Chicago-based Rocketmiles, a company that helps frequent flyers earn additional airline miles just by booking hotel stays using its site, has raised $6.5 million in Series A funding. The round was led by August Capital, and saw participation from existing investors Peterson Ventures, Link Ventures and Atlas Venture, as well as new investors, Chicago Ventures and Match.com CEO Sam Yagan.
Launched last spring, the site is led by former Groupon exec Jay Hoffman (CEO) who previously ran partnerships at Mileage Plus for United Airlines – experience which gave him insight into how this industry works. Co-founders Bjorn Larsen and Kris Helenek are also travel industry veterans.
For consumers, the premise is simple: you just enter in your dates of travel, location, number of guests and airline program, and Rocketmiles returns a list of hotels which allow you to earn miles automatically by booking via the Rocketmiles service.
To make this work as a business, Rocketmiles buys rooms at lower rates and resells them higher, allowing it to earn revenue to buy more miles from the airlines. Hoffman notes that the idea is to offer consumers a significant number of miles per booking, so the site focuses only on hotels where a minimum of 1,000 miles can be earned.
At launch, the company supported some half-dozen airlines, but today it has grown that number to nine, and it will reach 12 by the end of February.
“The tide had turned – initially we were trying to convince the airlines that this is going to be a great thing for them, and nowadays we’ve got the evidence that it’s been very well-received by their customers,” explains Hoffman.
Rocketmiles has also grown its hotel roster from around 300 at launch to now 5,000 at top business travel destinations around the world.
Hoffman declined to say how many customers have used the service to date, but says it’s “hundreds of thousands,” 78 percent of whom are booking for business travel purposes. The business has also been growing at 30-40 percent over the last four months, he notes.
With the Series A funding, Rocketmiles will begin to focus on expanding its service to include international partners. For example, next week the company will begin to support Aeroplan, a popular frequent flyer program in Canada.
Also in the works is a product designed for businesses themselves, which would help them book rooms in bulk for corporate events or other employee travel, for example.
In addition to the product development and international expansions, Rocketmiles plans to also use the additional funding for customer acquisitions. “We’ve learned this is a lifetime value business – what that means is that once a customer makes a transaction on Rocketmiles, they tend to buy from us over and over again,” says Hoffman. He says customers feel that the service is different from the other online travel agencies out there, and see the value, which has them returning.
An average user living in Rocketmiles’ home base of Chicago is earning around 80,000 miles per year on the site, he adds.
Rocketmiles will also hire in the near future, going from the 20 employees it has today to about 30 in six months.
As a part of the funding, the company is adding August Capital partner Tripp Jones to its board. It’s also adding Scott Hintz, TripIt co-founder and former SVP of Product at Hotwire, as a second outside adviser. Tom Botts, meanwhile, is joining Rocketmiles’ Advisory Council, joining Drew Patterson, former Jetsetter CEO and CEO at Room77.
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