6 ms·

Imagine if every Airbnb host had the option of having 5-10% of their earning withheld and used to purchase equity. You'd have a lot of regular people (that help

by staunch 11y ago

Imagine if every Airbnb host had the option of having 5-10% of their earning withheld and used to purchase equity. You'd have a lot of regular people (that helped build the business!) receiving a windfall, instead of a few rich jagoffs getting a bit richer. And on the downside there would be no serious harm. IPOs are finished. Crowdfunding with equity can't come soon enough.

dopamean 11y ago
What reason would Airbnb have to do this?
- staunch 11y ago
  Why not? The financial terms could be roughly identical. Having your users be your stockholders seems like a huge advantage in a lot of ways.
  - foobarqux 11y ago
    > The financial terms could be roughly identical. In what way would giving away shares to employees be the same as keeping them as an asset of the company?
    - staunch 11y ago
      They're already going to sell the equity to someone. Airbnb could sell equity to its users instead of private equity groups.
  - jdoliner 11y ago
    Companies generally expect to get a lot more than just money from their early investors. This is definitely a nifty idea for giving people an incentive to participate in a nascent 2 sided market. However it's not quite a no brainer as you're describing, there are trade offs here.
  - deleted 11y ago
    [deleted]
- baudehlo 11y ago
  Maybe it's just the right thing to do. When VA Linux IPO'd they let everyone who had contributed in some way to their open source distribution into the family and friends plan. I was one of them and managed to re-pay my mum for lending me the deposit on my mortgage. Note that I don't think you can classify it as a bad example just because LNUX was a spectacular failure after the IPO. The F&F situation had nothing to do with their failure. Sometimes it's just good to help the people who helped you build a business.
  - deleted 11y ago
    [deleted]
oh_sigh 11y ago
Why don't you start a FairBNB.com that does exactly this?
- staunch 11y ago
  I think this idea could work for most startups, not just Airbnb.
- Avitas 11y ago
  Given how gigantic this market is, that's a pretty common occurance (i.e., starting a property/vacation rental/related site). There's already plenty of other big players like HA, VRBO, FK, TA, rent and countless others. There's even giants that doing this that are not fully devoted to short-term rentals and vacation stuff like CL. That doen't even touch on the devoted timeshare and timeshare-related stuff. Or, how many convenient insurance companies can you think of that will underwrite policies for these shot-term renters? There's just so much opportunity in this field....
birken 11y ago
You don't need crowdfunding, this is literally the purpose of the public markets. Regular people can invest in the company (by purchasing shares), and the market ensures they can buy/sell shares in a fair way. Also there is still a lot of risk involved for these private investors, this isn't just free money. Just ask all the Facebook private investors who bought shares for $40, when you or I could have bought them for $20 a year later post-IPO.
- staunch 11y ago
  Public markets don't give regular people anything. At best it lets middle and upper class people pick off the left overs that Goldman Sachs & Co can't figure out how to take for themselves. I'm talking about giving the first 1,000 Airbnb users equity at angel prices. That's how you get life changing multiples for very small tech investors.
  - birken 11y ago
    This isn't how investing works. You can't just hand wave a situation in which one of the most successful tech companies ever should have offered its early shares to more people. If you went back to the early days of AirBNB and told the early members they could either have the $1,000 from renting their room or .01% of AirBNB's stock, almost all of them are going to take the $1,000. Tons of VCs passed on AirBNB because they thought it was a bad investment. I'm not against crowdfunding, I think it is great. But to pretend that angel investing is some sort of easy money is ridiculous. Companies like AirBNB which are successful are incredibly rare. Most companies fail and return nothing. Valuations for companies have also gone way up and there is no way to know whether investing now is actually a good deal or not. That is the point of investing, you are hoping for additional returns by taking more risk.
    - staunch 11y ago
      > This isn't how investing works. You're no authority on "how investing works", so consider expressing your personal opinions in a less arrogant way. It's hard to imagine why you think VCs not understanding Airbnb's potential means that the actual users of Airbnb didn't understand it. I absolutely believe many of the early hosts would have elected to have 5% or 10% of their earnings turned into stock certificates. And of course, I'm talking about future companies that fit the Airbnb profile. Users will be wrong and lose money, but you're wrong if you think regular people can't predict successful companies earlier and better than VCs. They're the ones that actually pick who wins in the market after all.
myared 11y ago
Correct me if I wrong, but wouldn't this force Airbnb to have to start filing financial reports once they exceed a certain number of shareholders? I imagine they rather these limited shareholder spots go to bigger investors.
- deleted 11y ago
  [deleted]
- erichurkman 11y ago
  Doubtful. There's a lot of tools available now to avoid limits. The JOBS Act (2012) increased the limit and gave additional carve outs to 2,000 shareholders or 500 un-accredited investors. All of AirBNB's new shareholders are accredited investors – it's not like they are taking angel or friends-and-family funding at this stage. Also, employees that exercise their option grants are not generally counted anymore toward these limits – it's considered part of their compensation benefit.
  - arkem 11y ago
    Would the average AirBNB host be an accredited investor? Also, I hadn't heard that employee grants are not considered towards the investor limit, is it just that holding options doesn't make you an investor or is it more than that? Can you point me towards some reading material? Edit: It looks like "Shareholder's of record" as defined in the JOBS Act might exclude employee incentive share programs (as long as those plans were exempt from registration under the Securities Act... not that I know what that means) Edit2: See erichurkman's links.
    - chowwesley 11y ago
      Employee option grants don't count. However, if they exercise and tern them into actual stock units, I believe they do count.
      - arkem 11y ago
        Turns out the JOBS Act specifically exempts employee stock plan recipients from the 500 (or 2000) shareholder count.
dylanjermiah 11y ago
They could if all their hosts had a net worth of 1 million. The arbitrary number set by the state to see if a person is 'smart' or not.
- deleted 11y ago
  [deleted]
akg_67 11y ago
Due to restrictions on maximum number of shareholders while private to avoid SEC filing requirements, Airbnb can't issue equity to all their hosts. But there is no reason, they can't do the same if and when they IPO to go public. Last December, Lending Club did this, LC allowed purchase of up to 250 shares at IPO price to each of its retail lenders.
- jedberg 11y ago
  They would probably place them all in a syndicate to avoid that problem. They would technically be holders in the syndicate not AirBnB itself.
  - akg_67 11y ago
    IIRC, SEC is not very kind to such arrangements.
Permit 11y ago
How do your Airbnb hosts exit their positions? Who do they sell to? The more I think this through, the less sense I think it would make. 1. VCs won't buy tiny quantities of equity from these hosts. 2. If they're expected to sell to other individuals, you've essentially recreated the stock market. 3. If they're expected to wait until Airbnb IPOs, well Airbnb now has even less reason to IPO. They can finance in such a way that they can sell equity, but no one else can ever sell equity.
- deleted 11y ago
  [deleted]
JesperRavn 11y ago
Anytime your argument relies on "instead of a few rich jagoffs getting a bit richer" you are basically making an argument for tax. And whatever you are proposing is going to be much less efficient than the actual taxation system, or at least the income/capital gains part.
CoffeeDregs 11y ago
Imagine if every Airbnb host had the option of having 5-10% of their earning withheld and used to purchase equity. Imagine if the rankings of your listing reflected your selection of equity preference... [This is a Thing, not a dystopian speculation.] Crowdfunding with equity can't come soon enough. What do you think IPOs were? Putting aside the craziness of the dotcom boom, this is basically what the public markets were doing 15 years ago. Sarbox fixed some of the dotcom issues and, basically, blew up the sub $1B equity market. As you note, the markets can manage this process provided they receive information, return and risk which are correlated with stage. We don't need a special term for this. We just need the regulatory burdens to be consistent with the levels of societal harm and to prevent faddish uni-portfolios.
deleted 11y ago
[deleted]

