8 ms·
Airbnb Has Arrived: Raising Mega-Round at a $1 Billion+ Valuation
- patrickgzill 15y agoApparently $1B doesn't get you as much as it used to...
- zitterbewegung 15y agoWell due to inflation it doesn't....
- stevenj 15y ago"Don't worry about people stealing your ideas. If your ideas are any good, you'll have to ram them down people's throats." -Howard Aiken http://www.paulgraham.com/googles.html http://www.paulgraham.com/googles.html
- alex_c 15y agoCongrats to AirBnB! The way I understand it, the biggest threat to Airbnb's model are local governments starting to clamp down on this kind of (usually unlicensed?) subletting. I'm curious how the high valuation factors this risk. Of course, I suspect the high valuation means Airbnb is planning to expand to hotels and travel in general?
- olivercameron 15y agoIsn't the point of Airbnb that you don't stay in a hotel? Edit: By hotel, I mean generic hotels like Holiday Inn's. I'm just going by their mission statement: "We are a community marketplace for unique spaces".
- drm237 15y agoI assumed it was to get the best deal on a bed. If it's in a hotel room, fine with me. Some probably do it just for the experience though.
- olivercameron 15y agoI'm just saying that it doesn't sound like their goal is to have rooms in generic hotels, see their mission statement: "We are a community marketplace for unique spaces." Of course, they could expand in that direction in the future, but I wouldn't say the Holiday Inn is a unique space.
- waterlesscloud 15y agoNo, the point is to rent spaces to people. When you look at them that way, a billion may be low. I was confused when I first heard of them, I thought they were just planning to be what they are right now- spare private room rentals to travelers. But then they explicitly stated a desire to directly disrupt the moribund hotel industry by offering services that make hotel room pricing more dynamic. Hotels are dynamic now, you can almost always negotiate the rate lower, but the vast majority of people don't know that, or don't want to try. If airbnb can somehow automate a chunk of that process, there's money for every in the transaction. I think that's a hard problem, but solvable. If they also move into subletting and temporary event space and so on... Big markets.
- maxwell 15y agoI don't know about the chains, but independent boutique hotels and inns already do this.
- wtn 15y agoLots of unreported personal income as well.
- rst 15y agoTechcrunch says, "On any given night in New York there are more people staying in homes via Airbnb than there are rooms in the biggest hotel in Manhattan." For comparison: Starwood Hotels (whose brand names include Westin, W, Sheraton, and others) has more than 20 hotels in New York (some quite large), and a market cap of about $11.3 billion. FWIW, Airbnb's commissions are 9-15% of the rate (3% from the host, 6-12% from the guest) according to their hosting FAQ[1]; no idea how that compares to typical hotel profits on a room listing... [1] http://www.airbnb.com/help/topic/hosting http://www.airbnb.com/help/topic/hosting
- moses1400 15y agofyi, the Manhattan Hilton has 2,100 rooms so that means AirBNB is renting out 2,101 or more per night - thats's awesome.
- monopede 15y agoIn the video he mentions it's about 5000 per night.
- invisible 15y agoAirbnb does not have many expenses (afaik) besides payroll and low operating costs. Their profit is probably huge considering that. (Whereas a hotel must spend money on electricity for each guest, linens, toiletries, water, elevators, real estate, etc.)
- olivercameron 15y agoI think a lot of startups put too much weight on what an investor thinks of their idea. Airbnb is a prime example of carrying on in the face of rejection, even if people are saying "it's a stupid idea". I know a lot of founders who, after being told by many of the Valley's finest angels that their idea is no good, would just give up. It just goes to show that you can create a $1 billion company, even if no one really gets it in the beginning, and in my eyes at least, they are actually justifying it (making a lot of money in a lot of different places).
