Western and Russian investors bring $1 million to hotel booking site

Ostrovok.ru, an online hotel booking service launched last summer, announced last week it had raised $1 million from General Catalyst Partners, a US-based venture capital and growth equity firm, Kite Ventures, a Russian venture fund, and business angels who founded online travel services in the US and China such as Kayak and Qunar.com.

The founders say it has “not been difficult” to attract investors who received “less than 15%” of the shares.

Ostrovok.ru aims to build Russia’s “most comprehensive [international] hotel base.” The site plans to provide its users with an enlarged offer as soon as next month.

The site claims 50,000 unique visitors every week and 2,000 new subscribers to its newsletter every day.

“Travel services represent almost 40% of the worldwide e-commerce market. This indicator is significantly lower in Russia, which means the market is still in its development phase,” says Ostrovok.ru co-founder and CEO Serge Faguet.

Faguet is a Russian-born entrepreneur and Stanford GSB graduate who, before creating Ostrovok.ru, worked as an analyst at Google, then founded TokBox, a web-based group video communications provider.

Ostrovok.ru President and co-founder Kirill Makharinsky describes himself as a “data virtuoso.” After studying at Eton, then Oxford, he co-founded YouNoodle, an online platform to develop the startup ecosystem; and Quid, a provider of data on innovation and emerging businesses.

In a recent interview with ArcticStartup, Faguet noted that “Russia has many markets that are not dominated by anyone while in other countries similar markets have companies that are already worth billions.” Faguet also finds it easier to recruit talented developers in Russia than in Silicon Valley, where “200 start-ups with $10 million funding each plus Google, Twitter, Facebook and the likes are all competing for the best developers.”

As reported earlier by East-West Digital News, online sales of tourism products have grown very fast in Russia over the last few years. Russia saw an estimated 6 million online purchasers of tourism products in 2010. Competition is becoming more intense, but the growth potential remains huge)—less than 5% of travel services are sold online in Russia vs. 30% to 60% in more advanced countries.

In early April, Oktogo.ru, another online hotel reservation company with its headquarters in St. Petersburg, announced it closed a $5 million round of financing with Western funds Ventech and Mangrove Capital Partners and Russian fund ABRT.

Topics: E-Commerce, Finance, International, Internet, News, Startups, Venture / Private equity
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