
Airbnb Files to Raise $850M at $30B Valuation - tekacs
http://www.bloomberg.com/news/articles/2016-08-05/airbnb-files-to-raise-850-million-at-30-billion-valuation
======
aerovistae
Not the first time this has been remarked here, but wow at these companies
just continuing to raise more and more money over and over. When does it stop?

I mean, I don't fault Tesla because I know exactly what they're doing:
enormous capital expenditures like factories and stores.

What does a website platform need _$850 million more for_?

~~~
williamscales
Lobbying, I would assume. Airbnb has met a lot of legal opposition lately.
They are dealing with regulations in jurisdictions all over the world. I guess
that takes a lot of cash.

~~~
zitterbewegung
Google in total spends $16M in the US for lobbyists in the US and they want
self driving car litigation. This seems like it would be used for more than
lobbying .

~~~
skrebbel
No, _they 'd like_ self driving car litigation.

Airbnb _needs_ liberal rent-out-your-home litigation

~~~
artursapek
rent-out-your-apartment* litigation. Afaik the only case where people have
issues with AirBNB is in buildings with shared entrances/hallways.

~~~
jgorn
Absolutely not the case.

Here in Australia city and state hospitality organisations are very vocal in
opposition to airbnb. The usual argument is why should they be paying to meet
licensing/safety requirements when airbnb hosts can rent out their home
without regulation. I'd guess 90%+ of these premises are standalone homes.

In my city the local council just announced plans to limit a property to 42
nights of airbnb per year, or face significant fines. Not sure it'll stick.

~~~
artursapek
Thanks, didn't know that. Speaking from my own experience living in cities
like Philly and NYC.

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spaceflunky
I'm late to the party, but here's what bothers me about Airbnb: It's being
treated like a technology company and not what it is, a retail company. Which
is bad because wall street hates retail, but not as much as venture capital
hates retail. And when people are delusion thats when mistakes are made.

Look at this way, Airbnb is a broker for rental inventory that __they never
own or control __. Since they don 't actually control the inventory, the owner
of the inventory is free to take it anywhere they want. Airbnb has no secret
sauce.

This leaves Airbnb's business totally unprotected and vulnerable to an
unlimited number of competitors coming up. Eventually Airbnb will make a
mistake, maybe they'll push hosts too far, maybe some catastrophic thing will
happen to a guest, the point is something will happen that will shift favor to
a competitor. Maybe not tomorrow or next year, but someday.

But it gets worse, Airbnb is going to spend a lot of their vc funds fighting
lawsuits, lobbying, and paving the way for their __competitors __. If I were
to compete with Airbnb, I 'd spend my time building a better platform and
marketing strategy. Then wait for Airbnb to solve short-term rental
legislation, then slip into those markets with a far lower cost to entry than
Airbnb paid.

But what about technology you say? They've built a great platform that will
take time for a competitor to replicate you say. Well if your business defense
is solely based on having a complicated website, you're going to have a bad
time.

They've hit on a great idea: home sharing. But they don't own the idea, they
don't own the homes and those homes are free to list anywhere they want.

~~~
dispatcher68
There is an entire blog dedicated to the topic of tech at Airbnb:
[http://nerds.airbnb.com/](http://nerds.airbnb.com/). Perhaps you will still
feel the same after reading this?

Peter Thiel's Zero To One described four pillars that were necessary for a
monopoly. It appears Airbnb has most if not all of these.

1\. Network effects - this is usually more important than proprietary tech.
They have this - global network effect. This is not a "retail company" any
more than Amazon's 3rd party marketplace or Alibaba's is.

2\. Tech - read blog and decide for yourself. It's easy to imagine at sub-
scale also being able to build Facebook, Instagram, Snapchat, etc. Most of the
challenges come at scale (and are protected by #1 above).

3\. Brand - the commenters seem to agree they have this.

4\. Economies of scale - they have this.

~~~
ethanbond
Why does everyone think that a competitor must be able to operate at the scale
of Uber/Airbnb the day it's released? How many taxi commissions thought "oh no
one can dethrone us, no one has 10,000 cars!"

~~~
thesimpsons1022
Because I travel to paris one week and new york the other and seattle the
other. If the listings aren't at all those places I discard the app and never
use it again.

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cft
Correct me if I am wrong, but the infusions of cash into startups of this
scale are probably historically unprecedented. If this is true, then nobody
really knows what the outcome of this is going to be for the companies that
appear sound: AirBnB, Uber, as well as for the whole Silicon Valley startup
ecosystem. It may well destroy it for good.

~~~
ryporter
Investors are not blindly giving these companies cash (insert tired Theranos
joke here). They see far more information we do, and they do more due
diligence than most investors do in publicly traded companies, including (and
especially) during the first dot-com bubble. That ended rather
catastrophically, and Silicon Valley was never in danger of being "destroyed
for good."

~~~
cft
Fundamentally, the underlying inspiration for these huge infusions is debt. On
the microeconomic scale, it will take a long time for Airbnb to generate
$3.5bn in profit, that has already been put into it. On the macro scale, tens
of trillions of US debt make zero interest rates possible, which in turn
creates a lot of fake money looking for returns on investment.

