Travel Startups Incubator Investment Offering

black-white-airplane-takeoffWe believe that the travel industry is on the cusp of a technological revolution on par with the advent of the Internet.

Mobile technology has empowered travel startups such as Airbnb and Uber to build platforms that have upended basic tenets of travel: Where we stay and how we move.

Now, technologies like artificial intelligence, machine learning, the Internet of Things, virtual reality, blockchain, the widespread acceptance of the sharing economy, the rise of centralized platforms, the open source movement, and the accelerating global adoption of smartphones are creating new opportunities to further disrupt the status quo and change how we plan and experience travel.

In August 2014 we launched Travel Startups Incubator with the goal of investing in and mentoring the most promising early-stage travel technology startups in the world. To date we have made 16 investments. Some of the first companies accepted are now approaching $1M run rates and changing the way digital travel identities are managed, tours and activities are purchased, and rides are booked.

Next, we are raising up to $6M to continue to drive innovation in the global travel industry.

We believe we can build a $500M company in 10-years by continuing to invest globally in talented entrepreneurs with big ideas that leverage new technologies. We aim to do this primarily through our proprietary platform which seamlessly connects our four key stakeholders: startups, advisors/mentors, corporate partners, and investors.

We are seeking investors, corporate travel partners, and travel executives who share our vision for the future of travel technology and wish to support travel innovation at the most fundamental level: early-stage investing and mentoring. Join us in this amazing investment opportunity and to ensure that the most innovative travel technology ideas in the world are funded and nurtured.

Below are the details of our investment offering including the investment timeline. This offering is being conducted as a 506(c) offering which enables for the marketing and solicitation of offering materials. The offering is for accredited investors only.

A message from Matt and Nicole Zito, Managing Partners.

Our story and how we help build travel tech startups.

Matt & Nicole Zito

Offering Timeline:

August 1, 2016: Soft commitments due by investors

September 1, 2016: Terms finalized with committed investors

October 1, 2016: Closing

What is Travel Startups Incubator?

We are the first digital investment, advisory and innovation platform designed specifically to fund, advise, connect and inspire travel technology startup entrepreneurs and companies.

Our incubator makes a $50,000 investment in each startup that consists of $25,000 in cash + $25,000 in-kind services including strategic advisory, business development, product development, mentoring, PR, legal, marketing and fundraising support. We acquire a 6%-12% equity stake in each startup that we invest in.

We also leverage our platform to provide an advisory-only (no cash investment) service for select startups in exchange for a smaller equity percentage or cash retainer.

Proprietary Platform

The TSI Platform connects our startups, advisors & mentors, corporate innovation travel partners, and investors to each other. These are the four key stakeholder groups that we believe need a better way to work together in order to close major knowledge gaps and build great companies.

The below graphic shows how we are helping build global travel technology companies through our platform, using portfolio company Biz Airlines as an example:

Our Network

We continue to build the most robust network in travel tech. It is now comprised of:
– 16 travel startups in our portfolio.
– 150+ startups on the platform looking for investment.
– 25 leading travel executives acting as advisors and mentors who work one-on-one with our startups.
– 4 Corporate Innovation partners who support the incubator from the ground up.
– 25+ Business Development partners who provide critical access to technology and resources.
– 100+ corporate travel executives from Innovation Labs, R&D, M&A and Corporate Sales departments we introduce to our startups for business development deals.
– 150+ investors subscribed to review follow-on investment opportunities in our top startups.
– 200+ members of the press who field and publish news about our startups.

Global and Virtual Presence

We believe that the future of investment, advisory and incubation services for startups will focus on specialized domain verticals (ex. finance, health) with business operations conducted globally on digital platforms.

We believe that in order to find the next Uber or Airbnb we need to invest globally – increasingly the best travel technology startups will not come out of Silicon Valley. In less than 2 years we have become one of the most active investors in the world in travel techn, having invested in 16 travel startups located across the USA, UK, Africa, South America and India.

