After years of smashing funding records, investments for travel startups have likely decelerated.
The COVID-19 coronavirus pandemic has disrupted the flow of capital that previously fueled the rise of countless travel startups in the past decade.
This sudden slowdown in funding is likely to obstruct the next generation of travel startups from growing, such as Greece-based travel experience platform Grekaddict.
Founded in January 2018 by entrepreneur Souzana Theodoridou, Grekaddict was bootstrapped until the first half of 2019 when the startup raised a small angel round.
The company grew to support a team of five employees and gained international clients, such as Philip Morris International, which booked with Grekaddict for its annual experimental teambuilding activities in Greece.
Eager to expand Grekaddcit’s business internationally, Theodoridou embarked on a mission to secure the startup’s largest capital raise to date.
Recently, Grekaddcit was in advanced discussions with a strategic investor and some angels for a seed round.
And then: COVID-19.
“Regarding investments, all active VCs I got in touch with responded that for the upcoming two to four months no investment in travel will proceed.”
Souzana Theodoridou – Grekaddict
“Since the virus started spreading in Europe and the United States, resulting in travel fairs and events getting cancelled one after another – all well justified prophylactic measures, naturally the investor decided to put our partnership on hold until we get out of all this mess and normality returns to our industry and the world,” says Theodoridou.
She adds that it was a joint decision with the investor to resume at a time when it will make good business sense for all parties involved.
“I obviously felt disappointed and frustrated at first, as I hoped there was a chance to close,” says Theodoridou. “The writing was on the wall though, as the COVID-19 outlook was getting worse by the day, so I was prepared.”
Startups across all sectors have experienced the same funding slowdown.
CB Insights says that funding in private markets for the first quarter of 2020 decreased by 16% compared to the fourth quarter of 2019.
“Talking with fellow travel-tech entrepreneurs, many had similar stories to share,” says Theodoridou. “It’s no secret this pandemic has completely crippled our industry globally, and many otherwise profitable and growing businesses and startups will go bankrupt.”
She describes the general situation in Greece as extremely tough.
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“Regarding investments, all active VCs I got in touch with responded that for the upcoming two to four months no investment in travel will proceed.”
This statement echoes similar comments made in a March 5 letter from Sequoia Capital where the venture capital company warned that COVID-19 is a “black swan” event that could last several quarters.
Nevertheless, Theodoridou says that Grekaddict views this funding roadblock “as an opportunity to focus our resources on building our new products and getting ready for the inevitable rebound.”
“Make no mistake, the COVID-19 pandemic will pass, and travel will return stronger than ever,” she says. “Tech-enabled startups in particular will have a golden opportunity to disrupt travel incumbents and shape the new day.”
She adds: “Savvy investors will hopefully see that and decide to support us through these hard times!”
