A D.C. startup that runs pop-up hotels in newly built apartment buildings has raised $20 million in Series B funding. WhyHotel announced Wednesday that it raised the funds from Harbert Growth Partners with participation from Rockville, Md.'s Camber Creek, Highland Capital Partners, Working Lab Capital, Geolo Capital, Revolution’s Rise of the Rest Seed Fund, and Mark Nunnelly, former Managing Director of Bain Capital Partners.
WhyHotel says it's now at $35 million in funding, after raising a $10 million Series A exactly a year ago. The company says it plans to use its new funds to keep expanding its operations and make new hires.
WhyHotel's corporate office in Northeast D.C. currently has just under 40 employees, CEO Jason Fudin told DC Inno, and the plan is to double that number. Adding hires for hospitality staff at the properties, Fudin says WhyHotel will likely hire 70 to 100 people in the D.C. area in the next year.
Among those hires is a senior vice president of technology joining in January. Fudin said the move is part of a plan to "lay on the tech" now that WhyHotel has been built into an operating business.
"So, while we've, over the last two and half years, been more of an innovative real estate company, we will be evolving into a company that has a deeper technical backbone as well," Fudin said.
WhyHotel makes deals with residential real estate developers as more luxury apartment buildings come up in U.S. cities. Such buildings often have large blocks of vacant rooms for months before long-term tenants move in. WhyHotel comes in to fill in the gap by furnishing around 100 to 150 rooms and offering them in lieu of traditional hotel rooms serviced by 24/7 WhyHotel staff. The units eventually get phased into apartments.
Since its inception in 2017, WhyHotel has run pop-up hotel rooms in D.C., Arlington, Va., Tysons, Va., Seattle and Baltimore. The company plans to expand into Houston, Orlando and Atlanta in the coming year.
"We wanted to make sure we got it right," Fudin said of the expansion plans. "Now that the unit economics are strong and that these deals are sustainable ... it's time to take what was done in a small cluster and push out nationally and really increase the volume."
Fudin said WhyHotel has recently been running about 300 units but that the number will grow "by a very large factor" soon.
"Our goal is, by the end of 2021, to be in most major U.S. cities, and ... our brand becoming ubiquitous with major markets," Fudin said.
WhyHotel is also working building its own properties with units that can flexibly go back and forth from being hotel rooms to apartments, depending on market conditions. The project, dubbed Hospitality Living, was announced earlier this year, and Fudin said it is expected to launch in 2022.
"One of the things that's weird about real estate is it's an apartment or it's a hotel. As in real estate historically could never be multiple things. It had to be a single asset," Fudin said. "We believe that real estate will move toward co-mingled use. So like, on a floor, that could be nightly stays, weekly stays, monthly stays or a two-year home."
Editor's note: An earlier version of this story misspelled Jason Fudin's name. It has also been updated to note the company also had a pop-up location in D.C. and that its Hospitality Living project was announced this year, not last year.
