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In the Dutch tech startup scene, it’s no secret that TravelBird – the daily travel discounter turned hotshot scale-up – is aiming for the moon. Even though the founders have made no secret of their desire to go public, no signs where there of an imminent offering. Until this week, when Main Capital and the Keizersgracht-located travel empire released a read-between-the-lines press bombardement about a multi-million euro mezzanine loan.
For those not familiair with the term mezzanine loan, let’s break it down. It’s not a typical bank loan, as that would be too risky for any bank to do debt financing in a make or break scale-up. But another equity round would put even more eaters to the already well set cap table. Travelbird last year raised €16,5M from Global Founders Capital (Rocket Internet, basically), on top of a previous round of €15,5M for a total 25,2% stake, amongst the founders and earlier investors. The company states it “invested” €32M in 2014 and 2015, in total.
Protects against dilution
Main Capital’s owner Lars van ‘t Hoenderdaal explains: “A mezzanine loan protects current shareholders against the effects of dilution. And [at] the same time it has an identical positive effect on the balance sheet, [with regards to improving solvency]. For a rapid growing company (a scale-up) attracting bank financing [is] almost impossible due to the fact that such a company can’t provide any kind of security (collateral).”
Round above €5M figure
What can we conclude from all of this? The press release states Main Capital’s mezzanine fund typically does deals from €1up until €5M, so let’s estimate this round is (well) above that figure. “The loan amount is not disclosed, but your conclusion is right”, Van ‘t Hoenderdaal acknowledges. As van ‘t Hoenderdaal states, raising Series C was not in question becauses “it takes too much time”. “I personally believe that TravelBird has a perfect profile for an IPO”, van ‘t Hoenderdaal writes to us in a statement. “If this will occur depends on lots of circumstances, not in the least the appetite of management/founding shareholders.”
As they already expressed their desire to go public, publicly, we can only draw one mayor conclusion: yes the IPO was or is the ultimate plan, but the (travel) bird needs a little bit more runway in order to get there. Or, maybe a lot. Firing 100 redundant staffers may have helped, now the company needs (wants) to hit breakeven. With an ongoing need for cold hard cash, this can only mean a Travelbird IPO really is the only (exit) possibility left.
Preparing for bankruptcy
But could they go public, really? Or are they just trying to save themselves for a really loud and obnoxious bankruptcy? Dutch business blog 925.nl’s financial writer Arno Wellens decyphered that TravelBird has a hefty negative operational margin, on top of its fierce annual losses. Quotenet reports that the 85% yearly growth Symen Jansma, CEO and co-founder, announced is way below the previously forecasted ‘doubling’ of revenue growth. Let alone the “costly” lost courtcase TravelBird is in with its landlord, over Uber as a new tenant.
Even their own accountant expressed “significant doubt” in the financial continuity of the company. Although a mezzanine loan is not as bad as 925.nl does make it sound, this may not end well. How can TravelBird build a sustainable business with those heavily yearly losses and not even profitable margins anywhere in sight? The whole businessmodel is based on 6 daily (cheap as hell) travel deals. That’s what the consumer signed up for. Not much room for a pivot to boost margins, I’d say. Currently, TravelBird is betting all their chips on one color, with hardly any space to maneuver.