On demand | Elevate 2022

PANEL  •  THOUGHT LEADERSHIP

Large, powerful company or small, nimble startup—each player’s perspective on the game can teach us something.

Join a few of the companies making moves as they chat with PhocusWire’s Mitra Sorrells about the impact of the pandemic in the startup space and the critical role startups play in futuristic thinking, no matter the industry. 

Mitra: Before we begin our session with our speakers, I would like to begin by sharing some data from the latest State of Startups report. This is produced by colleagues at Phocuswright, and this is an annual report that looks at startups across nearly every sector of travel that have been founded since 2012. For this report, that means about 2100 startups from around the globe, includes funding through May of this year.  

I'm just going to highlight a few of the data points that I think might be of interest to all of you. But if you're a Phocuswright subscriber, you can access the full report to read the detailed analysis. And I did hear that there are some data nerds in the audience, so hopefully you will enjoy some of this.  

So let's start with the big picture. After crashing in 2020, startup funding in 2021 came in at $12.5 billion, far exceeding the previous high of 8.3 billion in 2019. And so far this year, funding activity continues to be brisk. The bar on the far right is funding through May of this year at 5.2 billion. I can tell you I checked in with our startups folks at Phocuswright right before I came here and they gave me an updated figure that through mid-September, the funding is up to 7.4 billion. That's about 60% of the total raised last year. The blue line represents the number of investments. So, despite that jump in value, you can see that there were far fewer deals last year, 292, than in 2019 when there were 607. So this of course means that average deal size ballooned in 2021 and that is continuing this year. Average size so far in 2022 is approaching $48 million.  

Filtering the data by verticals for the past 10-year period, the hotel and hostel category is out front. But I will say that more than half of that 7.6 billion went to India's Oyo. So without that, this category would be just behind short-term rentals. Two verticals that may be of interest to all of you, the urban transportation category, that includes the vertical takeoff and landing aircraft providers. There are 45 companies that have raised about $5.5 billion in the last decade. And third from the bottom on this chart is the air vertical, with 268 companies that have raised a total of 832 million in the past ten years. And according to Phocuswright’s analysts, and maybe this won't be a surprise to all of you, funding to air startups is lower than other major travel verticals because there have been no massive investments in B2C startups in many years. The top funded air companies of the last decade relate to fintech and private aviation, two areas that, of course, were accelerated by the COVID pandemic.  

Looking more closely at urban transportation, which as you can see, pardon the pun, funding in this category really took off since the start of 2021. A few to mention: Germany's Volocopter has raised more than $400 million since March 21, China’s HT Aero raised 500 million just a year ago, and US-based Wisk raised 450 million in January. And to be honest, there's so much activity in this space, that may have actually changed since I wrote this a few days ago. In the air category, top funded companies include revenue management platform Flyr Labs, which I know is here, raised 150 million in Series C round last year and I guess is using some of that as a sponsor for this event. UK-based Fly Now, Pay Later and Los Angeles-based Surf Air.  

And finally, looking at funding by primary horizontal, excluding the booking horizontal where nearly $30 billion has been raised by B2C companies, the manufacturer software category is at the top of the list with 4.7 billion, followed by 2.3 billion for AI. Most of the funding in those top two horizontals corresponds to the V-TOL suppliers and other companies in that urban transportation category.  

If you'd like to stay in the know about travel startups, I encourage you to be on the lookout for this year's selection for PhocusWire of our Hot 25 Startups for 2023 that will publish on November 14th, which is also the first day of the Phocuswright conference in Phoenix. We will be talking about travelers, titans, and trailblazers and I hope to see many of you there. Please stop me if you have any questions about the event after this session and now we can get into our discussion.  

So please join me in welcoming to the stage our panelists today. We have the head of Amadeus Ventures, Suzanna Chiu. Welcome, Suzanna. From Kyte we have head of implementation and network success, Roma Sojitra. I apologize. I think I did that out of order. Sorry, I threw you off. And finally, from Fetcherr, cofounder and CEO Roy Cohen. So if you have any questions that you want to submit for our panelists, of course, you're all used to this by now, please scan for the Slido, and you can submit your questions and we will be getting to those toward the end of the discussion.  

