Hospitality Start-Up Sonder is in Talks for a Funding Round for US$175m
Main Photo: A studio apartment at One Platt in the financial district, New York
Date: May 2020
Location: Global – 36 cities, mainly USA with London, Edinburgh, Dubai, Rome and Dublin right now….
Name: Sonder
No. of Keys: TBA
Owner: Founded in 2012, Sonder has raised US$400 million to date at a $1.1 billion valuation. Sources said the latest funding round is not a coronavirus-related bailout, as Sonder was already in talks to raise additional funds before the pandemic. The startup’s valuation will remain the same to account for the altered hospitality landscape, sources said.
A representative for Sonder declined to comment. Though the Airbnb competitor had funds heading into the pandemic — it most recently raised $210 million in July 2019 — it was not immune to economic hardship stemming from the freeze on travel.
The company last month laid off or furloughed 400 people, or one-third of its staff. At the time, the company’s bookings were down 20 percent at the company’s 5,000 apartments across the U.S. “If we pull these levers simultaneously, we have a chance,” CEO Francis Davidson told The Information.
He said at the time that Sonder wasn’t running out of money and that investors were committed to investing more to give Sonder a cushion. “They cut their burn rate,” said one investor on the condition of anonymity. “If they weather this storm they’ll be one of the leading companies in the space.”
Unlike Airbnb, which makes money from fees it charges renters and hosts, Sonder leases space and rents units to end users. In New York, Sonder entered the market in 2018 after signing a lease at 20 Broad Street, where it operates 169 units.
But in a March 24 post on Medium, the company said it has economic protections built into many of its leases. “We’ve been planning for a downturn for the last 18 months and have contractual rent reductions built into 60% of our live properties,” it said. “Some leases allow free rent at our election — we are exercising those now.”
Since Covid-19 put a halt on travel, starting in late February, Sonder’s competitors have slashed jobs as bookings dried up. In March, Lyric cut most of its staff and shuttered locations.
Airbnb, which had planned to go public this year, has faced steep losses instead. Last month, it raised $2 billion in debt and equity that valued the company at $18 billion, down from $31 billion in 2017.
Funders: Fidelity and WestCap Group are leading the investment round for the San Francisco-based startup, which rents out hotel-style units for short-term stays. WestCap, a firm started by former Airbnb CFO Laurence Tosi, disclosed its investment with the U.S. Securities and Exchange Commission in a Form D dated April 29, 2020.
Fidelity and WestCap have previously invested in Sonder, along with Alex Rodriguez’s A-Rod Corp. and the Pritzker family through Tao Capital Partners. Jeff Bezos, through Bezos Expeditions, has also invested in Sonder.
THPT Comment: We’ve had a look at the Sonder model and like it….more control on the end-product that the traditional Airbnb method.
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