8 ms·

Airbnb Raises Over $100M as It Touts Strong Growth

37 points by coloneltcb 11y ago

skizm 11y ago
No paywall: http://on.wsj.com/1Ojvrh6 http://on.wsj.com/1Ojvrh6
- tedmiston 11y ago
  FWIW also no paywall if you save to Instapaper.
bosdev 11y ago
Raising $100M at a $25B valuation means someone paid $100M for a .4% stake in AirBnB, which is both surprising and amazing to me. This does ignore whatever preference and specialized terms the stakeholders were given. And of course, the buyers aren't necessarily saying they think the company is worth $25B, they are saying they believe the market will value it at more than $25B at some point in the future.
- hartard 11y ago
  Your last statement is not necessarily true. That's the funny thing about startup valuations; they are not an apples-to-apples comparison to a public market. In fact, a savvy investor may be willing to invest $100M at a $25B valuation knowing full well there will never be a liquidation event worth $25B. It all depends on the deal terms (preferences, ratchets, etc.). It's entirely rational to invest $XM at $YB valuation when your deal terms stipulate a minimum return of ($XM * 1.25), regardless of valuation.
  - jacquesm 11y ago
    Which leads to the conclusion that without knowledge of the terms of the deal it is a bit of a weird thing to value the entire company based on that deal. Because such a deal should be discounted based on the terms not applying equally to the rest of the shares already created.
    - mason55 11y ago
      "AirBnB raises $100m which gives them an unknown valuation due to the complex financial terms of the deal" just doesn't draw as many clicks on your story
- tedmiston 11y ago
  My first reaction was the 37signals prank a few years ago: PRESS RELEASE: 37SIGNALS VALUATION TOPS $100 BILLION AFTER BOLD VC INVESTMENT [1] 1: https://signalvnoise.com/posts/1941-press-release-37signals-valuation-tops-100-billion-after-bold-vc-investment https://signalvnoise.com/posts/1941-press-release-37signals-...
staunch 11y ago
Airbnb is a great company but they seem unnecessarily greedy. They shouldn't allow people to rent out apartments without neighbor consent. They should limit the number of days that people can rent their homes. And they shouldn't allow companies to operate dozens of Airbnb locations as de facto hotels. These are the kinds of reasonable regulations that will happen to them eventually, if they don't put constraints on themselves.
- Jormundir 11y ago
  Why? Your "shoulds" sound like arbitrary rules to make some people comfortable at other peoples' expense.
  - nrb 11y ago
    The flip side is also true, the lack of "arbitrary" rules are sometimes making airbnb guests comfortable at the expense of neighbors/communities. Isn't it the case he's making that there should be sensible middle ground?
    - toomuchtodo 11y ago
      At some point, we're going to need to decide what's more important: tech startup revenue/profits or quality of life.
      - grossvogel 11y ago
        Unfortunately there are two different concepts of "we" at play. The "we" who get pushed out of our neighborhoods by tourism-driven rent increases will most certainly not be the "we" who decide what's more important.
        toomuchtodo 11y ago
        The "we" who votes is most important.
        11y ago
ogezi 11y ago
This seems strange. Maybe a single investor wanted to get in pretty badly.
tyre 11y ago
1) This is a press release from a PR person in the company. There is no "person familiar with the matter" who is willing to risk their reputation and career to leak internal metrics of the company. 2) This is a follow-on to their last round of funding, not a separate capital raise. The valuation did not change. They likely had an interested party that missed the boat, got nervous about being left out, and agree to the same terms. Little distraction for the company + money at known terms + small stake (.4%) + press = #yes. 3) AirBnB takes a 15% cut on bookings. A stable company might have a price/earnings ratio of 5x. So for them to have a $25 billion valuation, that's $5 billion in revenue or $33 billion in bookings. That means they would need to grow ~24.5x their current size (either without raising again or raising at the same valuation) to justify this. According to an industry association[1], sales in 2013 for all lodging in the US was $163 billion. Yes international, but that's for the largest GDP in the world and there are non-zero costs in marketing/sales/regulation/data security to entering other markets. [1]: https://www.ahla.com/content.aspx?id=36332 https://www.ahla.com/content.aspx?id=36332 EDIT - I was wrong about the fee, thank you richiezc!
- richiezc 11y ago
  2) Agree, this is likely the case 3) From the article: "Airbnb generates revenue by taking a 3% cut of each booking along with a 6% to 12% service fee from guests. Based on the third-quarter numbers, it appears the company is collecting a maximum fee from guests, with revenue running at about 15% of bookings."
  - tyre 11y ago
    I was wrong about the revenue they make on bookings, thanks for pointing that out. That's closer to reality, but the numbers still feel aggressive. Along with the earlier $1 billion, they need to turn that into $24 billion in revenue.
- riggins 11y ago
  1. "A stable company might have a price/earnings ratio of 5x" You're way off on PE's. The Shiller PE is 26* right now. P/E moves inversely with interest rates. With rates around 1% (i.e. driving up P/E's) only distressed companies trade at 5x P/E ratios. 2. "AirBnB takes a 3% cut on transactions" You overlooked 2/3 of their revenue. "Airbnb generates revenue by taking a 3% cut of each booking along with a 6% to 12% service fee from guests" 3. "for them to have a $25 billion valuation, that's $5 billion in revenue or $167 billion in bookings" The relevant data is in the article. Note they made $340 on $2.2B of bookings (about %15 of bookings). "Airbnb generated $340 million of revenue in the third quarter, on bookings of $2.2 billion". You can just annualize that. Current run rate revenue is ~$1.4B. Current run rate bookings are ~$8.8B. I don't have an opinion on the valuation but I can understand how they could be worth $25B. Airbnb's incremental cost for processing customers is probably close to zero. If they double bookings again, they'd double top line revenue ~$3B. I could easily see $1B of that flowing to the bottom line. Also there are network effects/customer captivity at play that bode well for the long term. What do I mean? It would be hard to create a competitor to Airbnb because no one wants to establish their reputation on more that 1 platform (same under-appreciated advantage Ebay has). *http://www.multpl.com/shiller-pe/ http://www.multpl.com/shiller-pe/
troels 11y ago
I don't understand. What would they need that kind of money for at this point? Surely they are raking in lots of revenue?
- strebler 11y ago
  > This year, Airbnb expects an operating loss of about $150 million