So, Suzanna, I thought, you know, coming out of some of this, look at some of the data, I thought it might be helpful to get your perspective on that. You know, travel funding in 2020, one 12.5 billion already 7.4 billion through mid-September this year, give us your take on that.  

Suzanna: Sure. So far what we've seen is that the B2C investment in travel is pretty much in line with the larger industry. So obviously, there was a boom last year, 2021 record investment in VC overall. And so we see our fair share for the travel industry despite the challenges that that we were facing at the time. So for this year I would say that all the figures up to Q2 have been healthy. In the sense that the capital was still being deployed, deals were still being done, questions around if maybe some of those deals were to carry over from last year and so on and so forth. We are seeing a bit of a turning point maybe for Q3. So they still need to see more data to come through, But overall I think it's a very accurate description of the situation that we're seeing in the VC for travel.  

Mitra: And anything that you would add as a takeaway on the fact that the deal size has ballooned?  

Suzanna: Right. The environment that we are in, overall as we all have seen on the news, interest rates are going up worldwide. As a result, if you remember your finance class from the past, the higher the interest rate, the lower the valuation of the companies. And for startups, who are the high growth companies, the faster you grow, the harder you get hit with the valuation. So that is the environment that we are in right now. So that's factor #1.  

Factor #2 is the question of recession. So is that going to happen? When is that going to happen? How is that going to impact consumption overall in the economy? So with that question, we want to say and we believe that for travel we just come out of the pandemic, that we are all very hungry for experiences. We are done with material consumption, they say. We've bought everything that we need in our house. And so we want to believe that travel will stay strong in the coming 18 months.  

With those two factors, it becomes really difficult to price in the risk in investing in startups, especially the earlier stage. So we're seeing the deal size increasing, which is the effect of money is going into startups that are more matured, who have already shown that more KPIs in terms of the how they are making progress in their journey to become more mature companies where risk is easier to price. So earlier stage startups, typically it is harder for them to prove their business plan in the current environment. Despite all of this, we're still seeing term sheets being signed, great entrepreneurs, great ideas, they're still getting deals done in valuation similar to year 2021. So this is still happening.  

Mitra: Okay, well, and speaking of some of those earlier stage startups, we have representation here from Fetcherr and Kyte, both founded in 2019. Maybe if we can start both of you, Roma, maybe if you can start with us, just give us a sense, a 30-second, one minute understanding of what is Kyte.  

Roma: [inaudible]  

Mitra: You know what, the mic... Is it on?  

Roy: Here you go.  

Roma: Oh, thanks. Sorry. So Kyte started just before the pandemic. We are a modular service and it basically becomes a holistic solution for distribution and retail. So the three parts, one is the Kyte Adapter, which connects to airlines who want to provide better experience for travel agencies, OTAs, et cetera, for connecting to their NDC and just uptake NDC in a more modern way. Second is the Kyte API, which becomes the airline’s distribution API. Third is the auto management system, which we are soon going to launch. And the auto management system is basically built to make sure that airlines don't just have the ability to distribute content, but to create more content. So for example, connecting to third party retailers, having a Starbucks at a gate is one of my favorites, and we're looking to basically evolve in the auto management system. So that's Kyte.  

Mitra: Okay. Roy, tell us about Fetcherr.  

Roy: Thank you. So Fetcherr is an Israeli startup that was established in 2019 by four founders that are never been acquainted with the airline industry until 2019. We are coming from an ecommerce algo, trading, capital markets, banking, and media and advertisement. The main thing that we are doing is deep AI in the context of how to predict demand in real time and enable prices to move faster, what the airline is calling dynamic pricing. We are building two main abilities. One is a very advanced AI engine that can consume data and recommend and price in real time, fares and much more. And the second part is how to mitigate the risk on onboarding new technologies, how we onboard fast and how we publish fast. And it's a bit different than in the industry today and hope that we will shortly discuss it.  

