6 ms·

Airbnb Said to Pursue Valuation Above $10 Billion in New Fund-Raising Round

50 points by sohailprasad 13y ago

argumentum 13y ago
If this goes through YC's total portfolio valuation has gone from $14b to over $27b in a couple months.
dsugarman 13y ago
why not IPO? I mean I think going public is terrifying and awful, but have to exit sometime right? if you raise at >$10B you would need to IPO at >$20B no?
- grinich 13y ago
  https://en.wikipedia.org/wiki/Sarbanes–Oxley_Act https://en.wikipedia.org/wiki/Sarbanes–Oxley_Act Being a publicly traded company sucks. I imagine a lot of this financing will go to cash out early investors, providing liquidity for those who need it, while still keeping the company private. It's a common strategy with tech companies. (See Square, Uber, Dropbox, Twitter, etc.) The first major instance I remember was the $300MM DST/Yuri investment in Facebook in 2009.
- argumentum 13y ago
  Though there are drawbacks, I think there's a real good argument for AirBnB specifically to IPO. They would get a whole lot more stakeholders with skin in the game on their side. This will help in their ongoing public relations and regulatory battles.
- johnrob 13y ago
  I would think they need to sort out the lingering legal issues. You don't want to get into the area of "I raised money from public investors to run an illegal business". That's a jail time kind of offense. I'm not saying airbnb is illegal, but if the US courts turned on them I imagine it might get scary for the board and execs.
  - dsugarman 13y ago
    they provide enough value to enough people that they would never have something like that happen to them, there would be a public uproar. if they were doing something wrong in the eyes of the public, that's another case
    - mikeg8 13y ago
      yea, public uproar has been a huge deterrent on regulation in the past...
- boomzilla 13y ago
  It's easier to get a high valuation in a private round as the terms could be very favorable to investors: like 3x pref liquidation, etc. You don't need to sell the company for more than the valuation for the investors to make money. In fact they could even make money even if the company is sold for much less than the round's valuation. The only ones who are screwed are employees with common shares. Also, you can't short a private company, at least in the usual ways.
aaronapple 13y ago
I still feel like there are going to be some major regulatory changes that will eventually hit these types of businesses. What we've generally seen is cities say no, then realize how much value there is but not know what to do about it, then say yes. What we haven't seen as much is the post-yes interaction, where additional taxes and regulations get established. Should be interesting.
- sheetjs 13y ago
  That's why they aren't going public yet -- I'm sure they can fetch a much larger valuation if the problems are resolved first.
- gamblor956 13y ago
  AirBnB provides little to no value to most cities. Cities lose out on all of the taxes and revenue when someone uses AirBnB instead of a hotel. The types of people who use AirBnB are heavily price sensitive, so the lost tax revenue isn't made up by increased spending elsewhere, i.e., on goods, dining, or tourist attractions. Also, there's no need for "post-yes" for AirBnB. They already have hotel taxes and regulations (which cover everything from major chain hotels to tiny bread-and-breakfasts).
goatforce5 13y ago
As a comparison point, Expedia has a current market cap of $9.79bn: https://www.google.ca/finance?q=NASDAQ:EXPE https://www.google.ca/finance?q=NASDAQ:EXPE
- aaronapple 13y ago
  Well, yeah, but Expedia is primarily a search/booking engine, right? They aren't directly creating new, network-effect related opportunities. Much easier to innovate in that area (e.g. Hipmunk) vs. with a marketplace where scale and availability are key.
  - deleted 13y ago
    [deleted]
- deleted 13y ago
  [deleted]
bdcravens 13y ago
One day, something incredibly bad will happen. When that day comes, AirBnB is going to need a monumental war-chest.
- notlisted 13y ago
  They also need money for bigger plans/additional services. See http://www.fastcompany.com/3027107/punk-meet-rock-airbnb-brian-chesky-chip-conley http://www.fastcompany.com/3027107/punk-meet-rock-airbnb-bri... By the way, bad stuff happens all the time. I assume a lot if this doesn't make it into the press as they pay people off. Just last week: http://mashable.com/2014/03/17/airbnb-freak-fest/ http://mashable.com/2014/03/17/airbnb-freak-fest/ http://www.latimes.com/business/technology/la-fi-tn-airbnb-xxx-freak-fest-20140317,0,2616822.story#axzz2wX1rpJcI http://www.latimes.com/business/technology/la-fi-tn-airbnb-x...
  - bdcravens 13y ago
    I think they'll get hit with something huge. A fire in an apartment that takes out the complex. A rape. A death. Something that'll ding them to the order of tens of millions, or more. For one incident. Something that they can't make go away for $20K. If there's a big enough payday, it will make its way into the press, no doubt.
    - tanzam75 13y ago
      I wonder why the ambulance-chasing lawyers haven't already dinged Airbnb with class-action suits? Is the ToS really ironclad in limiting their liability? Or are they just not big enough yet that they can be counted on to settle the case? After all, class-action lawyers rarely want to go to trial. They're much happier with a settlement that leaves them with a rich payday, but has only modest benefits for the putative class members. (A $10 coupon for your next Airbnb stay!)
notlisted 13y ago
