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23 September, 2021
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HomeBecomingThis 28-year-old turned his college side hustle into a $1.3 billion start-up backed by Jeff Bezos

This 28-year-old turned his college side hustle into a $1.3 billion start-up backed by Jeff Bezos

Don’t just follow your dream but invest in your dream. 

When Francis Davidson was wrapping up his first year of college at McGill University in 2012, the then 19-year-old philosophy and economics major wanted to make some extra cash, so he rented out his apartment for the summer.

By subletting his and his roommates’ three-bedroom downtown Montreal apartment to vacationers on rental sites like Home Away and Airbnb, Davidson was able to bring in over $14,000, while paying around $5,000 in total rent for the apartment for the summer, he tells CNBC Make It

Then Davidson kept going. He started managing the empty apartments of other students at McGill, and then students in other cities. After three years, he dropped out of college to continue building the business into a global hospitality tech start-up.

“We think that our future is just as promising as it was last year or the year before,” he says.

Davidson’s company, Sonder, now leases and owns properties with over 5,000 listings in 35 cities around the world. Sonder is currently valued at $1.3 billion after raising a total of more than $550 million from venture capital firms as well as investors like former baseball player Alex Rodriguez and funds backed by Jeff Bezos and Elon Musk.

Now 28, Davidson is Sonder’s co-founder and CEO. Looking back, he tells CNBC Make It that he “had no idea I would want to be an entrepreneur” when he started renting out his college apartment. “I think I caught myself by surprise, as well.”

A summer side-hustle

Before Sonder, Davidson was just a teenager looking for a cheap place for himself to live for the summer, so he could rent out his three-bedroom apartment while his college roommates were away.

“I messaged a bunch of people that were advertising for sublets … And I said, ‘Listen, if you don’t find anyone,… the day before you leave, let me know and I’ll give you a thousand dollars for the entire summer. And it’s maybe 20% of your rent. But if you want a free thousand dollars, you just give me a call,’” Davidson says.

Most of the people he reached out to with that offer told him to get lost, but he found one taker. “So, basically, I got a two-bedroom apartment right next to McGill for a thousand bucks for the summer,” Davidson says.

More than just a side gig

In the fall of 2014, Davidson and Pellan brought their fledgling business, then called Flatbook, to a local tech accelerator in Montreal called FounderFuel.

There, Davidson began to get excited about the prospect of turning his summer side-hustle into a full-blown, global “hospitality brand” that would combine the mobile-booking and diverse accommodation options of other alternative rental start-ups like Airbnb or Home Away with the quality and comfort of a trusted hotel brand, like Hilton, he says.

He’d do that by partnering with real estate developers and landlords to lease blocks of apartments, or even entire buildings, in order to rent out the units for short-term stays via a proprietary app. Every unit would have a full kitchen and living room setup, so the company could offer the comfort of short-term apartment stay with the quality assurance expected from a top-flight hotel chain.

A billion-dollar company

From there, the company grew steadily, reaching a $1 billion valuation by 2019, at which point the company said it was nearing $400 million in annual revenue. However, the 2020 coronavirus pandemic rocked the global economy, and the hospitality industry was especially hit hard, as tourism and business travel plummeted.

Last year was “the hardest year for us,” Davidson says. “It’s been difficult, I think, for a lot of folks, and in particular the hospitality [and] travel industry.”

Indeed, Sonder was forced to lay off or furlough over 400 people, more than one-third of the company’s 1,100-person workforce at the time, in March 2020. (At the time, bookings across the hotel industry were down by 70%, and a report from American Hotel & Lodging Association estimated a 50% drop in overall revenue for the industry in 2020.)

That relative success allowed Sonder to “rehire some of the folks that were on furlough” later in 2020, Davidson says.

Sonder also scored a win in June 2020, when the company announced its latest fundraising round, with an additional $170 million investment led by Fidelity, WestCap, and Inovia Capital that valued Davidson’s startup at $1.3 billion.

Davidson says that investment round felt like “a huge vote of confidence” amid an extremely tough year and provided a “big uplift to the team.”

Davidson and Sonder are now focused on lining up more and more properties to lease to put the company in a prime position to continue growing its share of the online stay booking market once coronavirus fears and travel restrictions hopefully relax in 2021 and 2022.

“We think that our future is just as promising as it was last year or the year before,” he says.

Source: CNBC, Feb 20, 2021

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