Contxto – As Airbnb’s IPO hangs in the balance, another hospitality startup is also being hit hard by the coronavirus’ (Covid-19) effects on global tourism. Panamanian Selina is struggling to find capital to fuel its upcoming operations and plans.
Documents recovered by media outlet The Real Deal this week suggest that Selina is ambitious in the amount it wants to obtain in financing from investors. Moreover, the startup has high expectations of itself in terms of growth and achieving profitability.
The problem is that there are overall low expectations for its target market within the next couple of months.
No doubt many of the startup’s potential customers have paused their spring break and summer plans. They and many across the world are holding our breath that the pandemic eases up soon.
Plus, investors aren’t too fond nowadays of pitches that sound like WeWork’s, and in Selina they’re finding some familiar patterns.
Buddies for its business model
Selina’s business model requires partners (investors) for the acquisition of run down real estate properties. After the purchase, the startup and investors share the cost of flipping the property.
The startup doesn’t own the locations but it does manage them and subleases them to its target market “digital nomads.” These wanderers are basically people who want to travel the world but also have access to cool coworking spaces. And that’s just what Selina offers.
In exchange for their financial support, it signs leases with its investors.
Selina, expectations versus reality?
According to sources, the startup is after a US$75 million convertible loan to cover for its operational costs up until 2021. Yoav Gery, the startup’s President, stated that the deal for this loan should be closed by the end of March.
In any case, since last year it’s been seeking investors for a US$500 million real estate investment fund. But many months later, it appears there haven’t been any (disclosed) takers.
As far as numbers go the startup assures investors its revenue will grow from US$70 million this year to US$2 billion by 2024 and it will even reach profitability by 2022.
I really do hope it works out for Selina. Working and traveling the world immersed in adventurous experiences is the dream of any millennial.
Unfortunately, we’re all waking up to a new reality.
A recession is right around the corner (in some ways it’s already arrived) and investors are probably wary of anything that’s linked or sounds like WeWork’s business model and its disgraced former CEO, Adam Neumann. who is also one of Selina’s previous investors.
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