Travel booking startup Yamsafer made history this week, after receiving $3.5 million in investments of Series B funding. Led by Global Founders Capital, it was the first foreign-led venture capital investment in a Palestine-based company ever.
Global Founders Capital was founded by the owners of Rocket Internet – the company that acquired Kuwaiti startup Talabat in a record-breaking $170 million acquisition. Aside from this being the first first foreign-led venture capital investment in a Palestine-based company, $3.5 million is a large amount of cash for any startup in the region to receive.
Founded in Ramallah in 2011, a huge part of Yamsafer’s success has been its ability to understand the Middle Eastern market. The travel booking website offers services in Arabic and English, but most importantly, caters to the cultural needs of Arab travelers.
"What most Middle Eastern startups are going after right now is mostly cloning models which have been proven to be successful elsewhere is actually going to require them to be based in the Middle East. … and capital will flow in because you can’t do this out of the Bay Area,” CEO Faris Zaher told Tech Crunch.
Prior to this investment, the company received $1 million in Series A funding from Palestinian firm Sadara Ventures. Yamsafer is the second-largest online booking service for hotels in the region in terms of transaction volume after Booking.com.
Yamsafer was the first online company to offer the ability to book accommodations without credit cards, a fact that led to its initial exponential growth in the region. Users had to provide their name, cell phone number and email address, and the company used an algorithm that rewards people who pay at hotels upon arrival. The company also catered to the trend of last-minute bookings via mobile in the region with the launch of an app.
As travel is the biggest e-commerce sector in region, it is easy to see why Yamsafer has been able to drum up foreign investments so fast.
Although it only serves 18 countries, Yamsafer is focused on inter-regional travel in the Middle East, specifically in Saudi Arabia, which accounts for 70 percent of all transactions on the site, and the Gulf, which accounts for 20 percent of all the transactions on their website.
“Average transaction amounts in the GCC are 230 percent larger than what we see in the Levant, for example,” Zaher explained to The Gulf Times. “The GCC has also managed to avoid political turmoil and that has accelerated growth. GCC nationals who previously travelled to Syria, Egypt or Lebanon now travel to Jordan, or in most cases, travel within the GCC.”
As for Airbnb? Zaher doesn’t think the business model works in the region, as many are adverse to opening up their homes to strangers.
Focusing on providing a service that is culturally relevant to the Middle East remains a central part of Yamsafer’s businessplan. The group is trying to acquire more properties that offer houses or villas, as their Saudi Arabian clients tend to have large families and need upward of five rooms.
“[GFC] approached us because they are interested in building up their [travel] portfolio in the region,” Zaher said to TechCrunch. “The process was extremely fast relatively speaking.