~~~
ryporter
Fundamentally, the underlying inspiration is the growth of these companies.
The fact that interest rates are so low, and that investors are chasing yield
elsewhere, helps to enable it. However, these deals would still happen even if
debt were more expensive. On the other hand, if the company weren't showing
promising growth, then the deals would not happen.

~~~
cft
Good luck!

------
meritt
It's not that they need the money so much as investors want a piece of the
pie, so why not? Going public just introduces a lot of paperwork and red tape.
Uber is following the same path.

~~~
mooreds
Ah, the IPO standoff: [http://avc.com/2016/04/the-ipo-
standoff/](http://avc.com/2016/04/the-ipo-standoff/)

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genmon
Airbnb recently announced they have a hardware and software design lab...
Maybe they're planning to introduce new strands to the business and that's
what this money is for? [http://www.fastcodesign.com/3062246/an-exclusive-
look-at-air...](http://www.fastcodesign.com/3062246/an-exclusive-look-at-
airbnbs-first-foray-into-urban-planning)

------
jtchang
Airbnb might be trying to take on the entire travel industry. It's not that
insane to raise this much capital if they wanted to try their hand at EXPE or
HST's market.

~~~
notahacker
It does seem insane to invest at a notional valuation of double Expedia's
market cap (or nearly four times Sabre's) to try to build a business that can
compete with them though...

------
sna1l
I like that the article says that Airbnb has showed restraint by ONLY raising
$3.2 billion dollars.

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Tiktaalik
Airbnb is currently under intense scrutiny in Vancouver as the city is
struggling with a 0.6% (!!) vacancy rate. Some studies have suggested that
around 70% of Airbnb Vancouver revenue comes from commercial operators that
permanently rent out their condo units as a sort of hotel[1]. The city is
studying the issue and seems in my opinion quite keen and ready to take action
to end these sort of wholly commercially Airbnb operations. Airbnb would
likely only be allowed for casual, infrequent renting.

Cities love to copy one another. Going forward it seems likely that if
Vancouver is able to end extensive commercial renting on Airbnb, other cities
would adopt the same approach.

If commercial operations are as important to Airbnb's revenue as these studies
suggest, this would be a very significant change for the company. They'd have
to grow quite a bit to make up for this.

[1] [http://www.theglobeandmail.com/news/british-
columbia/vancouv...](http://www.theglobeandmail.com/news/british-
columbia/vancouvers-top-airbnb-earners-are-commercial-hosts-
research/article30324477/)

------
Tarrosion
For a company to be worth $30B* it must either be making a lot of money or
have extremely high probability of extremely high future earnings. Given that,
if they need cash, why not just take a loan? Both lenders and investors suffer
risk of default/company blows up, but only investors suffer a risk of "company
is worth a lot, just not as much as we thought." Given that, investors should
demand higher returns. So a company worth $30B should surely prefer to take
loans rather than issuing equity, right?

Apparently not - what am I missing?

* I'm not convinced, but for the sake of argument...

~~~
Mahn
You should consider that:

a) The company can always go tits up at any moment without prior warning,
however unlikely it appears to be now. A loan will always be riskier for the
founders (personal liability) even if they are printing money right now.

b) Investors want a shot at making 10x or 100x, even if that means a lot more
risk. Handing a loan is safer, but you only get to make 1.4x at best; that's
not the game they want to play.

~~~
mattkrause
> A loan will always be riskier for the founders (personal liability)

Can you explain? I thought that a major advantage of incorporation (rather
than a sole proprietorship or parternship) was that corporate debts are
separated from personal debts, so the investors (including founders) would
only be liable for money actually invested in the company.

~~~
Mahn
That's typically the case, but if you take a business loan from an old school
bank, the bank will usually ask the founders to sign with personal liability
on top, regardless the company status. It's a different kind of deal because
with a loan the bank doesn't get to own a share of the company, so their
profits depend exclusively on the company not going out of business until the
loan + interest are paid out.

~~~
mattkrause
But surely this must depend on the size of the business?

I could imagine this happening when Uncle Enzo wants to open a little pizzaria
as a retirement hobby/business, but there's no way Eric Schmidt and Larry Page
are on the hook when Google wants to finance something.

Also wouldn't the bank end up owning a share of the company (or the company's
stuff) if they did default?

~~~
Mahn
Sure, my experience is that a bank will always ask for some sort of security
with old fashioned loans, but I can't pretend I know what kind of deals would
a billion dollar company get. But even if personal liability isn't on the
line, things like having the bank seize your assets if you can't repay would
still be an undesirable liability.

As for the bank owning shares, sure if you default they'll take over whatever
they can get, as far as the contract goes, but it's not the same kind of deal.
VCs or angels effectively buy shares to sell them later at a higher price,
whereas the bank is just lending money and hoping to see it back with
interests; the bank may take over ownership of the company if it goes bankrupt
but it's not like they'd be able to sell it for much profit, if any at all.

------
neom
Hunkering down for those fines, I suppose.

