This hasn’t been an easy year for the travel startup world. Money is no longer cheap, belts have tightened and the rules of the game have changed.

Riding the post-COVID-19 momentum that saw a robust resurgence in travel, dozens of startups emerged to tackle everything from social trip planning and video-based discovery to modernizing the corporate travel tech stack and enabling more climate-friendly travel options.

Many of these startups bootstrapped their way to early product launch or raised some angel capital along the way. Now hitting their stride, they’re ready to graduate to the next level.

But what do you do when the ladder to that next level gets pulled up before you can grab a rung?

Is venture capital the right model?

Venture capital is a very specific asset class designed for a very specific purpose: generating exceptionally high returns for the limited partners who provide the capital to the VC firms to invest on their behalf. Limited partners require these high returns from venture to complement the rest of their portfolio, which is spread across lower risk investments. Thus, VCs are under pressure to find the moonshots that have the potential to drive these outsized returns.

You have to be in exceptional shape for this to be a viable path. The total addressable market (TAM) you aim for has to be enormous in order to capture a chunk of the market that is still meaningfully large enough for the VC math to pencil.

Travel can be tricky when it comes to TAM. The consumer travel market, while massive in aggregate, is exceptionally fragmented when it comes to go-to-market strategy and suffers from a low frequency transaction pattern – most travelers don’t do it often enough to drive a compelling customer lifetime value to customer acquisition cost (LTV/CAC) ratio. That makes consumer travel startups difficult to pencil for VC investment.

B2B travel is a somewhat better fit given higher enterprise transaction values and a more efficient go-to-market motion, but getting to scale can take longer than many VCs have patience for. Enterprise sales cycles are long, competition is fierce, and barriers to entry are low.

Many startups misunderstand these fundamental points and burn a lot of time chasing VC investment when their business model doesn’t fit these criteria. Others pursue venture only to find a misalignment in the intensity and focus that is expected of them or that they are able to commit to.

Venture capital can be an incredible path to success for startups that match the scale and intensity required, but it’s not the only way.

Enter the angels

Angels can be a secret weapon for startup teams. Although (like real angels) they can be hard to spot, often hiding in plain sight, there are organizations like the Angel Capital Association and Angel List that aggregate investing groups and syndicates by region, industry focus and thesis.

If you are selling into or previously worked for a large tech company, it’s also worth looking for angel investing groups organized by alumni of those companies (e.g., AirAngels, for alumni of Airbnb). Similarly, many universities have groups of alumni who angel invest together.

Customer funding and corporate venture

Another path that can work well for travel startups is customer funding, both from individual consumers and from corporate partners.

PhocusWire senior reporter Linda Fox recently wrote about crowdfunding for travel startups, and several hospitality startups have taken that path for hotel projects and membership- or community-oriented businesses.

For B2B startups, customers can be a viable funding option. Preferred equity, a seat on an advisory board or discounted commercial terms can be attractive benefits in exchange for investment. This path also better aligns objectives – your customer as an investor is doubly incented to see you succeed.

Many large enterprises also operate their own strategic venture funds to help them hedge against particular challenges they face with a given geographic region, customer segment or use case that they can’t serve effectively themselves. They use corporate venture as a vehicle to place bets on startups they believe could get them to scale in those areas faster than they could on their own.

Bootstrapping: Sexier than you think!

Although it can take longer to scale, with bootstrapping you control your own destiny, build at your own pace and retain 100% of the equity from your hard work. Self-funding from savings, debt or business profits can combine into a reasonable foundation to build from.

Bootstrapping doesn’t preclude you from raising venture capital later, either, so it can be the best of both worlds. Once you’ve built a viable, successful business, you’re in a much stronger position to negotiate terms with a VC. Many successful startups were bootstrapped in the early days before taking outside investment (Facebook, Apple, Amazon), or all the way through exit (Atlassian, Mailchimp).

Choose your own adventure

The current fundraising climate will improve, as investors who have been sitting on the sidelines with dry powder come back from summer break and get ready to sharpen their pencils.

If your startup fits the profile for VC investment, make sure you have a tight business model and a clear sight line on how you can achieve the financial returns VCs expect.

And don’t forget to pursue the other fundraising options noted above – they are not mutually exclusive! Taking a multi-pronged approach will help diversify your financial foundation, expand your network and likely surface some new ideas for both commercial and investment opportunities.

Lastly, keep in mind that some of the biggest companies we know were founded during times of economic upheaval, and plenty of successful companies generate amazing financial results without taking a drop of VC funding.

There are multiple routes to fundraising success, so make sure to explore them all.