Hipmunk nets a $20 million round, led by Oak Investment Partners
Hipmunk, the travel metasearch site, has raised $20 million in a new venture capital round meant to spur its growth.
Hipmunk would not reveal what valuation the new round placed on it. Since its launch in 2010, the alumnus of the Y Combinator program has raised a total of $40 million.
Having the extra cash will allow Hipmunk to spend more money on technology infrastructure and hiring a couple dozen more employees over the next 18 months, it says.
The company is “not profitable by choice,” choosing to re-invest margin to achieve growth. Hotel bookings are its fastest growing segment.
Hipmunk has long had a reputation for having a distinctive look, with bar graphs, a chipmunk mascot, and search results that, by default, filter out redeye flights, hotels with poor TripAdvisor reviews, and other undesirable trip options.
What’s new is how Hipmunk is positioning itself as an industry leader at cross-platform integration.
At least two-thirds of American users are spending at least some time searching on one device while booking on another.
To address that “cross-platform behavior”, Hipmunk introduced in March an “Anywhere” function that allows logged-in users to save desktop searches for later access on mobile.
Travel searches can be also be picked up on a desktop after being started on mobile, making the flow more seamless than Expedia’s Scratchpad.
It’s still early days. Hipmunk’s current split of traffic is roughly fifty-fifty between web and mobile.
In the next year or two, it expects half of of its hotel booking conversions to come through mobile instead of desktop.
CEO Adam Goldstein discussed the funding announcement with Tnooz. (Questions and answers have been edited and re-sequenced for brevity and flow.)
How does Hipmunk’s inventory compare to its competitors’?
We’ve been working incredibly hard to build the most comprehensive selection of flights and hotels.
We have become the first travel site to have 1.2 million different unique accommodations in our inventory, including hotels, vacation rentals, hostels, boutiques and B&Bs.
In particular, on hotels, where we’ve put a lot of our energy, we have already come up with the most comprehensive selection of last-minute and mobile-only rates of any of our competitors.
Was Hipmunk’s August 2013 jump into same-day hotel mobile bookings some kind of step change to Hipmunk’s growth trajectory?
I wouldn’t say step change, but it certainly steepened the pace.
The addition of last-minute and native in-app bookings, plus all the work we’ve done to bring in more and more rates, has meant the conversion rates and the retention rates and all of the unit metrics have just gotten better and better.
Some skeptics may wonder if you’re taking too long to scale. You’ve been at the metasearch game since 2010, and Kayak, the largest US metasearch site, isn’t scared of you yet.
Firstly, they are scared of us. I mean, gimme a break.
There is no other company I’m aware of ever where the CEO of Kayak has personally called it out on stage two years in a row at the PhoCusWright Conference.
That just doesn’t happen unless they’re nervous, right?
Secondly, the reason there’s a group of guys who like to put down the class of startups that have appeared in the past few years, like HotelTonight, and GetGoing, and us, is that they want to make it harder for us to get supplier partnerships, fundraising, and whatever we need to grow our business.
They’re not succeeding at that. But it costs them no money to try.
There have been several critiques of Hipmunk within the industry. [I list a few.]
Talk that Hipmunk isn’t gaining share, or mindshare, or any of that is just ludicrous.
What’s a good way of measuring Hipmunk’s progress so far in meeting its revenue goals?
We’re beating our revenue goals. We’re growing way faster than any of the large travel companies, whether you measure it by booking room growth rate, margin growth, any of the key metrics.
Of course, we’re growing off of a small base. But those competitors weren’t billion-dollar businesses in their Year Fours either.
I think with this funding, they’ll finally realize, Hipmunk’s not going anywhere.
Is the critique that we’re smaller than Expedia, Priceline, etc? If so, it took them 15 years to get to the size they are today. We think we can get there sooner. But it’s not going to happen in four years.
Is Kayak the main competitor of Hipmunk?
The way I think about this is that it’s a spectrum, it’s not binary. Everyone in travel competes, and most cooperate, too.
In theory we compete with some online travel agencies (OTAs) for eyeballs, but we also send them incremental business.
Kayak is more on the spectrum of competitor than cooperator. We don’t work with them directly on anything. But the way things are moving, the nature of “main competitor” is changing.
In some cases we compete with mobile-only services, in others with OTAs, in others with other metasearch sites. It’s all a question of context of what the user wants to do at any moment.
From a business model standpoint, metasearch sites are our closest competitors. But as customers adopt cross-platform engagement, we feel like we’re standing more and more alone, far ahead of the pack.
Is one of the planned uses for your new funding to help protect Hipmunk’s independence?
I never would have thought of it that way. I suppose there’s some truth to that. I mean, we’ve made a conscious decision from the beginning to build a standalone, big, household name business in the travel industry.
There’s a generational shift that’s going on that’s going to anoint one or maybe two winners of this new batch of travel companies, and we want to be one of those. And so, to do that, we’d have to be independent.
We’re not like a public company. Any discussion around independence or not, we’d make a fully informed decision, no guns to our heads.
How did you get to know Oak Investment Partners?
Early on, we realized we’re outsiders to the travel business. We don’t come from the old travel club. We haven’t spent the last one, two, or three decades in the business.
And that has pros and cons. We’ve been upfront about that with ourselves.
The pros are we can bring a fresh way of thinking, such as our user experience and the way we rely on organic marketing instead of $100 million budgets for buying Google AdWords.
On the other hand, there are certain things we know we don’t know, and that if we knew them, we could move faster.
So at every stage we’ve done an assessment: Have we struck the right balance between outsider versus insider, travel expertise versus non-travel expertise?
At every stage, we’ve added one or the other, depending on where we wanted to go.
At this round, we thought it would be really nice to have someone who had worked with a company, and helped them get to the IPO stage and beyond in the travel business.
So Oak was right on the top of our list of companies. They’re one of the few venture firms that have specifically done this in the travel business before.
We got introduced to them through a mutual contact in the hospitality industry. We hit it off immediately in terms of personal chemistry.
We got to know their experience in the travel space with some of our competitors. It became a really easy conversation.
You’re now CEO of a company that has become substantial in size. What’s your ingredient for staying on top of things?
One of the things I always think about is how to stay ahead of the growth curve.
“Pre-flexes” is a term we use, as a kind of opposite to reflexes. The idea being, you have to anticipate what the business is going to need to achieve three or five years from now.
We do a combination of things toward that end. We make sure the people in the company have a range of diverse experience and expertise. We build the best executive team we can.
We build an outside team of support and advisors whose perspectives come from both inside and outside the travel industry, so that we’re not all thinking the same way.
We look ahead at what may be coming next.
What about being more proactive about making recommendations to users? What about making it more seamless to transact multiple times over a lifetime?
Any comment on the rise of new technological capabilities in how travel suppliers may deliver information to metasearch companies and other third-party intermediaries?
Customization and personalization are things we’ve started to do and would be happy to do more of.
We already offer different prices to different users. Some hotels tell us, “This rate is only to be shown to mobile users within 72 hours of stay.” We do that.
Going beyond that, if an airline asked us to only show an offer to members of its frequent flier program or who are in certain countries, and the government says it’s okay to do that, then, sure, why not?