We are finding that the most talented and mature startup founders are looking for domain expertise, capital and a desire to stay in their home country or city to build their startup. The most efficient way to help these founders is to be domain-specialized, have a global business network they can tap into, and allow them to work virtually.

We also agree that co-working situations can be more distracting than helpful.

Our Team

The Travel Startups Incubator team is our core strength. When working with our startups, we focus on knowledge transfer and business development relationships. We have deep domain expertise in travel, tourism and hospitality.

Matt & Nicole Zito (Managing Partners), Mike Coletta (Managing Director), and Jessica Hoffman (Lead Counsel) run the day-to-day operations. Leading travel industry executives are our advisors and mentors, working one-on-one with our portfolio companies, helping them understand their vertical, making important introductions, and moving them toward product/market fit.

Corporate Innovation Partners & Business Development Partners

Our Corporate Innovation Partners help our startups grow their companies through access to APIs and technology services, testing and pilots, product feedback, and business development partnerships. In exchange they receive custom vetting of startups tailored to their vertical, travel tech trend analysis, branding as a supporter of travel innovation, and more. We connect our partners through the TSI platform. Amadeus, the leading GDS and supplier of travel technology solutions, is our flagship partner.

Open Transparency

We believe in being an open and transparent company with our startups, our partners, and the larger startup ecosystem. Openness and transparency spawns authenticity, a hallmark principle we aspire to. We believe that the best way to help our startups move the needle is to connect them to our partners in an open environment, not in a closed-door setting. The TSI Platform provides global investors and corporations the best opportunity for access to quality deal flow. We plan to open our platform to non-incubated travel startups in the near future in order to support travel innovation at scale.

To experience our aspiration to transparency firsthand (other than the very page about our fund raise you are currently reading), look no further than our blog posts, such as: “These four words can change your entrepreneurial life forever“, “Pull the covers to your side of the bed.”

Why we are angel investors, investing in early-stage travel technology startups

We are the first mover in the travel industry to invest on a global scale in early-stage travel technology startups (investing $50K or less). We typically acquire equity in each startup at the earliest stage possible as the first professional money invested into the startup.

The majority of investors in travel technology invest in later stages, thus we are capitalizing on an untapped market opportunity, gaining access to invest earlier in the most talented travel tech entrepreneurs and breakthrough ideas with less competition to invest.

We believe that our ROI will be much greater than the investors that sit downstream of us, as recent investment data is showing that startups are being acquired at an earlier stage and need less capital to grow than ever.

travel-funding-rounds

With higher risk comes higher reward. We use our combined decades of experience in the travel industry to identify startups that are working on problems worth solving, easing pain points for travelers (B2C) and travel companies alike (B2B).

We study cutting-edge trends in technology and think deeply about how they will change the industry.

We seek out founders bringing fresh ideas to our industry and leverage our network of mentors and partners to vet teams and ideas thoroughly.

We look for game-changing ideas that have the potential to grow into multi-million or billion dollar companies, and we get in early.

We strengthen our brand and value proposition daily through continued investments, attracting a growing pipeline of high quality deal flow and a growing investor network that sits downstream of us looking to invest in our top prospects.

We acquire equity in each startup at the earliest stage possible as the first professional money invested in the startup.

Travel tech funding has grown significantly over the past 5 years, as the below chart from CB Insights demonstrates. While Airbnb and Uber accounted for the large spikes in dollar amounts, the number of deals has risen steadily. Travel Startups Incubator is investing at the forefront of this trend.

Quarterly_travel.tech_Q1.16

Eyeing this trend, travel companies like JetBlue have recently launched JetBlue Ventures and major travel destinations like Paris, France have launched Paris’ Welcome City Labs to capitalize on the wave of travel innovation entering the market. We view these initiatives as complementary to what we are doing and beneficial to the travel startup ecosystem, given that the players sit downstream from us.

Travel Startups Incubator stands alone as one of the only firms investing cash into the earliest-stage travel technology startups.

