
Airbnb Is Raising a Round at a $20B Valuation - kyleowens10
http://techcrunch.com/2015/02/27/airbnb-2/
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jmduke
For comparison: Marriott International is valued at $22B. In 2013, Marriott
employed 199,929 workers and made $626M profits off of $12.78B revenues.

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skuhn
Airbnb's valuation seems totally irrational to me, given the nature of their
business. Still, I would think any business would like to double their
valuation in a year.

Mariott should convert all of their hotels into apartments, fire all of their
staff, rent the apartments, and then have those people rent the apartments to
other people via mAIRiottBNB.com. Boom, instant market cap doubling.

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jsprogrammer
Is market cap really the only objective?

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skuhn
No, and doing that would ultimately destroy Marriott's business. I think
Airbnb's investors would be wise to think about that.

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lettergram
Well according to this article[1] this ups Y Combinator's portfolio value from
$30 billion to at least $40 billion.

Pretty impressive.

[1] [http://www.fastcompany.com/3033215/most-innovative-
companies...](http://www.fastcompany.com/3033215/most-innovative-
companies/the-value-of-y-combinators-portfolio-exceeds-30-billion)

~~~
JoePonzi
> Well according to this article[1]...

Be careful about headlines written by kids playing journalist. The value of
the companies in YC's portfolio might be $30-$40 billion but that does not
mean that the value of YC's portfolio is $30-$40 billion because YC doesn't
own 100% of the shares.

> Pretty impressive.

Or scary. I heart Airbnb but the idea that it doubled in value in less than a
year and is worth almost as much as say Marriott, which owns real estate,
generated almost $2 billion in EBITDA in the past 12 months and returns cash
to shareholders in the form of a dividend, is absurd.

~~~
peteretep

        > but the idea that it doubled in value in less than a
        > year and is worth almost as much as say Marriott, which
        > owns real estate, generated almost $2 billion in EBITDA
        > in the past 12 months and returns cash to shareholders
        > in the form of a dividend, is absurd
    

Unless you believe (which I don't, but whatever) that it poses an existential
threat to Marriott, and that it will essentially kill all non-business (and
some percentage of business) hotel bookings with time; it's also got the
advantage that I've heard people say "just Airbnb it" or "just use Airbnb",
but I've never heard anyone say that about Marriott or the Hilton...

~~~
JoePonzi
I work in finance (hedge fund management) and my wife works in sales for big
pharma. I've never heard any of our rich, yuppie friends say "just use
Airbnb." It's more like "Where did you stay?" "The Four Seasons" Anecdotes are
worthless.

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vonklaus
Mcdonalds carved out a pretty good niche not catering to your yuppie friends.

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beachstartup
yuppies eat plenty of mcdonalds. primarily breakfast/coffee, and salads. they
'pivoted' away from only junk food a few years ago after the supersize me
fiasco and have done quite well with it. have you seen an mcdonalds at 8am in
a business district? it's like a fuckin' crime scene.

also, when yuppies get drunk in the city... all bets are off.

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tdicola
Err, McDonalds is significantly declining and their CEO is stepping down this
weekend: [http://www.businessinsider.com/mcdonalds-ceo-is-
out-2015-1](http://www.businessinsider.com/mcdonalds-ceo-is-out-2015-1) Don't
assume what you see locally is how things are at a macro level.

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beachstartup
LOL look at their stock price and market cap over the past 15 years you
simpleton.

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sureshv
Interesting since Homeaway (AWAY), who is probably their most direct
competitor has a market cap of around $3B, a P/E of 220, on annual revenue of
$450M. I'm curious what Air BnB's revenue and growth numbers are; gotta be
pretty impressive.

~~~
JoePonzi
According to
[http://www.wsj.com/articles/SB100014240527023038021045794510...](http://www.wsj.com/articles/SB10001424052702303802104579451022670668410)
revenue in 2013 was $250m. If you assume that doubled annually and now stands
at $1bn, and that Airbnb has a similar profit margin profile to HomeAway, you
need a crack pipe to get to a market cap of $20bn.

~~~
paul
Or an understanding of exponential growth rates.

I also notice that you created your account just now, presumably to comment on
this post. Who do you work for?

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JoePonzi
Yes, companies grow exponentially indefinitely regardless of addressable
market size.

I must work for an Airbnb competitor, or a large hotel chain. Because
everybody knows that astroturfing on HN is the best way to stop a company dead
in its tracks.

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paul
How large is the market for short term housing, and how close is airbnb to
saturating it?

I didn't say you were astroturfing, but I am curious what motivates you to
create an account for the purpose of commenting on this story.

