Estimated Valuation: $30 billion
Product: Home Sharing, Travel
IPO Timeline: Late 2017, 2018
Date Founded: 2008
Airbnb, the peer to peer home lodging network, has grown in eight years into one of the world's largest unicorns, currently valued at about $30 billion. It serves 2 million travelers in 34,000 cities worldwide all the way from New York City to Beijing to Rio De Janeiro. The startup has upended the traditional travel and tourism industries, and plans to post $10 billion in annual revenue within the next few years, even in the face of stiff resistance from local regulators and traditional lodging chains, according to The Wall Street Journal.
Airbnb has transformed the lodging industry in the same way that ride-sharing unicorn Uber Inc. has reshaped taxi service and other forms of transportation.
Airbnb at the Creation
The idea for the company started in 2007 when co-founders Brian Chesky, 35, now CEO, and Joe Gebbia, 35, now Chief Product Officer, moved to San Francisco after graduating from the Rhode Island School of Design (RISD) in Providence, Rhode Island. According to TechCrunch, the two couldn't pay the high cost of rent in San Francisco and needed to generate additional income. Ultimately, they set up a website, getting three people to rent part of their apartment for $80 each.
They formally founded Airbnb in 2008 with a former roommate, Nathan Blecharczyk, 33, now the company's Chief Technology Officer. Their first big venture was in 2008 when they used their website to rent rooms in the Denver area during a hotel shortage at the Democratic National Convention. The company got its first venture funding, some $20,000, from startup incubator Y Combinator.
Airbnb's Growth, Challenges
Since then, the San Francisco-headquartered company has expanded to 191 countries. It regularly offers more than 2 million listings for lodging across the globe, according to its website, employing as many as 1,600 people as of 2015.
Airbnb has grown so big, so quickly that it's facing staunch opposition to its growth worldwide, forcing it to compromise with regulators who often say it violates local laws. In 2016, Airbnb was forced to sue its home city, San Francisco, after regulators ruled that a $50 host fee Airbnb charged to tenants was unwarranted. In New York state, a new law could have badly damaged Airbnb's business in its largest market, New York City, according to a Reuters article. Airbnb eventually wound up settling with both the state and city of New York. It's also faced opposition in major cities such as Amsterdam, Barcelona and Montreal.
Competitors, New Products
Airbnb remains the largest peer to peer lodging network in the industry, aided by its acquisition in 2012 of its UK competitor, Crashpadder, according to CNET. But it faces potential rivals in HomeAway, owned by Expedia Inc., as well as HouseTrip and FlipKey. Airbnb may face a much more difficult time in its latest plan to expand into the passenger flight booking business, according to Recode. There, Airbnb faces entrenched giants such as Priceline Group Inc. and Expedia.
To date, the company's growth has been fueled by a steady stream of funding, a total of $3.95 billion in in 20 separate funding rounds, according to Crunchbase. Some of Airbnb’s larger rounds were a $112 million Series B round led by Andreessen Horowitz, a $200 million Series C led by Founders Fund and a $1 billion debt financing led by JPMorgan Chase & Co., according to according to Crunchbase. There was also a $1.5 billion Series E founding round with 14 investors, including General Atlantic, Hillhouse Capital Group and Tiger Global Management.
Founders Fund, for example, is famous for investing in companies such as Lyft, Stripe and Palantir Technologies, according to Crunchbase, while Andreessen Horowitz made investments in companies such as Lyft, Medium, Foursquare and others.
Airbnb generates revenue from both its platform and its users. It takes a 3% cut of each booking, as well as a service fee ranging between 6% and 12% from guests. That enabled Airbnb to tell investors in 2015 that it would generate $900 million in revenue, a nearly four-fold increase from $250 million in 2013, according to Fortune. However, the company indicated it won't be profitable until it reaches its goal of $10 billion in revenues by 2020, an 11-fold increase from 2015.
An IPO may be years away. Airbnb board member Jeff Jordan, an executive at Andreessen Horowitz, said in a Bloomberg report that the company isn't likely to go public soon, saying that Airbnb's growth rate is still in its early stages.
Others think an IPO may happen earlier. Last November, Airbnb launched a tours and experiences business in cities worldwide where travelers can book tours and activities from local experts, which is seen as an opportunity to generate additional revenue ahead of an IPO, according to a Recode report. Although he gave no specific time frame, CEO Chesky said the same month that Airbnb is getting ready to go public “as soon as possible,” according to Wired.