Mitra: Okay. So you know, considering that both of your companies launched just pre-pandemic, I'm wondering, Roma, maybe if you can start by telling us, did that create any opportunities for you?  

Roma: Yes, absolutely. So Kyte, traditionally, basically, we started as an aggregator and during the pandemic we were hearing a lot about airlines making really fast moves in the NDC space. I've heard otherwise today. But I would say I agree that yes, airlines have been more open to moving and evolving in the NDC space, and we thought how do we help and contribute in better retailing and distribution? So it gives us an opportunity to become that distribution API and that's something that was a decision basically we took in the early pandemic days. So yeah, definitely an opportunity.  

Mitra: And, Roy, I know you were in stealth for three years.  

Roy: Almost until about now.  

Mitra: Almost until now. Okay, so tell us a little bit about that, why that and what opportunities did you have as the world was shut down? 

Roy: So we start not as an airline company, our solution is quite agnostic. So we were looking for an industry where it's extremely outdated to today's technologies and there is the fear factor of obtaining new technologies and I believe that what happened in the industry, mainly after COVID happened, is that I think everybody understands they need to innovate, but how to do it? And there is right now an opening to the how. So we need to innovate, we need to do it much faster and we need to understand what we are innovating. All data sets are not working anymore. Linear models, linear regression models are not working anymore. And we bring a new approach how you onboard very fast and how you mitigate risk, evolving and creating the entire transition to a new kind of technology, and I believe that COVID had a lot of effect on that with low teams, the risk adverse went to a different way, so it's going much better.  

Mitra: Okay, before we get into it a little more with both of you, I would ask you, Suzanna, has what you look for in a startup changed at all in the last few years? Any impacts that you've seen?  

Suzanna: Actually, no. In terms of criteria, in terms of what do we look for from a startup, we always look at it from two angles. One is, is the company investable? So from that perspective, we wear the hat still very similar to a financial VC. We look at business plans. What is the size of the market? Whether the problem that they are working on is worth solving, how good is the solution? So from that perspective, we evaluate it almost like a financial VC. That is one half of the equation.  

And the other half of the equation is the strategic value. It's given that Amadeus Ventures is the startup investment program of Amadeus IT. So how can we make use of this investment in terms of bringing new value propositions for our customers, how does that contribute back to traveler experiences overall? And so it's coming in from that angle. Would we be able to work with this company and do something that can benefit all parties in the industry, for Amadeus, and for the startup?  

And so those two criteria hasn't changed is that we are still keeping on the financial focus. We are a strategic investment program, there's nothing strategic about losing money. So we need to find something that's worth investing. But at the same time it's about doing something that is aligned with the vision of Amadeus in terms of creating value for the industry.  

Mitra: So, we've heard mentioned several times by previous speakers about the legacy technology in this industry, about how things have been a bit slow to change. I'm wondering, for Roma and Roy, what challenges has that created for your companies?  

Roma: Air travel, I mean the travel industry, has got really high barriers to entry. And being a startup who wants to get in the space, it's not easy. There are a lot of challenges that you have to go through before you actually find a business that wants to work with you, especially an airline. So signing contracts, deals, et cetera has been extremely challenging.  

Secondly, I think from connecting to airlines, NDC API, it's because that was the core how we started, was definitely challenging because we're trying to build a modern experience through Kyte’s simplified API, but we're working with all technology, we're working with XML. And yesterday, I think, somebody I was speaking to who said, you know, XMLs are outdated and I have to agree, unfortunately. It is a challenge when it comes to developing. It's also a challenge when you think about the time that's required to integrate an NDC API. It typically takes 6 to 8 months for a medium-sized business, and if you're talking about large-scale businesses, it takes almost a year because there's so many moving components at the back end, there is servicing to consider, et cetera. So I think there are a lot of challenges that exist even today which have basically helped in a way for Kyte API to adopt and innovate to make it better for travel sellers who want to use the Kyte API.  

Mitra: Okay, Roy, anything to add to that? I know you mentioned you didn't come from travel so...  