------
erdevs
Interesting that this $30B valuation is only 25% higher than last year's
reported valuation of $24B, whereas the year before their valuation leaped up
from $10B.

[http://www.wsj.com/articles/the-secret-math-of-
airbnbs-24-bi...](http://www.wsj.com/articles/the-secret-math-of-
airbnbs-24-billion-valuation-1434568517)

I wonder how revenue growth has been this year. Perhaps it has slowed down
further, given the relatively modest increase in valuation.

------
jmspring
Raise anticipating a downturn ... @pmarca and @bhorowitz have advocated for
such. So, this plan makes sense.

------
jokoon
I'm curious, what are the costs of running a company like airbnb? I'm still
curious about what they need money for. Are they just hiring every programmer
they can find? Are there a lot of customer service hotline calls?

It seems like it's a golden egg goose.

------
rch
Maybe they'll buy a stake in Tentrr.

[https://en.wikipedia.org/wiki/Glamping](https://en.wikipedia.org/wiki/Glamping)

~~~
yolesaber
The Sharing Economy finally pimps out natural splendor herself

------
bernardlunn
During the hypergrowth years, frugality is not rewarded, the only KPI that
matters is growth, i am sure there is a lot of growth but - for now - who
cares?

------
dawhizkid
Can anyone explain why Airbnb's iOS app is 158mb? That's the same size as
Pokemon Go.

------
return0
That sounds reasonable, although, shouldnt at this stage airbnb be earning a
profit?

~~~
cLeEOGPw
You don't want to earn a profit. You want to lose as much money as possible.
The more money you lose the better. Earning profit implies that you already
matured and stopped growing and the amount of profit will always be
disappointing, lowering the value of the company.

------
brador
They'll be hitting severe scaling issues soon as they run out of good clients.

Hipsters and millenials are great customers, they're honest, trustworthy,
logical, reasonable, friendly, loose with their cash, and easily verified.
Everyone else not so much.

~~~
argonaut
My 50-something year-old parents use Airbnb. So no.

~~~
user5994461
Same thing here from the seller side.

Got a friend running some Bed and Breakfast hosting in the French countryside.
The typical 50 year old that I'd hardly imagine selling on AirBnB (can he even
use a computer ?).

It turns out that he puts his listing on AirBnb and it's actually bringing in
customers.

~~~
ghaff
The thing is that people have been running small inns/B&B's (and renting
vacation homes) forever as something between a formal business and some money
on the side. There were online listing services before AirBnB and paper
listings in various tourist catalogs before that.

AirBnB is just another listing service in that context. Today, if you run any
sort of bed and breakfast and can't deal with computer listings, online
reservations, etc. you're at an enormous disadvantage compared to your
competition. I know that if I can't immediately check availability online and
have to email--or heaven forbid call--I'm much less likely to book your
property.

What's mostly different about AirBnB is a lot of the quasi-legal rental of
properties that aren't really B&Bs or vacation properties.

~~~
user5994461
It's not just yet another listing. Nor it is about quasi-legal rental.

For the user, it allows to find room by location, enter in contact, book and
prepay in a convenient way that is unprecedented.

For the hosting, it allows to easily rent, accept the money and reply to
people.

There were simply no service that allowed to neither buy nor sell that easily
before.

It had the side effect of attracting a lot of "black market" operations onto
it but that doesn't make it about black market (even though it did play a role
in the growth). AirBnB is about providing a great service to both buyer and
seller.

(Anyway, there's always been a HUGE black market for property rental. The
incentive to declare are not worth it. AirBnB barely make the issue more
visible.)

------
simplemath
So AirBnB is worth 4x WYN?

That doesn't make sense to me

~~~
jonathankoren
Larger than Hilton
[https://www.nyse.com/quote/XNYS:HLT](https://www.nyse.com/quote/XNYS:HLT)

------
jcoffland
Maybe they can use some of this money to find the negative review I just
posted. After many successful airbnb experiences my wife and I recently had a
bad one. I wondered why the host had all great reviews. Then I found out why.
Although my negative review shows up on my personal page it does not show up
on the host's page or the house's. Even after waiting several days. Maybe this
was a fluke but it appears Airbnb is suppressing negative reviews. Anyone else
experience this?

~~~
ArtDev
Are you sure the host wrote a review of you? If not, your review will not
appear.

Airbnb has really good customer service, in my experience. You could contact
them. Airbnb doesn't want crappy hosts either!

[https://www.guesty.com/blog/host-guide-to-airbnb-review-
syst...](https://www.guesty.com/blog/host-guide-to-airbnb-review-system/)

~~~
jcoffland
Yes they did. I even got an email from Airbnb saying that both our reviews
were now public.

~~~
ArtDev
Bizarre. You should definitely contact Airbnb.

I am concerned that the popularity of Airbnb can damage the service.
Craigslist was safe and trustworthy for a long time.

------
pifon
Why do they need 1.6B + 850M?! Its literally just an app.

~~~
ArtDev
No. There is a lot going on behind the scenes.

I didn't know that they have their own photographers until one came to my
house.

