Airbnb Has Arrived: Raising Mega-Round at a $1 Billion+ Valuation

I've been waiting for some time to call out Airbnb, and I think this is the right time.<p>Firstly, the idea of short term residential rentals is not new. Long before Airbnb major cities, Paris, London, New York, and Toronto were dealing with the issues and the problems of short term / nightly residential rentals. In fact the latest condo boom in Toronto has been ascribed to international investors buying condos explicitly for this quasi-hotel rental market. Many cities have been passing local laws trying to prohibit this type of rental use for residences because they carry a whole host of problems. Some of those include -- emptying the downtown core of residences, artificially increasing housing costs for residents, removing the stability and security that comes from having permanent and community-invested residents, shorting cities on their hotel taxes, providing unlicensed locations for short term illicit activities, etc. So by increasing the market in these short term rentals, the communities will also feel the increase in the unfortunate side effects of these short term rental impacts. These are long term market problems that Airbnb will have to address.<p>Secondly, it's not a new idea because in the recent past, these rentals were managed by hotel brokers. So in that respect, Airbnb major idea is simply to replace the traditional broker that used to handle the short term rentals with a direct owner to renter model. Across the internet we see great success in online services removing brokerage inefficiencies to various markets, and for this they should be congratulated, but not overly so.<p>And finally, about their execution. Airbnb is not the market leader. In fact --<a href="http://www.vrbo.com/" rel="nofollow">http://www.vrbo.com/</a> is. This is what amazes me the most. Vrbo (I have no professional relationship or otherwise) regularly get better reviews in online discussion boards comparing the two services. Their price structure is much more competitive, their review structure is much more robust, in fact aside from Airbnb's more sophisticated visual design, Vrbo leads in many segment of this space.<p>So, to what do I think Airbnb's success comes from? I think it's Airbnb's marketing / hype / buzz that has been carefully choreographed to maximize their valuation. And to this, I congratulate Airbnb on their latest success, and to a dance well done.

I think a lot of startups put too much weight on what an investor thinks of their idea. Airbnb is a prime example of carrying on in the face of rejection, even if people are saying "it's a stupid idea". I know a lot of founders who, after being told by many of the Valley's finest angels that their idea is no good, would just give up.<p>It just goes to show that you can create a $1 billion company, even if no one really gets it in the beginning, and in my eyes at least, they are actually justifying it (making a lot of money in a lot of different places).

"Don't worry about people stealing your ideas. If your ideas are any good, you'll have to ram them down people's throats."<p>-Howard Aiken<p><a href="http://www.paulgraham.com/googles.html" rel="nofollow">http://www.paulgraham.com/googles.html</a>

Fred Wilson was one of the VCs who passed on his opportunity to invest in Airbnb - his musings on that opportunity, and learning from it, are well worth a read - <a href="http://www.avc.com/a_vc/2011/03/airbnb.html" rel="nofollow">http://www.avc.com/a_vc/2011/03/airbnb.html</a>

This might be a stupid question but what do you do after you secure such a large series of funding? Go on mass expansion? Would anyone mind telling me how startups typically use this kind of money (closing Series with 100+mil)?

Techcrunch says, "On any given night in New York there are more people staying in homes via Airbnb than there are rooms in the biggest hotel in Manhattan." For comparison: Starwood Hotels (whose brand names include Westin, W, Sheraton, and others) has more than 20 hotels in New York (some quite large), and a market cap of about $11.3 billion.<p>FWIW, Airbnb's commissions are 9-15% of the rate (3% from the host, 6-12% from the guest) according to their hosting FAQ[1]; no idea how that compares to typical hotel profits on a room listing...<p>[1] <a href="http://www.airbnb.com/help/topic/hosting" rel="nofollow">http://www.airbnb.com/help/topic/hosting</a>

Congrats to AirBnB!<p>The way I understand it, the biggest threat to Airbnb's model are local governments starting to clamp down on this kind of (usually unlicensed?) subletting. I'm curious how the high valuation factors this risk.<p>Of course, I suspect the high valuation means Airbnb is planning to expand to hotels and travel in general?

Airbnb is in a prime position to expand into the market of web-based PMS (I'm not kidding -- Property Management Systems) that are super expensive and still run on old MS-DOS machines in many hotels. Give hotels a web-based solution that interfaces with hotels.com and other sites (there's a rather involved protocol that you need to license, but the name escapes me) and you're in business.

