Airbnb’s Battle to Stay Private

AirBnB is such a great business. No significant competition for now among startups. Primary (initial) market is different from the incumbents (hotels) and it can gradually chip away from their market share too.<p>It also has better network-effect than say Uber (which has per-city network effect but no significant global network-effect) and less competition than latter. The &quot;moat&quot; is super strong and the leadership (Brian, Joe et al.) seem to be really good.<p>I&#x27;m so in awe of their prospect. My only misgiving is that they rejected my application (which proves no one&#x27;s perfect after all - as they seem to also make hiring mistakes:P)

Interesting bit about what Airbnb has been doing with all their raised VC...<p>&gt; The addition of Tosi in 2015 was a signal for Wall Street to pay attention to the company. He was eager to create new, cash-generating ventures at Airbnb, people familiar with his work said. He quietly built a hedge fund within the company’s finance department. He used a portion of capital from the balance sheet to buy stocks, currencies and fixed-income securities, mimicking the treasury fund he ran at Blackstone. The side project represented 30 percent of the company’s cash flow last year and made about $5 million a month for Airbnb, the people said.

Before I say what I&#x27;m about to say: I know nothing about Airbnb&#x27;s finances (aside from what&#x27;s mentioned in the article) and I have no idea if it actually does or does not make sense for them to go public this year from the standpoint of the success of their business.<p>However, in a general sense, I believe that any company that provides their employees equity as a part of compensation has a moral obligation to get to a point where they can provide liquidity to those employees. It seems the founders and some early employees of Airbnb were able to cash out some of their shares in previous VC rounds, but that likely leaves the bulk of employees holding options or stock in a position of hanging onto something they aren&#x27;t sure they&#x27;ll ever be able to cash out.<p>Obviously there needs to be a balance of priorities: going public in a situation where the stock price will likely tank or the business will fail before employees can sell will of course not help anyone. But ignoring the fact that you have a ton of employees depending on some sort of liquidity event (even if it&#x27;s just a company-initiated stock buyback) is IMO unethical.<p>Not saying that&#x27;s definitely what&#x27;s happening here at Airbnb, but the article sure makes it smell that way.

The linchpin for a lot of technology companies staying private has been Softbank. As they highlight in this article:<p>&gt; The Japanese firm <i>dumped billions of dollars</i> into Uber, WeWork Cos. and other highly valued tech startups in the last year.<p>I wonder where are these guys getting so much money to &quot;dump&quot;. And once all of this is over what will they really be remembered for?

The interesting thing I read from reddit was that 30% of Airbnb’s cash flow last year came from an internal hedge fund holding currencies, equities, fixed income. This hedge fund was set up by their ex-CFO, so it&#x27;s an interesting model for generating income. They take money from guests immediately, but do not pay out to hosts until the guests check in, this delay can be up to many months in advance. This gives them time to invest those assets how they see fit.<p>The danger here is that 30% of their cash flow is the result of an incredible bull market, so what happens to Airbnb when we hit a recession?

So as per article, Tosi&#x27;s internal hedge fund contributed to $60m ($5m per month) of Airbnb&#x27;s $93m annual profit?

Why would VC&#x27;s give Airbnb such much idle cash. 5.3 Billion in cash reserves is ~56 years of their current earnings.<p>Couldn&#x27;t VC&#x27;s take some of that money and invest elsewhere and get better returns on the cash than it sitting unused in a company?