Competitive Advantages

We strengthen our brand and value proposition on a daily basis through continued investments, attracting a growing pipeline of high quality deal flow, strengthening our network of mentors and corporate partners, and growing our investor network that sits downstream of us looking to invest in our top prospects. Every day, we increase our ability to find the right partner, the right investor, the right advice, for every startup we work with.

We hold #1 positions on Google for most “travel startup” keywords, including travel startups, travel startup funding, travel startup ideas, help for travel entrepreneurs, and many more, driven by dozens of pages of blog content written over the past 3 years. This makes us the default first stop for many aspiring travel entrepreneurs seeking guidance. We estimate that we have interacted with close to 1,000 travel startups and entrepreneurs over the past year, between applications received, inquiries, introductions, and meetings.

We have developed a community of 5,000+ email subscribers, and we run the 1,200+ member travel tech Meetup group Travel 2.0. Both serve as important sources of deal flow and outlets for feedback.

We’ve partnered with two of the leading global travel tech conferences Eye For Travel and Travel Technology Europe. We attend 4-6 travel conferences per year throughout the world and act as sponsors for the conference including acting as judges of the startup and innovation awards and participating as expert panelists and moderators of dedicated 1-day startup events. We leverage the conferences as a way to meet with new startups from around the world and to connect with our portfolio companies.

Market Opportunity

Travel is a $7.5 trillion industry which is projected to grow 5.4% over the next 8 years and was recently ranked by CB Insights as the #4 best industry for tech exits.

We believe that mobile will continue to reshape the travel industry in the near future and provide ample opportunities for startups to grab a foothold, scale, and exit.

Modern smartphones are an ideal match for travel and open up a world of possibilities. Travel is all about location and experiences. From high-powered cameras, to location services, to motion and position sensors, smartphones are the perfect device to capture, share, and enhance our travels. We believe we’re still at the beginning of a major digital revolution in how we do so.

Our top 3 startups Post-Incubation

It takes an average of 12-16 months from the time we initially invest until our a startup begins to make significant progress and attract investment from investors.

The following three companies are now post-incubation and have scaled up their businesses significantly. They will be raising between $500K-$5M in the next 6 months.

Testimonials from our Startups

The founding team of Proxce was made of up technologists, and most of us came from enterprise world. Travel Startups Incubator helped us connect to travel companies, advisors and industry influencers that helped us understand the travel industry as well as talk to right people at the right time. Matt, Mike and Nicole are always available if you need help and are very easy to approach.

Madhu Madhusudhanan

Founder & CEO, Proxce

When I first thought about building a travel technology startup, I didn’t realize how complex the industry really is, even though I had worked in travel marketing for the last 7 years. Being part of Travel Startups Incubator was game changing for us. From connections with key suppliers to a thorough analysis of market opportunities, Matt and his team of mentors have been instrumental in helping Biz Airlines find our product/market fit.

Bruno Santiago

Founder & CEO, Biz Airlines

When we joined TSI, we were hoping not only for investors, advisors and travel industry experts – but what we have received has been so much more. TSI has become a true partner for our business that we rely on to make introductions with strategic partners, potential customers and industry associations & organizations. TSI has been a sounding board for the challenges we have faced and provide tactical solutions in solving those issues while helping us keep an eye on the long-term growth of the company. As a result, we continue to fine tune our pitches, our pricing strategy and our go-to-market strategy. Joining TSI was one of the best decisions that we could have made to take TraknProtect to the next level.

Parminder Batra

Co-Founder & CEO, TraknProtect

Travel Startups Incubator has given Adventure Bucket List access to a wide array of partnerships and clients across the travel vertical. The TSI team continually plays an active roll in the strategy, planning, fundraising and business development of ABL.

Ryan Stobie

Co-Founder & CEO, Adventure Bucket List

As a travel entrepreneur, there are so many things needed to bring your vision to life. The two things that can dramatically accelerate the process are 1) building a team that shares the same vision and 2) having deep travel industry resources for advisement, networking, support and mentorship.

