Artificial intelligence can speed travel technology development, but founders still face longstanding challenges when they try to scale travel tech. Investors want evidence that entrepreneurs understand travel’s underlying problems, while startups must win customers and establish product-market fit before competitors catch up.
That tension emerged in discussions reported by PhocusWire about funding and growth during the online Travel Trends Summit on October 29. Amir Amidi, managing director at Plug and Play, said investors often hear similar pitches from people who enjoy traveling but may not understand the industry’s challenges.
Travel Tech Funding Requires Industry Knowledge
Amidi said traditional venture capital firms are often reluctant to back early-stage travel startups unless founders have a proven track record. Without a prior successful exit, he said, founders may struggle to get investor calls returned.
Investors are more inclined to provide capital after companies demonstrate product-market fit and strong growth in users, revenue or partnerships. Amidi said investors have heard repeated claims about opportunities from founders who do not understand the underlying challenges. That challenge starts before meetings, as travel technology buyers research vendors well before a sales call.
Roger Sharp, chairman of technology investment bank North Ridge Partners, pointed to a shortage of venture capital dedicated to travel and hospitality technology. PhocusWire’s account of third-quarter startup funding found fewer funding rounds, with most investments totaling less than $10 million.
Sharp said even a modest seed fund for new travel technology is sorely needed. The figures also reflect a broader funding squeeze for the sector: travel tech funding has fallen compared with the prior year.
AI Speeds Development, but Does Not Change the Basics
Amidi said Plug and Play’s investment priorities have not fundamentally changed with AI. The firm continues to seek technologies that address industry inefficiencies and improve the travel experience, rather than focusing only on AI-native startups.
Sharp, whose investment activity is concentrated in Asia Pacific, said B2B opportunities dominated the deals he encountered this year, while B2C was relatively scarce. He described a chaotic environment as AI agents enter travel and established players pursue acquisitions, adding that no one knows what comes next.
Sharp said uncertainty makes B2C investment difficult without substantial scale and financial backing. Business-to-business products can address more tangible problems with potentially less risk. Amidi agreed that B2B is safer, but sees greater potential in B2C because the traveler experience remains inefficient.
He expects much of that consumer-facing innovation to come from AI platforms that offer travel alongside other services, rather than travel-specific companies. Other industry coverage has described how AI is reshaping travel as companies adjust to new tools.
Startups Have Less Time to Establish an Edge
Betsy Mule, an investor at F Prime Capital, said the fundamentals of scaling remain the same: companies need product-market fit, customers and expanding offerings. AI has accelerated each part of that process, she said, while incumbents have access to the same technology.
Startups can move faster because they are not burdened by legacy technology, Mule said. But they also have less time to establish a competitive position before rivals catch up. Matt Zito, managing partner at mergers and acquisitions brokerage TravelExits, predicted that most AI scaling over the next year or two would come from incumbent and legacy companies.
Zito said established businesses already have customer bases and can apply AI to them. Mule said many companies that initially felt threatened by AI-native startups have adapted by expanding their offerings. Shane O’Flaherty, global director of travel and hospitality at Microsoft, described a possible human-led, agent-operated workforce, where employees oversee AI agents that perform tasks and potentially manage other agents.
Companies may need to rethink organizational charts and staffing decisions, O’Flaherty said. Zito closed with advice to follow customers’ needs. That leaves travel founders facing a familiar test: solve a real problem, win customers and grow before better-resourced competitors adopt similar tools.