by staunch 11y ago

dopamean 11y ago

What reason would Airbnb have to do this?

staunch 11y ago
Why not? The financial terms could be roughly identical. Having your users be your stockholders seems like a huge advantage in a lot of ways.
- foobarqux 11y ago
  > The financial terms could be roughly identical. In what way would giving away shares to employees be the same as keeping them as an asset of the company?
  - staunch 11y ago
    They're already going to sell the equity to someone. Airbnb could sell equity to its users instead of private equity groups.
- jdoliner 11y ago
  Companies generally expect to get a lot more than just money from their early investors. This is definitely a nifty idea for giving people an incentive to participate in a nascent 2 sided market. However it's not quite a no brainer as you're describing, there are trade offs here.
- deleted 11y ago
  [deleted]
baudehlo 11y ago
Maybe it's just the right thing to do. When VA Linux IPO'd they let everyone who had contributed in some way to their open source distribution into the family and friends plan. I was one of them and managed to re-pay my mum for lending me the deposit on my mortgage. Note that I don't think you can classify it as a bad example just because LNUX was a spectacular failure after the IPO. The F&F situation had nothing to do with their failure. Sometimes it's just good to help the people who helped you build a business.
- deleted 11y ago
  [deleted]

oh_sigh 11y ago

Why don't you start a FairBNB.com that does exactly this?

staunch 11y ago
I think this idea could work for most startups, not just Airbnb.
Avitas 11y ago
Given how gigantic this market is, that's a pretty common occurance (i.e., starting a property/vacation rental/related site). There's already plenty of other big players like HA, VRBO, FK, TA, rent and countless others. There's even giants that doing this that are not fully devoted to short-term rentals and vacation stuff like CL. That doen't even touch on the devoted timeshare and timeshare-related stuff. Or, how many convenient insurance companies can you think of that will underwrite policies for these shot-term renters? There's just so much opportunity in this field....

birken 11y ago

You don't need crowdfunding, this is literally the purpose of the public markets. Regular people can invest in the company (by purchasing shares), and the market ensures they can buy/sell shares in a fair way. Also there is still a lot of risk involved for these private investors, this isn't just free money. Just ask all the Facebook private investors who bought shares for $40, when you or I could have bought them for $20 a year later post-IPO.

