Caisse invests $40M on Montreal-made airfare analysis app
The Caisse de depot et placement du Québec is making a $40-million bet on Hopper, a Montreal company behind a fastgrowing mobile app that analyses and predicts airfares.
The Canadian pension giant said Thursday it is the lead investor in an $82 million financing round for Hopper, which already counts OMERS and BDC Capital’s IT venture fund among its backers.
Hopper’s mobile app, free for IOS and Android users, has recently made lists of the top innovations and useful tech in industry publications such as Fast Company and BuzzFeed, note executives at the Caisse, which has been tracking the tech and data firm for several years.
Algorithms are used to calculate the cheapest time to buy a ticket to a specific destination, with data including hundreds of millions of past airfares and those that are being searched and booked on a rolling basis, said Frederic Lalonde, Hopper’s co-founder and chief executive.
“Sixty per cent of what we send is telling you not to buy,” he said in an interview, explaining that the app’s function is different from others that simply alert mobile users to price changes.
In addition, the combination of data and technology would be difficult to replicate, he says. Before the first airline ticket was sold last fall, more than $12 million was pumped into research and development over five years to build the system of data mining and “machine learning.”
Hopper generates revenue through ticket sale agreements with airlines, and through a $5 per ticket services charge for users, who save an average of $50 per ticket, according to Lalonde, 43, who had early success in the dot-com boom.
In 2002, his first company, Newtrade Technologies Inc., was sold to travel booking company Expedia. After the tech firm that allowed hotels to connect their reservation systems to online distribution channels was sold, Quebec-born Lalonde worked at Expedia for a few years with stints in the United States and Asia.
In the past year, his new venture Hopper has increased the number of users to 10 million from one million, and $1 million worth of airline tickets is now sold each day.
Tom Birch, managing partner of funds and technologies at the Caisse, said the Quebec pension giant was able to track Hopper’s growth through its stake in early investor Brightspark Ventures, and saw downloads and transactions really begin to take off last fall.
“We believe Hopper could easily become the next unicorn” in the travel booking sector, Birch said in an interview. “It’s a huge competitive advantage they built.”
The Caisse-led funding is significant for the company, which was founded in 2007 and had previously raised $38 million through a series of financings, including $16 million of convertible notes.
Accounting for the notes, the total raised after the latest financing will be $104 million, according to Lalonde.
Hopper could easily become the next unicorn. It’s a huge competitive advantage they built.”