- IsaacL 15y agoYes, it's quite inspiring to see how much it succeeded despite the overwhelming negative feedback. Just goes to show that judging the viability of ideas is hard, no matter how many experts there always seems to be in the TechCrunch/HN peanut gallery. I've really tried to train myself to answer "do you think this is a good idea?" with "I haven't a clue."
- thaumaturgy 15y agoI don't think anyone can predict what's going to be big, and what isn't, and that's why bad VC/investor/coach advice is so pernicious. Let's look at the progression: Google shows up, makes a big splash among the tech elite but attracts little attention in the popular market until their obscene IPO, and investors collectively say, "Damn, well, I don't want to miss out on the next Google!" Then there was Facebook, and again, investors collectively say, "Damn, well, I don't want to miss out on the next Facebook!" Now there's Airbnb, and investors are saying what now? (I'm skipping over a ton of other big to almost-big examples in this progression; hopefully someone more knowledgeable will fill in some gaps, but I don't think it will diminish the point.) The thing is, Facebook wasn't the next Google and Airbnb wasn't the next Facebook. None of the breakout hits have been entirely original ideas, nor would an early-stage pitch have been compelling to anyone with the ability to be a significant early investor. There were zero signals that would have worked as a strong early indicator of future success. The more I observe this industry, the more it strikes me that any investor that's investing in the hopes of being part of The Next Big Thing is simply gambling. Just as in gambling, if you study the game and the rules carefully enough, you can tip the odds in your favor a bit, but there's still no such thing as a guaranteed win. When I hear people say, "We're looking for the next X," my eyes roll back into my head a bit.
- savrajsingh 15y agoCongrats guys! Great interview, Brian!
- JacobAldridge 15y agoFred Wilson was one of the VCs who passed on his opportunity to invest in Airbnb - his musings on that opportunity, and learning from it, are well worth a read - http://www.avc.com/a_vc/2011/03/airbnb.html http://www.avc.com/a_vc/2011/03/airbnb.html
- guynamedloren 15y agoI wonder if he's had an opportunity to invest since then?
- deleted 15y ago[deleted]
- tpatke 15y agoI bet the guys behind CouchSurfing are kicking themselves about now. http://techcrunch.com/2006/06/29/couchsurfing-deletes-itself-shuts-down/ http://techcrunch.com/2006/06/29/couchsurfing-deletes-itself... Always keep a backup of your database! :-) In this case, I think it is pretty clear the execution is worth a heck of a lot more than the idea.
- Tomek_ 15y agoDunno, maybe that's the other one but as far as I know CouchSurfing is still alive and kicking (see: http://www.couchsurfing.org http://www.couchsurfing.org - they claim to have almost 3mln users), it's just that it isn't a commercial thing.
- cheez 15y agoOuch.
- angryasian 15y agopart of their success is due to being in the echo chamber. If you view their stats pre yc, I would of questioned their success as well.
- dominostars 15y agoCouchsurfing and airbnb offer completely different services. Couchsurfing is free, and very focused on community building. It is definitely alive and kicking.
- namdnay 15y ago"I bet the guys behind CouchSurfing are kicking themselves about now." - they're not in it for the money.
- mrchess 15y agoThis might be a stupid question but what do you do after you secure such a large series of funding? Go on mass expansion? Would anyone mind telling me how startups typically use this kind of money (closing Series with 100+mil)?
- aresant 15y agoAn interesting quote from AlleyInsider on this: "They're probably going to need the money for customer acquisition. AirBnB is in the highly competitive travel space, where it's very expensive to acquire customers. From Paris, AirBnB has the top Google ad for "vacation rental", which has to be a pretty expensive click. " via http://www.businessinsider.com/airbnb-billion-funding-dst-andreessen-horowitz-2011-5 http://www.businessinsider.com/airbnb-billion-funding-dst-an...
