7 ms·

Airbnb Raises $555M in Funding

61 points by alexkehr 10y ago

palakchokshi 10y ago
Someone please correct me if I'm wrong in assuming this but it seems a company like AirBnb would only raise private capital instead of going IPO because it's financials suck. I mean if you were doing really well and had profits that you were pumping back into the company you would want to IPO to raise money for lower dilution right? A private round might cause much more dilution than an IPO. Maybe I'm missing something.
- deleted 10y ago
  [deleted]
- aetherson 10y ago
  Welllll.... there are hassles associated with being a public company beyond merely "people holding your feet to the fire of financials." You have to comply with Sarbanes-Oxley, which is just a real pain in the ass, for example (source: I worked for NetSuite as they went public, and coming into compliance with SarbOx was a bunch of work). A private funding round with a limited controlled equity buyback from employees gives you a certain amount of control that going public does not, too -- a company like AirBnB that had a broadly successful IPO would presumably mint a ton of millionaires among their employees, and I would expect to see a substantial talent drain once that happened. But yes, I assume that "financials aren't in great shape" is the majority explanation for AirBnB's failure to go public.
  - forthefuture 10y ago
    Even accepting all of those things, if the company was profitable and had anything in the war chest they wouldn't have to take more funding. They're either getting capital for war or survival which means what they have now isn't enough for either.
    - GreenPlastic 10y ago
      Or capital is cheap and it doesn't hurt to raise it while you can.
      - deleted 10y ago
        [deleted]
      - deleted 10y ago
        [deleted]
      - ethanbond 10y ago
        So strange how everyone seems to agree there's at least a bit of inflation of VC funding if not an outright bubble, yet no one seems to see why this might induce a company to take as much cheap cash as it can for the impending winter.
    - mrgordon 10y ago
      A lot of their fundraising is for partnerships. For example, their previous round was mostly large Asian investors who could help Airbnb continue to grow internationally
- hkmurakami 10y ago
  Dilution is a function of valuation and amount raised. Assuming they'd raise the same amount from public or private markets, valuation is the only factor in question. It is not a given that public markets would price Airbnb higher than private markets. In fact, recent history suggests that the opposite often happens. So no, IPOing is not necessarily less dilutive. Also, since their valuation is $20B+, dilution differences are a rounding error.
- deleted 10y ago
  [deleted]
- jdoliner 10y ago
  The standard operating practice for Silicon Valley startups now is to put of IPOing as long as possible. Facebook actually got several exceptions from the SEC so that they didn't have to go public. Going public entails a ton of hassle, for example if Airbnb went public and had one of their programmers accidentally introduced a bug that misreported the number of users they had they could be liable for fraud. There's very little benefit to going public except that it creates a market for the stock which gives employees liquidity. However public markets are actually pretty crappy for that too because in order to avoid insider trading employees are often confined to a narrow window of time when they can sell their stock. Because they are lots of employees who want to convert their stock into money to but things this window gets flooded with sellers and employees wind up getting 80 cents on the dollar compared to other stock holders. So yeah, you are missing something. Public markets are basically strictly worse than private investors. Also it's not like there are a bunch of private investors waiting to write $555M checks to company's whose financials suck... how could that make any sense?
  - vkou 10y ago
    > Because they are lots of employees who want to convert their stock into money to but things this window gets flooded with sellers and employees wind up getting 80 cents on the dollar compared to other stock holders. I receive stock in compensation. I have elected to auto-sell it - this works even during trade window freezes. Alternatively, they may end up getting 120 cents on the dollar, compared to other stock holders, if the stock rose in price between the time that other insiders could sell, and the time that employees could sell. If the company's on an upwards trajectory, this is quite likely. > Also it's not like there are a bunch of private investors waiting to write $555M checks to company's whose financials suck... how could that make any sense? https://en.wikipedia.org/wiki/Pets.com https://en.wikipedia.org/wiki/Pets.com
    - jdoliner 10y ago
      > I receive stock in compensation. I have elected to auto-sell it - this works even during trade window freezes. I don't think this works for employees who were already granted a huge chunk of stock pre IPO.
- jasonwilk 10y ago
  Not entirely. As you know, public companies fluctuate heavily on other factors than just financial news. Something like a summary judgment in New York or California that negatively impacts AirBnB's business could send it for a spiral. It is likely more responsible to stay private until they feel they have solid footing with the regulatory environment. Private investors are clearly willing to give them a huge valuation knowing these events will likely turn out to be positive, and as long as employees are able to get liquidity, might as well stay private for now. They do seem to be spending aggressively on growth (and legal) so I suspect you are half right in that they are probably losing a lot of money.
