Mid-2020, short term rental startup Lyric Hospitality farm most of its locations in what was widely seen as another pandemic casualty.
But the San Francisco company — which was there to help people struggling to choose between staying in a hotel or an Airbnb — wasn’t ready to go down without a fight. It’s spinning now the software side of his business, including a pricing tool for homes he had built, and that spinoff raised $16 million in funding.
Highgate Ventures and NEA co-led the round to Wheelhousewhich also included participation from Fifth Wall, Certares, RXR, SignalFire and PAR Capital, among others.
A lot of Words The core team regrouped and decided to focus on building what is now Wheelhouse, as the remote working environment precipitated by the COVID-19 pandemic led to more people looking for longer term rentals.
And a number of the company investors stuck with that team in the process.
Over its lifetime, Lyric had secured nearly $180 million in debt and equity. Investors included Airbnb, Tishman Speyer, RXR Realty, Obvious Ventures, SineWave, Dick Costolo and Adam Bain, Barry Sternlicht, NEA, SignalFire, Fifth Wall and Tusk Ventures.
In an interview with TechCrunch, Founder and CEO of Wheelhouse Andrew Kitchell shared details of the company’s pivot, its new funding and plans for the future.
Before the pandemic, Lyric had developed software called Wheelhouse Pro as part of its larger hotel tech stack. Additionally, Lyric also designed and managed the inventory, including the property it claims has become the #1 ranked hotel in New York..
“Sometimes I’ve described it as, “Perhaps the worst place to be in a pandemic like this was a venture-backed hospitality company focused on city-exposed business travelers,” he told TechCrunch. “We went from March 2020 to what actually seemed like record sales for us. And then literally from March 1, we just started having people cancel and occupancy dropped to 8-10% globally.
Company executives didn’t think they were in a cash position to survive the pandemic and, rather than drag things out, they reduced the workforce from 150 to 15 in mid-2020. Co-founder and president Joe Fraiman had left the company in May to pursue other opportunities. Those that remained focused their energies on developing Lyric’s underlying technology.
“When Covid hit, we were forced to shut down our operating company and focused on Wheelhouse,” Kitchell told TechCrunch. “We were able to use the software we had built for Lyric’s portfolio to improve Wheelhouse and make it more professional.”
After about 10 months of “building”, in February 2021, the team launched Wheelhouse Pro, its software designed for large wallets. With the new fundraiser, the company is “officially launching this software from Lyric,” he added.
“COVID ended up causing some really unexpected travel patterns and changes in how people stayed and traveled,” Kitchell said. “So when COVID hit, we basically made the decision to say, ‘hey, our operating company can’t survive as an OpCo, but we actually built some really cool technology that we think the next generation of hotel operators and businesses will want to operate .’ ”
With this, she changed from a B2C business to a B2B business.
Kitchell describes Wheelhouse as a “fintech platform for the $500+ billion flexible rental space” that includes pricing and financing. Think professional Airbnbs and corporate rentals. The company says its technology has been deployed for more than two years, but recently spun off from Lyric to go standalone.
“What we had built at Lyric was basically automated revenue management,” says Kitchell. “We would take over a property or house and dynamically fix it to try to help the owner earn more income. We’ve created a full suite of tools that our team has used to manage revenue from different properties. »
So what advantage can Wheelhouse bring to short and medium stay providers? Kitchell says providers “can earn 20% more money from their rental properties and can manage ‘huge and expansive portfolios’ when using the company’s technology.” In fact, some of Lyric’s former competitors are now Wheelhouse users, including venture-backed companies such as Mint House, Blackswan, Jurny and Sextant stays.
Picture credits: Wheelhouse
“We still have individual hosts and entrepreneurs with a few listings who are building their business on top of our technology and we have people with over 1,000 listings,” Kitchell said. “We work with multi-family businesses that are considering both short-term stays as part of their portfolio, as well as a fairly interesting emerging mid-length category, which can range from a 30-day stay to nine months. .”
“People are embracing flexible living,” he added. And working with a number of companies focused on mid-term stays has “significantly expanded” its total addressable market (TAM), according to Kitchell.
Wheelhouse claims to have experienced 100% overall growth over the past nine months and 45% growth in the first quarter. Its B2B business, in particular, has grown 500% to 600% over the past nine months and is now by far the fastest growing, and majority, of its business. Looking ahead, the company plans to roll out “Wheelhouse Everywhere”, which it describes as a pricing engine methodology – from 42 countries around the world.
The company plans to use its capital to “finalize” core technology inherited from Lyric, price mid-term stays, and make subscriptions.
“As larger teams continue to adopt Wheelhouse Pro, we are focused on adding features that make it easier for teams to adjust, track and communicate revenue strategies on our platform. We are also still investing in data science research to improve the ML pricing engine,” Kitchell told TechCrunch. “Underwriting for short-term rentals is difficult and requires our data and our engine.”
NEA General Partner Rick Yang first invested in Lyric in mid-2017 and has remained in close contact with the company throughout its evolution and current spin-out.
Kitchell recalls that Yang has been supportive since the start of the pandemic and immediately phoned Lyric’s management team to help them strategize when his occupancy took a dive.
“It’s quite interesting how quickly this company really understood the seriousness of the situation and was able to pull through to get to where we are today, which is such an interesting position and a lot stronger,” Yang told TechCrunch. “They’re a small team, but they make millions in ARR, and you don’t see that very often.”
Zeus Living, which raised $55 million last year, is another venture-backed company focused on enterprise flexible rental space. It was initially focused only on business travelers, but now also offers flexible rentals to the general population by partnering with landlords. Airbnb has also invested in this startup.
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