Short-Term Apartment Rental Startup's Valuation Hits $1 Billion
Sonder, a short-term apartment rental company based in San Francisco, completed a $210 million round of Series D funding and is now considered to have a $1 billion valuation, launching it into the elite ranks of real estate startups.
The recent funding round, which closed this month, was led by investment firm Valor Equity Partners, commercial mortgage bank WestCap and Nicholas Pritzker, a real estate and venture entrepreneur, through investment firm Tao Capital Partners. The company is also in the process of closing on an additional $15 million round, according to Mason Harrison, spokesman at Sonder.
The five-year-old company, which blends the short-term rental trend made popular by Airbnb with the more dedicated services and styling of a national hospitality company, has raised more than $360 million over six funding rounds, according to investment data website Crunchbase. Its valuation, which comes from estimates by the venture capital industry based on investments and growth projections, makes it one of a few private startups in the real estate industry to reach the "unicorn" rank, a term for those companies that reach the $1 billion valuation.
Sonder describes itself as offering “hotel amenities with the comforts of home,” according to Harrison.
“What we want to do is give people that luxury, that service, that standardization that people expect with a branded experience but also the spaciousness, the functionality, the authenticity that people want with these alternative accommodations,” he said.
Sonder has 8,500 units and properties in more than 20 cities nationwide but is focused on expansion with its new capital infusion. Among its plans, it expects to soon announce signed leases at two downtown Los Angeles hotels, according to Harrison. The company also has signed leases in Dubai and Dublin, Ireland, Harrison said. It also has locations in Canada, Rome and the United Kingdom.
While there are other similar companies, including vacation rental company Stay Alfred and Airbnb-backed short-term rental company Lyric, Harrison said Sonder actually leases all its spaces directly as well as designs and furnishes them. However, Sonder is still considered competition by hotels, according to Alan Reay, president at hospitality brokerage and consultancy Atlas Hospitality Group in Irvine, California.
“They are additional competition for the hotel business, but as a company they are going to have to overcome zoning laws and the task of overseeing thousands of rentals and the repairs/maintenance and upkeep seems to be an issue when you read some of the reviews of guests that have tried them out,” Reay said in an email. “Over the long term it will be interesting to see how many of these companies survive and actually grow.”