Airbnb Is Raising A Big Third Round, Aiming For A Valuation North Of $2B(techcrunch.com)
techcrunch.com
Airbnb Is Raising A Big Third Round, Aiming For A Valuation North Of $2B
http://techcrunch.com/2012/09/26/airbnb-is-raising-a-big-third-round-aiming-for-a-valuation-north-of-2b/
8 comments
I thought Airbnb sounded silly when I first heard about it, but I've spent the last month in the caribbean staying exclusively at apartments booked there. The UX is awesome, there's a huge discovery value to people with vacation rentals, and it's way cheaper than staying at hotels. Not to mention the money that I save because I have a kitchen to cook in. You can usually find a monthly price only a few hundred dollars more than what you would pay for an unfurnished rental with a lease. I've also been shocked at the explosive growth outside the US. When I checked the listings about six months ago I didn't see much in southern Brazil, but now there are ~500 listings. I don't know about $2B, but I've been very impressed with everything they've done so far.
I've always found AirBnB not to be that much cheaper than hotels.
Maybe it's just me?
Maybe it's just me?
in my experience cheaper. you get more room and stuff for your money. but it's also more inconvenient:
You cannot just enter a date and click button "Book Now". You have to contact multiple hosts and arrange key pick up and stuff.
You cannot just leave the room in whatever state and checkout. You feel like you have to clean and tidy it up a bit.
Picking up keys can be a hassle sometimes.
However you don't have to pay for silly services i never use in a hotel (conference rooms, business centers, telephone in the toilets, etc).
You cannot just enter a date and click button "Book Now". You have to contact multiple hosts and arrange key pick up and stuff.
You cannot just leave the room in whatever state and checkout. You feel like you have to clean and tidy it up a bit.
Picking up keys can be a hassle sometimes.
However you don't have to pay for silly services i never use in a hotel (conference rooms, business centers, telephone in the toilets, etc).
[deleted]
what is "that"? 50% off? 75% off? I've been using AirBnB to book places for my conference speakers for 2 years & I usually get between 30% and 55% off from a comparable hotel.
Depends on the location. There are other perks as well, such as a kitchen, unusual locations, cheaper long-term stays, etc.
Just to put this in perspect. Starwood has a valuation of about $10 billion.
Starwood employs 150,000 people, has 1000 hotels worldwide, and has revenues of ~$6 billion
I'm not saying AirBNB can't be huge one day, but a $2B valuation... wow.
Starwood employs 150,000 people, has 1000 hotels worldwide, and has revenues of ~$6 billion
I'm not saying AirBNB can't be huge one day, but a $2B valuation... wow.
Yeah, you are right... that makes it very clear why AirBnB is so valuable.
If it takes Starwood 150,000 people to make $6B, and AirBnB can make hundreds of millions with hundreds of people, I think it's pretty clear which is headed to a bigger valuation.
If it takes Starwood 150,000 people to make $6B, and AirBnB can make hundreds of millions with hundreds of people, I think it's pretty clear which is headed to a bigger valuation.
Or it's just way overvalued
Starwood doesn't own most of their hotels, nor do most of the staff, revenues, etc flow through Starwood. It is just a franchise/branding company with a property management and reservation system. Their direct employees are in line with airbnb.
you cannot make these comparisons. the valuation multiplier based on revenues changes by the industry. an industry with HUUUUUGE overhead [expensive real estate and tons of staff] cannot be compared at all by revenue to a tech startup that will never have anywhere near that amount of overhead.
is the valuation high? potentially, but this is not a metric that will tell you anything at all about that
is the valuation high? potentially, but this is not a metric that will tell you anything at all about that
AirBnB can reasonably generate profits of $4/night with their current model. A $2B valuation makes sense if they do 30M nights in a year. They did 8M in Jun 11-Jun 12, with 5M of that in the last 4.5 months. My guess is their current run rate is in the neighborhood of 18M nights/year.
The valuation is high, but it isn't unreasonable. Also I view AirBnB as having a low risk of falling out of fashion, unlike Zynga or Facebook.
The valuation is high, but it isn't unreasonable. Also I view AirBnB as having a low risk of falling out of fashion, unlike Zynga or Facebook.
Can I ask what the $4 in profit and 30M nights/ year to justify $2B valuation are based on? Just wondering if maybe my math/ view on it is wrong...
