Sam Shank's on-demand booking app, HotelTonight, has raised a $45 million Series D round, bringing its total fundraise to $80.5 million.
HotelTonight works with 3,000 hotels in 120 cities to help fill open rooms at the last minute. It offers the rooms at a heavy discount to 6.5 million people who have downloaded the app.
The lead investor is Coutue Management, a hedge fund that has a lot of experience with the online travel sector. It was a large shareholder in Expedia and Priceline, for example, and it has a robust research team that will help Shank dig up industry insights. GGV Capital, Battery Ventures, Accel Partners, U.S. Venture Partners and First Round Capital also invested.
Increasingly, hedge funds like Coutue Management are investing in startups. That's because companies are staying private for longer than ever before. If hedge funds want to be in big companies, they have to get in early.
In 1996 more than 800 companies went public, according to a report by SecondMarket's Barry Silbert. Most companies raised less than $50 million and took an average of four years to IPO or get acquired. Now the average IPO time has doubled to ten years.
Shank isn't eying an IPO anytime soon, but a mobile-first startup like his has the potential to become the next Kayak. His team has already seen a change in behavior on its platform; having information at your finger tips is becoming the norm. This mentality helped Uber become a $3.5 billion company.
While Shank's 6.5 million downloads may not sound like much, most of those users are completing transactions on his platform. Shank says both revenue and the number of transactions on HotelTonight have increased 300% in the past year.
Shank has raised a lot of money because he says he wants to continue to "move fast and be aggressive." It also takes a period of time before each new HotelTonight city reaches profitability.
While Uber, another on-demand app, has created a big business by focusing on logistics, Shank is focused on bookings. Someday, those bookings may expand beyond hotels, the same way Orbitz handles everything from hotels, to car rentals, to flights.
"There's a lot of ways we could expand and we know a lot about people who have an on-demand need for a product or service – more than just about anyone, so we're uniquely positioned [to expand]," Shanks says, "That said, we're more focused on shelter and finding a place to stay when you're not at home."