Startup Lyric is shutting down most of its business travel rental locations as its cofounder and … [+]
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Lyric, a short-term rental startup that raised $180 million from Airbnb and other investors, has shuttered all but one of its locations, making it the latest travel company to be defeated by the Covid-19 pandemic.
San Francisco-based Lyric will now shift focus to software tools including an existing pricing tool for accommodation, two people familiar with the matter tell Forbes. With the move, Lyric is now all but abandoning its initial mission of providing furnished short-term rental units to business travelers. Lyric and CEO Andrew Kitchell did not immediately respond to requests for comment.
Lyric has also quietly undergone a leadership shakeup. Co-founder and president Joe Fraiman confirmed to Forbes that he left the company on Wednesday. “Change in the industry is going to create new opportunity, and I want to go after it,” Fraiman said. Asked whether Lyric will exist in a year, he added: “in today’s environment, I think predicting the future a year out is hard.”
Lyric’s effective shutdown as a rental business is a drastic fall for a company once seen as a rising star in the category. Launched in 2014, Lyric leased full floors in apartment buildings and then rented out furnished units to business travelers, a customer base it focused on as Airbnb dominated the general traveler market. At the start of 2019, Lyric operated more than 400 units in 22 locations across 13 cities.
Big investors were sold on Lyric’s pitch of disrupting the business travel space — and the startup had found an ally in Airbnb, which led Lyric’s most recent funding round in April 2019. The $160 million raise was split between equity and debt and had been intended to drive growth and expand the number of Lyric’s locations. Additional investors included well-known players in real estate and venture capital including Tishman Speyer, RXR Realty, Barry Sternlicht, NEA, SignalFire, FifthWall and Tusk Ventures.
Lyric is not alone in its struggles among hospitality startups, which have been battered as a category by the arrival of the Covid-19 pandemic and the drying up of most travel. Airbnb was forced to raise $2 billion in debt to ensure the survival of its global vacation business. Sonder, a short-term rental rival of Lyric, received a $170 million lifeline in June, months after laying off a third of its staff. Others have closed altogether, including Stay Alfred, which shut its doors in May.
But even before the Covid-19 pandemic arrived in the United States, there were signs of trouble at Lyric. It reportedly failed to meet 2019 revenue targets, and then laid off 20% of staff in February. As the impact of the pandemic on the hospitality industry became clear, Lyric laid off close to 100 employees in March.
Lyric’s future now looks bleak. While it remains unclear whether the company will keep its sole remaining location open, at 70 Pine Street in Manhattan, the startup’s fate now depends on a pivot to selling technology. At present, that largely means finding customers for a pricing tool called Wheelhouse that calculates room bookings. Lyric is working on other tools, according to two people with knowledge of the matter, but details on those remain unclear.
Fraiman, Lyric’s departed cofounder, says he plans to launch a new business in the real estate tech category in the future. His departure became urgent, he says, after a medical issue in his family.
And despite death tolls rising again amid forecasts of a feared second wave of Covid-19 cases in the U.S., Lyric’s cofounder says he believes the worst of the pandemic has passed, and that the hospitality sector is still ripe for a comeback.“There have been other hospitality startups that have had to close their doors,” Fraiman says. “Lyric has not.” At least for now.