Francis Davidson, the founder of Sonder, a platform for apartment accommodation with luxury services, recounted the beginnings of his now successful business.
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| Francis Davidson, co-founder and CEO of Sonder |
Francis Davidson, 28, is the co-founder and CEO of Sonder, a global hospitality technology company currently valued at $ 1.3 billion.
His revolution began in 2012 when he was finishing his first year of study in philosophy and economics at McGill University in Canada. At the age of 19, it occurred to him to earn some extra money and decided to rent his apartment in downtown Montreal for the summer. Using platforms like Airbnb and Home Away, he sublet his three-bedroom space and that of his roommates to vacationers and made more than $ 14,000 when he paid about $ 5,000 in total for the rent of the apartment in that time frame.
That is how he saw the business and began managing the empty apartments of other students from McGill University, and later students from other cities.
After three years, he dropped out of school to continue building the project into a company that now rents more than 5,000 properties in 34 cities around the world and has raised more than $ 550 million from venture capital firms, as well as from investors like former baseball player Alex Rodriguez and funds backed by Jeff Bezos, the founder of Amazon, and Elon Musk, the founder of Tesla.
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| Sonder currently offers accommodations in 34 cities around the world |
In a CNBC Make It report, Davidson said he "had no idea I wanted to be an entrepreneur" when he started renting his college apartment. "I think it also took me by surprise," he acknowledged.
The popularity of sites like Airbnb and Home Away in 2012 made Davidson realize that the tourism industry was shifting to “a shift away from hotels towards staying in more extravagant properties,” he recalled.
“So I built a model to estimate how much income my apartment would generate versus what it cost to run and rent. And there was a big difference, like a pretty healthy margin, ”he explained.
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| Davidson in a Bloomberg interview in San Francisco on December 17, 2019 (Photo: David Paul Morris) |
And after earning a five-figure income in his first summer, Davidson doubled down on part-time work the following summer and partnered with his classmate Lucas Pellan, who helped him hire the apartments of other McGill University students. With the expanded model, they made about $ 60,000 in income that summer (of which about $ 23,000 was used to pay the rent for the apartments and the rest were benefits that Davidson and Pellan were able to share with the other students).
A year later, Davidson and Pellan secured more student apartments in Montreal and 10 other cities. Davidson posted job postings on the Internet, looking for “student entrepreneurs” who wanted to earn money by following his model of subleasing money.
“I actually just wrote in a PDF what I did to achieve it in Montreal, and shared it with a bunch of other students and then split the profits with them, which is how we get to operate in a bunch of cities with no capital,” Davidson explained to CNBC. "It was basically saying, 'This is what I've done and we're going to share the benefits. And that summer, revenue hit six figures, bringing total revenue for three seasons to more than $ 1 million.
At that moment, Davidson realized he had more than just "a nice summer business." "At that point, I was fully committed," he explained.
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| Davidson developed Sonder to provide "luxury" accommodation and rental services for travelers (Photo: David Paul Morris / Bloomberg) |
In the fall of 2014, Davidson and Pellan took their idea, then called Flatbook, to a Montreal tech accelerator called FounderFuel.
Davidson said that there he began to promote his desire to generate a global "hospitality brand" that combines mobile booking and the facilities of sites like Airbnb or Home Away with the quality and comfort of a trusted hotel brand, such as Hilton, for example.
For this, it would partner with real estate developers and owners to lease apartment blocks, or even entire buildings, in order to rent the units for short-term stays through its own application. Each unit would have a full kitchen and living room, so the company could offer a guarantee of quality expected from a top-tier hotel chain.
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| The objective of Sonder is that users enjoy a comfortable short stay in apartments as if they were luxury hotels |
Looking back on his history, Davidson now acknowledges that his overall view of the company has been "quite outrageous" from that first moment. "It was like, 'Hey, we think we can revolutionize hospitality,'" he recalled, stating that his goal was always "for most people to have experiences that feel really luxurious without having to empty their bank account."
That idea helped Flatbook, which later became Sonder, raise an initial investment of $ 6.5 million in February 2015 from a group of venture capital firms led by BDC Venture Capital and Real Ventures (the firm behind FounderFuel).
Davidson and Pellan used those millions of dollars to hire employees to create the technology platform for Sonder's online reservations. In 2016, they relocated the company to San Francisco, to be closer to the venture capital wealth of Silicon Valley. (That year, Sonder raised another $ 11.1 million from San Francisco-based venture capital firm Spark Capital, followed by another $ 32 million from Greylock, another local company, in 2017).
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| An example of the apartments offered by Sonder in the USA |
From there, the company grew steadily, reaching a valuation of $ 1 billion in 2019, at which point the company said it was approaching $ 400 million in annual revenue.
But, in 2020, the coronavirus pandemic shook the world economy, and tourism and business travel plummeted. "Last year was the hardest for us," Davidson said. "It has been difficult, I think, for many people, and in particular for the hospitality and travel sector."
However, Davidson also says that Sonder has been "very lucky" compared to many rivals, thanks to some strategic decisions that the company made in 2020. "We believe that our future is as promising as last year or the previous one", he claimed.
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