What a silly joke[1]. Though they are planning to launch additional services [2] @aaronapple below (above?) is right... regulatory changes are on the way. Right now they're violating the law, don't collect or pay local taxes unlike real hotels, don't bother with ensuring that local rules and regulations are followed. This will (and should) change soon. Hiding behind the people who rent out their spaces who are "supposed to pay local taxes" won't hold. Customer databases will need to be released to the IRS or local taxes withheld (which [2] indicates they're working on already). Once they are forced to play on a level playing field, their rates won't be as competitive and their service not as popular. [1] http://qz.com/190432/airbnb-doesnt-even-own-a-bed-but-its-backers-think-its-more-valuable-than-hyatt/ http://qz.com/190432/airbnb-doesnt-even-own-a-bed-but-its-ba... [2] http://www.fastcompany.com/3027107/punk-meet-rock-airbnb-brian-chesky-chip-conley http://www.fastcompany.com/3027107/punk-meet-rock-airbnb-bri...
- hkphooey 13y ago
  It's outrageous - no way is AirBnB "worth" more than Hyatt hotels!!! "At $10bn, Airbnb would be one of the world’s most valuable startups and worth more than than Hyatt Hotels ($8.3bn) or Wyndham Worldwide ($9.4bn)." http://www.theguardian.com/technology/2014/mar/20/airbnb-funding-talks-10bn-valuation http://www.theguardian.com/technology/2014/mar/20/airbnb-fun...
  - forrestthewoods 13y ago
    Why is that crazy? How many guests does Hyatt serve per year? How many does AirBnB serve today? How many could AirBnB serve with continued growth for the next five years? And of course the elephant in the room, how many will AirBnB serve if regulations are enforced? Also an open question of will AirBnB be commoditized and have its value spread across dozens, if not hundreds or thousands, of competitors across the globe?
    - pdq 13y ago
      HomeAway is public and worth $4 billion today. I'm pretty skeptical AirBNB is worth more than twice that.
jgalt212 13y ago
Does anyone have a good estimate on what % of AirBnB rentals are illegal (i.e. not allowed by local zoning laws) and what % are just dodging local hotel taxes?
- notlisted 13y ago
  I suspect most AirBnB rentals are illegal in NYC. Home owners who reside in the home are allowed to sublet a room, but not for less than 30 days (ie most are illegal). If the owner does not reside in the home, it's also illegal and/or zoning laws come into play. Most leases do not allow subletting of rental apartments without approval by the owner or they may face (and have faced) eviction (ie under 30 days, most are illegal as well). By the way, it's not 'just' hotel taxes/fees. Income taxes as well. In NYC, hotel taxes in NYC are about 15%, plus there are all kinds of rules an regulations that hotels need to adhere to (safety, maximum stay of 21 days, etc etc) Edit: here are the official rules - http://ny.curbed.com/archives/2013/03/25/an_introduction_to_new_yorks_short_term_rental_laws.php http://ny.curbed.com/archives/2013/03/25/an_introduction_to_...
- goodcanadian 13y ago
  OK, not a well researched estimate, but I would say close to 100%. No jurisdiction that I have lived in allowed short term rentals without jumping through a lot of hoops: zoning laws, accommodation taxes, hotel regulations, and so on.
- gamblor956 13y ago
  Outside of a small number of seasonal tourist towns, where short-term rentals are allowed or even encouraged, the types of rentals on AirBnB are overwhelming illegal. Not 100%. I would guess about 75-85% are illegal based on the small % of listings I've seen for owner-occupied AirBnB listings (which are usually okay).
brd 13y ago
It doesn't surprise me at all that AirBnB is doing another round. I'm sure they want to stay as opaque as possible while the regulatory landscape settles into place. Going public would force a lot more transparency and potentially weaken their negotiating position. As for people doubting their valuation and comparing it to hotels; keep in mind that hotels have no way to scale the way AirBnB does, nor can hotels cater to niche geographic areas the way AirBnB does. It is not a stretch to see AirBnB becoming the defacto start when searching for a place to stay and if that happens, hotels may find themselves subordinate to AirBnB.
bertil 13y ago
I’m a little confused: when Elon Musk skirts the law and dodges local concessions, most comments here argue that he is a pioneer, freeing us from evil; when AirBnB renters do, they are doing something illegal. Prohibiting any rentals between one night and a month is the result of lobbying, just like automobile concessions: either Y Combinator participants considers that laws can be changed to adapt to new business models, and that the current one (in the US) are the result of business pressures or they are not. Yes, hotels are incredibly less dodgy than car salesmen -- but still ‘illegal’ shouldn’t have a different meaning on similar debate.
- yesiamyourdad 13y ago
  Worth noting that not everyone is in favor of changing the hotel laws. Neighbors also likely dislike having short term renters. Sometimes lessors are in double violation - city and homeowners association covenants.
  - bertil 13y ago
    Absolutely — just like I’ve personally expressed doubts about not being able to tell limos apart from other cars: as a cyclist, both tend to park at random places; taxis also tend to drive more aggressively and pay less attention to side mirrors, I hope Uber drivers won't ever go that trend. Taxi rules are not just about signaling trustworthy transporters to users.

