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July 18, 2017

Airbnb – Funding Map

airbnb-funding

Airbnb was started in 2008 by founders Brian Chesky, Joe Gebbia and Nate Blecharczyk.

Airbnb founders

We have written about our thoughts on both the core Airbnb business model, along with their recent foray into the world of travel Experiences and targeting of a new generation of travelers, those who want authentic local experiences.

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While most people have heard about Airbnb (and have an opinion on them one way or another), very few realize the market cap, cash position, and growth runway for a company that after 9 years in existence has a market cap greater than every major hotel chain except Marriot.

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The company, which brought on board Wall Street veteran Laurence Tosi (former CFO of Blackstone Group) as their CFO in 2015, has $3bn cash in the bank, is currently profitable, and are planning an IPO in 2018/19 at a projected $50bn valuationAirbnb-Financials

The question is how did they get there – what did their funding roadmap look like from zero to $30bn?

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Airbnb Crunchbase

As you can see above, the company went from a valuation of $100mn in November 2010 when they raised $7.2mn from Greylock partners, to a $1.3bn valuation in July 2011 when they raised $112mn from Andreesen Horowitz. That’s a $1.2bn jump in valuation in 9 months!

There are several reasons why such a jump in valuation would have occurred:

  • discovery of a new business model: Airbnb’s ‘asset light’ business model allows them to scale globally without having to buy assets
  • creation of a new travel paradigm:

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  • Strong referral/word of mouth dynamics: Airbnb user-acquisition funnel breaks down as follows –  65% is Word of Mouth, 26% Referrals, 9% Paid

Given that they are in a strong market position, strong cash position, and continue to innovate on the business model with their Experiences program, it is likely that Airbnb will continue to attract investor interest and create new opportunities for expansion and revenue growth.

Experiences

All of this growth and expansion happened despite poor early-stage metrics for the company as documented in the post ‘Airbnb, My $1 billion lesson.’

“Luckily for me, I didn’t put much emphasis on their metrics. If you looked at the Airbedandbreakfast.com numbers as of September 20, 2008 you would have seen a sharp drop off (around 50%) in users, reservations, and revenue from August to September.” VC Paige Craig

It all goes to show that Category Kings can emerge from unexpected places, and build scalable business models that every investor dreams to participate in. Finding, funding and growing such companies requires a shift in thinking towards non-linear models and long-term funding strategies. Airbnb would have been unlikely to emerge in any other market outside of Silicon Valley, precisely because the company relied on capital, expertise and support while it went through its hyper growth years. Had Airbnb been forced to grow on a budget, it wouldn’t have become what it is today, a next-generation hospitality company with a huge future runway.