Matrix Partners India and SAIF Partners today announced that they have co-led a $6 million first institutional round of funding for Treebo Hotels. Founded in March 2015 by ex-McKinsey consultants Sidharth Gupta and Rahul Chaudhary, and ex-VP Engineering of MyGola, Kadam Jeet Jain, Treebo Hotels is a tech enabled chain of affordable and reliable hotels. Treebo will use these funds for expanding its network of hotels, developing state-of-the-art technology and hiring top talent. Veritas Legal served as legal advisors to Matrix Partners India and SAIF Partners on this transaction.
Treebo partners with small, standalone hotels and helps them improve their service quality standards and also market themselves more effectively. The core pillars of the company are technology innovations (for superior customer experience and for reliable backend operations), on-the-ground process discipline, and new-age marketing (digital and offline). Before launching this venture, Sidharth and Rahul worked as Vice-Presidents at Flipkart-Myntra leading several strategic initiatives for the group and were colleagues at McKinsey & Company before that. Their co-founder and fellow-alumnus from IIT Roorkee, Kadam, comes with 9 years of startup experience and until recently was the VP-Engineering for MyGola, an online travel company that was acquired by MakeMyTrip earlier this year.
Treebo claims that currently, there are more than 10 lakh budget hotel rooms in India and 95% of them are in the unorganized segment. Sidharth Gupta, co-founder of Treebo says, “Despite the availability of online booking options and third party reviews, the lack of quality assurance continues to be an unsolved problem for the traveller in this segment. This is the problem we are focused on solving. Our hotels come with an unprecedented ‘100% Quality Guarantee’. We believe there is a huge untapped opportunity in this space and ability to deliver great customer experience will be the key success factor.” Treebo has built an inventory of over 200 carefully curated rooms in Bangalore in a short span of two months. Over the course of the year, they will partner with more budget hotels to scale to a network of 5,000 rooms across 20 cities.
Tarun Davda, Director of Matrix India believes that the biggest challenge in the highly fragmented budget hotel space is the lack of standardization. Travellers are skeptical of what to expect when booking a room at an unbranded property. Coupling this need with a large market size, Matrix decided to invest in Treebo. “The budget hotel segment in India will continue to experience strong growth driven by growth in both business and leisure travel. The model adopted by Treebo has already seen tremendous success in China, which until a decade back was an unorganized market similar to what we see in India today, ” said Mayank Khanduja, Vice-President, SAIF Partners.
This investment is also in line with the increasing competition that Treebo will see from the likes of Oyo Rooms and Zostel’s Zo Rooms. Oyo Rooms has already raised more than $25 million from Sequoia Capital and others, Zostel raised funding to start Zo Rooms, smaller players like StayUncle are also building a base and one can expect more activity. The idea is to organize all the hotels that exist independently in the offline world and bring about two major changes: a) improve the quality of these facilities and b) improve the discovery from the end user’s point of view.