Looks like they charge a 3% fee meaning a night @ $100 would bring in $3 of revenue (not profit). At 30M nights that's $90M in revenue, putting the $2B valuation at 22.2x revenue... seems slightly unreasonable (at least not a valuation that public markets are likely to put on it). Thoughts?
Looks like they charge a 3% fee meaning a night @ $100 would bring in $3 of revenue (not profit). At 30M nights that's $90M in revenue, putting the $2B valuation at 22.2x revenue... seems slightly unreasonable (at least not a valuation that public markets are likely to put on it). Thoughts?
From the article: "The company takes an average of 10% on every transaction, according to sources familiar with the business"
Your numbers start to look a lot better at a 10% fee instead of a 3% fee.
Your numbers start to look a lot better at a 10% fee instead of a 3% fee.
yeah, was confused by that part a bit, since their website mentions 3%. perhaps that's just the listing fee vs. how much they make for each night someone stays at a listing...
disclosure: ex-Airbnb employee here
The total airbnb fee on a stay is about 12% (lets assume 9% avg guest fee and 3% host fee). But roughly 3% goes to credit card processing fees and then you have to deal with paying out in countries like Brazil where paypal and ACH aren't viable options. Lets just net it out to 9% for discussion purposes. Average price per booked night when I worked there was $100+.
If you do the same math as the post above then revenue would hypothetically be $270MM, as a revenue multiplier the range we're talking about begins to seem possible for a company on this trajectory with organic growth.
I have a vested interest in a high valuation, but having seen the growth from when I first joined (feb 2011, celebrated 1MM nights booked the first week I was there) to now its really unbelievable - true hockeystick growth.
The total airbnb fee on a stay is about 12% (lets assume 9% avg guest fee and 3% host fee). But roughly 3% goes to credit card processing fees and then you have to deal with paying out in countries like Brazil where paypal and ACH aren't viable options. Lets just net it out to 9% for discussion purposes. Average price per booked night when I worked there was $100+.
If you do the same math as the post above then revenue would hypothetically be $270MM, as a revenue multiplier the range we're talking about begins to seem possible for a company on this trajectory with organic growth.
I have a vested interest in a high valuation, but having seen the growth from when I first joined (feb 2011, celebrated 1MM nights booked the first week I was there) to now its really unbelievable - true hockeystick growth.
That makes a lot more sense. I realized my mistake after going back to the site and noticing that guests are charged a fee as well. It's still pretty crazy on a rev multiple basis but the company's growth is ridiculous as well. Thanks for the insight.
http://abovethecrowd.com/2011/05/24/all-revenue-is-not-creat...
see: (1) network effects (2) organic demand
see: (1) network effects (2) organic demand
20 p/e is awesome for a business which is growing "e" very fast, and in what appears to be a sustainable way. Look at AMZN's p/e...
but it's not really earnings is it? that's 20x revenue, so even with really good margins that would be at least double. You're right that amazon's P/E is insanely high, but on a revenue basis they trade at 1.5-2.0x. I guess with the kind of growth AirBnB has there's nothing really comparable... just trying to understand how they're justifying that valuation
Starwoods is valued on the public stock market, not private investors.
It might not seem like it, but theres a difference.
It might not seem like it, but theres a difference.
For example: Facebook ($FB)
One way to look at AirBnB is as a craiglist plus escrow service. The idea is they spammed people advertising rental properties on craiglist to get them to visit the AirBnB site and it has worked so far. Eventually, though, all the people advertising on sites like craigslist will have migrated over to AirBnB and then the growth ends.
The escrow service seems a little dodgey since they are not licensed (see Greenspan's critique - he was roommates with one of the founders of AirBnB). Few major incidents so far, but how long will that last as they scale? The attraction of AirBnB over craiglist may be that the hosts perceive some added degree of safety by using AirBnB. But really, how much liability is AirBnB taking on? Can you sue AirBnB if your property is destroyed? Good luck with that.
What if another site that has an even faster interface pops up and uses a growth hacker to lure away hosts listing their properties on AirBnB? Then what? Acquire them out of fear!
The web is a medium. People use it to advertise things. It's hard to believe that any one company can monopolize a medium like the web for some class(es) of goods or services. But it sure looks like they can, doesn't it?
