VCJ Report: Travel Sites Taking Off

A year ago, Adam Goldstein and Steve Huffman, frustrated with their online travel search experiences, co-founded San Francisco-based Hipmunk to help people book travel plans quicker and easier.

The Hipmunk site is a hit with users and some VCs, as the company has raised $5.2 million in venture funding from Ignition Partners, Y Combinator, SV Angel, Webb Investment Network and individual investors, including Erik Blachford, Simon Breakwell, Rob Glaser, Jim Hornthal, Rich Barton, Paul Buchheit and Ashton Kutcher.

Hipmunk claims it attracts about 100,000 unique visitors to its site every month—a number they say is continuously growing. With the inroads the site has already made with consumers, one would think Hipmunk has been around for a while or is heavily marketing its services, but that’s not the case. The site has simply gained users through word-of-mouth.

“Travelocity and Expedia have been doing this for a decade, and these two kids [at Hipmunk] came in and figured out a better way to shop for airfare and hotels,” Bob Offutt, a senior technology analyst with travel research firm PhoCusWright tells Venture Capital Journal in the September 2011 issue. Last year, PhoCusWright named Hipmunk one of the winners of its Travel Innovation Summit award at its 2010 conference.

While the online travel sector is not new, it was in need of a facelift, according to Offutt, and entrepreneurs are aware of the increasing number of dollars consumers are spending to plan and search travel destinations online these days. In fact, only 15% of travel plans are made through a live travel agent today. That’s up from almost 100% just 15 years ago.

“Local travel agencies have gone the way of Blockbuster and long distance telephone carriers,” says Charles Lax, managing general partner with GrandBanks Capital, which invested more than $4 million in SilverRail Technologies, a Woburn, Mass.-based company that provides railway bookings.

PhoCusWright says new startups that have emerged in the last five years are providing a range of travel-related services, with many offering help in planning trips. Others provide services to the travel industry, such as New York-based digital media provider Travel Ad Network, which raised a $15 million Series C round in late 2010 and has now raised $30 million from Village Ventures and Rho Capital Partners, among others, according to Thomson Reuters (publisher of VCJ and peHUB.com).

Other new sites that have raised funding include online travel agent Kukunu, which raised $19.1 million from Kima Ventures, Jaina Capital and Seedcamp, as well as online travel agent Wanderfly, which raised $1 million from Charles River Ventures, Jason Calacanis, StartupAngel, James Bailey, Roger Kickey and others.

Another startup is San Francisco-based myTab Inc., which Heddi Cundle founded late last year with her own savings. Cundle says she is looking to raise $1.5 million to $2 million in funding for her company, which she calls a social travel gift registry that provides users the ability to gift, save, plan and book their travel plans. Cundle launched the site in June.

“The feedback I’m getting so far from investors is that it’s a novel concept that no one else is doing,” Cundle says.

VCJ subscribers can read the full story about online travel here.

Not a VCJ subscriber? Click here for a free trial.

If you want to talk more about online travel other hot trends, send an email to VCJ editor Alastair Goldfisher at alastair.goldfisher@thomsonreuters.com or contact him on Twitter at @agoldfisher.

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