Frontdesk secures $6.8 million in funding

Startup predicts changes to hospitality industry post-COVID-19

frontdesk bridge round example unit
A FrontDesk corporate rental unit.

Milwaukee-based corporate homesharing startup Frontdesk, Inc. continues to attract the attention of investors despite the travel industry’s unprecedented shakeup.

The startup just completed a $6.8 million Series A funding round in an equity and debt combination. In August of 2019, Frontdesk completed a bridge round for $2.75 million.

Frontdesk 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.

Although Frontdesk sees a lot of opportunity for new business due to the coronavirus pandemic, the company was not immune to the economic impact of COVID-19 – Frontdesk recently laid off 35 of its 241 employees, said Jesse DePinto, Frontdesk co-founder and chief product officer.

How COVID-19 has impacted the travel industry is so profound that DePinto believes the following months are critical and have the potential to reshape various segments of the hospitality industry.

Post-COVID-19, travel will look much different, which in addition to the company’s product and ability to execute, is the reason why investors are placing faith in the startup, DePinto said.

The recent funding round, DePinto admitted, was in part a measure to protect the investor’s original investment. However, the company and its investors also believe the businesses in the hospitality industry that survive the pandemic will face some of the best economic conditions on the other side.

“Before the coronavirus crisis, we always felt that we had the most supportive investors imaginable,” said Kyle Weatherly, co-founder and chief executive officer of Frontdesk. “Now we are absolutely certain of it. Not only did (investors) make good on their initial commitment, but they increased it by almost $3 million.”

Some predict that the short-term and vacation rental segment of the hospitality industry is going to fair much better following the pandemic, DePinto said. Consumers will likely favor more isolated and local vacationing such as camping, and road-tripping as opposed to tourist destinations, he said. Hotels may see less traffic with consumers avoiding tight proximity environments and exposure to potentially hundreds of transient guests, DePinto added.

“People are forecasting that short-term rentals are going to rebound faster than hotels,” DePinto said. “Our revenues in April for example has shown the same story. Our revenue has not taken nearly as big of a hit as hotels, from what we’ve seen.”

Frontdesk has carved out a niche in the short-term rental space, but they are also following the lead of Airbnb, which has crept into the long-term rental space with its product “monthly stays.” This new AirBbnb feature offers fully furnished homes for longer stays without the commitment of a long-term lease.

“This coronavirus crisis appears to be a potential catalyst for a feature digital-nomad type of movement,” DePinto said. “I think work-from-home might quickly turn into work-from-anywhere when employers feel pressure to work from home.”

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