On Wednesday, short-term rental startup Lyric announced it closed $160 million in Series B funding to bring its highly curated rental spaces to new markets across the United States.
Airbnb led the round, and other participants include a who’s who of tech and real estate investors, including Tishman Speyer, RXR Realty, Obvious Ventures, SineWave, former Twitter CEO Dick Costolo, former Twitter COO Adam Bain, Starwood Capital Group CEO Barry Sternlicht, NEA, SignalFire, FifthWall and Tusk Ventures.
Lyric actually operates the spaces it rents out — in contrast to Airbnb’s existing marketplace, which largely consists of individual owners listing their own homes and apartments. The company prides itself on its aesthetically-pleasing living spaces, aimed at business travelers.
Currently operating in 13 cities, Lyric tries to design each space to reflect the city it’s in, and works with local businesses and coffee shops to make each space feel a little different, cofounder and CEO Andrew Kitchell told Business Insider.
“The idea that short term rentals are just for backpackers and bachelor parties is wrong,” said Kitchell. “And, actually, business travelers are increasingly looking for spaces like this and we can develop and maintain them.”
Airbnb, now a Lyric investor, is famous for its early philosophy of asking forgiveness, rather than permission, as it entered new markets. However, Kitchell says that Lyric is going with a different tactic: It approaches the owners of multi-family developments before opening up shop, and either leases or buys space straight from the developer, so that nobody is caught by surprise and everybody is happy with the arrangement.
Kitchell says that with this investment, Airbnb will bring legal expertise that Lyric will need, as its growth will inevitably present new regulatory and legal challenges.
“Traditionally the tech world and the real estate world have not gone hand in hand and that’s been something we’ve been working really hard the last 3 years to kinda show how it could be done right,” said Joe Fraiman, president and cofounder of Lyric. “We want to show how we could be a great partner to real estate teams while still providing fantastic supply to the short term rental ecosystem while doing it in a totally compliant way.”
Kitchell believes that Lyric represents a new category of real estate — something that isn’t quite a hotel, but not quite the same as staying in someone else’s apartment via Airbnb.
The need for experience-based travel, as Kitchell and Fraiman explain it, was popularized by millennials who now make up close to half of all business travel expenses — but other customers were quick to catch on. Kitchell said the team is exploring the possibility of adding a loyalty program to compete with more traditional hotel chains.
“We think some of the competitive moats we’ve built around data and software and some of the operations pieces give us an opportunity to create a lot of change,” said Kitchell. “We have a pretty strong opinion about where the space goes and that’s really valuable.”
Kitchell and Fraiman said Lyric is not currently looking at an exit, saying the two are “having too much fun” to hand the reins over to other management.
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