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Why Private Equity Firm Certares Is Dabbling In Travel Venture Investing

Certares was founded as a private equity firm in 2012 and has gone on to invest heavily in travel companies — most prominently American Express Global Business Travel, Hertz Corp., airline group Latam, and Liberty Tripadvisor Holdings. But the New York-based investments specialist also has a fledgling venture investment practice.

Chantal Noble Haldorsen leads Certares’ venture lead strategy, which in recent months helped with a $19 million Series A round in UFODrive, a rental service for electric vehicles, that Certares and one of its portfolio companies, Hertz Corp., co-led.

Certares, whose leadership includes alumni from JP Morgan Chase, Sabre and One Equity Partners, calls its approach a “strategy” rather than a formal practice.

“We don’t definitely consider what we’re doing to be corporate venture,” said Haldorsen, a Harvard MBA who previously worked at Torch Capital, an early stage consumer venture capital firm.

The firm’s interest in venture investing is related to what it’s doing in its much larger private equity business, but with an eye to previously untapped small and niche businesses.

“Just being able to play across all stages of a company’s lifecycle is something we wanted to lean into,” Haldorsen said.

What Certares Wants in Startups

The company is today mainly looking at startups in North America and Europe.

“We’re focused primarily on companies with a proven ‘product-market fit’ as shown by demonstrating meaningful traction,” Haldorsen said.

“We have insight into the strategic priorities and potential pain points within our portfolio companies,” Haldorsen said. “We’re well-positioned to identify areas for potential partnership with early-stage companies and find chances for [our portfolio companies] to adopt other technology, versus having to build everything in-house.”

The company calls itself a “strategic” investor. It invests in startups that are complementary to the vertical where it takes stakes under the private equity model.

But is it a requirement for Certares’ that its venture investments need to be in startups that benefit its existing portfolio companies? Haldorsen answered that the firm’s bigger picture goal is to uncover smaller, niche opportunities that might be overlooked by a generalist investor, given Certares’ extensive experience as sector specialists in travel and mobility.

“Sooner or later, most travel tech companies find their way to Certares [to get on its team’s radar],” Haldorsen said.

Certares Eyes Hot Investment Themes

Haldorsen said Certares is open-minded about startup concepts. But a few areas especially interest her because of their potential.

“Not in any particular order, but I’m personally keenly interested in the intersection of travel and fintech [financial technology],” Haldorsen said. “Also one-click checkout, buy-now-pay-later [installment payments], secondary ticketing platforms [such as reselling rooms or flights], the emergence of Web3 solutions, innovation in the insurance space, data-driven decision-making, and contactless tech.”

“The pandemic exposed a lot of vulnerabilities within the data infrastructure of the travel industry,” Haldorsen said. “It also created challenges for travel companies who didn’t know who their consumers were, so to speak. So there’s a renewed focus at the corporate level and operationally for increased connectivity to databases and the adoption of smarter and more actionable analytics.”

“This new backend infrastructure creates opportunities within revenue management for pricing optimization, within fleet management, and so on,” Haldorsen said.

“My expectation is the sharing economy trend will only continue to grow as ownership behavior is changing, particularly in younger generations,” Haldorsen said. “We see this across asset categories. Fewer consumers are opting to buy. Peer-to-peer sharing sets the stage for entirely new utilization models like some of the subscription services you’re seeing in mobility and hospitality right now.”

Mindfulness of carbon footprints is another area that will generate startup opportunities, particularly for technology that helps airlines reduce or offset their emissions and that assists the transition to electric vehicles from fossil fuel ones.

Private aviation is also experiencing a renaissance with the rise of new models.

Bullish on Travel Tech and Mobility Startups

Haldorsen said she sees generalist investors have returned to investing in travel startups after having been cautious about the sector during the pandemic. The revenue crunch of the past couple of years has also helped make several startups leaner and more agile.

“Travel companies still face a higher bar for judgment than some other sectors such as fintech, where you see a lot more activity,” Haldorsen said. “I don’t necessarily see that as a bad thing as it forces travel tech founders to be diligent about validating their value proposition to customers.”

Some macroeconomic trends and other events have weighed on travel tech’s rebound.

“Concerns about possibly lasting inflation, greater geopolitical instability, and the so-called de-globalization of tech could, at least in the short-term, shrink the TAM [total addressable market] for a lot of venture-backed companies,” Haldorsen said.

“I’m advising founders to raise enough capital to get them through the next 18 months so they can achieve milestones necessary to justify valuation markups the same way we historically expected between rounds,” Haldorsen said.

The frenzy of the last two years was partly driven by non-traditional investors having flirted with early-stage investing, she said. Hedge funds and other players are now pulling back.

Breaking With Misconceptions and Old Thinking

Haldorsen does more than just seek out companies to invest in.

“It doesn’t necessarily have to be a direct partnership,” Haldorsen said. “It’s where we feel we can add value. We make qualified introductions to key decision-makers and make sure that founders are getting in front of the right person at the right time.”

Haldorsen said she likes to share knowledge with promising entrepreneurs.

“You have a lot of travel startups that have great ideas and fundamentals in terms of what they’re looking to achieve but maybe don’t have much underlying understanding of how the industry works today and the connectivity that’s really required to scale, or similar factors that may be holding them back,” Haldorsen said. “Sometimes there’s an education piece [to my role].”

Haldorsen sometimes tells founders she meets that they shouldn’t seek venture funding as the main path to growth.

“The reality is that not every startup has an addressable total market opportunity able to support venture returns,” Haldorsen said. “Some founders need to know it’s respectable to build a lifestyle business that generates a meaningful cash flow.”

“There’s a misconception that every company needs to be a unicorn,” Haldorsen said. “We need to get to a more grounded reality about what’s considered a health outcome.”

The Certares executive would also like to see some shift in funding trends toward greater diversity, equity, and inclusion.

“Investors should be advising founders to build diverse management teams,” Haldorsen said. “We also need to be focused on bringing more diverse representation into the investor base. Sad to say, it’s an area that definitely needs a lot of focus.”

“We need more thought going into constructing the cap table [capitalization table, or the record of investors in a business],” Haldorsen said. “Founders need to push for more diverse investors from, say, angel investors, if they feel the GPs [general partners] at a venture fund aren’t representative of what they’d like their cap table to look like.”

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