Skyscanner’s 15 Year Journey to a $1.7BN Acquisition
The largest acquisition to date of a travel technology company in the U.K was announced in November 2016. Scottish travel aggregator Skyscanner was acquired by Chinese travel services provider Ctrip for $1.7 Billion.
This was 15 years after the company was founded. We explored Skyscanner’s public filings to reveal its pathway to success.
Skyscanner was incorporated in 2001, under the name Solutions 4 Dotnet, by 3 co-founders – Gareth Williams (32 years old at the time) Barry Smith (27) and Bonamy Grimes (30). For the first five years, the company’s operations were small, with cash on its annual balance sheets never exceeding £90,000.
Skyscanner in 2008 had £4 million ($4.9m) cash in the bank, and started to accelerate growth, and also productivity. As Revenue grew from £2.1 million ($2.6m) in 2008 to £8.8 million ($10.7m) in 2010, Revenue per Employee also increased, from £84K ($100K) in 2008 to £142K ($173K) in 2010.
6 years after founding, Skyscanner reported its first revenue figure: £1.4 million ($1.7 million) in 2007. And from then, revenue grew consistently at an impressive rate each year. Skyscanner’s Compound Average Revenue Growth Rate from 2007-15 was 74%.
But in 2014 and 2015, Skyscanner’s key financials seemed to encounter headwinds. Revenue growth, which had been at 75%+ in 2012-13, slowed to 41% in 2014 and 29% in 2015. EBITDA margins, around 35% in 2012-13, dropped to 18% and 15% in 2014-15.
The first outside shareholder in Skyscanner was Nitro Ventures International, receiving a 5.3% stake in 2006. The following year, the Company raised £1.5 million ($1.8m) from Scottish Equity Partners, at a valuation of approximately £5.6 million ($6.8m), or 4X revenue. Six months later, in April 2008, SEP invested a further £1 million ($1.2m) at the same valuation, while a month later, European Founders Fund invested £2 million ($2.4m), valuing the business at approximately £18.4 million ($22.4m), or 8.8X revenue.
By 2012, Barclays Wealth Trustees held 11.4%, while European Founders Fund no longer appeared in the capitalization table, suggesting Barclays may have bought out European Founders Fund.
In 2012, Skyscanner received 12.9 million average monthly unique visitors and generated £25 million ($30m) in Revenue. The company now had 158 employees across 4 offices in Edinburgh, Glasgow, Beijing and Singapore.
In 2013, Sequoia Capital acquired approximately 10% of the company from existing shareholders. Revenue grew over 100% to £66 million ($80m), 2 new offices were opened in Miami, and in Barcelona, where Skyscanner had acquired Spanish hotel metasearch engine Fogg.
The business was now valued at £329 million ($401m), 5X revenue.
Approximately 60 non-founder employees held 262,000 shares, approximately 3% of the company, valued at £9.4 million ($11.5m).
In January 2016, Skyscanner raised its final round of capital, £128 million ($156m) from Artemis, Baillie Gifford, Khazanah, Vitruvian Partners and Yahoo! JAPAN. The valuation stood at just over £1 Billion ($1.2B).
In 2015, approximately 500 non-founder employees held 8% of the company, approximately 700,000 shares in total. The median employee shareholding was 234 shares. The following table shows the distribution of shares among employees at the end of 2015. Each 10,000 shares was worth £1 million ($1.2m) in value, so 12 non-founder employees held over £1 million in value. 66 employees held between £100K ($120K) and £500K ($600K).
Founders of Fogg
The two largest non-founder employee shareholders of Skyscanner, with 92,000 shares and 59,000 shares respectively, were Carlos Gonzalez-Cadenas and Sergio Berna, co-founders of hotels metasearch engine Fogg, which Skyscanner acquired in 2013 for approximately £2 million in cash. Fogg had raised Eur3.5 million in funding, so selling for £2 million was not really a success. However, at Skyscanner, Carlos rose to Chief Product Officer, while Sergio became Senior Architect. Their Skyscanner shares were worth £12 million ($15m) and £8 million ($10m) respectively at the exit, proving how lucrative a bolt-on acquisition can later become.
In November 2016, Chinese online travel leader CTrip announced that it would acquire Skyscanner for £1.4 billion ($1.7B), a 33% premium to the valuation of the last funding round in January 2016.
Scottish Equity Partners held 37%, valued at £523 million ($638m). Sequoia held 10%, implying £140 million ($170m) value at exit.
CEO Gareth Williams’ stake was valued at nearly £200 million ($244m). Cofounders Bonamy Grimes and Barry Smith, held 4% each, valued over £50 ($61m) million each.
And some 500 non-founder employee shareholders, with approximately 700,000 shares, held approximately £95 million ($116m) in total value. The median value per employee shareholder at exit was £32,000 ($39K).
It took Skyscanner 15 years to reach a $1Bn valuation and its successful exit. Along the way it executed with consistency and steady impressive growth.
For a master datasheet of key metrics for Skyscanner over the years, click here.
Sources & Notes:
Companies House Filings
All currency conversions from GBP to USD are at the conversion rate of 1.22 as at Jan 3, 2017.
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