We are closing out our first investment portfolio (TSI 1). In keeping with our belief of being a transparent company, with startups and the investment community, we are publishing the TSI 1 portfolio investment return data as part of this process.
During the first half of 2017, we will focus on expanding our advisory business, and continuing to develop the Deal Flow Platform, our proprietary in-house technology, helping us identify and engage with travel technology startups. For Q1/Q2 we will briefly step back and survey the startup ecosystem we helped build. We will be analyzing the travel tech startup life cycle to find where the next opportunity lies to enter as an investor.
We are currently looking for sponsors for the Deal Flow Platform and our collaboration with a Florida university with a Hospitality & Tourism School. TSI has signed a MOU to co-locate the incubator on the campus.
TSI launched in August 2014, making its first investment in the Fall of 2014. We raised capital to invest in 10 startups and things took off so we continued to raise capital and make more investments. To date, we have acquired equity in 19 travel technology startups. The majority of the startups received a $25,000 investment although some received no cash and we took a smaller equity % for our advisory and incubator services. 14 companies remain active operating companies, 5 have closed and 1 recently went public, our first exit.
Travel industry insiders and other investors have told us, “You are great pickers.” We believe this to be true and think it’s a core strength of our investment team. We invested so early in the startup phase, we literally didn’t have any metrics to go off of and we purely invested based on the team, market idea and whether we thought we could help them grow their business through our business development network.
Our first two picks, Proxce and FlitWays may turn out to be in our top 5. Proxce has won many startup technology awards and is now outfitting large luxury hotel brands with their hotel identity management software. Recently, FlitWays went public and now trades on the OTC market, the U.S. micro-cap stock exchange. FlitWays plays in the ground transportation market, the hottest market in the travel industry. We have two other portfolio companies in acquisition talks so we could get another exit or two here in 2017.
Here is the investment return data on our portfolio.
1 company is realized and went public. 14 of the active companies are unrealized, no exit. 5 are closed. We use the Berkus Method to value the active startups we have equity positions in that have not raised follow-on investment capital. We use the International Private Equity and Venture Capital Valuation Guidelines for startups that have raised follow-on capital. We used public stock trading data to value 1 company that trades publicly. The closed startups have a valuation of $0.
Our gross multiples are calculated by dividing “Estimate TSI Portfolio Value” by the “Invested Capital”. The multiple, excludes un-invested cash and TSI’s operating costs.
TSI produced over a 7x gross return in a little over 2-years and an IRR of 138% on invested capital. We believe this places us in the top percentile of comparable investment companies, incubators and VCs. We are aware, this is just an estimate and the multiple is highly subjective due to the nature of valuing unrealized gains. The stated multiples are our own estimate of the current value of our investments using our own methodology mentioned above and was not provided by the startups in our portfolio or any 3rd party valuation.
It’s too early to know how things will shake out over the next 5-10 years. We do believe we have 2 companies that can be $25M+ businesses and 1 company that can be $100M+. 2-3 of the companies will be $5M-$25M companies and most likely the rest will close or become small businesses. We are proud of both the active and closed startups that risked building a travel technology company and gave us a chance to be apart of the ride.
If you’re interested in being a sponsor of the Deal Flow Platform or our university partnership please reach out to me directly at email@example.com