By mid-2020, short term rental startup Lyric Hospitality closed most of its locations in what was widely seen as another pandemic victim.
But the San Francisco company — which was ready to help people struggling to decide between staying in a hotel or an Airbnb — wasn’t ready to go down without a fight. Now it’s spinning out the software side of her business, including a pricing tool for accommodations she built, and this spinout raised $16 million in funding.
Highgate Ventures and NEA co-led the round of wheelhousewhich also had the participation of Fifth Wall, Certares, RXR, SignalFire and PAR Capital, among others.
Much of Lyric’s core team regrouped and decided to focus on building what is now Wheelhouse, as the remote work environment precipitated by the COVID-19 pandemic has driven more people to seek long-term rentals.
And several companies investors stayed with this team in the process.
Over its lifetime, Lyric has 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 financing and plans for the future.
Before the pandemic, Lyric had developed software called Wheelhouse Pro as part of its larger hospitality technology stack. In addition, Lyric also designed and managed the inventory, including the property that became the #1 rated hotel in New York City..
“Sometimes I’d describe it like, ‘Maybe the worst place to be in a pandemic like this is a venture-backed hospitality company focused on corporate travelers with urban exposure,'” he told TechCrunch. “We went through March 2020 with what really looked like it was going to be record revenue for us. And then literally starting March 1st, we started having people canceling and occupancy dropped to 8-10% globally.”
Company executives did not believe they were in a cash position to survive the pandemic, and instead of dragging things out, they reduced the number of employees from 150 to 15 in mid-2020. Co-founder and chairman Joe Fraiman left the company in May to look for other opportunities. Those who remained focused their energies on building Lyric’s underlying technology.
“When Covid hit, we were forced to close our operating company and shifted our focus to Wheelhouse,” Kitchell told TechCrunch. “We were able to use the software we built for the Lyric portfolio to make Wheelhouse better and more professional.”
After about 10 months of “building”, in February 2021 the team released Wheelhouse Pro, their software designed for large portfolios. With the new fundraiser, the company is “formally unbundling this software from Lyric,” he added.
“COVID ended up causing some really unexpected travel patterns and changes in the way people stayed and traveled,” Kitchell said. “So when COVID hit, we basically made the decision to say, ‘Hey, our operations company can’t survive as an OpCo, but we’ve actually built some really interesting technology that we think the next generation of operators and hospitality companies will want. leverage .’ ”
With that, it went from a B2C company to also a B2B company.
Kitchell describes Wheelhouse as a “fintech platform for the more than $500 billion flexible rental space” that includes pricing and financing. Think professional Airbnbs and corporate rentals. The company says its technology was deployed more than two years ago, but only recently parted ways with Lyric to be on its own.
“What we built into Lyric was basically automated revenue management,” explains Kitchell. “We would take over a property or a house and dynamically price it to try to help the owner get more revenue. We’ve built a complete set of tools that our team has leveraged to manage revenue across different properties.”
So what benefit can Wheelhouse bring to short and mid-stay providers? Kitchell claims providers “can make 20% more money from their rental properties and can manage “huge, sprawling portfolios” when using the company’s technology. In fact, some of Lyric’s former competitors are now Wheelhouse users, including venture capital backed companies such as Mint House, Blackswan, Jurny and Sextant Stays.
“We still have individual hosts and entrepreneurs with a few listings that build their businesses on our technology, and we have people with over 1,000 listings,” Kitchell said. “We work with multi-family companies that are looking at short-term stays as part of their portfolio and also a very interesting emerging medium-term category, which can range from 30 days to nine months.”
“People are embracing flexible living,” he added. AND working with several companies focused on medium-term stays “greatly expanded” their total addressable market (TAM), according to Kitchell.
Wheelhouse says it has experienced 100% overall growth over the past nine months and 45% growth in the first quarter. Their B2B business in particular has seen 500% to 600% growth in the last nine months and is now by far the fastest growing and is the majority of their business. Looking ahead, the company plans to launch “Wheelhouse Everywhere”, which it describes as a pricing engine methodology – from 42 countries around the world.
The company plans to use its capital to “finish” the core technology it inherited from Lyric, price mid-range stays and take out some underwriting.
“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 about revenue strategies on our platform. We also always invest in data science research to improve the ML pricing engine,” Kitchell told TechCrunch. “Short-term lease underwriting is challenging and requires our data and 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 spinout.
Kitchell recalls that Yang was supportive from the start of the pandemic and immediately called Lyric’s executive team to help them strategize when their occupancy dropped.
“It’s very interesting to see how quickly this company really understood the gravity of the situation and was able to come out of it to find us where we are today, which is such an interesting position and much stronger,” Yang told TechCrunch. “It’s a small team, but it’s making millions of ARR, and you don’t see that very often.”
Another venture capital firm focused on corporate flexible rental space is Zeus Living, which raised $55 million last year. It was initially focused only on business travelers, but now it also offers flexible rentals for the general population, in partnership with the owners. Airbnb also invested in this startup.