
Airbnb Said to Pursue Valuation Above $10 Billion in New Fund-Raising Round - sohailprasad
http://dealbook.nytimes.com/2014/03/20/airbnb-said-to-pursue-valuation-of-over-10-billion-in-new-fund-raising-round/
======
notlisted
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-
ba...](http://qz.com/190432/airbnb-doesnt-even-own-a-bed-but-its-backers-
think-its-more-valuable-than-hyatt/)

[2] [http://www.fastcompany.com/3027107/punk-meet-rock-airbnb-
bri...](http://www.fastcompany.com/3027107/punk-meet-rock-airbnb-brian-chesky-
chip-conley)

~~~
pg
_Once they are forced to play on a level playing field, their rates won 't be
as competitive and their service not as popular._

This is a common misconception on HN. People with technical backgrounds love
structural explanations for things. You see a similar phenomenon in the number
of people who believe that the shape of an airfoil is what keeps a plane up.
But in fact the main thing driving Airbnb's growth is not price, but that
guests are looking for authentic experiences. Price helps, just as lift
generated by airfoil shapes does, but it's not what has made Airbnb big.

~~~
notlisted
I can see that being the case in many exciting locations, but in busy metro
areas like NYC I am quite certain price is a major motivator.

Clarification re: popularity, I think we can agree that AirBnB lives and dies
with its inventory. If cities/IRS were to crack down on the legal and tax
aspects, inventory would significantly reduce.

One concerted enforcement action, eg enforcing disclosure of all who rent
rooms to the IRS, or requiring disclosure of apt. addresses to landlords, and
a very large part of the inventory will drop out overnight.

------
jgalt212
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
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_...](http://ny.curbed.com/archives/2013/03/25/an_introduction_to_new_yorks_short_term_rental_laws.php)

------
goatforce5
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
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.

------
aaronapple
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.

~~~
gamblor956
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).

------
bertil
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
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
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.

------
brd
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.

------
dsugarman
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?

~~~
johnrob
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
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
yea, public uproar has been a huge deterrent on regulation in the past...

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

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

~~~
notlisted
They also need money for bigger plans/additional services.

See [http://www.fastcompany.com/3027107/punk-meet-rock-airbnb-
bri...](http://www.fastcompany.com/3027107/punk-meet-rock-airbnb-brian-chesky-
chip-conley)

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-x...](http://www.latimes.com/business/technology/la-fi-tn-airbnb-xxx-
freak-fest-20140317,0,2616822.story#axzz2wX1rpJcI)

~~~
bdcravens
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
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!)

