Growth equity firm PSG has taken a big bite out of Toronto startup Hostaway, which provides software for managing short-term and vacation rentals. According to the startup, PSG provided Hostaway with $237.7 million CAD ($175 million USD) in growth financing.
However, Hostaway representatives were unwilling to answer basic questions regarding terms of the investment, including whether it was all-primary capital or featured a secondary component. Additionally, sources indicated to BetaKit that PSG acquired a majority ownership stake in Hostaway as part of this transaction. A spokesperson for Hostaway declined to confirm this detail, stating: “All the information that is being shared is in the release.”
Hostaway said proceeds from this round will be used to support its growth trajectory as it looks to cash in on this year’s travel rebound. It plans to grow its headcount and make enhancements to its product.
Hostaway claims it has increased its revenues by more than ten times since 2021.
Founded in 2015 by Marcus Rader, Saber Kordestanchi, and Mikko Nurminen, Hostaway’s platform was created to automate and simplify processes in property management. It allows users to manage all key aspects of their vacation rental business, with capabilities for marketing, communication, analytics reporting, payments, and distribution channels.
Through a two-way API, Hostaway can be integrated into online travel platforms like Airbnb, Booking.com, Expedia, Vrbo, and Tripadvisor.
Hostaway claims to have seen a period of significant growth in recent years, driven by the recovering tourism industry and its accelerating shift to digitizing its operations.
When the COVID-19 pandemic began in 2020, the travel sector shut its doors, ultimately impacting the vacation rental market. This led Hostaway to lay off one third of its staff as revenues dropped by 60 percent, as reported by TechCrunch.
Despite the setback, Hostaway gradually recovered as the rest of the tourism sector reopened during the long recovery period from COVID-19.
A report from the World Travel and Tourism Council found that the industry is set to contribute $162.6 billion to the Canadian economy in 2023, which is an increase of 17 percent from last year. The previous peak was $173.9 billion in 2019.
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As it rode through this sector-wide boom, Hostaway claims it has increased its revenues by more than ten times since 2021, alongside “strong profitability.”
Today, Hostaway said its customers collectively manage more than 100,000 properties in over 100 countries. Though its founders are originally from Finland, the company is headquartered in Canada and built its team out of the DMZ, Toronto Metropolitan University’s business incubator.
Hostaway previously raised $1.9 million in seed funding in 2018, which was led by Finland-based venture capital firm Vendep Capital. The startup also received a $75,000 grant in 2016 from the Finnish Funding Agency for Innovation as it prepared for launch.
Per its release, Hostaway noted that its fundraising is the largest round in the vacation rental sector. However several other vacation and short-term rental startups have raised larger rounds. Airbnb, for example, raised $1 billion in a combination of debt and equity in 2020. Canada’s own Sonder raised $210 million USD in 2019, surpassing a $1-billion valuation.
When reached for clarification, a Hostaway spokesperson said: “It’s the largest round in the vacation rental software space. Sonder is an operator and Airbnb is an OTA (online travel agent) so not software companies.”
Featured image courtesy Hostaway.