One of Canada’s most highly funded technology companies, online travel agency Hopper, has raised another US$96-million from partner and backer Capital One Financial Corp. as the Montreal company benefits from a rebound in travel.
The equity deal values Hopper at an undisclosed amount – but certainly greater than US$5-billion, its valuation when Brookfield Asset Management bought a stake early this year, a Hopper spokesperson said. That makes it one of Canada’s most highly valued private tech companies and puts it in stark contrast with the rest of the sector, as companies have had their valuations slashed this year.
But then Hopper also serves a resurgent travel sector. It has become the fastest-growing travel app in the United States, with almost 80 million downloads, and said its share of third-party air travel in the U.S. has grown to 11.2 per cent, making it the continent’s third-largest online travel agency. It also sells hotel stays, car rentals and short-term home rentals.
What sets Hopper apart from rivals is that it uses machine learning to leverage vast data sets obtained from travel booking systems to offer high-margin ancillary financial services products to travellers. They include the ability to freeze a flight price for days, buy the right to cancel for a full refund for any reason, rebook a missed connection at no extra charge or change a ticket to a different day without forfeiting the full ticket value.
Hopper has parlayed that data-focused approach into a fertile side business by partnering with consumer-facing businesses such as Capital One and Marriott International Inc. to power their travel booking and reward services. Its B2B business now accounts for 40 per cent of Hopper’s business.
The company also said its push to woo millennials globally has paid off, with international users accounting for more than 20 per cent of sales, up from less than 3 per cent in 2021. Hopper said it should sell US$4.5-billion in travel and financial products this year, up 300 per cent to 400 per cent from 2021 levels. Revenue should exceed US$350-million, up 25-fold from 2019.
Capital One’s managing vice-president of U.S. card, Matt Knise, said his company had invested in its technology platform and, “with Hopper, we have found a partner who can not only match that pace, but help us continue to challenge the status quo and take a differentiated approach to building a world class travel brand.”
Asked how Hopper could increase its valuation in a tough year for tech, president Dakota Smith said: “If you are growing fast enough, innovating quickly enough and launching new business lines that have hundreds of millions of dollars of revenue, you can offset that.”
Early in the pandemic, Hopper slashed staff to brace for what chief executive Fred Lalonde called an “extinction-level event.” But that year it secured US$70-million in capital led by former Airbnb chief financial officer Laurence Tosi’s WestCap Group and Montreal’s Inovia Capital.
Hopper then raised US$170-million last year led by Capital One, the McLean, Va.-based financial giant, and another US$175-million later in 2021. Other investors include OMERS Ventures, Caisse de dépôt et placement du Québec, Brightspark Ventures, Goldman Sachs Group, Citi Ventures, GPI Capital and Glade Brook Capital. With the latest funding, it has raised about $900-million since its founding in 2007.
OMERS Ventures managing partner Damien Steel, a Hopper director, said the funding – which all goes to Hopper and not to buy out investors – “is further validation of a great partnership Hopper has been building with Capital One. It’s been a priority for Hopper” to develop its B2B business, and the deal “is an indication that it’s working.”