Stellar Labs, the online business jet charter market, has raised $26.3 million in Series A equity. The investors in the round are: business jet finance company Global Jet Capital; Columbia Equity Partners – a specialist aviation investor; and Expa the venture capital fund launched by Uber founder Garrett Camp, co-founder of Uber and discovery engine StumbleUpon.
“We are very excited, we were oversubscribed on this round and have an amazing group of investors who all see the vision and highly motivated to see it through,” says Paul Touw, co-founder of Stellar. He says that they are likely to raise more funding next year.
Touw and, co-founder, David Fox launched Stellar in 2015 aiming to revolutionise business jet charter. They wanted to create software that allowed operators to run business aircraft fleets more efficiently and an app that allowed customers to book business jet flights more efficiently. At the NBAA Convention in 2016 they announced a deal where they would partner with Rockwell Collins’ Flight Operations System or FOS. FOS is used by more than 600 operators who manage more than 5000 aircraft. (Stellar had already hired Fred Powell the coder responsible for FOS and the son of its founder.)
Touw: “We have an amazing group of investors who all see the vision”
“Our first job is to create a system that helps operators,” says Touw. “Our agreement with Rockwell Collins has given us the opportunity to do that first. After that our chess pieces are still on the board and we can decide what to do. We may target consumers ourselves or we may follow what airline Global Distribution Services like Sabre and Amadeus have done and partner with sites like Priceline, Kayak and travel agents. Our key mission – to make business aviation more accessible to consumers is still the same.”
Dave Poltorak, vice president, Business and Government Aviation for Rockwell Collins, says: “Stellar is taking the rich features that have made ARINCDirect FOS a proven leader, and together we are building a next-generation collaborative platform that will help to automate, simplify, and streamline business aviation operations.
Fox adds: “When we founded Stellar in 2014, the industry basically ran on technology built before the Internet era. In commercial aviation, innovations in advanced technologies drove ticket prices down 73% and increased access to regional communities over the last two decades, despite rising fuel prices of 400%.”
Diverse investor group
Stellar raised $8.6 million in seed financing in 2015 and closed a smaller round in 2016. It has now raised more than $30 million with Rockwell Collins also committing another $20 million. The three new investors all add a different perspective.
The equity round was led by Columbia Equity Partners, an aviation focused investment group led by Dean Donovan and Brian Flynn. Donavon and Flynn are best known for founding Mexican low-cost carrier Volaris Airlines. Before that Donavon ran consulants Bain & Company’s aviation group.
Touw says they have looked at the lack of systems – particularly the absence of a global standard way of booking tickets like Sabre (launched by American Airlines in 1960). They also believe that optimising flights – such as reducing dead-legs when aircraft fly empty – will allow operators to reduce costs.
Fox: “The industry basically ran on technology built before the Internet era”
“Business aviation is riddled with inefficiencies, from overhead and transaction costs of 40%, to a nearly 38% non-revenue or ‘deadhead’ rate, to asset utilization rates one-eighth that of commercial airlines,” says Flynn. “Stellar is on the verge of solving these problems and even incremental improvements to these metrics could cut on-demand charter costs by more than one-third.”
Touw stresses that they believe that operators will be able to cut prices by becoming more efficient, not by cutting their own margin. “As a former operator [he founded US charter company XOJET] I realise how many operators are barely making money on charter. But by making the system more efficient and just as importantly reducing the administration burden that mainly falls on the operator, we can make life easier for operators and help them cut costs and lower pricing.”
Donovan believes that this can grow the number of people using business aviation. “At Volaris, a 1% drop in ticket price yields a market stimulation rate in higher consumer use of typically 3–4%.,” he says. “As the latest technologies utilized in commercial aviation begin to penetrate business aviation, we expect on-demand charter to triple in size over the next six to eight years as the industry moves online.”
The involvement of Global Jet Capital, a company created to finance business aviation, will be a surprise to many. Global Jet Capital is backed by The Carlyle Group, Blackstone’s GSO Capital Partners, and AE Industrial Partners.
“We invested in Stellar because we see its potential to increase access to air charter supply and quickly, efficiently match it with demand thus changing the travel experience in this segment,” said Bill Boisture, operating partner at AE Industrial Partners and former CEO of Hawker Beechcraft. “We expect their digital access to the business air travel marketplace will open new customer segments with direct, timely, and cost effective air travel.”
So far Global Jet Capital has not targeted business jet charter companies, preferring to finance owners buying jets for their own use. But the company appreciates that many business jet buyers move into ownership after chartering. Global Jet Capital is also working closely with operators and placing aircraft with them after lease terms have ended.
“We are excited about the long-term growth potential for Stellar as more operators shift to modern, cloud-based technology for their sales, marketing, and operations,” said Shawn Vick, CEO of Global Jet Capital. “We are making a strategic investment in Stellar and expect them to be a disruptive technology that will help transform the business jet industry.”
Expa’s investment – effectively the backing of an Uber founder – gives Stellar amazing credibility in Silicon Valley.
Donovan, Flyn and Vick have also joined Stellar’s board along with David Siegel, the former CEO of US Airways, Frontier Airways, Avis Budget Group, commercial lessor and XOJET. Siegel is now managing partner at TS Capital Partners.
“The industry needs a common operating platform—a single source of truth—similar to the commercial airline sector,” says Siegel. Stellar is the only company in a position to build that vision and platform. We expect the network effects for the entire industry to be significant.”
How many digital platforms does the market need?
The last five years has seen a large number of companies launching claiming to disrupt business aviation charter. More than $200 million has been invested in a sector that Avinode, the leading charter marketplace, values at between $12 billion and $15 billion each year.
Touw says that they relish the competition. “A lot of guys are going after business jet charter because it is a big market that could grow. But, there it could be a winner takes all market or one where there are a couple of leaders. This capital gives us a war-chest to be one of them.”
Stellar Labs history so far
[svt-event title=”Stellar announced at Corporate Jet Investor Miami” date=”20/10/2015″ class=”svt-cd-blue” ]
[svt-event title=”Stellar formally announced at NBAA” date=”07/11/2015″ class=”svt-cd-blue” ] [/svt-event]
[svt-event title=”Seed funding closes” date=”20/10/2015″ class=”svt-cd-blue” ] Closes $8.6 million seed funding round[/svt-event]
[svt-event title=”Stellar launches Marketplace at NBAA 2016 and announces Rockwell Collins FOS agreement” date=”06/10/2016″ class=”svt-cd-blue” ] [/svt-event]
[svt-event title=”Rival attacks launch at NBAA ” date=”05/10/2017″ class=”svt-cd-blue” ] Rival StrataJet reacts angrily to Stellar’s claims at the show [/svt-event]
[svt-event title=”Closes $26 million Series A funding round” date=”05/10/2017″ class=”svt-cd-blue” ] [/svt-event]