- urazen 10y ago
  IPO is a one-time event. You gotta wait for the best perfect timing. I don't think its financial suck. It might not be the best shape at this moment.
- pbreit 10y ago
  Dilution would be about the same and it's only low-mid single digits which no one is worrying about. The financial are important (and by most/all accounts, AirBnB's are impressive) but there are a number of other implications of IPOing, mainly around severe restrictions of how the business is run.
_RPM 10y ago
Hey Airbnb founders/employees. Fuck you. Working for you isn't rocket science, so fuck you and all your elitist attitudes not even considering me for employment because I didn't go to Harvard|Stanford|Insert Top 10 school here.
- 1_listerine_pls 10y ago
  How true is this?
  - deleted 10y ago
    [deleted]
  - dominotw 10y ago
    Happened to me too. I thought it might have been an exception or some sort of a fuck up. They called me all the way to SFO to tell me that my degree is not from elite schools so I can go home. No not in some sort of an indirect way, like right to my face. The interviewer asked me where I went to school, made a face told me 'oh not from a top university?' .
- buckbova 10y ago
  I been there, getting rejected for what amounts to a CRUD job because I didn't have the right pedigree. Shake it off and move on.
  - eric_h 10y ago
    From what I can tell from comment history, the GP is quite young and still in school. While I learned a long time ago that a degree (and even a master's degree, can't speak to fresh PhDs as I've not had the opportunity to work with any) from a prestigious university is not worth the paper it's printed on as far as judging someone's ability to actually ship good code, it seems that lots of SV firms hiring people right out of college think it is. It's foolish on the part of said firms, but the answer is to take a job at a company that's not a "unicorn" and build up experience (and proof of experience, e.g. shipped products) such that one's "pedigree" is fucking irrelevant. Honestly, if the job was just a CRUD job, and you're fresh out of college, you don't fucking want it. You need to get out of your comfort zone if you want good experience.
pritianka 10y ago
It's interesting they are offering employees the option to cash out. I wonder if that's usual?
- holman 10y ago
  It's becoming fairly normal at this point for more mature private companies, from what I can tell. If you've been at a company for 4-7 years with no IPO in sight, it can make some sense for the company to do a buyback. I know Uber has a tenure-based buyback program, Palantir did at least one in the last year or so, etc.
  - linkregister 10y ago
    From the rumors I have heard, the Palantir buy-back is limited. My understanding is that most folks with options still haven't exercised the majority of them.
- arkem 10y ago
  A company I worked for did the same, they raised some money and used some of it to purchase a portion of the employees' vested equity. In other cases the company's major investors were willing to tender to purchase employee equity to increase their stake.
ameyamk 10y ago
Why airbnb needs so much cash? They are not exactly subsidizing either side of the market?
- shostack 10y ago
  Massive legal and lobbyist fees?
  - clydethefrog 10y ago
    Yes, they also need the money to fund their lobbying and fake grassroots. One campaign cost 8 million. https://www.fastcompany.com/3059975/how-airbnb-turned-its-hosts-into-political-foot-soldiers https://www.fastcompany.com/3059975/how-airbnb-turned-its-ho...
    - mangeletti 10y ago
      > ... and fake grassroots Indeed. Btw, funny thing: fake grassroots is called "astroturfing".
      - friendlygrammar 10y ago
        wow, I never actually thought about why it's called astroturfing
- hkmurakami 10y ago
  Personnel costs and marketing costs as they expand to new markets. Further experimentation with vertical integration (Airbnb owning room servicing teams, or Airbnb owning actual apartments/hotels).
  - toomanybeersies 10y ago
    > Airbnb owning actual apartments/hotels Wouldn't that just make them literally a hotel chain, with no disrupting difference to any any other? I'm fairly sure I can book a room online at the Hilton.
skhnpnb 10y ago
Fuck you airbnb, what a bunch of assholes.
- sctb 10y ago
  You can't comment like this here. https://news.ycombinator.com/newsguidelines.html https://news.ycombinator.com/newsguidelines.html
throwaway12344 10y ago
It's so their founders can keep their wealth in the family. They grew up from upper middle class families, so they have a duty to themselves and the world to pass down large amounts of wealth. They also would want higher net worth so they can get tax benefits from donating to charity and in return it makes them look like they are so generous when in reality they couldn't care less about anyone else but themselves. They have their cake and eat it too, because the press will glamorize them for their "philanthropy"
- dang 10y ago
  I'm not sure what's driving this comment but it breaks the HN guidelines. Please stop creating accounts to break the HN guidelines with (we've banned this one, since it did so twice already). We detached this comment from https://news.ycombinator.com/item?id=12560765 https://news.ycombinator.com/item?id=12560765 and marked it off-topic.
gm-conspiracy 10y ago
Anybody know its previous valuation before the $555M?
- mtmail 10y ago
  Article from June 2016 reported it as $25.5 billion http://www.bloomberg.com/news/articles/2016-06-16/airbnb-said-to-get-1-billion-debt-facility-from-big-u-s-banks http://www.bloomberg.com/news/articles/2016-06-16/airbnb-sai...