~~~
JoePonzi
A huge chunk of the short term housing market is corporate. You're talking
about stays of 30+ days and you need to book multiple rooms regularly with a
single phone call. That's not Airbnb's sweet spot. The pricing in this market
is also pretty competitive. I know because the investment bank I used to work
at used corporate housing and the rates we negotiated for rooms in Manhattan
were much better than what you can get on Airbnb for Manhattan.

If you want a publicly traded comp for short term housing, look at Extended
Stay. $1.2bn in revenue. About $500m in EBITDA. $4bn market cap. And it offers
a 3% dividend yield.

As for my motivation, you want the truth? It's Friday night and my wife is out
of town. I had a long week and instead of sleeping with one of her boring
girlfriends like I usually do I'm trolling you on HN.

~~~
pbreit
"the rates we negotiated for rooms in Manhattan were much better than what you
can get on Airbnb"

Which is why AirBnB's business is much better.

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jusben1369
Airbnb is to hotels what Uber is to taxis. Not wise to compare to valuations
of established businesses in one vertical.

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vskarine
Please explain what you mean by "Not wise to compare to valuations of
established businesses in one vertical."

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mrgordon
The poster meant that Uber and Airbnb don't have the same cost structure as
the existing behemoths in their respective industries so the valuations aren't
comparable. For example, Airbnb doesn't need to pay rent for their properties
and an unfilled vacancy doesn't typically cost them anything.

Another issue is that Hilton, Starwood, and most of their competitors operate
so many properties in the US that they are very sensitive to exchange rates
and evolving travel preferences:
[http://www.cnbc.com/id/102435380#](http://www.cnbc.com/id/102435380#).

~~~
vskarine
That makes sense. Thanks for explaining.

I think all these things also affect AirBnB but through the hosts. I guess
AirBnB can have relatively fixed costs of operation (with volatile revenue)
which is probably better than having volatile operational costs.

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jgalt212
Who has gone public at valuation greater than $20B? Facebook?

Is Airbnb a bigger company than Facebook?

I just don't understand how these late stage investors think someone is going
to take them out of their trade at a higher valuation.

Here's a table of recent IPO's. I have to do the math to get to the market
caps, but I don't think any of them is above $20B.

[http://www.renaissancecapital.com/ipohome/pricings/priced.as...](http://www.renaissancecapital.com/ipohome/pricings/priced.aspx)

In short, where is the greater fool for these late stage valuations?

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mrgordon
Alibaba ended their first day at about $231 billion and I haven't heard anyone
say they were 10x overvalued lately:
[http://www.theguardian.com/business/2014/sep/19/alibaba-
shar...](http://www.theguardian.com/business/2014/sep/19/alibaba-shares-price-
americas-biggest-ipo)

Other big ones include UPS ($60 billion), AT&T ($58 billion), Facebook ($81
billion), Kraft ($54 billion), GM ($49.5 billion), and Visa ($44 billion) plus
a bunch of non-US ones. This article has a great table of them:
[http://blogs.wsj.com/moneybeat/2014/09/05/alibaba-biggest-
ip...](http://blogs.wsj.com/moneybeat/2014/09/05/alibaba-biggest-ipo-by-
market-value-of-all-time/)

~~~
jgalt212
Other than Alibaba and Facebook, none of your examples are start-ups. There
are many more $20B private valuation companies right than there are historical
examples of such companies making it to IPO.

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oskarth
I don't understand the majority of the comments in this thread. Airbnb is the
definition of a fast-growing, take-over-the-world kind of startup that has
been amazingly successful. How can you even begin to compare it to a hotel
chain with super-tight margins, or some random bubble company with no profits
and no sustainable business model?

Have you ever used Airbnb? I'm not affiliated with them (other than as a
user), but: welcome to the future. How can you be surprised it's a $XXbn
company?

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david927
You can compare. Airbnb has more inherent risk to be disrupted than an
existing hotel chain. It's illegal in places and some could argue that, while
the sharing economy is the future, it won't be eternally brought to you the
providers operating today.

And to answer your question: I used Airbnb once and would be very reluctant to
use them again because of customer support issues, and I have thick skin that
way.

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foobarqux
Others have explained it in more detail but these valuations are distorted
because the newly issued securities usually have higher seniority and
liquidation preference compared to those previously issued.

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brunooo
And often it's convertibles or outright debt, senior to any equity.

So the question for those pretty smart investors who have trouble finding good
places for their money is not if AirBnB is or will be worth 20B, but rather
1-2 billion.

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dummyfellow
EXPEdia has a market cap of 11.82B, is airbnb really this big?

