Sonder adds US $225 million in Herculean funding round

Sonder, a platform that provides thousands of short-term rentals around the world, is announcing a Series D round of funding totalling US $225 million. The company’s new valuation puts it at just over US $1 billion, making it the newest Canadian-founded startup to achieve “unicorn” status.

The company will also open a second global headquarters in Canada and hire several hundred engineers, designers, finance and operations experts through next year.

For CEO Francis Davidson, there are several reasons the company is bringing on the funding. Sondor’s customers love the experience, the unit economics are favourable and they’ve got a clear growth trajectory. The company wants to add fuel to the fire and expand aggressively, he told MTLinTECH.

“The way we view is there’s immense benefits to scaling. And to build ubiquity for our customers, we need to have more markets for them to think about when they travel,” said Davidson.

Sonder’s spaces have been described as “half hotel half Airbnb”.  The Montreal-headquartered company leases large amounts of units in office buildings through partnering with developers.

For example, they might sign leases for 75 or 100 units of a new 200-unit building through a partnering developer building a new office building. The company typically signs five-year leases and guarantees the developers a number in monthly rent. Once they’ve signed a deal, Sonder designs and furnishes its spaces.

“We’ve really nailed the core foundation of our business over the last 18 months. All of the subcomponents are working and the engine is humming on all cylinders. Customer satisfaction is really high. Secondly, the unit economics of the business is working really well, so contribution margin and payback periods are hugely attractive. We’ve made a lot of progress on that front and we now pay back our investments within 12 months. And finally, we’ve unlocked the regulatory compliance in pretty much every market we’re in, so we’ve found a way to find out what standards apply to the hospitality industry and then meet those standards.”

Davidson founded Sonder while living in a basement as a student at McGill. Today the company has over 8500 boutique living spaces in over twenty cities all over the world.

The base round is worth US $210 million, led by Valor Equity, Westcap and Nicholas Pritzker (through Tao Capital Partners). However, over the coming weeks Sonder will add an additional US $15 million in investment through developers partnering with Sonder on new deals around the globe. The $225 million will bring  the company “closer than ever before to making exceptional travel experiences available to everyone.”

In Montreal, Sonder says it’s taken a significant amount of time to work together with the City in terms of ensuring regulation through its units. That said, Davidson assured us that we’re about to see explosive growth above its current 600 units across the city. Along with the product growth, Sonder’s headcount will also grow significantly.

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