Bootstrapping Into Brazil’s Travel Metasearch Market With Voopter

Editor’s note: Julie Ruvolo is a freelance writer and editor of RedLightR.io and RioChromatic.com.

Global Founders Capital has made its first Brazilian investment in Voopter, the newest player in Brazil’s travel metasearch market joining Mundi. Skyscanner, Trivago and Kayak Brazil also operate in the country, though only Mundi and Voopter are Brazilian startups. The Series A is Voopter’s first capital raise, after 100 percent bootstrapping for the first three years as a part-time project.

Voopter co-founders Pettersom Paiva and Tales Tommasini met working in advertising in Porto Alegre in the south of Brazil. Tommasini moved to Spain in 2003 and invited Paiva, who started managing performance clients for advertising giant Media Contacts in 2005.

“Seeing how we were in Spain, the principal digital industry is travel. So I had a lot of travel clients, like Expedia, handling their digital marketing. We tracked their conversions and had to optimize their trafficking against performance. So I got to know the metasearch engines, which were already starting to garner attention in 2005, like Kayak and SkyScanner.”

After a stint managing publisher relations for TradeDoubler, Europe’s biggest performance marketing network, Paiva decided he had enough subject-matter expertise, paired with Tommasini’s interface and programming skills, to launch their own metasearch engine. As a hobby. While they kept their day jobs.

After a couple of years they decided it was time to go full time and move to Brazil. “The markets we were in before with Voopter, Spain and Portugal are much more stable and advanced,” Paiva says, “but there are a lot more competitors, and the markets are already shrinking because of the economic crisis. So if you’re the eighth player in a saturated market, it’s a really risky proposition. We got to Brazil and there was only one competitor in the whole market segment — Mundi.”

And things are not looking so great for Mundi after its principal investor, Globo, sold off its stake in the company in January and started laying off staff.

Voopter is the lone player in Brazil’s travel market that maintains a 100 percent neutral position as a flight aggregator. Travel agencies, which dominate the market, as well as Mundi, prioritize listings in accordance with who they have the best partner deal with, versus who is offering the best price to the end consumer. “It’s one approach,” says Paiva.

Voopter displays search results from airlines directly, as well as travel agencies, which in Brazil often offer a cheaper ticket price, and they make money every time a lead from Voopter converts to a sale. They’ve been turning a profit since they launched in Brazil last year, and maintain 25 percent profit margins, although Paiva says they might reduce them to make way for customer-acquisition campaigns. The snazziest feature? Truly multi-date searches that let you pick up to four non-sequential dates for each leg of the trip.

And after bootstrapping for their first three years of operation, Paiva and Tommasini decided it was time to raise some capital.

Voopter is the latest Brazilian startup to raise capital abroad. “Brazilian investors offered a lot less money,” Paiva says. “Here in Brazil, what you find more than anything is angels, and we were already past that stage. The sensation I got was that the investment firms in Brazil are a lot more conservative, and Global Founders is much more aggressive. You’re going for No. 1 or nothing. And our mission in Brazil is to be the No. 1 travel metasearch engine, and now we have the resources.”

Global Founders Capital is a new investment arm for Rocket Internet, the world’s largest digital incubator, which has funded Brazilian startups like Dafiti, a fashion ecommerce site that closed 2012 with $200mm in revenue.

GFC invests aggressively in emerging markets, and Brazil’s travel market is certainly emergent in some respects. Brazil is late to the low-cost airfare party that has been going strong in the U.S., Europe and Asia, which the Wall Street Journal chalks up to “government regulation, poor airport infrastructure and the dominance of flag carriers.” But with “rising wages, government support, improving infrastructure and the failure or consolidation of some of the region’s biggest full-service carriers,” Brazilians are starting to spend more time flying the friendly skies.

Paiva says the market is fertile for low-cost airlines – and flight comparison sites like Voopter. “The first reason is that demand for air travel was repressed by really high ticket prices. Air travel used to be a privilege reserved only for the highest economic class. It’s still expensive, but it’s a lot cheaper than they used to be. And that has to do with the introduction of new airlines in Brazil like Azul and Avianca.”

Since JetBlue founder David Neeleman’s discount airline Azul (“Blue”) landed in Brazil in 2009, Brazilians taking flight have jumped 40 percent to 94.6 million people. That’s still fewer people than take the bus, but bus travel is down 3 percent in the same period to 126 million people. In 2011, about 5 percent of the country (10.7 million Brazilians) flew for the very first time. And more Brazilians are going abroad than ever. Brazilians are the second-largest source of foreign tourists in New York alone, and the fastest-growing.

Paiva also cites a piece of Open Skies legislation expected to be approved this year, which would allow foreign airlines to operate domestic routes in Brazil, possibly in time for 3.6 million World Cup travelers this summer (four out of five will be Brazilians).

Which will mean more competition and lower prices. “Normally they’re really protectionist. Brazil is an extremely protectionist market in various sectors, including air,” Paiva explains. “But the Brazilian government knows that the air solution is more rapid than building more roads or train tracks, which is expensive. And you’re looking at decades, not years. So for all the problems Brazil has with travel infrastructure, the fastest and most efficient solution in the short term is more flights.”

Brazil’s flying class has been growing by about 10 percent a year for the last decade. Boeing predicts a 400 percent increase in air travel in Latin America over the next two decades. And in Brazil, they’re starting to buy online. Only 20 percent of tourism bookings in Brazil are made online — people actually visit physical travel agencies; online travel is a $6 billion industry in Brazil, but it’s expected to double by the Olympics.

“In the last five years, the number of people with Internet access doubled in Brazil. In the same timeframe, the number of airline passengers grew at the same proportion,” says Paiva. “Coincidence? Absolutely not. Among the diverse factors contributing to the rapid expansion of the travel industry in Brazil, more specifically the airline sector, the Internet has been without a doubt the most important.”

Brazil’s online travel agency market is booming, but it’s dominated by travel agencies. Rio de Janeiro-based HotelUrbano, which raised a $20 million Series C last summer from Insight Venture Partners, and another $50 million from Tiger Capital and Insight, is expected to top $250 million in revenue this year – and they rank eighth on the list of Brazil’s comparison travel sites, capturing 3.5 percent of web traffic. Mundi ranks fourth with 9 percent of the web traffic share of voice.