61 points by alexkehr 10y ago

Someone please correct me if I'm wrong in assuming this but it seems a company like AirBnb would only raise private capital instead of going IPO because it's financials suck. I mean if you were doing really well and had profits that you were pumping back into the company you would want to IPO to raise money for lower dilution right? A private round might cause much more dilution than an IPO. Maybe I'm missing something.

deleted 10y ago
[deleted]
aetherson 10y ago
Welllll.... there are hassles associated with being a public company beyond merely "people holding your feet to the fire of financials." You have to comply with Sarbanes-Oxley, which is just a real pain in the ass, for example (source: I worked for NetSuite as they went public, and coming into compliance with SarbOx was a bunch of work). A private funding round with a limited controlled equity buyback from employees gives you a certain amount of control that going public does not, too -- a company like AirBnB that had a broadly successful IPO would presumably mint a ton of millionaires among their employees, and I would expect to see a substantial talent drain once that happened. But yes, I assume that "financials aren't in great shape" is the majority explanation for AirBnB's failure to go public.
- forthefuture 10y ago
  Even accepting all of those things, if the company was profitable and had anything in the war chest they wouldn't have to take more funding. They're either getting capital for war or survival which means what they have now isn't enough for either.
  - GreenPlastic 10y ago
    Or capital is cheap and it doesn't hurt to raise it while you can.
    - deleted 10y ago
      [deleted]
    - deleted 10y ago
      [deleted]
    - ethanbond 10y ago
      So strange how everyone seems to agree there's at least a bit of inflation of VC funding if not an outright bubble, yet no one seems to see why this might induce a company to take as much cheap cash as it can for the impending winter.
  - mrgordon 10y ago
    A lot of their fundraising is for partnerships. For example, their previous round was mostly large Asian investors who could help Airbnb continue to grow internationally
hkmurakami 10y ago
Dilution is a function of valuation and amount raised. Assuming they'd raise the same amount from public or private markets, valuation is the only factor in question. It is not a given that public markets would price Airbnb higher than private markets. In fact, recent history suggests that the opposite often happens. So no, IPOing is not necessarily less dilutive. Also, since their valuation is $20B+, dilution differences are a rounding error.
deleted 10y ago
[deleted]
jdoliner 10y ago
The standard operating practice for Silicon Valley startups now is to put of IPOing as long as possible. Facebook actually got several exceptions from the SEC so that they didn't have to go public. Going public entails a ton of hassle, for example if Airbnb went public and had one of their programmers accidentally introduced a bug that misreported the number of users they had they could be liable for fraud. There's very little benefit to going public except that it creates a market for the stock which gives employees liquidity. However public markets are actually pretty crappy for that too because in order to avoid insider trading employees are often confined to a narrow window of time when they can sell their stock. Because they are lots of employees who want to convert their stock into money to but things this window gets flooded with sellers and employees wind up getting 80 cents on the dollar compared to other stock holders. So yeah, you are missing something. Public markets are basically strictly worse than private investors. Also it's not like there are a bunch of private investors waiting to write $555M checks to company's whose financials suck... how could that make any sense?
- vkou 10y ago
  > Because they are lots of employees who want to convert their stock into money to but things this window gets flooded with sellers and employees wind up getting 80 cents on the dollar compared to other stock holders. I receive stock in compensation. I have elected to auto-sell it - this works even during trade window freezes. Alternatively, they may end up getting 120 cents on the dollar, compared to other stock holders, if the stock rose in price between the time that other insiders could sell, and the time that employees could sell. If the company's on an upwards trajectory, this is quite likely. > Also it's not like there are a bunch of private investors waiting to write $555M checks to company's whose financials suck... how could that make any sense? https://en.wikipedia.org/wiki/Pets.com https://en.wikipedia.org/wiki/Pets.com
  - jdoliner 10y ago
    > I receive stock in compensation. I have elected to auto-sell it - this works even during trade window freezes. I don't think this works for employees who were already granted a huge chunk of stock pre IPO.
jasonwilk 10y ago
Not entirely. As you know, public companies fluctuate heavily on other factors than just financial news. Something like a summary judgment in New York or California that negatively impacts AirBnB's business could send it for a spiral. It is likely more responsible to stay private until they feel they have solid footing with the regulatory environment. Private investors are clearly willing to give them a huge valuation knowing these events will likely turn out to be positive, and as long as employees are able to get liquidity, might as well stay private for now. They do seem to be spending aggressively on growth (and legal) so I suspect you are half right in that they are probably losing a lot of money.
urazen 10y ago
IPO is a one-time event. You gotta wait for the best perfect timing. I don't think its financial suck. It might not be the best shape at this moment.
pbreit 10y ago
Dilution would be about the same and it's only low-mid single digits which no one is worrying about. The financial are important (and by most/all accounts, AirBnB's are impressive) but there are a number of other implications of IPOing, mainly around severe restrictions of how the business is run.