50 points by sohailprasad 13y ago

If this goes through YC's total portfolio valuation has gone from $14b to over $27b in a couple months.

why not IPO? I mean I think going public is terrifying and awful, but have to exit sometime right? if you raise at >$10B you would need to IPO at >$20B no?

grinich 13y ago
https://en.wikipedia.org/wiki/Sarbanes–Oxley_Act https://en.wikipedia.org/wiki/Sarbanes–Oxley_Act Being a publicly traded company sucks. I imagine a lot of this financing will go to cash out early investors, providing liquidity for those who need it, while still keeping the company private. It's a common strategy with tech companies. (See Square, Uber, Dropbox, Twitter, etc.) The first major instance I remember was the $300MM DST/Yuri investment in Facebook in 2009.
argumentum 13y ago
Though there are drawbacks, I think there's a real good argument for AirBnB specifically to IPO. They would get a whole lot more stakeholders with skin in the game on their side. This will help in their ongoing public relations and regulatory battles.
johnrob 13y ago
I would think they need to sort out the lingering legal issues. You don't want to get into the area of "I raised money from public investors to run an illegal business". That's a jail time kind of offense. I'm not saying airbnb is illegal, but if the US courts turned on them I imagine it might get scary for the board and execs.
- dsugarman 13y ago
  they provide enough value to enough people that they would never have something like that happen to them, there would be a public uproar. if they were doing something wrong in the eyes of the public, that's another case
  - mikeg8 13y ago
    yea, public uproar has been a huge deterrent on regulation in the past...
boomzilla 13y ago
It's easier to get a high valuation in a private round as the terms could be very favorable to investors: like 3x pref liquidation, etc. You don't need to sell the company for more than the valuation for the investors to make money. In fact they could even make money even if the company is sold for much less than the round's valuation. The only ones who are screwed are employees with common shares. Also, you can't short a private company, at least in the usual ways.

