One of the consequences of the COVID-19 pandemic is that more people have become flexible work remotelyand it meant they also had more flexibility to live where they wanted.
As a result, more and more people decided to move – temporarily or permanently – to other cities.
For the online rental market Zumper, this represented a shift in user demand. The San Francisco-based company has historically connected tenants to landlords for long-term rentals, with short-term rentals only a very small part of its business.
But in 2021, as more people began to explore other locations, Zumper saw a “significant portion” of renters looking for more flexible options, such as month-to-month or hybrid rentals.
For those not in the know, a hybrid lease is typically one to six months with no fixed contract. It can also be described as a “rolling tenancy” where tenants have short notice periods to leave.
“We saw that our users wanted more flexibility in their lives,” said CEO and co-founder Anthemos “Anth” Georgiades. “Some just want to be a nomad, and some just want to try out different areas before committing to the long term.”
Last year, Zumper had about 1 million listings and over 70 million users. Of those 70 million, about one-third were looking for short-term apartment, hotel or condo rentals, according to the data Georgiades. To better cater to this user group, Zumper today announces that the founder describes as a “revival”.
To that end, the company raised $30 million in a Series D1 funding round led by Kleiner Perkins to help it improve its product to better serve people looking for short-term rental options.
The funding was actually cut earlier this year, but is only being announced today. Goodwater, Greycroft and other unnamed investors also participated in the financing, bringing the company’s total funding to nearly $180 million.
Zumper picked up 60 million dollars series D round in March 2020. Although the latest raise is a continuation of this round, Georgiades told TechCrunch that the company saw a “significant move” in valuation. (Typically the ratings are equal as the expansion rounds go up).
The CEO declined to disclose the figure at which Zumper is currently valued, but sources familiar with the company’s inner workings told TechCrunch that it is now “over $500 million.”
He said that the money mainly went to funding product development across all of the above trends. already Zumper has added more than half a million short-term listings to meet customer demand.
Is Zumper encroaching on Airbnb territory with short-term rental push? Notably, Airbnb has also changed course during the pandemic, offering more long-term stays on its platform.
Admitting that there are “some overlaps”, Georgiades said that Zumper “Focused on helping people find a place to stay, compared to Airbnb’s focus on helping people find a place to stay, often while traveling or vacationing.”
“Airbnb has done a great job during the pandemic by providing flexible rentals,” he told TechCrunch. “We see a a slightly different approach to flexible tenancy with much lower fees for tenants and the majority of our users staying between one and six months compared to residential. I wouldn’t say we’re going to go head-to-head with Airbnb, and we’re not trying to go against them in vacation rentals, but we see an opportunity as a real rental platform to give in this flexible world a little bit different.”
Ilya Fushman, a partner at Kleiner Perkins, notes that the venture capital firm has invested in every funding round in Zumper since it was founded in 2012, starting with the $1 million seed round announced that year in two weeks public beta launch at SF Disrupt. Other supporters of this early funding included Andreessen Horowitz (a16z), NEA and Greylock.
“Finding a home is a fundamental need and must evolve with the way people live and work today,” Fushman wrote in an email. “Zumper has created a modern, highly flexible, cost-effective and high-quality inventory experience that empowers people to find better places to live.”
He went on to describe Zumper as “the first real estate marketplace to offer annual, monthly and nightly rental options in regions that people want.”
“Today’s renters are looking for mobility, flexibility and high-quality software, and Zumper delivers on all of that,” Fushman added.
Investors were attracted by what Georgiades called an “explosion” of tenant interest after the 2021 vaccination.
That explosion led to double-digit revenue growth over last year, he said.
With a self-described mission to make renting “as easy as booking a hotel,” Zumper competes with publicly traded companies such as Zillow, Apartments.com and CoStar.
The company makes money by charging apartment and single-family landlords to subscribe to its platform so that their inventory can be featured by Zumper users. For example, it works with companies like Blueground to bring its furnished apartments to more potential tenants. Although it looks like a SaaS offering, since landlords typically pay Zumper on annual contracts, Georgiades describes its long-term proposition as a “classic advertising business.” In the short-term space, it’s a bit more transactional, with the company charging at the time of rental booking an average of 10% of the booking value.
But unwilling to make the same mistake as many other companies that have seen business disruptions related to the pandemic, Zumper is not going to put all its eggs in one basket.
“Long-term rentals remain our core offering,” Georgiades said. “At the same time we absolutely convinced that flexible is here to stay. I don’t think demand will go back to where it was last year, but it’s still a massive underserved segment and no one has created a market for it, and we think it’s a big opportunity.”
The rental market is hot these days. Last week, the well-known venture capital firm Andreessen Horowitz wrote his largest individual check in historyfor $350 million, in Flow, Adam Neumann’s new rental-focused residential real estate company.