I bet the guys behind CouchSurfing are kicking themselves about now. <a href="http://techcrunch.com/2006/06/29/couchsurfing-deletes-itself-shuts-down/" rel="nofollow">http://techcrunch.com/2006/06/29/couchsurfing-deletes-itself...</a><p>Always keep a backup of your database! :-) In this case, I think it is pretty clear the execution is worth a heck of a lot more than the idea.

Congratulations to everyone involved. This is way cool. Super inspiring.

I think this is the blog post from 2007 he references in the video <a href="http://www.core77.com/blog/events/airbed_breakfast_for_connecting_07_7715.asp" rel="nofollow">http://www.core77.com/blog/events/airbed_breakfast_for_conne...</a>

<i>That's true. It's also true that there are quite a few marketplaces out there that serve this same market</i><p><a href="http://www.paulgraham.com/airbnb.html" rel="nofollow">http://www.paulgraham.com/airbnb.html</a><p>The difference is execution. Any skilled designer (and I'm not a designer but I can respect design) would've looked at airbnb.com in the past couple of months and realized: this is different. The way Facebook was different. All those key design decisions add up and you get enough of an edge over everything else that you redefine the whole sector by making the sector suddenly interesting.<p>Anyway, I'm biased. I stayed at an Airbnb place over this weekend and it worked great. It's bigger than EBay though, for my money. It's next generation lodging that is OOM more efficient and the flood gates are probably going to start overflooding (economy seems just right with enough consumer spending to support some trips, but enough of a groupon-appreciating eye, for more and more people, to avoid hotels where possible, etc.).<p>I sent in my resume to airbnb after deciding to try the site (while booking a place for the night before Bay to Breakers). I didn't actually stay at a place (until this past weekend) -- but I knew that whoever created that site was way ahead of everyone. I found the answer to one of their programming challenges on the interwebs and e-mailed about it (so haven't heard back -- I expect they are pretty swarmed with interest now too). And honestly, I'm at the point where I'm not that into working for a successful startup (would just confuse things for my side projects, etc.). But I am a very happy customer. And Brian Chesky is a new kind of entrepreneurial genius (his Startup School presentation still reverberates). Cheers.

Huge congratulations to Airbnb. That's incredible.

Random financial speculation:<p>Around 5000 rooms a night get rented (via the video).<p>The make an average of ~10% per transaction (3% from the host, the rest from the guest: <a href="http://www.airbnb.com/help/topic/hosting" rel="nofollow">http://www.airbnb.com/help/topic/hosting</a>)<p>Say an average of $60/night.<p>60 * 0.1 * 5000 = $30,000 revenue/day.<p>That's pretty decent money.

For all the talk of bubbles, I think AirBnb is actually undervalued at $1billion. I want this noted. Before AirBnb space was being wasted. Now its being used. That is something of fundamental value. The dubious valuations are things like FourSquare, LinkedIn and GroupOn.

What is their revenue? How much profit are these guys making? How big is their team?

It will be interesting to see how AirBnB maintains the listing quality as it scales which I would argue is currently its main advantage over VRBO, HomeAway, Craigslist, et al. These types of sites tend to devolve into a homogeny of bland, "professional" listings, hence HomeAway's boring rollup strategy. What has made AirBnB somewhat unique and appealing has been the interesting listings and the care and personality of the property owners.

All things considered, this is definitely fantastic. I was watching the TechCrunch TV video of Ashton Kutcher earlier today about his surprise (at the time) investment of Air BNB. Looks like this guy really knows what he's doing when it comes to investing - skype, foursquare, not abnb. Pretty cool.<p>Anyway, congrats to the abnb team, much deserved!

I'm curious how well Airbnb is doing outside of New York. New York's real-estate market is so out of whack it strikes me as fertile ground for p2p hotel rooms.<p>One example: I wonder how many people are renting out rent-controlled apartments on Airbnb at a huge profit, while the owner maintains the unit at a loss?

Wow, congratulations.

Congrats guys! Great interview, Brian!

What's wrong with craigslist's vacation rentals??

Apparently $1B doesn't get you as much as it used to...

When tech companies raise billions, it's a bubble.<p>When hedge fund CEOs are paid $600 million in salary... it's a recession.<p>Congrats to AirBnb and YC on joining the top .001% :]