We found TSI to be a critical partner in fulfilling these needs. During our incubation period we were just newbies in the field, trying different things to see what worked and what didn’t. TSI was there to guide us and help us lay the right path to follow. TSI investment capital and several introduction to potential distribution partners helped FlitWays to grow by 400% within 5 months, and now we are growing into a truly global brand.

We participated in the incubation program over 1 year ago and to this day we can reach out to TSI and ask anything that can help us to make important decision on business growth.

Tobi Mac

Co-Founder & CEO, FlitWays

Use of Funds

We are raising up to $6M in this round. The final amount will be determined based on commitments. We are able to scale our investment plans up or down accordingly for this round. The below investment details factor in a raise of $6M.

One of the unique things about Travel Startups Incubator, LLC as an investment vehicle is that we are not a fund in the traditional sense but an investment enterprise (an operating company). An investment enterprise has many benefits over a fund which we discuss below.

Investment Model

We have modeled our entity and investment structure similar to how Y Combinator (YC) started. When we invest in startups, we invest from within our LLC entity, thus we hold 100% of the equity we own in each startup.

Our investment thesis is that as we build equity ownership in startups and hold the equity ownership inside the LLC we become more valuable with each new investment, compounding over time. YC had close to 940 investments after 10 years, having launched in 2005.

Based on data published in a blog post (how many companies had exited, and how many are worth $1B or more) by Sam Altman, President of YC in August 2015 about YC’s value, we extrapolated the following model below. The model is not exact by any means and we can’t verify the exit prices and all the valuations, but as you can see we believe YC was worth close to $2.2B in 2015.

The Travel Startups Incubator business model is to invest small amounts of capital, be the first professional investor, help build the company by leveraging our platform partners, introduce investors, and then repeat. The more startups we invest in at an early stage, the higher the chances of a small investment becoming hundreds of millions-to-billion dollar ventures.

Reduce risk by diversifying at scale

Angel or early-stage investing is the highest-risk form of investing because of the lack of positive signals an investor can measure initially, but it can also have the highest return on investment and outperform the public markets (S&P 500) as well as early and late-stage venture capital. As you can see from the comparable model and from the data below, risk is reduced by investing in multiple startups over time which in return leads to a higher return on investment.

Historical data shows that on average 80%-90% of startups fail. But startups in incubators and accelerators tend to have a lower failure rate. Based on the current 16 startups we have funded, and less than 2 years of operating the incubator, we believe that 30%-50% of our startups will succeed. We believe that our higher success rate will be due to our proprietary vetting process to identify high-quality startup teams, our ability to invest globally, our preference to work with startups for a minimum of 6 months to 1.5 years vs. 3 month incubator programs, our deep domain expertise in travel, and our ability to leverage the TSI platform to help our startups grow with our partners.

In order to statistically reduce risk, one needs to be invested in 20+ startups over a 3-year period at a minimum. This is very difficult to accomplish for individual investors as it requires a lot of capital and more significantly it takes time to master. We believe our investors will receive a much better ROI by investing in Travel Startups Incubator vs. trying to invest in startups on their own.

Benefits of Investing

Due to our unique investment enterprise structure,  our company creates intrinsic value far beyond just the equity we hold in our startups. In contrast to a fund, the incubator itself can accumulate value, and investors gain upside exposure to the entire investment portfolio.

Exit Strategy

Because we are an investment enterprise, aka an operating company, we believe we will have strong exit opportunities including going public or being acquired either by other investors or major travel companies.

Investor Information

Accredited investors please click here to access our non-public/private offering documents including financials and business strategy or contact Matt Zito below.

Matt Zito
Managing Partner
1-207-460-0740
matt@travelstartups.co

The Offering Timeline:
Aug 1: Soft commitments due by investors
Sept 1: Terms finalized with committed investors
Oct 1: Closing

Travel Startups Incubator, LLC is conducting a 506(c) offering which allows for public solicitation and marketing of the offering. This offering is for accredited investors only.