Apartment/Hotel Hybrid Concept Sonder Hits $1B Valuation After $210M Funding Round
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Sonder, a company that straddles the ever-blurring line between hospitality and multifamily real estate, has secured major funding for its continued expansion.
Sonder announced the closure of a $210M Series D funding round Thursday, led by Valor Equity, Westcap and Tao Capital Partners, the investment office for former Hyatt Chairman Nicolas Pritzker. With total funding of over $400M, Sonder’s valuation now sits at over $1B, vaulting it into startup "unicorn" territory.
A number of previous investors, such as Greenoaks and Spark Capital, added more capital in the latest fundraising round, and they were joined by newcomers like the Pritzker family (through Tao Capital), Fidelity and A-Rod Corp., former MLB star Alex Rodriguez's investment firm.
Sonder leases blocks of apartments from multifamily landlords, furnishes them and customizes them to rent for stays as short as one night and as long as several months. The units, called Sonders, come in a range of properties from row houses to high-rises and are serviced like hotel rooms.
In the next few months, the company will add $15M of investment through partnerships with developers across its markets, Sonder CEO Francis Davidson said in the announcement. The method will add to the multiple partnership structures Sonder uses with building owners.
Within its more established block-leasing formula, Sonder has landed its biggest deal yet, Bisnow can exclusively report: a 36-story, ground-up tower developed by Capexco in San Diego called 10th and E. Estimated to fill about 390K SF and deliver in 2022, 10th and E will also be the first modular construction high-rise in San Diego, according to the announcement.
Sonder will operate 260 units on the upper floors, while 17 units will be designated as affordable housing. Co-living operator Common, new to the San Diego market, will operate 334 beds in 94 units on the lower levels. The ground floor will include two restaurants totaling 3K SF, shared community and workspaces, a package locker service, "shared mobility zones" and access to an automated, below-ground car storage system.
San Diego has grown considerably in stature as a tourist destination, requiring more innovation in hospitality than ever. Davidson believes Sonder meets that requirement in San Diego and around the world, as proved by its growth in both valuation and footprint.
Sonder tripled its unit count to 8,500 across 20 cities in 2018 and has not slowed down since, bringing 500 Sonders online in May alone, Davidson said — partially due to cutting the average cost of bringing a Sonder online in half since the company's founding. He also projects a revenue run rate of $400M by the end of this year, which would quadruple last year's total.