Startup Analysis: How Much Is Airbnb Worth?
Airbnb is a networked website and mobile app platform that allows people to rent out a room in their home, or their entire home, to other users of Airbnb. The company is privately owned and headquartered in San Francisco, California. Users of the site can register and create a profile, and then request to rent out listings on the site, which are posted by other users who own properties. As of August 2015, The Wall Street Journal reports that the company is the highest valued hotel operator in the world.
While Airbnb's valuation is high, it is incredibly difficult to accurately value a private company. This is due to the fact private companies do not need to disclose any financial statements or financial information to the public. This is in stark contrast to public companies, which are required to report quarterly financials and conduct quarterly analyst calls.
Due to these differences in disclosures, it is much easier to value a public company, either by an analysis of its fundamentals or through its share price . It is easiest to value a private company immediately after a financing round, which Airbnb recently experienced. Below is the current valuation of Airbnb, as of 2015, and the methodologies used to arrive at that number.
Value of Airbnb
After a $1 billion funding round from notable venture capital firms, Airbnb is valued at roughly $24 billion, according to The Wall Street Journal. Additionally, CNN Money reports the financing round was actually $1.5 billion and gives the company a valuation of $25 billion.
This contrast in funding levels and valuation accurately highlights the fact it is very difficult to value a private company that holds its cards close to its chest. Regardless, third-party investors and evaluators base their valuations on the evidence available to them, and below is the valuation methodology.
1. Forecasted Revenue Growth
In the original prospectus given to investors in Airbnb's most recent funding round, the company forecasted revenues of $850 million for the fiscal year 2015. This is more than triple the company's best-performing revenue year, which was $250 million in 2013, explains The Wall Street Journal.
After its strong performance in the first quarter of 2015, Airbnb raised that projection to $900 million. From there, the company forecasted its revenue to grow to $10 billion by year-end 2020, which means the company would become profitable in that year. This is incredible growth if the company is able to hit the revenue forecasts it set for itself and promised to investors.
2. Forecasted Growth in Users and Listings
YipitData reports that Airbnb had nearly 1.4 million listings at the end of May 2015. This is more than double the 600,000 the company reported having in February 2014, a little more than one year previously. The listings have drawn an increase in users to the website, since the company has multiple listings for modest homes and apartments, exotic homes in distant locations and quirky properties. This growth in users and listings supports Airbnb's $24 to $25 billion valuation due to the fact the company makes its money by taking a percentage of listings' earnings.
3. Valuation of Other Operators in the Hospitality Industry
While it is not a good idea to value a private company strictly on the valuation of well-known companies in the same industry, other public hospitality companies have garnered high valuations. Travel site Priceline, for example, has a market cap of $61 billion. The company expects to generate over $9 billion in revenue in fiscal year 2015, reports The Wall Street Journal. This shows investors and evaluators the market potential of Airbnb is large enough where the company's growth trajectories validate its current valuation.