
Airbnb Raises Over $100M as It Touts Strong Growth - coloneltcb
http://www.wsj.com/articles/airbnb-raises-over-100-million-as-it-touts-strong-growth-1448049815?mod=wsj_nview_latest&alg=y
======
tyre
1) This is a press release from a PR person in the company. There is no
"person familiar with the matter" who is willing to risk their reputation and
career to leak internal metrics of the company.

2) This is a follow-on to their last round of funding, not a separate capital
raise. The valuation did not change. They likely had an interested party that
missed the boat, got nervous about being left out, and agree to the same
terms. Little distraction for the company + money at known terms + small stake
(.4%) + press = #yes.

3) AirBnB takes a 15% cut on bookings. A stable company might have a
price/earnings ratio of 5x. So for them to have a $25 billion valuation,
that's $5 billion in revenue or $33 billion in bookings. That means they would
need to grow ~24.5x their current size (either without raising again or
raising at the same valuation) to justify this.

According to an industry association[1], sales in 2013 for all lodging in the
US was $163 billion. Yes international, but that's for the largest GDP in the
world and there are non-zero costs in marketing/sales/regulation/data security
to entering other markets.

[1]:
[https://www.ahla.com/content.aspx?id=36332](https://www.ahla.com/content.aspx?id=36332)

EDIT - I was wrong about the fee, thank you richiezc!

~~~
riggins
1\. "A stable company might have a price/earnings ratio of 5x"

You're way off on PE's.

The Shiller PE is 26* right now. P/E moves inversely with interest rates. With
rates around 1% (i.e. driving up P/E's) only distressed companies trade at 5x
P/E ratios.

2\. "AirBnB takes a 3% cut on transactions"

You overlooked 2/3 of their revenue.

"Airbnb generates revenue by taking a 3% cut of each booking along with a 6%
to 12% service fee from guests"

3\. "for them to have a $25 billion valuation, that's $5 billion in revenue or
$167 billion in bookings"

The relevant data is in the article. Note they made $340 on $2.2B of bookings
(about %15 of bookings).

"Airbnb generated $340 million of revenue in the third quarter, on bookings of
$2.2 billion". You can just annualize that. Current run rate revenue is
~$1.4B. Current run rate bookings are ~$8.8B.

I don't have an opinion on the valuation but I can understand how they could
be worth $25B. Airbnb's incremental cost for processing customers is probably
close to zero. If they double bookings again, they'd double top line revenue
~$3B. I could easily see $1B of that flowing to the bottom line.

Also there are network effects/customer captivity at play that bode well for
the long term. What do I mean? It would be hard to create a competitor to
Airbnb because no one wants to establish their reputation on more that 1
platform (same under-appreciated advantage Ebay has).

*[http://www.multpl.com/shiller-pe/](http://www.multpl.com/shiller-pe/)

~~~
jacquesm
All of that checks out, but:

> It would be hard to create a competitor to Airbnb because no one wants to
> establish their reputation on more that 1 platform (same under-appreciated
> advantage Ebay has).

Bookings.com is a pretty strong competitor to AirBNB in some market segments.

------
bosdev
Raising $100M at a $25B valuation means someone paid $100M for a .4% stake in
AirBnB, which is both surprising and amazing to me. This does ignore whatever
preference and specialized terms the stakeholders were given. And of course,
the buyers aren't necessarily saying they think the company is worth $25B,
they are saying they believe the market will value it at more than $25B at
some point in the future.

~~~
hartard
Your last statement is not necessarily true.

That's the funny thing about startup valuations; they are not an apples-to-
apples comparison to a public market. In fact, a savvy investor may be willing
to invest $100M at a $25B valuation knowing full well there will _never_ be a
liquidation event worth $25B. It all depends on the deal terms (preferences,
ratchets, etc.).

It's entirely rational to invest $XM at $YB valuation when your deal terms
stipulate a minimum return of ($XM * 1.25), regardless of valuation.

~~~
jacquesm
Which leads to the conclusion that without knowledge of the terms of the deal
it is a bit of a weird thing to value the entire company based on that deal.
Because such a deal should be discounted based on the terms not applying
equally to the rest of the shares already created.

~~~
mason55
"AirBnB raises $100m which gives them an unknown valuation due to the complex
financial terms of the deal" just doesn't draw as many clicks on your story

------
troels
I don't understand. What would they need that kind of money for at this point?
Surely they are raking in lots of revenue?

~~~
strebler
> This year, Airbnb expects an operating loss of about $150 million

------
ogezi
This seems strange. Maybe a single investor wanted to get in pretty badly.

------
skizm
No paywall: [http://on.wsj.com/1Ojvrh6](http://on.wsj.com/1Ojvrh6)

~~~
tedmiston
FWIW also no paywall if you save to Instapaper.

------
staunch
Airbnb is a great company but they seem unnecessarily greedy. They shouldn't
allow people to rent out apartments without neighbor consent. They should
limit the number of days that people can rent their homes. And they shouldn't
allow companies to operate dozens of Airbnb locations as de facto hotels.

These are the kinds of reasonable regulations that will happen to them
eventually, if they don't put constraints on themselves.

~~~
nostromo
I'm of the view that property rights are an important component of civil
rights. I think the constitution is on my side given the fourth amendment.

It's interesting that on HN I see near universal support for the freedom to
smoke pot in one's home, or to live with a same-sex partner, or replace a lawn
with a rock garden, or to have our communications remain private.

But when it comes to letting someone crash on your couch in exchange for a few
bucks, suddenly there are calls for a full-scale invasion of privacy and
limitation of what one can do in their own home, in order to protect one's
neighbors from... what exactly?

Obviously property rights have reasonable limitations, but is Airbnb really
such a case? If you have a neighbor that is hosting a bad guest, then surely
the bad behavior is the problem (and probably already illegal).

~~~
jacquesm
> freedom to smoke pot in one's home, or to live with a same-sex partner, or
> replace a lawn with a rock garden, or to have our communications remain
> private.

Those affect you.

> when it comes to letting someone crash on your couch in exchange for a few
> bucks

That scenario also only affects you, when you add the term 'occasionally'.

But if you live in a residential area and suddenly on four sides you find
yourself with low-budget hotels with people coming and going at all hours and
partying until 3 am because the owner of the apartment is absent when the
guests are there then that is not a nice thing per-se and this is where your
'couch' starts to leak in to the lives of others around you.

So yes, AirBNB really can be such a case.

~~~
mahyarm
Then enforce noise regulations and other common property laws. If a long term
tenant college party house moves in beside you, then you have the exact same
problems. But you cannot blame AirBnB or similar in this case.

~~~
jacquesm
Long term college tenants as a rule are extremely well behaved, mostly because
they value quiet as much as the next person (or even more) on account of their
studies. They may have a few more parties than any other household but as a
rule they don't generate too much of a problem because they are in there for
the longer term and so have to be on good terms with the rest of the
neighborhood.

And I would not blame AirBNB in that case because they have absolutely nothing
to do with that.

