As the COVID-19 pandemic devastates the global travel industry, Montreal-based airline-ticket broker Hopper has secured another US$70 million in funding, The Logic has learned.
The round closed in mid-April based on a flat valuation, according to sources who spoke to The Logic on the condition they not be named due to the sensitivity of the negotiations. San Francisco-based venture capital firm Westcap led the round, with investors including Montreal-based Inovia as well as the Business Development Bank of Canada (BDC), the Ontario Municipal Employees Retirement System (OMERS), Investissement Québec and the Caisse de dépôt et placement du Québec.
The US$70-million round Hopper closed in mid-April is meant to get the company through the COVID-19 crisis, which has all but wiped out the travel industry, so it can “leapfrog” other online travel agencies like Expedia and become a category leader when the economy starts recovering, a source told The Logic. The company secured the funding even as it made the decision to lay off hundreds of workers.
The company secured the funding even as it made the decision to lay off hundreds of workers, cuts that were announced April 6. Those layoffs affected over a third of its workforce, including over 70 employees in Quebec, according to The Logic’s sources.
Founded in 2007, Hopper uses artificial intelligence to gauge when it is cheapest to purchase airline tickets, making recommendations to users through its app, which has been downloaded over 40 million times. Headquartered in Montreal’s Mile Ex neighbourhood, Hopper has offices in New York; Cambridge, Mass.; and Sofia, Bulgaria.
The company closed a Series D round in 2018, raising US$100 million from OMERS Ventures, the Caisse, Investissement Québec, Accomplice, Brightspark Ventures and the BDC Capital IT Venture Fund. At the time, the company said it would use the funding for global expansion and continued development of its AI.
Yet the COVID-19 pandemic has wreaked havoc on the airline industry. Hampered by travel restrictions and a likely recession, airline passenger revenue is set to decline by US$314 billion in 2020, according to International Air Transport Association estimates. On Wednesday, The Logic reported that Montreal-based travel technology company FlightHub had been granted creditor protection amid the fallout from the pandemic.
The new funding is meant to get the company through the crisis so as to “leapfrog” other online travel agencies like Expedia and become a category leader when the economy starts recovering, a source told The Logic.
The company didn’t announce the most recent funding round, and declined to discuss its particulars.
“[Hopper CEO Frederic Lalonde] feels like we are going to have a really interesting growth story to share and he’d love to work with you once the travel industry has a bit more time to rebound. However, given the current state of everything, he doesn’t feel like it’s the appropriate time to be discussing growth and financials,” spokesperson Brianna Schneider said.
None of Westcap, Inovia, BDC, OMERS Ventures, Investissement Québec or the Caisse would comment for this story.
The BDC funding, which came through in March, was from BDC Capital’s Co-Investments, a part of the Crown corporation’s venture capital arm that “aims to support late stage, high growth and knowledge-based companies through direct investments or special purpose vehicles as part of later stage funding rounds led by BDC-backed fund managers.” Inovia was BDC’s co-investor, sources said.
“There was a lot of concern about Hopper surviving. That’s why they went with co-invest, because they could go much faster,” said a source with knowledge of the deal.
Hopper received the Caisse funding in early April, shortly before the layoffs were announced, according to a source with direct knowledge of the deal.
Because of the volume of cuts, some employees were laid off in batches of up to 10, according to a source.
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The company also applied for and received funds from the Paycheck Protection Program (PPP), according to correspondence seen by The Logic. The U.S. government loan program is “designed to provide a direct incentive for small businesses to keep their workers on the payroll.”
One source close to the company said Hopper would have applied for PPP funding as a matter of course, but would return any money it received from the U.S. government after securing the US$70 million from investors.