SoftBank leads TravelPerk's $104 million fundraising, in a bet that AI will reshape corporate travel
- Barcelona-based startup TravelPerk on Tuesday said it raised $104 million in a new equity round led by SoftBank's Vision Fund 2 and backed by Kinnevik and Felix Capital.
- TravelPerk said that it plans to use the money to invest in continued growth and product expansion, particularly around artificial intelligence technology.
- TravelPerk has rebounded in a big way from the Covid-19 pandemic, with revenues growing 70% year-over-year in 2023.
Barcelona-based startup TravelPerk, which helps automate corporate travel and expenses, has raised $104 million in fresh funding from Japanese tech investing giant SoftBank and a flood of other names, to invest in artificial intelligence development and new products.
The company said Tuesday that it raised the cash in a new equity round led by SoftBank Vision Fund 2 and backed by existing investors Kinnevik and Felix Capital. TravelPerk said it plans to use the money to invest in continued company growth and product expansion.
TravelPerk primarily uses AI technologies like machine learning and neural networks in the back end to help automate a lot of the manual tasks involved in corporate travel — for example, connecting users with the best prices for flights and accommodation.
"Traditionally, if you look at legacy players, like American Express or Expedia, or holiday travel sites, most of the work is done manually by travel agents," Avi Meir, CEO and co-founder of TravelPerk, told CNBC.
"This is one of the reasons why you don't really see huge success at scale with travel, because technology was not used, and technology is how you scale today."
SoftBank invested $70 million in TravelPerk's latest round, which the company said was an extension of its "D-1" funding round. The fundraising round shows SoftBank is placing a major bet on a company driving disruption in corporate travel through new technologies, such as AI — which has seen significant buzz since the November 2022 launch of OpenAI's ChatGPT.
The latest fundraising round lifts TravelPerk's valuation to $1.4 billion, a touch above the $1.3 billion at which TravelPerk was assessed during its previous cash raise a year ago.
An "upround," where a private startup pulls in funds at a higher share price, became a rare event over the last year or two amid sky-high interest rates.
Investing in AI that's not for 'show'
Meir poured cold water on some of the buzz around AI, saying that a lot of the experimentation he sees with generative AI tools like ChatGPT seems like more of a "show" than a practical adoption of AI for improving cumbersome problems in travel business.
He said TravelPerk is running on a far leaner operating model than incumbents in the legacy travel agency market. Whereas many travel agents operate on low single digits gross margins, Meir says that TravelPerk's profit margin stood at 60% last year.
"What we did in 2023 is, with the use of AI, basically automated a lot of these kinds of back office manual processes," Meir told CNBC. "It's less sexy than having a chat bot, but it's worth it," said Meir.
2023 a year of 'hyper growth'
TravelPerk also intends to use the fresh cash to fuel an acceleration of its gross profit, which grew 90% in full-year 2023 through automation and AI. TravelPerk made annualized revenues of $150 million in 2022, according to its co-founder and CEO Avi Meir.
TravelPerk had a tough time over the Covid-19 pandemic, when travel of all kinds, not just corporate trips, ground to a halt to stem the spread of the virus.
The company has since benefited from a resurgence in international travel, as vaccine rollouts enabled public health authorities to lift travel restrictions around the globe.
"Not only are we out of the pandemic, we're back to hyper growth. 2023 was our best year ever. We grew revenue more than 70% year-over-year, on a pretty large base," Meir told CNBC.
TravelPerk competes with American Express, BCD Travel, SAP Concur and Navan in the corporate travel management space.
Will IPO when 'ready'
Post-Covid-19, Meir says, TravelPerk's growth has been on a tear. He sees the firm reaching profitability on a monthly basis by the end of 2024 and quarterly profitability by the end of 2025.
TravelPerk has continued hiring, rather than laying off staff, as several other travel tech firms have done. The company brought on 50% of its staff in the last two years, according to its CEO.
Meir said that TravelPerk has no immediate plans to go public, as his intention is to build a company that will be around in 100 years. However, an initial public offering is something the company would be "ready" to do if and when it approaches that event, he added.
TravelPerk hired a new chief financial officer, Roy Hefer, last year, who has experience in taking companies public and was part of two tech IPOs in the U.S.