Indian travel tech startups are closing the great funding gap with Chinese counterparts

When South African media company Naspers Group invested an additional $250 million in online travel venture Ibibo Group in February, everyone noticed.

Travel tech had never received much attention, given that majority of the $8 billion invested by venture capital firms in India last year went towards e-commerce firms, among other startups in the consumer sector.

But this sector has quietly been developing into a major area for investment. Although it is still way behind what Chinese travel tech companies have raised, Indian travel tech is swiftly coming into its own.

That mirrors what has happened worldwide, where travel tech startups attracted record financing last year, and took on areas such as consumer booking for flights and hotels, lodging, fare alerts and more in the broader travel category.

Until now, the US and China have accounted for majority of the deals, with their combined share rising to 74 per cent of all travel tech deals worldwide in 2015, from 59 per cent in 2013.

India’s travel tech surge

Investors are now turning towards India as well, which is the last unconquered market on the planet. In 2016 alone, Indian travel tech companies have raised $546 million from venture capital firms, and from corporates (like Ctrip’s $180 million investment in MakeMyTrip), according to research firm Tracxn. That is higher than the funding through the whole of 2015 ($236.1 million), and a giant leap from $11.5 million in 2013.

There are a couple of reasons for the increased interest from investors. The level of penetration by most of the organised players is low in the affordable hotels segment. The travel segment, in which Ibibo, MakeMyTrip and Yatra are present, is also growing well, as average incomes rise and more Indians travel.

Players like Oyo raised large amounts in funding last year, and are burning huge amounts of cash to grab more inventory in the low-cost accommodation space. Oyo got $125 million last year, and has raised $100 million this year, mostly from Softbank and Sequoia Capital, easily the highest among all affordable-room providers.

But the company has faced complaints about the quality of its rooms and service, and the sector still has a lot of space for new players. New entrants like Treebo Hotels and Fab Hotels raised $6 million and $5 million respectively.

Screen Shot 2016-05-16 at 5.42.42 PM

Travel tech funding (in $ million). Source: Tracxn

 

Chinese players have stolen a march over Indian startups, and are way ahead in funding. That’s not a surprise, given how fast its economy has grown for over two decades, the only country to have achieved that kind of growth for so long. China has had fewer number of deals, but has had more mega-funding rounds. In fact, India had more than double the number of deals with 69 last year although was way behind in funding.

However funding in Chinese travel tech has slowed markedly from last year ($3.8 billion) and might end up a much lower figure than last year, closer to the $972.8 million seen in 2014. And it was two big deals — the $300 million Series D to TuJia Online Information Technology in June and $85 million Series C for Mafengwo — that were the standouts last year, showing that big sized deals also dropped in the nation’s travel tech sector.

This year, the largest deals have been a $92.4 million Series C round in Travelzen, and a $85 million Series D in Yaochufa. Total funding in the sector has been $676.9 million so far, according to Tracxn data, nowhere near the levels it was at the same period last year.

If the trends in India and China hold up through the year, this year would be the first time that Indian travel tech would somewhat narrow the hitherto yawning gap between themselves and their Chinese counterparts. And that would be a sign that startups in India’s largely unorganized travel market are finally starting to make a difference.

Also read:

SIG Asia participates in $57m Series D round in Chinese online travel firm Qyer.com

Indian online travel biggies delist, spin off budget hotels into separate businesses

China online travel firm Ctrip in tie-up with rival Qunar, deal valued at $3.4b

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.