Why Thayer Ventures is investing in hospitality

Since its founding in 2009, Thayer Ventures has invested in the growing world of hospitality technology. Photo credit: iStock / Getty Images Plus / anyaberkut (Computer Investment)

Thayer Ventures Acquisition Corp., a special purpose acquisition company that has invested in a range of hospitality and travel-related projects, closed its initial public offering of 17.25 million units in December at a price of $10 per unit. The company plans to keep its focus on the same industries, with a slightly changed strategy.

Thayer Ventures started out investing in early-stage deals, said Chris Hemmeter, the fund’s managing director. “But as we've grown up, we've begun to migrate later and later.” While the core part of the company’s strategy is still based on investing in the Series A and B rounds, the team recognized that some long-term partnerships demanded a different kind of support. “And so we've been working more and more with later stage companies because they fit better with some of our partners that are already enterprise-grade suppliers,” he said. 

Since its founding in 2009, Thayer Ventures has monitored the growing world of hospitality technology, from property-management systems to enterprise software, Hemmeter said. “We have invested in a range of different companies in the space over the last several years”—including cloud-based PMS Muse; hotel revenue-management software firm Duetto; event-planning software company Social Tables; and Life Hospitality, the management arm of Life House that is focused on independent hotels.

In the early days of the  COVID-19 pandemic, the Thayer Ventures team began to investigate the idea of a special purpose acquisition corporation in this area to go along with the later-stage investing. “We live in a world where private companies are staying private longer, so you're seeing a lot of high-value private companies out in the marketplace,” Hemmeter said. The pandemic, meanwhile, has been an “incredible demand shock that caught the industry largely flat footed,” he said, noting a new imperative for agility and productivity in the hospitality industry. As travel recovers and demand grows, he added, the sector—already worth trillions of dollars—could see 10 to 20 percent compounded annual growth over the next three to five years. 

The businesses with which the company is now talking in relation to the special purpose acquisition corporation are at a more advanced stage than the traditional businesses with whom the team has traditionally worked—“but there are players that we know because we've been working in the category for so long.”  

Sea Change

Hemmeter sees two sea changes in the field of hotel technology investment, even before the pandemic hit. The growth in the cost of labor was outstripping growth in revenue per available room—a trend that drove the company to invest in Lighthouse. “Lighthouse has completely rethought the delivery of hospitality,” Hemmeter said. “It's centralized so many things and pulled a lot of costs out of running a hotel.”

COVID, meanwhile, caught many suppliers flat-footed, which Hemmeter blames on both the heavy labor component and the “legacy ways of doing things.” Traditional technology companies did not have the kind of agility that they needed to respond to the crisis, he explained. “So as a result, at least in our view in the hospitality space, there is a new imperative to really drive technology into the core infrastructure of the business in order to improve productivity and also enhance agility.” That means, he said, that Thayer is seeing an acceleration in the adoption of technology and the testing of technology. 

In addition, he said, younger companies have an opportunity to see acceleration through 2021, 2022 and beyond. “They're becoming much more relevant and important to operations.” At the same time, some of the bigger players out there that would be targets of the special purpose acquisition corporation have an opportunity to get more aggressive, get out on the offense and not only grow but also be in a position potentially to acquire the company. “Being a publicly traded company, they'll enjoy a much lower cost of capital, and they'll have a great currency to go shopping with the right publicly traded stock.” 

Going Public

The units began trading on the Nasdaq Capital Market on Dec. 11 under the ticker symbol "TVACU.”

Each unit issued in the offering consists of one share of the company’s Class A common stock and one-half of one redeemable warrant. Each whole warrant entitles the holder to purchase one share of Class A common stock at a price of $11.50 per share. Once the securities comprising the units commence separate trading, the shares of Class A common stock and redeemable warrants are expected to be respectively listed on Nasdaq under the symbols “TVAC” and “TVACW.” No fractional warrants will be issued upon separation of the units and only whole warrants will trade.

A registration statement relating to the securities became effective on Dec. 10. The offering was made only by means of a prospectus, which forms a part of the registration statement. 

As of press time, TVACU was trading at $10.85 per share.