Sonder in talks over $150-175m investment

US: Short-term rental apartment operator Sonder is reportedly in discussions with prospective investors Fidelity and WestCap Group about raising funding for the company in the region of $150 million to $175 million.

The hospitality unicorn, which signs multi-year leases in residential buildings and rents out units with hotel standard amenities for short-term stays, is believed to have raised $400 million to date since being founded in 2012, while its valuation surpassed $1 billion in the same timeframe.

Fidelity and WestCap Group are leading the investment round for the San Francisco-based startup. Documents reveal that the latter, a growth-oriented investment firm launched by former Airbnb CFO Laurence Tosi, disclosed its investment with the U.S. Securities and Exchange Commission on 29 April.

According to The Real Deal, the round is not a coronavirus-inspired bailout and the investment had been in the pipeline for some time before the outbreak reached U.S. shores.

Last month, however, we reported that Sonder had laid off 22 per cent of its workforce and furloughed a further 11 per cent of its staff as the reality of the coronavirus impact bit hard on the travel industry. At the time, it was estimated that bookings of its 5,000 apartments across the United States had dropped by up to 20 per cent.

CEO Francis Davidson denied then that the company was for sale and was optimistic for its long-term survival: “If we pull these levers simultaneously, we have a chance. There isn’t a single line that won’t come under deep scrutiny.”

Founded in 2014, Sonder’s last round of investment came in July 2019, when it secured $225 million in a fourth round of private equity funding, helping it to triple the number of available units to rent on its platform compared to the previous year.

Davidson himself insisted that while Sonder was not immune to the wider impacts of Covid-19 on the global travel sector, the company was not running out of money and its investors were committed to steering it through the crisis.

While many of Sonder’s key competitors have taken drastic options to cut costs, such as Lyric, Stay Alfred and the Guild, the company wrote in a blog post on Medium in March that it had taken contingencies prior to the crisis by “planning for a downturn for the last 18 months” and having “contractual rent reductions built into 60 per cent of our live properties”.

Fidelity and WestCap have both previously invested in Sonder, as well as A-Rod Corp, Tao Capital Partners and Jeff Bezos’ Bezos Expeditions.

ShortTermRentalz has reached out to both Sonder and Tosi for a comment.