Airbnb Raises Over $100 Million as It Touts Strong Growth
November 20 2015 - 3:50PM
Dow Jones News
Airbnb Inc. has raised over $100 million in a new round of
funding that has closed, according to a person familiar with the
matter. The round was done at the same $25.5 billion valuation
where the company raised capital over the summer.
The home-rental service showed off solid growth to investors as
it sought to fill its coffers with the fresh capital.
Airbnb generated $340 million of revenue in the third quarter,
on bookings of $2.2 billion, according to an investor slide-deck
presentation reviewed by The Wall Street Journal. Both figures
roughly doubled from the same period a year ago.
The presentation says the San Francisco company is performing
ahead of plan, forecasting revenue of $900 million this year after
previously projecting $825 million during a fundraising completed
in July. The Journal reported in June that the company was already
targeting $900 million for the year by that point.
The climate for later-stage fundings of highly valued companies
has cooled in recent weeks amid a tepid IPO market. At the same
time, firms such as Fidelity Investments and BlackRock Inc. have
marked down the value of some of their private investments in
companies such as Dropbox Inc., Snapchat Inc. and Zenefits Inc.
As of Aug. 31, mutual funds from Fidelity, Vanguard Group and
Morgan Stanley still carried their Airbnb shares at the price where
the company sold the shares in the July funding round. Airbnb's
challenge in attracting investors is primarily the steep price of
the shares, rather than questions about the ultimate potential of
its business, according to two investors privy to the company's
financial details.
It will take a couple of years for the business to grow to a
point that justifies the current valuation, these people say.
Meanwhile there is risk to holding the shares since there is no
public market for them.
Airbnb generates revenue by taking a 3% cut of each booking
along with a 6% to 12% service fee from guests. Based on the
third-quarter numbers, it appears the company is collecting a
maximum fee from guests, with revenue running at about 15% of
bookings.
One item missing from the company's slide-deck presentation: any
mention of the bottom line. That may be due to the steep losses the
company is racking up as it spends money on growth. This year,
Airbnb expects an operating loss of about $150 million, the Journal
reported in June. A person familiar with the matter said the
company expects 2017 will be the first full year it generates an
operating profit.
The company might have grown faster had it been able to attract
more property owners to list rooms on its site. In the year leading
up to this past April, the growth rate of "new active listings"
slowed, according to the presentation. Growth of new listings has
reaccelerated since then, however, in part due to increased
marketing efforts, according to the document.
Airbnb ended the quarter with more than 1.7 million total active
listings, the company said. The figure was around 1.4 million at
the end of May, according to YipitData, a research firm that tracks
Web data for institutional investors.
The company is focused primarily on maximizing room nights at
this stage, said the person familiar with the company's thinking,
as opposed to revenue. Since over 70% of nights booked is outside
the U.S., a strong dollar weighs on revenue, this person said.
Write to Rolfe Winkler at rolfe.winkler@wsj.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires
(END) Dow Jones Newswires
November 20, 2015 15:35 ET (20:35 GMT)
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