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Montreal-founded hotel business disruptor Sonder Canada raises $85-million


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Montreal-founded hotel business disruptor Sonder Canada raises $85-million


Sonder Canada Inc., a Montreal-based startup aiming to disrupt the travel accommodation business by renting out hotel-quality apartments through Airbnb and other websites, said Thursday it has raised US$85-million in a financing led by San Francisco venture capital firm Greenoaks Capital.

Sonder, both an alternative to Airbnb-like services and an emerging rival to the traditional hotel business, generates US$100-million in annualized revenue through a unique model that 25-year-old founder and chief executive Francis Davidson began building when he was a student at McGill University.

The company rents 2,200 apartments from real estate owners in 14 cities in the United States, Canada and Europe and, in turn, offers them up online for short-term rentals to business travellers and vacationing families. Sonder positions itself as a better quality experience than a typical rental through Airbnb – and a more distinctive stay than a typical hotel offers.

Compared with individual Airbnb accommodation providers, where amenities on offer can vary widely, Sonder’s properties offer standard mattresses, regularly stocked hotel toiletries and full sets of dishes and cutlery. The company offers a round-the-clock concierge and regular cleaning service.

Sonder also offers an alternative to a downtown or suburban Marriott or Holiday Inn, with larger spaces – often with two bedrooms – in hip neighbourhoods and with more distinctive furniture and art, which vary from location to location. The company lists its rooms through a range of channels, including its own website and Airbnb.

“Airbnb built a version of Expedia, and we’ve built a version of Marriott for the evolving needs and preferences of consumers," Mr. Davidson said.

Mr. Davidson, a native of Gatineau, Que., started the business six years ago after his freshman year at McGill, where he studied economics and philosophy. That summer he rented his Montreal apartment to travellers to earn extra money, valeting cars and providing guests with bottles of wine. The following year he managed vacant apartments for several other students who had left for the summer, and a year later he hit $1-million in revenue, dropped out of school and raised $5-million in seed money from Canadian investors including Business Development Bank of Canada (BDC) and Real Ventures in 2015. “Canadian investors took a big bet on this one,” said Matt Roberts, who led the investment for BDC and continued to invest in Sonder after becoming a partner with Toronto-based venture capital firm ScaleUP Ventures.

Sonder soon moved away from student apartments and began leasing directly from real estate companies, giving it more control over the spaces it offered. “It takes a lot of effort to scale a business like this,” Mr. Roberts said. “It’s the most complicated business I’ve ever been involved with as an investor” because of the long list of steps the company goes through to secure each new property.

In 2016 early Twitter financier Spark Capital led a US$10-million financing and Sonder moved its main operations to San Francisco, largely to improve access to talent needed to scale the business, Mr. Davidson said. Sonder has grown rapidly and served more than 200,000 guests. The company is still technically Canadian though just a few dozen out of its 350 employees remain in Montreal. Mr. Davidson said Sonder will expand operations and staff in Canada in the coming months, including an impending expansion into Vancouver.

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