staunch 11y ago
Public markets don't give regular people anything. At best it lets middle and upper class people pick off the left overs that Goldman Sachs & Co can't figure out how to take for themselves. I'm talking about giving the first 1,000 Airbnb users equity at angel prices. That's how you get life changing multiples for very small tech investors.
- birken 11y ago
  This isn't how investing works. You can't just hand wave a situation in which one of the most successful tech companies ever should have offered its early shares to more people. If you went back to the early days of AirBNB and told the early members they could either have the $1,000 from renting their room or .01% of AirBNB's stock, almost all of them are going to take the $1,000. Tons of VCs passed on AirBNB because they thought it was a bad investment. I'm not against crowdfunding, I think it is great. But to pretend that angel investing is some sort of easy money is ridiculous. Companies like AirBNB which are successful are incredibly rare. Most companies fail and return nothing. Valuations for companies have also gone way up and there is no way to know whether investing now is actually a good deal or not. That is the point of investing, you are hoping for additional returns by taking more risk.
  - staunch 11y ago
    > This isn't how investing works. You're no authority on "how investing works", so consider expressing your personal opinions in a less arrogant way. It's hard to imagine why you think VCs not understanding Airbnb's potential means that the actual users of Airbnb didn't understand it. I absolutely believe many of the early hosts would have elected to have 5% or 10% of their earnings turned into stock certificates. And of course, I'm talking about future companies that fit the Airbnb profile. Users will be wrong and lose money, but you're wrong if you think regular people can't predict successful companies earlier and better than VCs. They're the ones that actually pick who wins in the market after all.

myared 11y ago

Correct me if I wrong, but wouldn't this force Airbnb to have to start filing financial reports once they exceed a certain number of shareholders? I imagine they rather these limited shareholder spots go to bigger investors.

deleted 11y ago
[deleted]
erichurkman 11y ago
Doubtful. There's a lot of tools available now to avoid limits. The JOBS Act (2012) increased the limit and gave additional carve outs to 2,000 shareholders or 500 un-accredited investors. All of AirBNB's new shareholders are accredited investors – it's not like they are taking angel or friends-and-family funding at this stage. Also, employees that exercise their option grants are not generally counted anymore toward these limits – it's considered part of their compensation benefit.
- arkem 11y ago
  Would the average AirBNB host be an accredited investor? Also, I hadn't heard that employee grants are not considered towards the investor limit, is it just that holding options doesn't make you an investor or is it more than that? Can you point me towards some reading material? Edit: It looks like "Shareholder's of record" as defined in the JOBS Act might exclude employee incentive share programs (as long as those plans were exempt from registration under the Securities Act... not that I know what that means) Edit2: See erichurkman's links.
  - chowwesley 11y ago
    Employee option grants don't count. However, if they exercise and tern them into actual stock units, I believe they do count.
    - arkem 11y ago
      Turns out the JOBS Act specifically exempts employee stock plan recipients from the 500 (or 2000) shareholder count.

dylanjermiah 11y ago

They could if all their hosts had a net worth of 1 million. The arbitrary number set by the state to see if a person is 'smart' or not.

deleted 11y ago
[deleted]

akg_67 11y ago

Due to restrictions on maximum number of shareholders while private to avoid SEC filing requirements, Airbnb can't issue equity to all their hosts. But there is no reason, they can't do the same if and when they IPO to go public. Last December, Lending Club did this, LC allowed purchase of up to 250 shares at IPO price to each of its retail lenders.

jedberg 11y ago
They would probably place them all in a syndicate to avoid that problem. They would technically be holders in the syndicate not AirBnB itself.
- akg_67 11y ago
  IIRC, SEC is not very kind to such arrangements.

Permit 11y ago

How do your Airbnb hosts exit their positions? Who do they sell to? The more I think this through, the less sense I think it would make. 1. VCs won't buy tiny quantities of equity from these hosts. 2. If they're expected to sell to other individuals, you've essentially recreated the stock market. 3. If they're expected to wait until Airbnb IPOs, well Airbnb now has even less reason to IPO. They can finance in such a way that they can sell equity, but no one else can ever sell equity.

deleted 11y ago
[deleted]

JesperRavn 11y ago

Anytime your argument relies on "instead of a few rich jagoffs getting a bit richer" you are basically making an argument for tax. And whatever you are proposing is going to be much less efficient than the actual taxation system, or at least the income/capital gains part.

CoffeeDregs 11y ago

Imagine if every Airbnb host had the option of having 5-10% of their earning withheld and used to purchase equity. Imagine if the rankings of your listing reflected your selection of equity preference... [This is a Thing, not a dystopian speculation.] Crowdfunding with equity can't come soon enough. What do you think IPOs were? Putting aside the craziness of the dotcom boom, this is basically what the public markets were doing 15 years ago. Sarbox fixed some of the dotcom issues and, basically, blew up the sub $1B equity market. As you note, the markets can manage this process provided they receive information, return and risk which are correlated with stage. We don't need a special term for this. We just need the regulatory burdens to be consistent with the levels of societal harm and to prevent faddish uni-portfolios.

deleted 11y ago

[deleted]