December 20, 2007
Kayak Raises $196 Million, Buys Rival SideStep

Discount travel site Kayak has acquired rival SideStep for $200 million. This story was set to be announced tomorrow but word is leaking all over the place after Sidestep CEO Rob Solomon told his company employees the news at an all hands meeting.

This is a two part deal. Kayak raised $196 million in a new round of financing from their existing investors (Sequoia Capital, General Catalyst Partners and Accel Partners), two of SideStep’s existing investors (Norwest Venture Partners and Trident Capital), new investors (Oak Investment Partners and Lehman Brothers Venture Partners) and debt lenders (Silicon Valley Bank and Gold Hill Capital). Prior to this new round, Kayak had raised $27 million in capital.

Kayak subsequently acquired SideStep. Terms are not being disclosed, but we are hearing that the deal was for $180 million in cash. An additional $20 million that SideStep holds in cash is being distributed as well, making the total deal size around $200 million.

SideStep and Kayak are the two leaders in the discount travel search space (along with Mobissimo and Farecast ). Kayak is reportedly doing around $50 million in yearly revenues, compared to SideStep’s $35 million.

This marks quite a turnaround for SideStep. Two years ago the company was on the ropes. Founding CEO Brian Barth had been ousted. Rob Solomon, previously Yahoo’s SVP Commerce, joined as CEO and replaced 40 of the company’s 50 or so employees. In the last two years he grew the company from $14 million to $35 million in revenue, and turned it profitable. SideStep has raised $32 million in venture capital.

Twenty or so of SideStep’s seventy five employees will stay on at Kayak over the long run. Rob Solomon and a few others will remain for a sixty day transition period and will then be back on the market.