Long sales cycles, difficulty moving to implementation and a patchwork of legacy systems are some of the challenges facing startups in the travel technology space.
Finding the right venture capital partner can help, delegates at The Future of Travel, a travel technology summit held in Cork, heard recently.
The event, organised by Enterprise Ireland, brought global leaders in the travel sector together with Irish travel tech innovators to discuss how they are transforming to meet rapidly evolving customer expectations.
Ireland is a leading travel tech hub with more than 100 companies operating in the space, including global leaders such as Ryanair, Datalex and CarTrawler.
Partnering with a US venture capital firm can speed a firm's growth in that market, according to Katherine Grass, managing director of Thayer Ventures, a San Francisco-based venture capital firm specialising in travel technology investment.
"For a European-based company looking for investors, you want someone who brings expertise to the table," she said.
Thayer's primary focus is Series A funding. Right now, it sees opportunity in a subset of the hospitality sector, including what she calls "'alternative lodging models', trying to professionalise the whole Airbnb concept".
Ditto smart cities. "How a city uses its kerb space better, the taxing of the streets," she added. The rise of delivery services, from Amazon to Uber, creates a need for solutions that help cities operate more effectively.
Industry knowledge is held at a premium by travel VCs, agreed Amy Burr, managing director, partnerships and operations, at JetBlue Technology Ventures. The Silicon Valley-based corporate venture capital arm of JetBlue Airways invests in early-stage travel technology companies, including seed, Series A and Series B rounds.
To secure investment from JetBlue Technology Ventures, a start-up must fall under one of five 'themes'.
These are customer experience; hospitality and service; operations and maintenance; loyalty and distribution of revenue; and evolving regional travel.
All are broad enough that "anything that actually touches travel, we can look at", said Burr, whose role is to help bring value to portfolio companies.
Industry knowledge helps in this highly nuanced sector.
"It's really complicated to hook into the legacy systems and processes and change the way people do business in travel. If you don't have that background in travel, you maybe want to look for someone who can help you in this vertical," said Burr.
There is, of course, value in bringing the fresh perspective of the outsider to any industry, she said.
"But the balance is that you've got to be able to find a way to work with the legacy systems."
500 Startups, the California-based early-stage venture fund, with a family of 19 funds around the world, invests at all stages, but typically Series C.
"We are sector agnostic, but we invest in so many things that have applications that will or already have impacted on the travel industry," said Pedro Santos Vieira, head of partnerships at 500 Startups.
For companies seeking VC investment, the most important consideration is the expertise of the board member it brings with it.
A key driver for VC investors is the founding team, he said.
"In deep tech, it's very customary to see teams that are super strong scientifically and technologically, but if they don't have the commercial ability, that's a potential red flag for us.
"So we do try to find a team with complementary skills."
The size of the market opportunity is vital but, interestingly, founder-market fit is more important than product-market fit for very early stage investors, he said.
This is because 500's experience with its accelerator programme shows clearly how a strong team can pivot as the market requires.
If they are the right team for that market, "the chances of us investing are much higher", he said.
Enterprise Ireland will launch an international campaign to promote the travel tech sector later this year.
To learn more, visit: www.irishadvantage.com/traveltech.
Maire P Walsh is SVP Digital Technologies, Enterprise Ireland, San Francisco.
Sunday Indo Business