37 points by coloneltcb 11y ago

skizm 11y ago

No paywall: http://on.wsj.com/1Ojvrh6 http://on.wsj.com/1Ojvrh6

tedmiston 11y ago
FWIW also no paywall if you save to Instapaper.

bosdev 11y ago

Raising $100M at a $25B valuation means someone paid $100M for a .4% stake in AirBnB, which is both surprising and amazing to me. This does ignore whatever preference and specialized terms the stakeholders were given. And of course, the buyers aren't necessarily saying they think the company is worth $25B, they are saying they believe the market will value it at more than $25B at some point in the future.

hartard 11y ago
Your last statement is not necessarily true. That's the funny thing about startup valuations; they are not an apples-to-apples comparison to a public market. In fact, a savvy investor may be willing to invest $100M at a $25B valuation knowing full well there will never be a liquidation event worth $25B. It all depends on the deal terms (preferences, ratchets, etc.). It's entirely rational to invest $XM at $YB valuation when your deal terms stipulate a minimum return of ($XM * 1.25), regardless of valuation.
- jacquesm 11y ago
  Which leads to the conclusion that without knowledge of the terms of the deal it is a bit of a weird thing to value the entire company based on that deal. Because such a deal should be discounted based on the terms not applying equally to the rest of the shares already created.
  - mason55 11y ago
    "AirBnB raises $100m which gives them an unknown valuation due to the complex financial terms of the deal" just doesn't draw as many clicks on your story
tedmiston 11y ago
My first reaction was the 37signals prank a few years ago: PRESS RELEASE: 37SIGNALS VALUATION TOPS $100 BILLION AFTER BOLD VC INVESTMENT [1] 1: https://signalvnoise.com/posts/1941-press-release-37signals-valuation-tops-100-billion-after-bold-vc-investment https://signalvnoise.com/posts/1941-press-release-37signals-...

staunch 11y ago

Airbnb is a great company but they seem unnecessarily greedy. They shouldn't allow people to rent out apartments without neighbor consent. They should limit the number of days that people can rent their homes. And they shouldn't allow companies to operate dozens of Airbnb locations as de facto hotels. These are the kinds of reasonable regulations that will happen to them eventually, if they don't put constraints on themselves.

