LOST iN Raises $4M, Plans Travel Media M&A Rollup
RockWater Roundup
RockWater analysis to make you a better investor and operator. Today we discuss the fundraise, newco value prop, first M&A deal, and estimate some travel guidebook revenues.
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Former Jukin execs just launched LOST iN, a travel media newco.
Will include M&A rollup strategy, starting with a legacy guidebook publisher.
Let’s break it down…
🔎LOST IN OVERVIEW
- New travel media brand targeting younger, online-savvy “premium economy” traveler
- Will aggregate content from prominent online travel creators
- Target audience is “young working professionals looking for a comfortable, yet authentic travel experience”
- Founded by Jon Skogmo, Mike Skogmo, and Anton Reut
- Founders are former execs of Jukin, which sold to Trusted Media Brands in 2021 (reported at 9 figures per Forbes)
- Will pursue M&A rollup of travel media brands
💰SEED INVESTMENT
- $4M seed fundraise
- Led by MaC Venture Capital
- Other investors: BDMI, Pitbull Ventures
- Angels: founders of Hawke Media, Skybound, Kombo Ventures, Pocket.watch, Fullscreen
🤝1ST ACQUISITION
- LOST iN, a travel guidebook publisher founded in 2014
- Produced 25 global travel books in 50 countries
🏅NEWCO LEADERSHIP
- Jonathan as CEO
- Mike as CMO
- Anton at COO
💡NEWCO VALUE PROP
- Travel enthusiasts to get entertaining and informative travel content
- “Revolutionize travel coverage for urban professionals”
- Help advertisers reach highly affluent and desirable travelers
- Travel forecast to grow 5.8% annually through 2032, more than 2x overall economy
- Legacy travel media doesn’t cater to digital-natives, ripe for disruption
- Pair LOST iN guidebooks D2C biz w/ ad-supported digital video biz
- Build events, memberships, and more to add value to travel community
- Founders learned how to build and monetize large audiences from Jukin days
🧐WHAT I FIND INTERESTING & DEAL INSIGHTS…
The LOST iN team raised money for a media rollup, in a difficult fundraising environment. Many digital execs talk about rollups, but few are getting access to financing to execute. LOST iN’s team track record at Jukin, longstanding investor relationships, and vision stand out amongst peers.
I’m very curious to new acquisitions that are in the works, and how much new capital will be required for additional M&A. TBD when other deals will be announced, but I bet a few are already in the works.
Worth nothing is that the Jukin founding team may have some of their own capital to deploy.
Let’s therefore run some numbers on the Jukin / Trusted Media Brands distribution waterfall…
Public info on Jukin valuation and funding
- Pitchbook says Jukin sale to Trusted Media Brands in Aug 2021 was 9 figures, and Pitchbook reports $115M
- Crunchbase says total Jukin funding was $8.6M prior to sale, between 2014 – 2016
- Of that $8.6M, Crunchbase says $4.5M was debt financing, and the rest was venture capital
My Assumptions
- $4.5M was venture debt and had 10% warrant coverage, or 450k of warrants. Assume that was 2% of company outstanding shares, and all venture debt interest was paid off prior to sale (i.e. wasn’t a PIK) since Jukin was profitable for most, if not all, of existence
- $4.1M of equity financing rounds was done at a blended company valuation of $20M, which implies a 21% stake
- 17.5% employee stock option pool (may incl options paid to owners of People Are Awesome, which Jukin acquired in 2015)
- No investor liquidation preference
Waterfall of sale proceeds
- $115M total
- LESS: $24M to venture equity investors
- LESS: $4.5M to venture debt investors
- LESS: $2M to warrants
- LESS: $20M employee option pool
- LESS: $4M transaction fees (bankers, lawyers, etc)
- Distributed to founders: $60.5M (pre tax)
I don’t know how that was split between founder / CEO Jon Skogmo and the rest of his founding team, but it means that the LOST iN founders likely have some capital of their own to deploy in the newco formation, and for future travel media M&A.
This founding team is smart, so I bet they’ll put their own money in to have “skin in the game”, a strong signal to current and prospective investors, and to maximize their new venture ROI. But as is clear in the press release, it seems the majority of capital is coming from 3rd party investors.
There are a few good reasons to do this:
- Minimize founders’ own capital at risk
- Get access to strategic partners who can provide other non-monetary value and connections to help grow LOST iN (the listed investors are well pedigreed in digital media)
- Have funds and investors on cap table that can write larger future investment checks as LOST iN scales, and requires more capital for team and product growth, and more rollup M&A
To note, the above exercise is not to put a spotlight on founders’ winnings from a great digital media win. And I’m making many assumptions based on public data, so my intent is to just be directionally accurate. My goal here is to show how a distribution waterfall works in a venture deal. And further, why just because founders have access to capital, doesn’t mean they need (nor should) put a lot of it to work into their next venture.
Capping their own capital investment is smart for both strategic reasons in building their newco as I highlighted above, and for personal capital preservation. Emphasis on the last point, since I believe there now are, with many more to come, many newly-minted millionaires in the creator economy. Unfortunately, I’ve seen some very poor use of funds from founders and execs after paydays.
As a personal finance nerd, I encourage financial prudence to all those this wild west game of digital media, where fortunes can come, and go, very quickly.
A last point to quickly dive into is estimating revenue for the LOST iN acquisition…
What We Know
- 25 global travel books in 50 countries
- Includes D2C and wholesale distribution (per website)
- $17 cover price (per website)
My Assumptions / Market Research
- No historical ebook or digital sales
- Global book sales were $144B in 2023
- Assume travel and guidebooks are 2% of that
- Operates in 80% of markets where guidebooks are sold
- 0.1% market share
It’s late on a Wednesday before July 4th holiday, so we’re going to keep this analysis top-down and simple…
LOST iN Book Revenue Estimate
- 2% guidebook share of $145B global market = $3B
- 80% of geographical market presence = $2.4B
- 0.1% of that market = $2.4M
- $17 avg book price implies 141k books / year
At $2.4M guidebook revenue for 2023, you can assume wholesale margin is 10-15% of cover price, and self publishing is 35-70% of cover price. So let’s assume majority of sales are via wholesale, and thus a blended margin of around 25%, which implies $600k of profit. Add in $200k for OPEX, and that’s around $400k EBITDA
For a declining biz, I bet the acquisition price was around 0.5 to 1.5x LTM revenue or 2-4x EBITDA. Assume majority of cash upfront, and some equity in the travel newco.
Alright, my brain is fading and ready for the holiday weekend, so I’ll stop the quant analysis there.
For all you Americans, have a great July 4th holiday. Enjoy some sunshine and classic Americana celebrations with family and loved ones. For you international readers, enjoy some quiet from your American counterparts.
…and a final note…LOST iN CEO Jonathan and I may be planning a premium exec “water activity” for September in LA. Stay tuned! 😉
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I’m the founder of RockWater Industries. We do financial and strategy advisory for media, agencies, and creator economy. From M&A and fundraising to consumer research and go-to-market planning.
DM me on LinkedIn or email me chris @ wearerockwater dot com