aaronapple 13y ago

I still feel like there are going to be some major regulatory changes that will eventually hit these types of businesses. What we've generally seen is cities say no, then realize how much value there is but not know what to do about it, then say yes. What we haven't seen as much is the post-yes interaction, where additional taxes and regulations get established. Should be interesting.

sheetjs 13y ago
That's why they aren't going public yet -- I'm sure they can fetch a much larger valuation if the problems are resolved first.
gamblor956 13y ago
AirBnB provides little to no value to most cities. Cities lose out on all of the taxes and revenue when someone uses AirBnB instead of a hotel. The types of people who use AirBnB are heavily price sensitive, so the lost tax revenue isn't made up by increased spending elsewhere, i.e., on goods, dining, or tourist attractions. Also, there's no need for "post-yes" for AirBnB. They already have hotel taxes and regulations (which cover everything from major chain hotels to tiny bread-and-breakfasts).

goatforce5 13y ago

As a comparison point, Expedia has a current market cap of $9.79bn: https://www.google.ca/finance?q=NASDAQ:EXPE https://www.google.ca/finance?q=NASDAQ:EXPE

aaronapple 13y ago
Well, yeah, but Expedia is primarily a search/booking engine, right? They aren't directly creating new, network-effect related opportunities. Much easier to innovate in that area (e.g. Hipmunk) vs. with a marketplace where scale and availability are key.
- deleted 13y ago
  [deleted]
deleted 13y ago
[deleted]

bdcravens 13y ago

One day, something incredibly bad will happen. When that day comes, AirBnB is going to need a monumental war-chest.

notlisted 13y ago
They also need money for bigger plans/additional services. See http://www.fastcompany.com/3027107/punk-meet-rock-airbnb-brian-chesky-chip-conley http://www.fastcompany.com/3027107/punk-meet-rock-airbnb-bri... By the way, bad stuff happens all the time. I assume a lot if this doesn't make it into the press as they pay people off. Just last week: http://mashable.com/2014/03/17/airbnb-freak-fest/ http://mashable.com/2014/03/17/airbnb-freak-fest/ http://www.latimes.com/business/technology/la-fi-tn-airbnb-xxx-freak-fest-20140317,0,2616822.story#axzz2wX1rpJcI http://www.latimes.com/business/technology/la-fi-tn-airbnb-x...
- bdcravens 13y ago
  I think they'll get hit with something huge. A fire in an apartment that takes out the complex. A rape. A death. Something that'll ding them to the order of tens of millions, or more. For one incident. Something that they can't make go away for $20K. If there's a big enough payday, it will make its way into the press, no doubt.
  - tanzam75 13y ago
    I wonder why the ambulance-chasing lawyers haven't already dinged Airbnb with class-action suits? Is the ToS really ironclad in limiting their liability? Or are they just not big enough yet that they can be counted on to settle the case? After all, class-action lawyers rarely want to go to trial. They're much happier with a settlement that leaves them with a rich payday, but has only modest benefits for the putative class members. (A $10 coupon for your next Airbnb stay!)

notlisted 13y ago

What a silly joke[1]. Though they are planning to launch additional services [2] @aaronapple below (above?) is right... regulatory changes are on the way. Right now they're violating the law, don't collect or pay local taxes unlike real hotels, don't bother with ensuring that local rules and regulations are followed. This will (and should) change soon. Hiding behind the people who rent out their spaces who are "supposed to pay local taxes" won't hold. Customer databases will need to be released to the IRS or local taxes withheld (which [2] indicates they're working on already). Once they are forced to play on a level playing field, their rates won't be as competitive and their service not as popular. [1] http://qz.com/190432/airbnb-doesnt-even-own-a-bed-but-its-backers-think-its-more-valuable-than-hyatt/ http://qz.com/190432/airbnb-doesnt-even-own-a-bed-but-its-ba... [2] http://www.fastcompany.com/3027107/punk-meet-rock-airbnb-brian-chesky-chip-conley http://www.fastcompany.com/3027107/punk-meet-rock-airbnb-bri...

