If you thought hotels had a lot of soft brands, wait until you see what's emerging in the vacation rental sector. The early success of the 25-year-old co-founder of Sonder is inspiring others.
Sonder, a boutique rental startup, has closed an $85 million Series C round of funding.
Greenoaks Capital led the round. Greylock, Spark Capital, Structure Capital, and Harbourvest participated. The San Francisco-based startup, which kept a low-profile until Thursday, has raised $135 million to date.
CEO Francis Davidson, 25, said Sonder was on course to generate $100 million in revenue this year. The company has hosted more than 200,000 guests since its debut four years ago.
It leases or manages 2,200 units in 11 cities in four countries.
Sonder’s hallmark is a distinctive interior design that aims to reflect the local aesthetic of a destination. It custom orders from manufacturers some of its own furniture and bedding, which requires it to run warehousing operations and use its own inventory tracking software.
The startup fully licenses its properties to avoid local regulatory disputes. In some cities that may mean operating as a property manager, in others as an extended-stay (minimum 30-day stays) renter. In others, it gets a hotel license.
It hires local staff for housekeeping, maintenance, and greeting guests. It has more than 350 employees and has dozens of open full-time positions.
Founded by Davidson and fellow college student Lucas Pellan in 2012 as a platform for subleasing apartments, Sonder rebranded in 2016 to pivot from subleasing and focus on the short-term rental market for travelers. That effort, and marketing under the SonderCollection domain name, was then discontinued.
Today Sonder leases all of its units directly from developers and manages them internally, a spokesperson said.
A Bet on Soft Brands
Sonder faces a rival Lyric, which similarly has a “design-forward, consistent amenities” approach to rental management and marketing.
Lyric works with multi-family property developers to source units. It has raised about $19 million, including a $15.5 million Series A equity investment earlier this year that included investors hotelier Barry Sternlicht, Fifth Wall Ventures, and New Enterprise Associates.
In February, alternative accommodation giant Airbnb launched a soft brand for houses that meet guaranteed, hotel-like amenities. Airbnb Plus consists of 2,000 verified listings in 13 cities that have been vetted for consistent quality.
When Skift asked if Airbnb would want to buy Sonder, Sonder co-founder Francis Davidson said, “Fundamentally, Airbnb’s business is not focused on operating spaces themselves but on building a trust-infused marketplace for unique accommodations and experiences. I think we’ll see Airbnb work hard on ensuring that more and more high-quality supply can be sold through their platform. Where Airbnb has built the Booking and Expedia of the new economy, we’re building the Marriott or Hilton.”
Other industry players are experimenting with soft brands. In April, Marriott International began a homesharing effort via home rental management company Hostmaker. It lets travelers stay in more than 200 homes in London, each of which has been chosen by Marriott and Hostmaker for consistency and quality and a chance to earn loyalty points in Marriott’s rewards program.
Oasis, for example, has raised about $35 million since its founding in 2009 and runs about 2,500 units.
On Thursday Domio, the $4 million-backed boutique rental startup, named Richard Lieb, the former head of Goldman Sachs’ Real Estate Investment Banking Group, to its advisory board.
Sonder’s news comes amid a flurry of funding rounds for the vacation rental sector as investors have been funding vacation rental property managers left and right. Vacasa has raised $143 million over two rounds, while Turnkey, Hostmaker, Vacation Rental Pros, and others have received sizable investments recently. Rented, which provides income to vacation rental owners, raised a $125 million arm last December.
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Photo credit: An image of an apartment for rent by Sonder, a startup that has raised a Series C round. CEO Francis Davidson, 25-years-old, said Sonder, his boutique rental startup, was on course to generate $100 million in revenue this year. Sonder