Short-term rental startup Frontdeskclosed on a $7 million round of funding and is on pace to become profitable in 2022, the Milwaukee-based company announced Thursday.
The tech-enabled company targets short-term business and personal travelers, leasing apartments in upscale neighborhoods and then subletting them to guests and providing on-site management of the properties.
The oversubscribed fundraise was led by Laguna Beach, California-based Stormbreaker Ventures and included an investment from Golden Angel Investors, an angel investor network based in Brookfield. The funding round represents the largest fundraise to date for Frontdesk, bringing its total raised capital to $18 million.
Frontdesk is present in 35 U.S. markets and in more than 160 buildings with over 700 fully managed suites. The startup added Austin, Philadelphia and Nashville to its footprint in spring and expects to double its portfolio this year, said Jesse DePinto, co-founder and chief product officer.
DePinto says Frontdesk will become profitable in 2022, although the company has been operationally profitable and doubled its growth in 2020.
“Next year, we hit a turning point as a company where we have enough scale to where that operational profitability covers our scale and investments back into the business,” DePinto said.
Founded in 2017, Frontdesk has achieved scale in a way that is 5 to 10 times more capital-efficient than its peers, Stormbreaker managing partner Said Mia said in a statement. Moreover, competitors like Sonder have required 35 times more capital to achieve a fraction of Frontdesk’s scale, he said.
“Meanwhile, other brands have raised $50 million or more with less scale than Frontdesk,” Mia said in a statement. “We’re confident in the company’s ability to fundamentally change the way consumers live, work and travel in a post-pandemic era, with their capital-light and tech-forward model."
Frontdesk was not actively raising funds when Stormbreaker approached the startup about the investment, DePinto said. However, the company recognized how an influx of capital would help it scale exponentially and fulfill the demand for short-term stays, which now exceed pre-pandemic levels, Frontdesk co-founder and CEO Kyle Weatherly said in a statement.
“Ultimately, we decided to 'fuel the fire' and emerge from the pandemic as leaders in the booming short-term rental space,” Weatherly said in a statement.
Frontdesk also plans to accelerate growth in its software business, Frontdesk Flex, which provides property managers with a full suite of proprietary and white-labeled technology solutions including a property management system, direct booking engine, dynamic pricing algorithm, access control, task management and more.