Sonder Is Real Estate’s Newest Unicorn After $210M Raise

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Short-term rental start-up Sonder has closed a $210 million round of funding at a valuation of over $1 billion, cementing its rumored unicorn status. 

SEE ALSO: Is Sonder the New Airbnb?

The hospitality company, which offers apartment-style hotel stays in 28 cities worldwide, has experienced explosive growth since its launch in 2012. The Series D funding round, led by Valor Equity Partners, WestCap and Tao Capital Partners, brings the company to a total of $400 million in funding. 

Sonder master leases residential properties and rents them out at daily rates to travelers, offering a consistent experience across markets. Key to their model is the use of technology to eliminate costs that traditional hotels incur, such as full-time concierge staff on the property, said Francis Davidson, the company’s founder and CEO.  

It’s part of a crop of companies, including Stay Alfred and the Airbnb-backed Lyric, carving out a space between vacation rental platforms like Airbnb and traditional hotels. “It’s crazy that hospitality hasn’t changed in 50 years,” said Davidson. “It’s not about operating funky places but actually managing accommodations.”

Sonder has passed the competition in terms of volume, with 8,500 units across 28 markets. “We’ve added one building every day for the last quarter,” said Davidson. “That represented 3,000 units in the last three months. Most of our competitors, about a dozen, have added a few hundred units at most.” Sonder is on track to earn $400 million in revenue by the end of the year, and their occupancy rate is in the mid-eighties, per Davidson.

The $210 million, combined with $15 million from real estate partners, will fuel the company’s growth into a global brand, said Davidson. Sonder has plans to expand throughout Europe and into the Middle East and Latin America. 

The Spokane-based Stay Alfred, which has been around since 2011 and raised a total of $62 million, has 2,500 units in total in 33 markets nationwide. Jordan Allen, its founder and CEO, said their goal is to grow without over-reliance on venture capital, which can demand growth at the expense of sustainability.

Sonder started by master leasing blocks of units in existing residential buildings, but has since expanded to other property types, in part to accommodate the regulatory landscape in each city. Sonder has leased space in hotels and ground-up developments as well as in condominium and rental buildings. At the moment, 60 percent of their stock is in buildings that they’ve fully leased. Their long term plan is to be a management portal that could work across residential and hospitality spaces, said Davidson. 

While Sonder doesn’t compete directly with Airbnb, its rise was made possible by the demand Airbnb exposed for alternatives to hotels. It’s also in line with the real estate industry’s move towards more flexibility across all asset types.