Roy: When trying to understand what is an airline, because we work with airlines, and trying to understand what is an O&D, what is an RBD, we also try to understand how to implement. But I can speak about AI and models and throw around buzzwords, but the main thing that we saw as a challenge is speaking with the RM people, speaking with the data analyst, speaking with the team leaders. Understanding, because everybody understands you need to innovate. But innovate is a nice word to say and everybody is speaking about real continuous pricing. So when our first challenge is how to connect to something called the PSS. But from our industries, IT departments are their Bermuda Triangle of their projects. So we didn't want to go there. So our amazing team just piggybacked any PSS because we are able to do it. So onboarding should take, I don't know, to replace an RM system a few years, less than two months. Almost 0 handshaking with IT department so they're happy.  

Now we have the teams. The team don't trust something that they cannot see. So okay, we are a RASK-based system. Teams in pricing and RM are working on bookings. How do you connect bookings to us? So we invested last year a lot of money in providing the airlines or the airlines’ teams tools to understand us and implementing those tools in the system and trying to make the entire onboarding like no cut offs, gradual onboarding, you want five O&Ds? Take 5 O&Ds. You want to take down constraints? Take down the constraints. You want to publish? That's published. This is why we are here at ATPCO. ATPCO are our best partner from day one in the industry, and we understand that they are bottleneck in a funnel. So we publish to ATPCO and so on and so forth.  

So those challenges along the way, seeing from outside the industry using technologies that are effective, validated in capital markets and ecommerce is being bent like the others because before I said to the needs of the industry itself.  

Mitra: I'm curious actually, and this would be a question really for any of you, all of you, would you say that it is primarily a lack of openness in the technology and in the systems or a lack of openness in the mindset that has been the biggest stumbling block to innovation?  

Roy: I'll take it. So I think it's both, both mindset and both. It's mainly based on fear because I believe that people are happy to innovate, but saying innovation to the CFO's office, bottom line, you cannot extrapolate it. When you connect, that's a nice buzzword to an ROI, to a KPI that the team themselves can understand and drizzle down. Everybody learns a new a new subject to work with. They gain more interest in the change. So this is what basically we learned, that the mindset is open once you provide the tools for the mindset to be opened.  

Mitra: Right.  

Suzanna: I agree. So it's both. So airlines is an industry about safety. I think that's a point that I'm receiving from a lot of the conferences that I attended from the airline industry as well. So I myself coming in from the financial industry. So it's about safety, it is a safe pair of hands, it is keeping things in order. But on top of that, on the system side, I'd say that that's exactly what the ventures program is about, is about bridging the systems that are in place, the bridging startups with new ideas bridging customers, is a lot of those data belongs to the customers. It's the airlines who have ownership and they decide how would you like to interact with the startups. And we have to facilitate in between. And in that circumstance I would say Volantio has always been our best example in terms of how we can make things happen for a startup. I think a lot of you in the room probably know them as well, so it's mutually beneficial relationship to say there is an additional value proposition, that we can combine together and present it to our customers and so we reinforce each other in terms of the value proposition. So overall we want to be able to help more of these startups. So to be able to promote their proposition to a wider community of airlines and customers.  

Mitra: Well, Roma, if you want to speak to that, but I'd also be interested to hear because I know a lot of what you were doing is the NDC connections and the hooking up the APIs, I'm curious about your take on a successful partnership. What does that look like for you?  

Roma: A paid one, for sure, tops our list, but a successful partnership for us given the essence of what Kyte does, for us it's really important to have an airline that really wants to expand their increasing demand around distribution, who wants to create more content that is sellable, and a partnership where an airline API becomes the main API in the retailing strategy for any airline. That would definitely be a successful partnership.  

I would like to touch upon what Suzanna and Roy said. I feel like because we're in the NDC space, we've seen a shift in that mindset. In 2020 when we started, yes, things were really difficult, but I think since the adoption of NDC has only grown, we've seen that shift in mindset. I think what the challenges are are more technical, I feel, because there's so much going around in the airline space and there's so much, so many systems that you have to collaborate with. And I think that's where the challenge has begun as to where you start what, what do you solve for first? And earlier on a lot of people talked about servicing and that's a major aspect for an airline as well. So I would say they're changing mindsets for sure when it comes to NDC.  