- tptacek 15y agoBig ticket items: * Mainstream promotional marketing * Direct sales efforts (identifying target markets, staffing sales teams to pursue them) * Business model changes to ramp up customer acquisition at the expense of profitability * Rollups of related companies and acquisition of complementary companies. * International expansion * Lobbying And there's just always something to be said for having a war chest; in today's climate, if you can lock in a very long runway at favorable terms because it's obvious you have a great shot at financial success, why not? The saying goes, "when you're hitting your numbers, you're in charge; when you're not, your investors are in charge". Even with more outside investors, Airbnb probably isn't giving up control over their destiny.
- nostrademons 15y agoHiring as well. I remember that Twitter was about 25 people when I was looking for jobs in 2008, just as they'd closed their mammoth $50M+ round. They're now at 400+.
- forensic 15y agoEverything he said involves hiring.
- jpiasetz 15y agoI think this is the blog post from 2007 he references in the video http://www.core77.com/blog/events/airbed_breakfast_for_connecting_07_7715.asp http://www.core77.com/blog/events/airbed_breakfast_for_conne...
- picasso81 15y agoI can confirm this is the original blog post via Core77.
- lionhearted 15y agoCongratulations to everyone involved. This is way cool. Super inspiring.
- st3fan 15y agoWhat is their revenue? How much profit are these guys making? How big is their team?
- mtw 15y agoI'd like to know this as well (although $1 billion makes sense, they make a cut on every transaction, as opposed to Facebook which doesn't make a revenue on every customer)
- Klinky 15y agoGiven that they probably sell at least some of their advertising CPM, every new customer probably does equal more revenue. How much, not sure, but it could be pretty high when you consider how many impressions an active user will make each day.
- markbao 15y agoHuge congratulations to Airbnb. That's incredible.
- jhuckestein 15y agoAirbnb is in a prime position to expand into the market of web-based PMS (I'm not kidding -- Property Management Systems) that are super expensive and still run on old MS-DOS machines in many hotels. Give hotels a web-based solution that interfaces with hotels.com and other sites (there's a rather involved protocol that you need to license, but the name escapes me) and you're in business.
- ChuckFrank 15y agoI've been waiting for some time to call out Airbnb, and I think this is the right time. Firstly, the idea of short term residential rentals is not new. Long before Airbnb major cities, Paris, London, New York, and Toronto were dealing with the issues and the problems of short term / nightly residential rentals. In fact the latest condo boom in Toronto has been ascribed to international investors buying condos explicitly for this quasi-hotel rental market. Many cities have been passing local laws trying to prohibit this type of rental use for residences because they carry a whole host of problems. Some of those include -- emptying the downtown core of residences, artificially increasing housing costs for residents, removing the stability and security that comes from having permanent and community-invested residents, shorting cities on their hotel taxes, providing unlicensed locations for short term illicit activities, etc. So by increasing the market in these short term rentals, the communities will also feel the increase in the unfortunate side effects of these short term rental impacts. These are long term market problems that Airbnb will have to address. Secondly, it's not a new idea because in the recent past, these rentals were managed by hotel brokers. So in that respect, Airbnb major idea is simply to replace the traditional broker that used to handle the short term rentals with a direct owner to renter model. Across the internet we see great success in online services removing brokerage inefficiencies to various markets, and for this they should be congratulated, but not overly so. And finally, about their execution. Airbnb is not the market leader. In fact --http://www.vrbo.com/ http://www.vrbo.com/ is. This is what amazes me the most. Vrbo (I have no professional relationship or otherwise) regularly get better reviews in online discussion boards comparing the two services. Their price structure is much more competitive, their review structure is much more robust, in fact aside from Airbnb's more sophisticated visual design, Vrbo leads in many segment of this space. So, to what do I think Airbnb's success comes from? I think it's Airbnb's marketing / hype / buzz that has been carefully choreographed to maximize their valuation. And to this, I congratulate Airbnb on their latest success, and to a dance well done.
