Montreal Hopper valued at US$5 billion as Brookfield invests in travel startup

Brookfield Asset Management Inc. BAM-AT acquired a stake in Hopper Inc. in a secondary financing that makes the Montreal-based online travel company one of Canada’s largest private technology companies.

Brookfield’s growth equity arm has joined Toronto-based Stack Capital Group and U.S.-based Drive Capital to buy US$35 million of employee equity in a deal that values ​​the US$5 billion company, Hopper CEO Fred Lalonde said in an interview.

While Hopper himself did not issue any shares in the deal — which typically prompts investors to write down the value of their stakes — one of his existing backers, the venture capital firm of Boston Accomplice, whose partner Jeff Fagnan sits on its board, also bought the deal.

Fellow director Damien Steel, managing partner at OMERS Ventures, Hopper’s largest shareholder with a 10-15% stake, said in an interview that buyers are “paying absolutely fair market value” just six months after the announcement. by Hopper. its most recent formal financing at a valuation of US$3.5 billion. Mr. Steel said OMERS would not determine until the end of the quarter whether to increase the value of its stake.

Mr. Lalonde went so far as to say that US$5 billion “is not much” because the shares sold were common stock and not senior preferred stock that Hopper would issue in a financing. “The actual valuation if we did a preference round is probably much higher,” he said. “They get a deal.”

While it was rare for Canadian companies to reach valuations of US$1 billion – “unicorn” status – these entities proliferated last year as valuations of fast-growing, mature domestic startups soared. Hopper is now at least the fourth Canadian company since the start of 2021 to reach the much rarer $5 billion valuation level, joining 1Password, Wealthsimple Technologies Inc. and PointClickCare Technologies Inc.

Valuations of public tech companies have crashed this year, which some observers believe will spill over to private markets. But Mr. Lalonde said Hopper was unaffected because, while many technology providers who have profited from the pandemic have seen their valuations shredded, his business stands to benefit from its end.

He predicts a “super travel cycle” as restrictions lift and pent-up consumers travel with a vengeance. “Ask any hotel or airline CEO – people have a huge amount of money saved up and everyone is trying to travel once the restrictions are lifted,” he said.

Hopper is well positioned as it offers airline, hotel, vehicle and now short term home stay bookings. The company’s mobile platform, which targets millennials, was the most downloaded travel app in the United States last year.

It also leverages access to large datasets obtained from travel reservation systems such as Saber, applying AI to offer ancillary financial services products to travellers. Travelers can pay extra to freeze the price of a flight for multiple days, purchase the right to cancel for any reason for full credit, book a missed connection at no additional cost, or change a ticket to a different day without losing the total value of the ticket.

After figuring out before the pandemic how to price the deals, Hopper turned them into high-margin products that now make up nearly 40% of revenue, Lalonde said. The company is also partnering with consumer-facing giants to power their travel booking services, starting last year with Capital One Financial Corp., an investor in Hopper.

“Hopper’s total market opportunity has been multiplied by at least 10 times” thanks to its partnership strategy, Mr. Steel said. “That’s what got everyone excited.” Stack Capital CEO Jeff Parks told The Globe and Mail that his company invested US$6 million in the financing due to Hopper’s emergence as a leading travel booking company, its revenue diversification into financial services, its management team and its “long-term growth potential” as travel demand returns.

It’s a sharp turnaround for a 14-year-old company that treated the onset of the pandemic as an “extinction-level event.” But Hopper managed to raise US$70 million in capital in May 2020, led by WestCap Group – the private investment firm of ex-Airbnb CFO Laurence Tosi, Hopper’s director – and Inovia Capital. Revenues doubled in 2020 as travelers continued to book and subscribe to its financial products. In 2021, bookings surged and Hopper raised an additional $345 million in growth capital.

Although Mr Lalonde did not disclose his revenue, he said Hopper’s gross bookings had increased almost fivefold since before the pandemic and were expected to top US$2 billion this year and double in 2023, with the business taking 10 percent. hundred more cut.

Mr. Lalonde said he believes the nascent category of travel financial products created by Hopper could reach US$100 billion. He plans to take Hopper public once he has generated “several hundred million” dollars and has a better understanding of the growth potential of his fintech products.

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