2016 IPO Prospects: Skyscanner Bootstraps First from Scotland, Raises Money Later from Sequoia

According to the AAA, nearly 180 million people visited online travel sites per month in 2015, recording a 27% growth over the year. Researchers believe that most of the online growth in the coming years will be driven from Italy, Spain, Germany, Mexico, China, the United Arab Emirates, Brazil, Norway, and India as the markets of Europe and the US have matured.

Skyscanner’s Offerings

Edinburgh, Scotland-based Skyscanner has already made waves in the international markets. Skyscanner was founded by UK-based IT professionals and Manchester University batchmates Gareth Williams, Bonamy Grimes, and Barry Smith. It was in 2001 when Gareth was searching for best flights to visit his brother in France that he realized how difficult it was in those days to search multiple airline and travel agent websites. He came up with the idea of creating a single website that could collect, collate, and compare prices for every commercial flight in the world. It was from this simple excel spreadsheet driven solution that Skyscanner came to be. He got together with his co-founders and built the first prototype of Skyscanner.

Within two years, the project grew by word of mouth and had attracted over thousands of people who began to use the prototype Skyscanner site for their travel needs. In 2003, Skyscanner opened an office in Edinburgh, and its site was officially released.

Skyscanner may have begun operations to help consumers find cheap flights, but it soon graduated to other travel offerings including hotels, car rentals, airport transfers and even camper van offerings. In 2011, it had established international presence by opening a Singapore office to target the Asia-Pacific market. By 2014, the company had become the largest travel search engine by traffic in Europe and the world’s second largest travel search engine, second only to Kayak. Unlike Kayak that focuses on the US market, Skyscanner has a much wider international presence. It has nearly 40 local websites offered in more than 30 different languages including Thai, Vietnamese, Japanese, and Russian.

In 2015, Skyscanner expanded beyond travel search to airline booking and tied up with British Airways that allows tickets to be booked directly through Skyscanner’s app.

Skyscanner’s Financials

Skyscanner earns revenues by charging a referral fee from the airline agent for the booking. It does not charge any booking fee from the consumer. The company is privately held and was bootstrapped for a while before seeking venture funding. It has been profitable since 2009. Skyscanner’s revenues have grown at a strong pace. For fiscal 2013, its revenues grew 96% over the year to $108.6 million as traffic doubled to an average of 25 million unique visitors per month. Revenues for fiscal 2014 came in at $135 million, recording a 42% growth over the year and it ended fiscal 2015 with revenues of $183 million. Gross bookings for the company grew 49% last year from $7.51 billion to $11.2 billion. EBITDA grew from $32.4 million in 2014 to $34 million.

After being bootstrapped for four years post launch, Skyscanner finally took in venture funding in 2007. It has raised $197 million so far with investments from Artemis, Baillie Gifford, Khazanah Nasional Berhad, Scottish Equity Partners, Sequoia Capital, Vitruvian Partners, and Yahoo! Japan. Its last round of funding was held in January this year when it raised $192 million from investors including Baillie Gifford, Khazanah Nasional Berhad, the Malaysian government’s strategic investment fund, and Vitruvian Partners. The round valued Skyscanner at $1.6 billion. In October 2013, Sequoia Capital acquired an undisclosed stake at a valuation of $800 million.

Market reports suggest that prior to the funding, Priceline was evaluating Skyscanner as a potential acquisition target. The online travel industry has seen a lot of consolidation in the recent years. Back in 2012, Priceline acquired Kayak for $2.1 billion. At that time, Kayak was generating revenues of $292.7 million. Within the last two years, Expedia also made big acquisitions by adding Travelocity, Orbitz Worldwide, and HomeAway to its portfolio. Skyscanner has managed to stay independent so far. It hasn’t commented, but analysts believe that the company may be slowly preparing to go public.

This segment is a part in the series : 2016 IPO Prospects