Jormundir 11y ago
Why? Your "shoulds" sound like arbitrary rules to make some people comfortable at other peoples' expense.
- nrb 11y ago
  The flip side is also true, the lack of "arbitrary" rules are sometimes making airbnb guests comfortable at the expense of neighbors/communities. Isn't it the case he's making that there should be sensible middle ground?
  - toomuchtodo 11y ago
    At some point, we're going to need to decide what's more important: tech startup revenue/profits or quality of life.
    - grossvogel 11y ago
      Unfortunately there are two different concepts of "we" at play. The "we" who get pushed out of our neighborhoods by tourism-driven rent increases will most certainly not be the "we" who decide what's more important.
      - toomuchtodo 11y ago
        The "we" who votes is most important.
      - 11y ago

ogezi 11y ago

This seems strange. Maybe a single investor wanted to get in pretty badly.

tyre 11y ago

1) This is a press release from a PR person in the company. There is no "person familiar with the matter" who is willing to risk their reputation and career to leak internal metrics of the company. 2) This is a follow-on to their last round of funding, not a separate capital raise. The valuation did not change. They likely had an interested party that missed the boat, got nervous about being left out, and agree to the same terms. Little distraction for the company + money at known terms + small stake (.4%) + press = #yes. 3) AirBnB takes a 15% cut on bookings. A stable company might have a price/earnings ratio of 5x. So for them to have a $25 billion valuation, that's $5 billion in revenue or $33 billion in bookings. That means they would need to grow ~24.5x their current size (either without raising again or raising at the same valuation) to justify this. According to an industry association[1], sales in 2013 for all lodging in the US was $163 billion. Yes international, but that's for the largest GDP in the world and there are non-zero costs in marketing/sales/regulation/data security to entering other markets. [1]: https://www.ahla.com/content.aspx?id=36332 https://www.ahla.com/content.aspx?id=36332 EDIT - I was wrong about the fee, thank you richiezc!

richiezc 11y ago
2) Agree, this is likely the case 3) From the article: "Airbnb generates revenue by taking a 3% cut of each booking along with a 6% to 12% service fee from guests. Based on the third-quarter numbers, it appears the company is collecting a maximum fee from guests, with revenue running at about 15% of bookings."
- tyre 11y ago
  I was wrong about the revenue they make on bookings, thanks for pointing that out. That's closer to reality, but the numbers still feel aggressive. Along with the earlier $1 billion, they need to turn that into $24 billion in revenue.
riggins 11y ago
1. "A stable company might have a price/earnings ratio of 5x" You're way off on PE's. The Shiller PE is 26* right now. P/E moves inversely with interest rates. With rates around 1% (i.e. driving up P/E's) only distressed companies trade at 5x P/E ratios. 2. "AirBnB takes a 3% cut on transactions" You overlooked 2/3 of their revenue. "Airbnb generates revenue by taking a 3% cut of each booking along with a 6% to 12% service fee from guests" 3. "for them to have a $25 billion valuation, that's $5 billion in revenue or $167 billion in bookings" The relevant data is in the article. Note they made $340 on $2.2B of bookings (about %15 of bookings). "Airbnb generated $340 million of revenue in the third quarter, on bookings of $2.2 billion". You can just annualize that. Current run rate revenue is ~$1.4B. Current run rate bookings are ~$8.8B. I don't have an opinion on the valuation but I can understand how they could be worth $25B. Airbnb's incremental cost for processing customers is probably close to zero. If they double bookings again, they'd double top line revenue ~$3B. I could easily see $1B of that flowing to the bottom line. Also there are network effects/customer captivity at play that bode well for the long term. What do I mean? It would be hard to create a competitor to Airbnb because no one wants to establish their reputation on more that 1 platform (same under-appreciated advantage Ebay has). *http://www.multpl.com/shiller-pe/ http://www.multpl.com/shiller-pe/

troels 11y ago

I don't understand. What would they need that kind of money for at this point? Surely they are raking in lots of revenue?

strebler 11y ago
> This year, Airbnb expects an operating loss of about $150 million