GetYourGuide closes $133M convertible note as travel startups continue to weather the Covid-19 storm

On the heels of Germany announcing another lockdown to try to contain the rapid rise in Covid-19 cases in the country, one of the hottest startups in its capital city is announcing the closing of a large convertible note to help it keep moving forward.

GetYourGuide, which in brighter times runs a thriving and viral business curating, selling tickets for, and running walks and other exploration experiences for people touring different parts of the world - viral because it's been taken up by a critical mass people who love to share pictures of their experiences on social media - has now closed funding, in the form of a convertible note, of 114 million ($133 million).

The funding is being led by Searchlight Capital, with SoftBank Vision Fund, KKR, Battery Ventures, Highland Europe, Spark Capital, Lakestar, Heartcore Capital, NGP Capital, and the founding team all also investing.

The company tells me that the convertible note will convert into equity when it next raises a round, with the investors getting a stake in the company at that point based on its valuation in that round.

That equity round is not anticipated to be for another 12-18 months, the company tells me, which could be why some might think of a convertible note as a loan (and strictly speaking they are called Convertible Loan Notes).

For some context, the company was last valued at over $1 billion after it raised a Series E of $484 million in 2019.

The funding comes not just at a tumultuous time for Germany amidst the global health pandemic, but the world in general, and also the tourism and travel industry in particular, which has been hit especially hard by the shut down of many flights and the ability to travel places, the closures of many facilities, as well as a general reluctance from consumers to congregate with lots of people who are not already in their bubble."

Johannes Reck, the co-founder and CEO of GetYourGuide, described the situation back in March as a nuclear winter" to us.

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At least this summer, business slightly started to recover, with GetYourGuide seeing a bounce back in its home country with ticket sales up 60% in Germany over the warmer months, with people also looking at making far-far-foward bookings in general, too. However, the startup has in recent weeks laid off around 100 employees as part of its own cost-cutting and right-sizing for the market that exists today, and likely for the near future.

All that said, GetYourGuide tells me that it's now seen ticket sales of 45 million in aggregate on its platform, which is only up 5 million on its figures from January this year - a major slowdown in growth that speaks to the struggles companies like it are facing, and very likely far from the projections it had originally made for its expansion.

The plan is still to keep on keeping on, though, with an IPO remaining in its sights for the longer term.

Reck said today that the fundraising is one of the easier rounds it's closed in its life as a startup - a mark of how investors, who are still flush with lots of money to invest, will continue to use some of it to help shore up the most promising but most hard-hit of its portfolio companies through the current crisis.

Raising this new capital was straightforward, because our investor base shares the belief that our mission matters," he told TechCrunch. The pandemic has been the worst crisis in the history of tourism, but it's also proven that leisure travel is a fundamental human need. Throughout the crisis, people have never stopped dreaming of traveling again, and when they do, experiences will be what they crave the most."

In a separate statement (in a press release announcing the funding), he continued that optimistic position:

After the pandemic, people will travel again, and experiencing the sights and culture of the world's iconic destinations will be what they crave the most," he said.

The belief that the industry - not just GetYourGuide but the rest of it, too - is credible enough for new backers also to come in, it seems. Eric Zinterhofer at Searchlight Capital is a first-time investor in the company with this funding.

We have a natural affinity with the talented, entrepreneurial team at GetYourGuide, given Searchlight's own enterprising culture and our success in partnering with founder-led businesses," he said. While 2020 has undoubtedly been a challenging year for the travel sector, we believe GetYourGuide has the right strategy, capabilities and investor support in place to rebound strongly once the pandemic is under control. We are excited to begin our work together."