- suking 15y agoA little off topics, vrbo was bought by homeaway, which recently filed to go public. Their whole model was to acquire every competitor and sort of monopolize the vacation rental market. I'm guessing they've probably made an offer on airbnb, but probably too big for them now...
- hxf148 15y agoWow, congratulations.
- deleted 15y ago[deleted]
- deleted 15y ago[deleted]
- nostromo 15y agoI'm curious how well Airbnb is doing outside of New York. New York's real-estate market is so out of whack it strikes me as fertile ground for p2p hotel rooms. One example: I wonder how many people are renting out rent-controlled apartments on Airbnb at a huge profit, while the owner maintains the unit at a loss?
- kwis 15y agoIf I caught the details correctly, they state that they do as many rooms in the NYC region as the largest NYC hotel, which puts them at 2k+ rooms/night in NYC. Then I believe they claim about 5k rooms/night total, which means that >40% of their global business is NYC.
- forensic 15y agoWhen tech companies raise billions, it's a bubble. When hedge fund CEOs are paid $600 million in salary... it's a recession. Congrats to AirBnb and YC on joining the top .001% :]
- nl 15y agoRandom financial speculation: Around 5000 rooms a night get rented (via the video). The make an average of ~10% per transaction (3% from the host, the rest from the guest: http://www.airbnb.com/help/topic/hosting http://www.airbnb.com/help/topic/hosting) Say an average of $60/night. 60 * 0.1 * 5000 = $30,000 revenue/day. That's pretty decent money.
- naeem 15y agoAll things considered, this is definitely fantastic. I was watching the TechCrunch TV video of Ashton Kutcher earlier today about his surprise (at the time) investment of Air BNB. Looks like this guy really knows what he's doing when it comes to investing - skype, foursquare, not abnb. Pretty cool. Anyway, congrats to the abnb team, much deserved!
- creativeone 15y agoWhat's wrong with craigslist's vacation rentals??
- derrida 15y agoFor all the talk of bubbles, I think AirBnb is actually undervalued at $1billion. I want this noted. Before AirBnb space was being wasted. Now its being used. That is something of fundamental value. The dubious valuations are things like FourSquare, LinkedIn and GroupOn.
- tmsh 15y agoThat's true. It's also true that there are quite a few marketplaces out there that serve this same market http://www.paulgraham.com/airbnb.html http://www.paulgraham.com/airbnb.html The difference is execution. Any skilled designer (and I'm not a designer but I can respect design) would've looked at airbnb.com in the past couple of months and realized: this is different. The way Facebook was different. All those key design decisions add up and you get enough of an edge over everything else that you redefine the whole sector by making the sector suddenly interesting. Anyway, I'm biased. I stayed at an Airbnb place over this weekend and it worked great. It's bigger than EBay though, for my money. It's next generation lodging that is OOM more efficient and the flood gates are probably going to start overflooding (economy seems just right with enough consumer spending to support some trips, but enough of a groupon-appreciating eye, for more and more people, to avoid hotels where possible, etc.). I sent in my resume to airbnb after deciding to try the site (while booking a place for the night before Bay to Breakers). I didn't actually stay at a place (until this past weekend) -- but I knew that whoever created that site was way ahead of everyone. I found the answer to one of their programming challenges on the interwebs and e-mailed about it (so haven't heard back -- I expect they are pretty swarmed with interest now too). And honestly, I'm at the point where I'm not that into working for a successful startup (would just confuse things for my side projects, etc.). But I am a very happy customer. And Brian Chesky is a new kind of entrepreneurial genius (his Startup School presentation still reverberates). Cheers.
- pbreit 15y agoIt will be interesting to see how AirBnB maintains the listing quality as it scales which I would argue is currently its main advantage over VRBO, HomeAway, Craigslist, et al. These types of sites tend to devolve into a homogeny of bland, "professional" listings, hence HomeAway's boring rollup strategy. What has made AirBnB somewhat unique and appealing has been the interesting listings and the care and personality of the property owners.