$38 million not enough for a startup – Ostrovok closes 5th round of funding in 3 years

Ostrovok.ru, a major Russian hotel booking service, announced last week that it has raised $12 million in a round led by Vaizra Capital, a fund which belongs to Vkontakte co-founders Vyacheslav Mirilashvili and Lev Leviev.

A number of the startup’s existing investors also took part in the round. The transaction, the details of which have not been disclosed, brings total investment in the project to more than $50 million.

Launched back in 2010, Ostrovok – “island” in Russian – was initially designed as a flash sales site for travel. In 2011 – after switching to a classic hotel booking concept – the site secured its first round of financing from General Catalyst Partners, Kite Ventures and business angels.

Several rounds followed, the latest bringing to the startup no less than $25 million in March 2013.

These millions seemed enough for the startup. “Luckily we’re not in the market for fundraising right now,” co-founder Kirill Makharinsky told TechCrunch last month.

Surprise funding

Ostrovok obviously changed its mind, perhaps wooed by Mirilashvili’s and Leviev’s reasoning and money.

The two businessmen have shown a certain appetite for high tech investment since the UCP fund bought their share in Vkontakte last year.

Ostrovok now employs 200 people – after cutting one third of its staff last year. According to statements made by Makharinsky before the latest round, the company could breakeven within a year, with revenues “growing at almost 20% every month.”

Last month Makharinsky announced his departure from the company. However, he remains on the board of directors and is “supporting the company as much as [he] can.”

Speaking to TechCrunch, Makharinsky said he was parting ways with Ostrovok and his co-founder Serge Faguet “because we had too much overlap in the role which impacted day-to-day disagreements.”

Among Ostrovok’s competitors are Oktogo.ru, another startup well funded by Western and Russian venture funds, and Ozon Travel, the specialized arm of leading e-commerce player OZON.

Booking.com and some other foreign players also have strong traction in Russia. The domestic online hotel booking market has been estimated by Data Insight at $900 million in 2012.

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