Alaska Airlines taps Up.Labs to build the next-generation of aviation startups

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Alaska Airlines taps Up.Labs to build the next-generation of aviation startups

Alaska Airlines wants to solve some of the stickier problems in aviation. And it’s turning to UP.Labs — a new venture lab that launched publicly in 2022 — for help.

The two companies announced Thursday at the UP Summit event in Dallas an agreement to form an aviation venture lab. This lab will create startups designed to address specific issues in aviation travel, such as guest experiences, operational efficiency, aircraft maintenance, routing and revenue management. UP.Labs founder and CEO John Kuolt said he expects the first startup from this aviation venture lab to be announced in 2024.

These startups won’t be created solely to serve Alaska Airlines, nor are these proof-of-concept programs. These are designed to operate independently and as commercial enterprises from the get-go, eventually bringing in revenue by selling its product or service across the industry.

Alaska CEO Ben Minicucci told TechCrunch on the sidelines of the UP Summit that Alaska Airlines has a long history of innovation, making this latest tie up with UP.Labs a natural decision. Alaska Airlines was the first commercial airline to use satellite navigation, to sell tickets online and to use machine learning to make flight path more efficient, he said.

Minicucci said he’s comfortable that these startups will be designed to serve a larger market and potentially its competitors.

“We’ve always tried to be the first movers,” he said. “But you never can keep something transformational to yourself.”

Alaska Airlines isn’t a stranger to the ecosystem around UP.Labs. Alaska Airlines is already a limited partner in UP.Partners, the Los Angeles-based VC firm that is connected to UP.Labs. Alaska Star Ventures, which launched in October 2021, invested $15 million into UP.Partners’ inaugural early-stage fund.

UP.Labs is not an incubator, nor is it a corporate accelerator. And while there is some trace DNA from the GP/LP venture capital world, UP.Labs is not your traditional VC either. However, UP.Labs was born from — and operates in parallel with — UP.Partners.

Instead, UP.Labs is structured as a venture lab with a new kind of financial investment vehicle. The firm is locking in major corporations — Porsche was the first — and establishing startups with new business models that aim to solve that industry’s biggest problems. Porsche represents automotive, Alaska takes the aviation slot and a third undisclosed partner is a large retailer.

UP.Labs doesn’t allow the corporate partner to invest more than their pro rata in any of the financing rounds because it can make it difficult to attract talent and future investors, Kuolt has previously said. After three years, a corporate partner like Porsche or Alaska Airlines will have the option to acquire the remaining shares of the startup. They will use a third-party valuation firm to determine the fair market value.

Under the three-year agreement with Porsche, Up.Labs has said it will establish six companies, or two a year. The first was Pull Systems, a startup that developed software that manages and automates the performance of EVs. Sensigo, a startup that debuted Thursday at the UP Summit, has created an AI platform that allows service technicians to diagnose problems in modern, software-defined vehicles in a matter of minutes, instead of days. Sensigo has raised $5 million in a seed round led by UP.Partners.

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