Scientist-investor Elad Gil is making a big bet that business travel will rebound after Covid
- Elad Gil, known for early bets on Airbnb, Instacart and Square, is co-leading a $155 million investment in TripActions at a $5 billion valuation.
- The company, which makes travel management software, was hit hard by the pandemic, cutting about 25% of its workforce last year.
- "I thought it was wise to invest while things still looked tough for travel, because it would be much more expensive to invest when things come rushing back," Gil said.
In 13 years as a start-up investor, Elad Gil has backed some of the era's biggest tech breakouts, such as Airbnb, Instacart, Stripe and Square. He also co-founded genomics company Color, drawing on his Ph.D. in biology and previous work in virology labs.
Late last year, before optimistic vaccine news started rolling out from Pfizer and Moderna, Gil combined his science expertise with his start-up success to scout out his next investment. He was projecting that the developed world would be mostly through the Covid-19 crisis by late 2021, so he started looking for businesses hurt by the pandemic that were poised to rebound sharply on the other side.
Other than Airbnb, which was already in his portfolio, the next best bet he found was TripActions, a developer of travel and expense management software. TripActions cut hundreds of jobs in March amid a massive cutback in corporate travel. Gil, who previously worked at Google and later ran corporate strategy at Twitter, saw the company positioning itself to capture market share when the economy reopens.
Gil connected with TripActions CEO Ariel Cohen through ex-Twitter COO Adam Bain, an investor in the company. Gil and Cohen met first through Zoom and then in person. Now, Gil is co-leading a $155 million financing, investing alongside Andreessen Horowitz and Addition, Lee Fixel's venture firm.
"I thought it was wise to invest while things still looked tough for travel, because it would be much more expensive to invest when things come rushing back," said Gil, who lives in San Francisco. "Business travel is not going to go away."
The funding round, announced on Thursday, values TripActions at $5 billion, up from $4 billion in mid-2019. Revenue is still down from pre-Covid days, though the company isn't providing numbers.
Combining science and investing
Gil has been on top of Covid research since early in the pandemic. He wrote a blog post last February, titled "Coronavirus (COVID-19) PSA for Startups," warning of a coming global spread and suggesting that companies "curtail travel and conferences and move to video calls" and "plan for the remote work contingency."
He has credibility on the subject. In addition to earning his doctorate in molecular biology from the Massachusetts Institute of Technology, Gil has been close to this pandemic through his work at Color, where he remains a board member. Color partnered with health diagnostics company PerkinElmer and the state of California to enable Covid testing for large populations.
Even without widespread vaccinations, Gil was expecting that herd immunity would largely pass through society by early 2022. That bullishness informed his view on TripActions.
Cohen, who co-founded TripActions in 2015, said the increased valuation is a reflection of signing on new customers in recent months and the traction the company is seeing from new products.
In February, TripActions introduced a payments product called Liquid that allows customers to sync employee business travel purchases with a back-end system for reporting expenses and handling compliance and analytics. It's like combining an American Express card (TripActions provides its own card) and Concur software, removing the manual burden for employees.
TripActions also expanded beyond travel into broader expense management, which has become more important with people working remotely and bulking up their home office. Cohen said travel is only at about 20% of pre-Covid levels, but growth in other expense categories is offsetting some of those declines. He said TripActions' new tools help customers put policies in place for what can and can't be expensed.
"Can you buy lunch? Can you buy office equipment? Can you buy software?" Cohen said. "You're doing it with a credit card. The employer wants to have a say in it."
Cohen said the company, which is based in Silicon Valley, has ambitious plans to build out its global workforce and operations in cities like Amsterdam, Sydney and London. While it's been in hiring mode of late, total headcount sits at 700, well below the 1,100 employees before the crisis.
To help some current and ex-employees who may be struggling or who could just use some cash, TripActions is holding a secondary share sale of up to $240 million that will close later this year. Cohen said an IPO is likely a few years out, depending on the vaccine rollout and how quickly business bounces back and becomes more predictable.
Cohen called the secondary sale a good opportunity to get some liquidity "for people on this journey and on the ups and downs." He also said it was a way to satisfy investor demand without causing excess dilution.
Travel start-ups stagnated
For Gil, investing at this high a price is unusual. He spends most of his time with early-stage start-ups and building his own companies. He said he's "soft launching" a new company with some ex-Google engineers in a week or so to develop a browser-based virtual reality tool. To invest late, "I need very high conviction," he said.
TripActions is specifically a post-Covid bet that Gil says could be dramatically undervalued given the growth potential in the next couple years. He said the product is "10x better than anything else on the market" and that start-ups in travel software have been stagnant during the pandemic.
"Many travel companies stopped investing in themselves and their market and no new start-ups were really getting funding," Gil said. "It created an opportunity for TripActions to expand the distance between themselves and the competition."