Complex Made Simple

What are the trends driving the global travel and mobility sector?

Travel report By: The Lufthansa Innovation Hub (LIH)- named “Germany’s Best Digital Lab” by Capital Magazine and “Digital Leader” by IDG – is the digital transformation spearhead of the world’s largest aviation corporation, Lufthansa Group

Travel and Mobility have long been considered two separate industries. But the digital age and a user-centric understanding of the traveler journey have made both sectors closely intertwined. One example: for the longest time, airlines have solely focused on taking care of the passenger while they are on board. But taking a plane from A to B is only one component of the entire door-todoor travel experience. Travelers need to get to and from the airport (mobility), need housing (accommodation), look for things to do at the destination (experiences) and wish for (digital) assistance along the entire trip.

10 VC trends- graph

The Travel & Mobility Tech VC sector is outgrowing the market

VC funding dynamics are skyrocketing More venture capital was invested in Travel & Mobility Tech startups in 2018 than ever before. This funding record is a strong signal that the speed and level of innovation amongst startups are further accelerating and it’s important to mention that almost 80% of last year’s funding amount was allocated to only 44 companies.

The travel and mobility VC funding now garners 18% of the overall VC market across all sectors.

More billion-dollar companies than ever before

Out of close to 400 unicorns across all industries worldwide, 44 of such billion – dollar companies exist in Travel & Mobility Tech today (as of September 2019). This number went up from only 22 in early 2018.

Together, these 44 unicorns hold an aggregate valuation of more than $220B

Favorable funding environment powers all of VC

Several macroeconomic forces – most importantly, low interest rates – have created a very friendly investment climate for the VC asset class. As investors have been seeking higher returns, many shifted their focus from low – return assets to VC, resulting in record amounts of investment dollars flowing into startups. The allure of finding the next unicorn has been a powerful motivator. As a result, deal sizes have gotten bigger and bigger, not only in Travel & Mobility Tech but across the entire VC spectrum. Thanks to this friendly financing environment and the growing size of funding rounds, many startups have started to opt for additional VC rounds to lengthen their cash runway instead of going through a liquidity event, such as an IPO. VC as a source of capital is increasingly being used for grown – up startups during their expansion phase, thereby playing the role of growth equity. The new mantra in Venture Capital: stay private to grow bigger.

Travel & Mobility Tech is maturing

When removing all unicorns, funding levels plateau Typical for all of venture capital, outliers in Travel & Mobility Tech capture the majority of total VC funding amounts. In fact, 80% of total investments in 2018 was allocated to the sector’s 44 unicorn companies. The remaining 20% ($9.253 billion) went into the broader “mainstream” Travel & Mobility Tech startup ecosystem. The stagnating funding levels of the past two years for all these non-unicorn startups signal that the sector is entering into more mature stages.

Consolidation

Nine out of the ten largest exits by Travel & Mobility Tech companies in 2018 have been in the form of acquisitions. This signals consolidation as an important trend in the Travel & Mobility Tech sector. Especially within highly funded categories, such as ride- and bike-sharing, key players (e.g. Uber, Lyft, DiDi) attempt to improve their investment returns via acquisitions that are expected to result in synergies with cost savings and productivity gains as a consequence.

Seed money down

Constant year -over -year decline On a deal basis, the share of angel and seed deals has gradually decreased over the past three years. As investors shift their attention to later – stage deals and deploy larger and larger sums to more mature companies with a visible product/market fit, those startups at the idea stage struggle to raise the necessary funding to get their ideas off the ground.