From For Sale ads in Usenet groups to a mailing list that grows to a website (craigslist) to AirBnB acting as an informal escrow agent to _______?
The interesting thing is that Usenet was originally free. As long as you had an internet connection, you could advertise for free. I'm not sure I understand why advertising still shouldn't be free. And we should be able to reduce the signal to noise ratio, and make doing business via internet more personable and trustworthy, without having to pay a spammer who acts as a dubious escrow agent and takes a percentage.
The escrow service seems a little dodgey since they are not licensed (see Greenspan's critique - he was roommates with one of the founders of AirBnB). Few major incidents so far, but how long will that last as they scale? The attraction of AirBnB over craiglist may be that the hosts perceive some added degree of safety by using AirBnB. But really, how much liability is AirBnB taking on? Can you sue AirBnB if your property is destroyed? Good luck with that.
What if another site that has an even faster interface pops up and uses a growth hacker to lure away hosts listing their properties on AirBnB? Then what? Acquire them out of fear!
The web is a medium. People use it to advertise things. It's hard to believe that any one company can monopolize a medium like the web for some class(es) of goods or services. But it sure looks like they can, doesn't it?
From For Sale ads in Usenet groups to a mailing list that grows to a website (craigslist) to AirBnB acting as an informal escrow agent to _______?
The interesting thing is that Usenet was originally free. As long as you had an internet connection, you could advertise for free. I'm not sure I understand why advertising still shouldn't be free. And we should be able to reduce the signal to noise ratio, and make doing business via internet more personable and trustworthy, without having to pay a spammer who acts as a dubious escrow agent and takes a percentage.
I think you're very off in your analysis.
I have never used craigslist nor other classifieds sites, and neither have any of my family members, nor my work mates, nor the friends I meet on a weekly basis.
Yet me, my brother, a colleague and two friends have booked nights on airbnb. The growth will end when all of my colleagues, and all of my family and all of my friend use it, and they'll know about it because every time they ask me "so where did you sleep" I'll answer "found this cheap place on AirBnB".
I have never used craigslist nor other classifieds sites, and neither have any of my family members, nor my work mates, nor the friends I meet on a weekly basis.
Yet me, my brother, a colleague and two friends have booked nights on airbnb. The growth will end when all of my colleagues, and all of my family and all of my friend use it, and they'll know about it because every time they ask me "so where did you sleep" I'll answer "found this cheap place on AirBnB".
> Can you sue AirBnB if your property is destroyed?
https://www.airbnb.com/guarantee
https://www.airbnb.com/guarantee
[deleted]
Airbnb is the ebay of housing, creating liquid markets for unused or unwanted goods without taking on any inventory, risk or capital. This is a service that literally prints money - and so long as they don't get Meg Whitman as their CEO - they won't fuck up.
I wouldn't be surprised if they surpassed eBay within the decade in terms of net profit. Next up on the liquid market list should be cars.
Any other markets out there that need liquidity? Goods that aren't used or assets that lay dormant? I'm all ears.
I wouldn't be surprised if they surpassed eBay within the decade in terms of net profit. Next up on the liquid market list should be cars.
Any other markets out there that need liquidity? Goods that aren't used or assets that lay dormant? I'm all ears.
When you create a company that acts as an agent or marketplace between 2 parties you have to take on some of the risk in the transaction if you're profiting from it.
AirBnB struck a goldmine in apartments cos it's pretty hard to 'steal' an apartment and take it away or damage it beyond all repair through normal expected use. I would gather most places are 'uninsured' for the duration of the sublease because the normal conditions have been broken but owners feel that that is a risk worth taking on for the expected return.
Cars that sit around are a different story - I feel for these guys http://techcrunch.com/2012/01/01/luxury-car-sharing-service-... but the truth of the matter is that with the next tier of high value illiquid stuff below apartments such as luxury cars and boats the perceived risk of letting somebody 'borrow' it is much higher. It is entirely feasible that whatever you're leasing out could get destroyed/sunk/totaled/stolen in normal use for its intended purpose. To provide such a market you would have to provide the insurance that goes with it and that's the hard bit.
This is why zipcar et al has stitched up the lower end of the car market. The car is 'common property' and they have the insurance to cover all who drive it.
Not saying it shouldn't be done - I'd actually love to build AirBnB for boats cos I sail but I can't afford my own boat or the charter prices being asked.