_RPM 10y ago

Hey Airbnb founders/employees. Fuck you. Working for you isn't rocket science, so fuck you and all your elitist attitudes not even considering me for employment because I didn't go to Harvard|Stanford|Insert Top 10 school here.

1_listerine_pls 10y ago
How true is this?
- deleted 10y ago
  [deleted]
- dominotw 10y ago
  Happened to me too. I thought it might have been an exception or some sort of a fuck up. They called me all the way to SFO to tell me that my degree is not from elite schools so I can go home. No not in some sort of an indirect way, like right to my face. The interviewer asked me where I went to school, made a face told me 'oh not from a top university?' .
buckbova 10y ago
I been there, getting rejected for what amounts to a CRUD job because I didn't have the right pedigree. Shake it off and move on.
- eric_h 10y ago
  From what I can tell from comment history, the GP is quite young and still in school. While I learned a long time ago that a degree (and even a master's degree, can't speak to fresh PhDs as I've not had the opportunity to work with any) from a prestigious university is not worth the paper it's printed on as far as judging someone's ability to actually ship good code, it seems that lots of SV firms hiring people right out of college think it is. It's foolish on the part of said firms, but the answer is to take a job at a company that's not a "unicorn" and build up experience (and proof of experience, e.g. shipped products) such that one's "pedigree" is fucking irrelevant. Honestly, if the job was just a CRUD job, and you're fresh out of college, you don't fucking want it. You need to get out of your comfort zone if you want good experience.

pritianka 10y ago

It's interesting they are offering employees the option to cash out. I wonder if that's usual?

holman 10y ago
It's becoming fairly normal at this point for more mature private companies, from what I can tell. If you've been at a company for 4-7 years with no IPO in sight, it can make some sense for the company to do a buyback. I know Uber has a tenure-based buyback program, Palantir did at least one in the last year or so, etc.
- linkregister 10y ago
  From the rumors I have heard, the Palantir buy-back is limited. My understanding is that most folks with options still haven't exercised the majority of them.
arkem 10y ago
A company I worked for did the same, they raised some money and used some of it to purchase a portion of the employees' vested equity. In other cases the company's major investors were willing to tender to purchase employee equity to increase their stake.

ameyamk 10y ago

Why airbnb needs so much cash? They are not exactly subsidizing either side of the market?

shostack 10y ago
Massive legal and lobbyist fees?
- clydethefrog 10y ago
  Yes, they also need the money to fund their lobbying and fake grassroots. One campaign cost 8 million. https://www.fastcompany.com/3059975/how-airbnb-turned-its-hosts-into-political-foot-soldiers https://www.fastcompany.com/3059975/how-airbnb-turned-its-ho...
  - mangeletti 10y ago
    > ... and fake grassroots Indeed. Btw, funny thing: fake grassroots is called "astroturfing".
    - friendlygrammar 10y ago
      wow, I never actually thought about why it's called astroturfing
hkmurakami 10y ago
Personnel costs and marketing costs as they expand to new markets. Further experimentation with vertical integration (Airbnb owning room servicing teams, or Airbnb owning actual apartments/hotels).
- toomanybeersies 10y ago
  > Airbnb owning actual apartments/hotels Wouldn't that just make them literally a hotel chain, with no disrupting difference to any any other? I'm fairly sure I can book a room online at the Hilton.

skhnpnb 10y ago

Fuck you airbnb, what a bunch of assholes.

sctb 10y ago
You can't comment like this here. https://news.ycombinator.com/newsguidelines.html https://news.ycombinator.com/newsguidelines.html

throwaway12344 10y ago

It's so their founders can keep their wealth in the family. They grew up from upper middle class families, so they have a duty to themselves and the world to pass down large amounts of wealth. They also would want higher net worth so they can get tax benefits from donating to charity and in return it makes them look like they are so generous when in reality they couldn't care less about anyone else but themselves. They have their cake and eat it too, because the press will glamorize them for their "philanthropy"

dang 10y ago
I'm not sure what's driving this comment but it breaks the HN guidelines. Please stop creating accounts to break the HN guidelines with (we've banned this one, since it did so twice already). We detached this comment from https://news.ycombinator.com/item?id=12560765 https://news.ycombinator.com/item?id=12560765 and marked it off-topic.

gm-conspiracy 10y ago

Anybody know its previous valuation before the $555M?

mtmail 10y ago
Article from June 2016 reported it as $25.5 billion http://www.bloomberg.com/news/articles/2016-06-16/airbnb-said-to-get-1-billion-debt-facility-from-big-u-s-banks http://www.bloomberg.com/news/articles/2016-06-16/airbnb-sai...