hkphooey 13y ago
It's outrageous - no way is AirBnB "worth" more than Hyatt hotels!!! "At $10bn, Airbnb would be one of the world’s most valuable startups and worth more than than Hyatt Hotels ($8.3bn) or Wyndham Worldwide ($9.4bn)." http://www.theguardian.com/technology/2014/mar/20/airbnb-funding-talks-10bn-valuation http://www.theguardian.com/technology/2014/mar/20/airbnb-fun...
- forrestthewoods 13y ago
  Why is that crazy? How many guests does Hyatt serve per year? How many does AirBnB serve today? How many could AirBnB serve with continued growth for the next five years? And of course the elephant in the room, how many will AirBnB serve if regulations are enforced? Also an open question of will AirBnB be commoditized and have its value spread across dozens, if not hundreds or thousands, of competitors across the globe?
  - pdq 13y ago
    HomeAway is public and worth $4 billion today. I'm pretty skeptical AirBNB is worth more than twice that.

jgalt212 13y ago

Does anyone have a good estimate on what % of AirBnB rentals are illegal (i.e. not allowed by local zoning laws) and what % are just dodging local hotel taxes?

notlisted 13y ago
I suspect most AirBnB rentals are illegal in NYC. Home owners who reside in the home are allowed to sublet a room, but not for less than 30 days (ie most are illegal). If the owner does not reside in the home, it's also illegal and/or zoning laws come into play. Most leases do not allow subletting of rental apartments without approval by the owner or they may face (and have faced) eviction (ie under 30 days, most are illegal as well). By the way, it's not 'just' hotel taxes/fees. Income taxes as well. In NYC, hotel taxes in NYC are about 15%, plus there are all kinds of rules an regulations that hotels need to adhere to (safety, maximum stay of 21 days, etc etc) Edit: here are the official rules - http://ny.curbed.com/archives/2013/03/25/an_introduction_to_new_yorks_short_term_rental_laws.php http://ny.curbed.com/archives/2013/03/25/an_introduction_to_...
goodcanadian 13y ago
OK, not a well researched estimate, but I would say close to 100%. No jurisdiction that I have lived in allowed short term rentals without jumping through a lot of hoops: zoning laws, accommodation taxes, hotel regulations, and so on.
gamblor956 13y ago
Outside of a small number of seasonal tourist towns, where short-term rentals are allowed or even encouraged, the types of rentals on AirBnB are overwhelming illegal. Not 100%. I would guess about 75-85% are illegal based on the small % of listings I've seen for owner-occupied AirBnB listings (which are usually okay).

brd 13y ago

It doesn't surprise me at all that AirBnB is doing another round. I'm sure they want to stay as opaque as possible while the regulatory landscape settles into place. Going public would force a lot more transparency and potentially weaken their negotiating position. As for people doubting their valuation and comparing it to hotels; keep in mind that hotels have no way to scale the way AirBnB does, nor can hotels cater to niche geographic areas the way AirBnB does. It is not a stretch to see AirBnB becoming the defacto start when searching for a place to stay and if that happens, hotels may find themselves subordinate to AirBnB.

bertil 13y ago

I’m a little confused: when Elon Musk skirts the law and dodges local concessions, most comments here argue that he is a pioneer, freeing us from evil; when AirBnB renters do, they are doing something illegal. Prohibiting any rentals between one night and a month is the result of lobbying, just like automobile concessions: either Y Combinator participants considers that laws can be changed to adapt to new business models, and that the current one (in the US) are the result of business pressures or they are not. Yes, hotels are incredibly less dodgy than car salesmen -- but still ‘illegal’ shouldn’t have a different meaning on similar debate.

yesiamyourdad 13y ago
Worth noting that not everyone is in favor of changing the hotel laws. Neighbors also likely dislike having short term renters. Sometimes lessors are in double violation - city and homeowners association covenants.
- bertil 13y ago
  Absolutely — just like I’ve personally expressed doubts about not being able to tell limos apart from other cars: as a cyclist, both tend to park at random places; taxis also tend to drive more aggressively and pay less attention to side mirrors, I hope Uber drivers won't ever go that trend. Taxi rules are not just about signaling trustworthy transporters to users.