Montreal-founded Sonder (formerly Flatbook) has raised a $210 million USD ($274 million CAD) Series D funding round, surpassing a valuation of $1 billion. The raise and new valuation make Sonder the latest Canadian-founded company to reach unicorn status.
The Series D funding round was led by US-based Valor Equity, US real estate and venture entrepreneur Nicholas Pritzker through Tao Capital Partners, and Westcap, which was founded by former Airbnb CFO Laurence Tosi. A number of new and returning investors also participated in the round (see below). Sources familiar with the terms of the round indicated to BetaKit that it was more than two times oversubscribed, with many existing investors unable to exercise their full pro-rata rights.
Sources familiar with the terms of the round indicated to BetaKit that it was more than two times oversubscribed.
In a blog post, Sonder announced that it expects an additional $15 million USD in investment in the coming weeks “from select developers” who will partner with the company on new deals in cities around the world. The $225 million round would bring Sonder, which revealed in 2018 that it had raised $135 million to date, to more than $360 million USD ($470 million CAD) in total funding.
The company has seen rapid growth in the past few years. As part of its funding announcement, Sonder noted that last year it more than tripled the number of signed units on its platform, giving it more than 8,500 spaces in more than 20 cities around the world. Sonder also projected a $400 million revenue run rate by the end of this year, which it noted would be four times larger than the previous year. At the same time, the company says it has “cut the cost of onboarding a space in half.”
“This new capital will power our vision and bring us closer than ever before to making exceptional travel experiences available to everyone,” Sonder stated. “We’ve been working towards a distinct vision of the future of hospitality, one that provides a unique jaw-dropping experience, accessible to everyone, and doesn’t sacrifice quality for character.”
Last year, Sonder raised an $85-million USD Series C round, led by Greenoaks Capital with participation from ScaleUP Ventures, Real Ventures, Greylock Partners, Structure Capital, and Spark Capital. The company noted in its announcement blog post that Greenoaks, Spark Capital, Greylock, and Structure were returning investors in this most recent round, with new first-time investors Fidelity, Atreides Capital, and baseball star Alex Rodriguez’s ARod Corp. BetaKit has confirmed that Canadian investors Real Ventures and ScaleUp Ventures have returned, with Inovia Capital joining for the first time. While none of these Canadian VC firms were mentioned in Sonder’s announcement they remained bullish on the company’s potential.
“I led the seed [round at BDC] and it has been phenomenal to watch this company grow,” said Matt Roberts, partner at ScaleUp Ventures, and former associate director of IT Venture Fund at BDC. “Having been front and centre for the entire thing, I have never felt more sure about the opportunity in front of a company as I do for Sonder.”
“Having been front and centre for the entire thing, I have never felt more sure about the opportunity in front of a company as I do for Sonder.”
– Matt Roberts, SUV
Sonder was founded by Francis Davidson while a student at McGill University in Montreal, but has since moved its headquarters to San Francisco. Sources indicated to BetaKit that as part of this round, Sonder is pursuing a corporate inversion so that it will no longer be treated as a foreign corporation in the US tax system. While this means Sonder would officially no longer be a Canadian company, sources indicated that this will allow US pension funds to make significantly larger investments in Sonder’s future rounds (currently they are limited by US tax law).
Perhaps as a counterpoint to this move, Sonder also announced plans this week to use its funding to open a second global headquarters in Canada. Sonder did not disclose the new HQ’s location, and sources indicated to BetaKit that the startup is still undecided as to where it will be (Montreal would be the ideal narrative choice, but not the best logistical fit). With the new funds, Sonder also plans to hire several hundred engineers, designers, finance, and operations experts over the next year.
With its apartments-as-hotel rooms business, Sonder directly competes with Airbnb, which earlier this year acquired last-minute hotel booking app, HotelTonight. The Silicon Valley sweetheart has raised more than $4.4 billion USD across 16 funding rounds according to Crunchbase, and recently lead a round in short-term rental brand Lyric. Airbnb has also pointed to plans to go public, with the IPO anticipated for 2020.
As noted previously, Sonder’s new corporate structuring will allow it to raise significantly larger rounds of US capital to compete with Airbnb. The company also might not need as much as its competitors; by owning the properties it rents, Sonder makes significantly more per rental than Airbnb. One Canadian investor BetaKit spoke with compared Airbnb to eBay, where Sonder is Amazon.
“A brief look at the history of travel shows us just how important Sonder’s model will prove to be for travelers and the industry,” said Chris Arsenault, general partner, Inovia Capital in a blog post. “Our investment in Sonder, alongside Laurence [Tosi] and a strong syndicate of investors, represents a shared belief that co-founder and CEO Francis Davidson is the visionary leader to bring change in this highly attuned age of personalization; that Sonder has the team and operational plan to scale the benefits of home sharing, while quickly overcoming challenges.”
While Sonder plans to officially become a US company, this most recent financing marks the largest funding round for a Canadian tech company so far this year, and one of the largest rounds in Canadian tech history. The more than $1 billion valuation also adds Sonder to a small group of Canadian companies that have reached unicorn status, including Kik, Wealthsimple, Ritual, and most recently Lightspeed.
“We’re incredibly proud to back the team at Sonder for its next phase of international growth alongside a complimentary syndicate of co-investors,” Arsenault told BetaKit. “Since meeting Francis a few years ago, we have kept being inspired by his vision for the future of hospitality and relentless drive to delight guests on a global scale.”
With files from Douglas Soltys.