Mitra: Roy, I know Fetcherr has an algorithm to predict airline prices instead of using the historical data. I'm curious about your take on the future of fares.  

Roy: And the future of fares is that there will be no fares. That's the future. So I can give an example of what we are doing today with Azul Airlines in Brazil, a local carrier that we understood that in history there are a few kinds of airlines that are working in a different manner. Fares, when you go to real continuous pricing and continuous pricing is being to publish about 50 million fares a minute. There would be a threshold where fare structures as they were built will not be sufficient to drive monetization and if the airline or the industry on an architectural basis want to improve themselves. So there are ways that we can see in different industry like ecommerce when they move to omni-channel, that what does it mean, omni-channel? Basically connecting the warehouse to the cash register to the publication channels and indexing everything so everything works in the same code. And the result of that, you have live inventory with all channels. Fares today, I know that it is trying to connect ancillaries for so long, for engines like us connecting ancillaries is very simple because we just expand the catalogue, as it's called in here in the industry, to support real continuous pricing, to support real direct sales from airline website, it will need to be changed. They're also seeing that our solutions that are being used today that are extremely successful, validated ecommerce and retail and capital markets, in banking, that you can see it out in fintech. So yes. It's doable.  

Mitra: Okay. I'm looking here at some of the questions that have come in. Here is one. Everyone is trying to improve customer experience. Really, that's what it all comes down to, right? Is that traveler and their experience and hopefully their loyalty. Would you say, and really any of you that have a perspective on this, startups and ventures are better at understanding and answering how to do that? Which my interpretation of that is, does that push for innovation and improvement sometimes have to come from outside?  

Roma: I definitely agree.  

Roy: We also.  

Roma: I definitely agree to that because if we think about other industries, right, like banking for example, how many times do you go to a bank now, besides just opening an account? And that's where I think travel needs to be. And for that sometimes it doesn't just mean to rely on some legacy systems to innovate the technology that you want as an airline, but also takes new tech companies that really are in this space. And a big question today is how many tech companies actually are there today? And the ones that are there, and to your point, Fetcherr, three, three and a half years?  

Roy: Three and a half years, yes.  

Roma: I mean that just goes to say that airlines really need to look forward and collaborate with these new tech companies  who might just be that solution that you're looking outside of the current legacy systems.  

Roy: And might I add that, what is a customer experience in the airline industry? Coming off ecommerce, when we move to shopping cart. Okay, airline industry cannot support shopping cart because of fares. So it's all connected. If you want to improve customer experience, and let's say I'm a business traveler willing to pay $5000 a week before to fly from New York to wherever, I expect that what I paid for, I will see it, I will expect that somebody will pick me up. I would expect that I will be directed to a different line in the airport. I expect a lot of things, like coming from ecommerce, I'm buying on Amazon. I expect to get the product same day or next day because this is what I'm used to. The experience today is limited because the infrastructure is outdated and one of these things are fares and there are many, many other things. How we publish, how we name things, Many things. But yes, there is a lot of improving customer experience, especially from the airline side because they are the biggest funnel. People buy airline tickets first most of the time.  

Suzanna: Like me, I'll do that. Startups are extremely good at delivering solutions within a topic. Be it on search and book, be it in loyalty, be it in touchless solutions at the airport. One message that I want to bring to you today is the fact that the travel industry is very complex in the sense that there are many, many different parties who are involved in delivering one single journey for a traveler, from the end-to-end standpoint. Every single moment that the traveler interacts with the airline, the airport, the hotel, the travel agents. Every single part of it becomes part of that overall travel experience. And so  the startups are adding a lot of value in creating new experiences, new ideas, bringing them very quickly to the market for the different moments.  

And from the bigger companies’ standpoint is that we see our role in putting them all together. There's stitching through the different verticals to the different focuses and different moments in time. Such that, from an end traveler’s standpoint, when they go, having the inspiration of wanting to go to a trip, all the way back to the memories that they bring with them after the trip, that there is a holistic, seamless and memorable experience.  

