Sonder Raises $135 Million To Turn Airbnb-Style Apartments Into A Different Kind Of Hotel
It was the summer after his freshman year, and Francis Davidson, like many college students, was having trouble finding a subletter to take over his apartment. Rather than dropping money on empty rooms, Davidson tried a different path: what if he rented it out to tourists instead?That was 2012, a few years after Airbnb launched, popularizing the idea of living like a local in someone else's space. It was no longer weird to sleep in a stranger’s apartment, and Davidson needed to cover his rent. The philosophy and economics major at McGill University ran the math to see if charging tourists to sleep in his apartment could pay for itself -- and it did. Davidson started to convince other students to sign their leases over to him and turned the apartments into tourist rentals, attracting guests through Expedia and Airbnb to stay in the apartments he was managing with his cofounder Lucas Pellan. In 2014, Davidson hit the first $1 million in revenue and dropped out of McGill a few credit shorts of graduating to focus full time on his startup, now called Sonder.
Four years later, more than 200,000 guests have stayed in a Sonder and the company is on track to do $100 million in revenue this year. It’s also attracted the eye of top venture capital firms that have invested over $135 million in Sonder, including an $85 million Series C led by Greenoaks Capital which Forbes is revealing exclusively for the first time.
“Given that there was such a movement from traditional hospitality to alternative hospitality, we saw that there would be an opportunity at a really massive scale to provide a customer experience that essentially resolves the two problems of consistency for the sharing economy and authenticity and uniqueness that is lacked in the traditional hotel model,” says Davidson, Sonder’s CEO and a Forbes 30 Under 30 honoree in 2017.
Davidson had seen the opportunity grow alongside the rise of Airbnb. More travelers were craving local experiences that felt like staying in a city, not a sterile hotel. Yet Airbnb’s strength is also a weakness: the uniqueness that makes it fun to stay in an Airbnb can also make it unpredictable. Even after a string of great stays, showing up at a trashed apartment can ruin the experience for any traveler.
“Travel is a high cost of failure market,” he said. “If you only have two weeks a year, things can’t go wrong, so we’ve learned to put a really high cost on quality.”
Davidson and Pellan saw an opportunity to build a hospitality business around nightly rentals that felt like apartments but had the consistency and quality of a hotel, down to the mini toiletries and fresh sheets. And while it started with negotiating student leases, Sonder today works directly with developers who are either building new apartments or renovating vacant old spaces into Sonder’s apartment-style units and signing leases directly with the company.
Compared to your typical Airbnb, no one “lives” in Sonder apartments except for its guests. Each rental comes with a living room space and kitchen so people can cook and relax like they would in their own home. Units range from studios in a heart of a city to sprawling a six-bedroom unit in downtown Montreal. No two spaces look alike but are instead designed to match the style and decor of the neighborhood around it. One advantage of the deconstructed hotel model is that travelers can stay in neighborhoods like San Francisco’s Mission district or London’s Shoreditch. Sonder doesn't concentrate its units in one location like you’d find with a typical hotel. A 24/7 concierge is accessible through a call or text in case a light bulb burns out or someone forgets their keys....MUCH MORE
