. As you can see, over the last 15-years the majority of investors have sat downstream at the Seed and Venture Series A & B.


Angel Return on Investment is comparable to Venture Capital in the short-term yet much more accessible.
If you look at angel investing and venture capital and compare side-by-side, an argument can be made that angel investing (upstream) returns a comparable ROI to Venture Capital (downstream) in the short-term.

One of the largest angel investment studies ever compiled by the Kauffman Foundation shows that from 2010-2016 the average IRR is 22% or a 2.5x ROI in 4.5 years.

It’s been widely written that around 20 firms out of the total universe of venture capital firms generate upwards of 90 percent of the industry’s total returns. While we believe this is changing with new emerging VCs entering the market, this makes access to the top venture capital firms inaccessible for the majority of investors.

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Startups are being acquired earlier than ever before
What most investors may not be aware of is that travel tech startups are selling at a much earlier rate in the growth cycle after receiving funding than ever before. The below graph displays the stark trend of a shortening timeline between when travel technology startups are funded and when they are acquired.

Funded startups today are being acquired in under 5-years. Most VCs are investing at later stages and may be missing these acquisitions. A recent CB Insights report showed that 73% of tech exits in 2014 had no venture or institutional investment.

We believe that the high return on investment for angel investors at 22% IRR/2.5x ROI averaging 4.5 years is attributable to this major trend impacting startup investing. If the trend continues, and we believe it will, the professional investors that invest at the earliest stage and invest the most frequent will ultimately be the winners earning the highest ROI.

To succeed at angel investing and to reduce our risk, TSI remains 100% focused on travel technology. Our methodology of identifying promising travel startups, steadfastly building a network of the most knowledgeable people in the travel industry, and investing in a diversified portfolio of global talent across multiple travel verticals gives investors in TSI the opportunity to sit upstream where emerging travel tech is spawning.

Today we ask you to invest with us upstream, just in time for the fall Steelhead run. We believe we can build a $500M company in 10-years by investing upstream and building out our global travel technology investment platform to help us scale our investments on a global basis.

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