Mitra: Yeah, because you know you're working across a variety of verticals, then you're talking to startups all over the world, across the industry. So I guess that is an interesting point then. Anything that you're seeing that excites you or opportunities there to fix some of that and stitch things together better?  

Suzanna: Absolutely. At the moment, I think the industry is talking a lot about automation. The fact that we are having some of the labor challenges, we are also going into a high interest rate environment where there's maybe capital investment in other areas are going to be more difficult. So maybe capital investment into technology on automation is actually the right moment to be done. So I would say that there's one key area that the last 18, 24 months also bring up a lot of opportunities for automation. So we see disruption today, they're happening to the extreme, and how can we use technology to manage all those things, the peaks and troughs, of these demands. So automation is going to be a big topic.  

From a VC standpoint, we are seeing a lot of new technology-driven ideas that that continue to come through. Blockchain is still on the table. And so the question is which use case makes sense, and how can we use it in a sensible way and responsible way in terms of the footprint that it brings onto our environment? So that I would say we continue to see blockchain and we want to see it being deployed in the larger scale in a sensible way. And the last thing that I need to mention is metaverse as well. And I think another new technology coming on to the table that we are seeing. I think we are definitely at the exploration and experiment phase with metaverse. And so is it about training, is it about inspiration, is it about searching and so bringing people into that inspiration process before they actually book the actual trip. So a lot of exciting things going on.  

Mitra: Okay. Roma and Roy. I'm just wondering as we're getting down here to our last few minutes, first of all, anything that you could share that you're doing as far as preparing to handle some of the macroeconomic headwinds?  

Roma: So we started just before the pandemic. We've been in the storm ever since. We've become more resilient, we are more reactive now. Of course, the economic challenges do come once in a while, but I think for us at Kyte, situations have really gotten better, because since 2020 there's been a big improvement, a big shift that we see, we really aware of what's next to come and uncertainties et cetera that come along, and yeah, we're prepared, we're prepared to see what's coming next for us.  

Roy: For us, the first thing that we did, we looked and scraped WHO every day and let our main engine understand it by itself and then after I think 3 months with our pricing with COVID data. But the main thing that we did in preparation to post-COVID because we could understand what will happen is investing a lot in automation. Because we have seen that the amount of people leaving the airlines. But what is automation? Automation is connecting an ATPCO feed to an infare data and showing it in one screen. So data analysts will work less. Automation means integrating into reservation systems seamlessly and uploading fares to ATPCO from the same system. So we have taken a lot of effort reducing the time spent by the teams on the granular work, and more releasing them to do strategic work, thinking about how to advance the brand, not just how to price a fare. So that's the main thing that we will be able to achieve post-COVID.  

Mitra: All right. And as we're getting ready to wrap up, I have a final question for each of you. So just briefly, Suzanna, if there's some founders here in the audience or as you're talking to our fellow panelists here, what are just one or two things that you wish founders understood better?  

Suzanna: Fall in love with the problem but not the solution. So to say, focus on problem. They keep changing the solutions, fixing the solutions. Listen to your customers until you finally get to that solution for that problem that you're solving.  

Mitra: And Roma and Roy, any final things that you would like to say to the airlines in the audience that you wish they would understand?  

Roma: I would just add, like I touched upon earlier, I think be open to new tech companies like Kyte, of course. Also, everything has an expiration date, including technology. Some people already considered NDC as obsolete, and I think it is time for us as an industry to be more attentive to what's happening around us, to make sure we're not investing in obsolete tech and we are up to date in the technology space because that's what we do.  

Roy: I would like to add that we are not so scary, new startups. For airlines that are willing to do early adopters and innovate, eventually they will win because they will be first to market. There are technologies, not just us, there are many wonderful companies out there that can solve big, meaningful problems. And that all can help the industry, not in 10 years’ time and in 20 years’ time, but in a few months’ time. I believe that a lot of people will be amazed what startups can do, and we hope to show you.  

Mitra: Okay, wonderful. Well, Roma, Roy, Suzanna, thank you so much.  

Roma: Thank you.