AirBnB struck a goldmine in apartments cos it's pretty hard to 'steal' an apartment and take it away or damage it beyond all repair through normal expected use. I would gather most places are 'uninsured' for the duration of the sublease because the normal conditions have been broken but owners feel that that is a risk worth taking on for the expected return.
Cars that sit around are a different story - I feel for these guys http://techcrunch.com/2012/01/01/luxury-car-sharing-service-... but the truth of the matter is that with the next tier of high value illiquid stuff below apartments such as luxury cars and boats the perceived risk of letting somebody 'borrow' it is much higher. It is entirely feasible that whatever you're leasing out could get destroyed/sunk/totaled/stolen in normal use for its intended purpose. To provide such a market you would have to provide the insurance that goes with it and that's the hard bit.
This is why zipcar et al has stitched up the lower end of the car market. The car is 'common property' and they have the insurance to cover all who drive it.
Not saying it shouldn't be done - I'd actually love to build AirBnB for boats cos I sail but I can't afford my own boat or the charter prices being asked.
Cars also lose value through continued use much more rapidly than "space". Doubling the utilization rate of a car may halve its usable lifetime.
There's also the issue of liability and risk to the user. A poorly maintained car might be dangerous to drive and difficult to recognize.
There's also the issue of liability and risk to the user. A poorly maintained car might be dangerous to drive and difficult to recognize.
There are boats listed on airbnb. I've rented one.
Aside from the insurance coverage, Airbnb appears to reduce risk for involved parties by humanizing the transactions. They encourage getting to know your host, and I'd imagine people are more likely to respect other people's property when they are aware of and can relate to the person behind the space. Even before transactions take place, users are encouraged to have rich profiles and social connections to demonstrate reliability and facilitate trust.
There may be potential for this sort of humanization in other areas where the perceived risk of a transaction currently outweighs the benefit. One way to think about it may be to consider things that you borrow from a friend. Airbnb covers the sleep on a friend's couch/spare bed niche quite well.
Some interesting things I can think of... perhaps using space on a more granular level such as holding a meeting in a conference room or watching a movie on a home theater system. Things like renting parking spaces might be interesting as well in some areas where parking is very limited.
There may be potential for this sort of humanization in other areas where the perceived risk of a transaction currently outweighs the benefit. One way to think about it may be to consider things that you borrow from a friend. Airbnb covers the sleep on a friend's couch/spare bed niche quite well.
Some interesting things I can think of... perhaps using space on a more granular level such as holding a meeting in a conference room or watching a movie on a home theater system. Things like renting parking spaces might be interesting as well in some areas where parking is very limited.
Did a bit of search on Meg Whitman. I found this on Wikipedia:
Whitman served as president and chief executive officer of eBay from 1998 to 2008. During her ten years with the company, she oversaw expansion from 30 employees and $4 million in annual revenue to more than 15,000 employees and $8 billion in annual revenue.
Doesn't seem too bad. Not trolling or anything but why do you think she is so bad?
Whitman served as president and chief executive officer of eBay from 1998 to 2008. During her ten years with the company, she oversaw expansion from 30 employees and $4 million in annual revenue to more than 15,000 employees and $8 billion in annual revenue.
Doesn't seem too bad. Not trolling or anything but why do you think she is so bad?
http://exiledonline.com/how-meg-whitman-failed-her-way-to-th...
http://bits.blogs.nytimes.com/2009/04/23/undoing-meg-whitman...
Third cause successes can hide failures rather well. Companies can succeed despite their absolutely atrocious leadership - not because of it.
Both she and Carly Fiorina were two of the worst things that could've happened to eBay and HP respectively (Meg Whitman for both).
They are nasty pieces of work.
Balmer is another example - he is single-handedly going to destroy a $200 billion dollar corporation and no one is stopping him. Hell they'd save a lot of money by making me CEO :D.
http://bits.blogs.nytimes.com/2009/04/23/undoing-meg-whitman...
Third cause successes can hide failures rather well. Companies can succeed despite their absolutely atrocious leadership - not because of it.
Both she and Carly Fiorina were two of the worst things that could've happened to eBay and HP respectively (Meg Whitman for both).
They are nasty pieces of work.
Balmer is another example - he is single-handedly going to destroy a $200 billion dollar corporation and no one is stopping him. Hell they'd save a lot of money by making me CEO :D.
