There is just too much money around and it looks to be heading to riskier but higher growth spots. Sally White reports

Hard luck for the ordinary private investor! There is too much money around and, according to international financial consultants Bain, that superabundance is here to stay. So stock markets and small private investors are no longer being courted. Funding the star companies has become a ‘members only’ scene for those in the private equity and venture capital fraternities.

So instead of launching the expected IPO this summer, Didi Kuaidione one of China’s star travel companies, announced it was instead going for a new funding round - of $1.5billion. The sums give a valuation to Didi of $12-15 billion. Formed by a merger of Didi Dache and Kuaidi Dache in February, this is considered to be one of Uber’s foremost Chinese competitors. It is the country’s largest taxi-hailing company, with an estimated 80% of a $1 trillion market.  

According to Bain’s Macro Trends Group global financial capital increased by 53% between 2000 and 2010 to $600 trillion. By 2020, its analysts say, banking, entrepreurial,  fund, corporate, institutional and government cash flows will all combine to push it up another 50% to $900 trillion.

So  globally money is actually desperate for somewhere go to. A lot of it can no longer find attractive rewards in traditional favourites – negative interests, for example, are a deterent in some UK, Swiss and Australian financial markets. In the best asset-based deals – iconic hotels, for example – there is huge competition.

If you are not rich enough, you won’t get a look in at the early (and most profitable) emerging growth company fundings. No one seems to care that courts and governments are coming out against some of these distruptive travel newcomers (Uber is obviously first in line here). In fact, since many of the investors have taken risks as entrepreneurs themselves, they seem to be postively egging the distruptors on!

Growth is all! 

By the time these companies do get to a stock market they’ll have a pretty pricey ticket on them. Again, Uber looks like being a case in point.

Fund managers in the private equity business have to deliver profits or else they won’t keep their jobs. Hence the rush for the new growth stocks with (hopefully) years of accumulating profits ahead of them, such as those in travel.  

Prospects for investment in travel look excellent – passenger numbers for air and land are all expected to continue their upward trends. Better still, more and more of servicing and marketing for the business is going online, creating a rapidly growing industry of hi-tech, high-growth companies. Hence the rush of  investors, the lack of IPOs and the mass of private deals. A noticeably large portion of these investors are industry insiders. 

Noticeably those allowed into the best Chinese fundings have been mainly local (another club?). These areonline shopping firm Alibaba, Internet giant Tencent, SoftBank and Tiger Global Management China.

Uber has a star-studded investment list, too. It contains some of the best and biggest blue-blooded global funds. Qatar Investment Authority, Blackrock and Google Ventures to name just three, according to venture deal site Crunchbase. Industry is represented by entrepreneurs - Amazon founder Jeff Bezos and Atom Factory founder Troy Carter, both well known as backers of talent, are on the list.  

In the UK, thetrainline.com went for £500 million of funding from private equity firm KKR rather than the expected London Stock Market floatation.

In India, much of the funding for the plethora of online travel companies is coming from foreign investors as local investors are too impatient to go for growth companies. So, for example, Goibibo - signed up by Google to be its local partner for Google’s new Flight Search too –went to South African media group Naspers for the $0.5 million funding it needed.

Nor are these new tech companies the only part of the travel market being chased by money. Travel property specialists JLL, says that the strong flow of cross border capital into the hotel business is galvanising deal volume and helping push new online marketing concepts. It expects deal volume to reach $68 billion this year, an increase of 15% on 2014. Much of that money is outbound Chinese capital, especially from the new shadow banking activities of the insurance companies.

Historically, says JLL, most of the private equity money has gone to mature hotel markets of the US and Europe – counting for 45% of the flow. Yet rewards are higher and competition lower in the emerging markets, where private equity money accounts for only 25%.

So JLL is expecting the balance to change. Watch out for developments in Africa?