TripActions got off the ground by gamifying corporate travel and rewarding customers who chose cheaper hotel rooms with cash for personal travel or Amazon gift cards. Now investors are rewarding the startup’s fast-paced growth with money of their own.
On Thursday, the company announced a new $250 million funding round led by venture firm Andreessen Horowitz’s new growth fund alongside Zeev Ventures, Lightspeed Venture Partners and Group 11. TripAction’s valuation also quadrupled since its most recent $154 million funding round in November 2018 that valued it at $1 billion. The corporate travel startup has now raised a total of $480 million since its launch in 2015.
It’s a massive sum, but TripActions CEO and cofounder Ariel Cohen says he didn’t seek more money because the company was short on cash. Instead, he was asking himself one question: “Can I accelerate our growth?”
As if quadrupling its valuation wasn’t enough, now four years since its launch, TripActions now manages over $1.1 billion in trip budgets a year (actual spend, and subsequent revenues, are lower, but the company won’t disclose it). Companies like Lyft, WeWork and Sara Lee Frozen Bakery are among TripActions’ 2,000 customers, and it hass partnered with other expense management companies, like Divvy, to power travel booking inside their platforms.
Offering incentives, like Amazon credit to stay in a cheaper hotel an extra few blocks away, started as a way to draw travelers to TripAction’s platform and save companies money along the way. But extra cash alone wouldn’t keep employees coming back if it was a bad experience. Instead, the company sees its superpower as using machine learning to provide a faster and better booking experience—it claims an average of six minutes from start to finish—and offering around the clock customer support for the times when things go wrong.
TripActions works by sourcing flights and hotels largely from global distribution systems and third-party partners like Booking, Priceline and Expedia. It then narrows down the options using machine learning based on what it believes the employee might like based on information like their job title or loyalty programs on file, and shows employees what would work within their company’s travel policies.
Often, the rates are even cheaper than the corporate pre-negotiated deals because TripActions works with larger third parties that have cut their own volume discounts, says its cofounder and Chief Technology Officer Ilan Twig. “Even when you’re WeWork, Priceline is much bigger,” he says. He also sees it as a win-win for other travel sites because they get the money from the bookings, but without having to deal with fraud concerns or the customer support.
TripAction’s main revenue source comes from a $25 trip fee it charges companies every time an employee books a trip. It also takes a commission from some of its partners for hotels or flights booked. The company declined to disclose its revenue numbers and says it is not profitable yet, but Cohen said its unit economics are positive, showing it can do customer support at scale. “You can only continue to have good service if the unit economics work,” Cohen says.
But like any journey, TripActions also ran into a bit of turbulence at the start of 2019. Delta blocked TripActions from booking flights over a disagreement on how TripActions had been displaying Delta’s fare classes. TripActions claims it had already been working on a better way to display flights so that customers could understand the difference between business class on Delta and Polaris on United, but the disagreement stalled Delta sales for over a month. As industry outsiders (Cohen and Twig had previously started and sold business communications startup streamOnce), they admit they didn’t understand the problem at first, but they’ve become pioneers of the solution: a new technology standard called Next Generation Storefront, a way to share and display fare information that was backed by Delta, United and American Airlines.
The system not only makes it easy to see all of a flights amenities up front, like whether it’ll have Wi-Fi, but it also ranks fare classes on a star system so it’s easy to tell that a main cabin seat on Delta is somewhat equivalent to an economy seat on United.
In February, Delta returned to TripActions, and the Atlanta-based airline now praises TripActions for being an early adopter of the system. Because of the change though, TripActions stopped offering rewards for taking cheaper flights, the startup says. Now, it only rewards employees for hotel bookings.
In June, the company announced that it partnered with United for direct access to United’s inventory, which allows TripActions to skip using a third party and book directly. Now on a clearer flight path, TripActions is hoping the $250 million in new funding will just add fuel and allow the company to move faster. “We want to remove the stress around booking your trip and getting service on the go,” Cohen says.