I'd add Stephen Elop to that list as well, he will be judged in due time
That is an election year hit piece on a fringe blog (alter net)
Whitman led eBay to incredible valuations (6x from 1998 IPO to 2005), until the bizarre Skype flop, and as the MS buyout showed, Skype was run by some very clever crooks.
https://www.google.com/finance?client=ob&q=NASDAQ:EBAY&#...
Whitman led eBay to incredible valuations (6x from 1998 IPO to 2005), until the bizarre Skype flop, and as the MS buyout showed, Skype was run by some very clever crooks.
https://www.google.com/finance?client=ob&q=NASDAQ:EBAY&#...
As a user, that's roughly the timespan during which eBay went from the marketplace to being more or less irrelevant. When Craigslist beats you based on user interface, you know you have issues.
But what is their actual profit?
Is it normal to have 10% of a company's valuation be invested/debt cash?
Congratulation to PG! Seems like working with top scammer from the FBI list that you and I had to pay in our taxes for their damages, is finally paying off!
Pop, there goes a bottle of Dom Pérignon!
Pop, there goes a bottle of Dom Pérignon!
Sounds like this could be an interesting comment, but needs substance and a link or two, instead of sarcasm and malice. No one knows what you are talking about... I vaguely suspected you were referring to that one isolated incident long ago where a woman had her apartment trashed by some renters.
Pretty sure this based off his previous posts: http://venturebeat.com/2011/10/27/airbnb-spam-allegations/
According to Dave Gooden, AirBnB had a growth hacker who did her magic via email. "[email protected]" was her address.
She harvested emails from people adveritising on craigslist and sent out thousands of emails. Some call that unsolicited bulk commercial email. Some call is spam. Others call it growth hacking.
Remember, wise man say startups need <em> high growth </em>.
Founding startup is like being research scientist. Science!
"[email protected]", an unsung hero of AirBnB.
Harvard grad gets shut down by FTC for sending porn-related spam from custom-built spam machine in his dorm room. Earns some nice coin. Moves on to greener pastures:- doing the dirty work for internet venture capitalists. Say hello to the CTO of AirBnB.
Ivy League indeed.
The eventual victim is untimately the public investor if there's an IPO or the naive acquirer... because these businesses are not built to last long enough to provide the return on investment the public expects, nor to cover the inevitable charge the acquirer has to take.
These petty criminals doing the dirty work for internet VC are young with many years ahead of them to regain their reputation. But time may not heal bad reputations as well as it used to... because the internet never forgets.
She harvested emails from people adveritising on craigslist and sent out thousands of emails. Some call that unsolicited bulk commercial email. Some call is spam. Others call it growth hacking.
Remember, wise man say startups need <em> high growth </em>.
Founding startup is like being research scientist. Science!
"[email protected]", an unsung hero of AirBnB.
Harvard grad gets shut down by FTC for sending porn-related spam from custom-built spam machine in his dorm room. Earns some nice coin. Moves on to greener pastures:- doing the dirty work for internet venture capitalists. Say hello to the CTO of AirBnB.
Ivy League indeed.
The eventual victim is untimately the public investor if there's an IPO or the naive acquirer... because these businesses are not built to last long enough to provide the return on investment the public expects, nor to cover the inevitable charge the acquirer has to take.
These petty criminals doing the dirty work for internet VC are young with many years ahead of them to regain their reputation. But time may not heal bad reputations as well as it used to... because the internet never forgets.
Oh god, not Aaron Greenspan again.
Hey, money is more important than ethics or morals to some people. You got a problem with that?
Yes, I do.
I don't wish anyone bad, but if one day your family too will be bomb by foreign troops and you will wake up in a hospital and see your daughter without arms and legs, you too will understand that.
Until then, God bless you!
I don't wish anyone bad, but if one day your family too will be bomb by foreign troops and you will wake up in a hospital and see your daughter without arms and legs, you too will understand that.
Until then, God bless you!
Details please. Maybe you cannot name names but give us a clue.
There's no way AirBnB is going to try to IPO after the Facebook debacle. They must entice someone to acquire them. The higher the valuation the more enticing. Pump it up!
There's no way AirBnB is going to try to IPO after the Facebook debacle. They must entice someone to acquire them. The higher the valuation the more enticing. Pump it up!