Someone please correct me if I'm wrong in assuming this but it seems a company like AirBnb would only raise private capital instead of going IPO because it's financials suck. I mean if you were doing really well and had profits that you were pumping back into the company you would want to IPO to raise money for lower dilution right? A private round might cause much more dilution than an IPO. Maybe I'm missing something.
The standard operating practice for Silicon Valley startups now is to put of IPOing as long as possible. Facebook actually got several exceptions from the SEC so that they didn't have to go public. Going public entails a ton of hassle, for example if Airbnb went public and had one of their programmers accidentally introduced a bug that misreported the number of users they had they could be liable for fraud. There's very little benefit to going public except that it creates a market for the stock which gives employees liquidity. However public markets are actually pretty crappy for that too because in order to avoid insider trading employees are often confined to a narrow window of time when they can sell their stock. Because they are lots of employees who want to convert their stock into money to but things this window gets flooded with sellers and employees wind up getting 80 cents on the dollar compared to other stock holders.
So yeah, you are missing something. Public markets are basically strictly worse than private investors. Also it's not like there are a bunch of private investors waiting to write $555M checks to company's whose financials suck... how could that make any sense?
> Because they are lots of employees who want to convert their stock into money to but things this window gets flooded with sellers and employees wind up getting 80 cents on the dollar compared to other stock holders.
I receive stock in compensation. I have elected to auto-sell it - this works even during trade window freezes.
Alternatively, they may end up getting 120 cents on the dollar, compared to other stock holders, if the stock rose in price between the time that other insiders could sell, and the time that employees could sell. If the company's on an upwards trajectory, this is quite likely.
> Also it's not like there are a bunch of private investors waiting to write $555M checks to company's whose financials suck... how could that make any sense?
"Our financial don't suck, it's just that going public is really really hard and we don't want to comply with the law that's going to show that our financials suck. Wait... scratch that last line."
Welllll.... there are hassles associated with being a public company beyond merely "people holding your feet to the fire of financials." You have to comply with Sarbanes-Oxley, which is just a real pain in the ass, for example (source: I worked for NetSuite as they went public, and coming into compliance with SarbOx was a bunch of work).
A private funding round with a limited controlled equity buyback from employees gives you a certain amount of control that going public does not, too -- a company like AirBnB that had a broadly successful IPO would presumably mint a ton of millionaires among their employees, and I would expect to see a substantial talent drain once that happened.
But yes, I assume that "financials aren't in great shape" is the majority explanation for AirBnB's failure to go public.
Even accepting all of those things, if the company was profitable and had anything in the war chest they wouldn't have to take more funding. They're either getting capital for war or survival which means what they have now isn't enough for either.
So strange how everyone seems to agree there's at least a bit of inflation of VC funding if not an outright bubble, yet no one seems to see why this might induce a company to take as much cheap cash as it can for the impending winter.
A lot of their fundraising is for partnerships. For example, their previous round was mostly large Asian investors who could help Airbnb continue to grow internationally
Not entirely. As you know, public companies fluctuate heavily on other factors than just financial news. Something like a summary judgment in New York or California that negatively impacts AirBnB's business could send it for a spiral. It is likely more responsible to stay private until they feel they have solid footing with the regulatory environment. Private investors are clearly willing to give them a huge valuation knowing these events will likely turn out to be positive, and as long as employees are able to get liquidity, might as well stay private for now.
They do seem to be spending aggressively on growth (and legal) so I suspect you are half right in that they are probably losing a lot of money.
Dilution is a function of valuation and amount raised. Assuming they'd raise the same amount from public or private markets, valuation is the only factor in question.
It is not a given that public markets would price Airbnb higher than private markets. In fact, recent history suggests that the opposite often happens.
So no, IPOing is not necessarily less dilutive. Also, since their valuation is $20B+, dilution differences are a rounding error.
Dilution would be about the same and it's only low-mid single digits which no one is worrying about.
The financial are important (and by most/all accounts, AirBnB's are impressive) but there are a number of other implications of IPOing, mainly around severe restrictions of how the business is run.
Wouldn't that just make them literally a hotel chain, with no disrupting difference to any any other? I'm fairly sure I can book a room online at the Hilton.
Even funnier, because most of the brands don't even own most of their branded hotels, they're usually franchised. Hilton/Marriott/Starwood/Choice/Wyndham/Accor collecting 5% to 15% is basically the same thing as AirBnB is if you're not using someone who actually rents out part of their home.
Concur with imjared -- Uber likewise went "full circle" and started adopting more "cab company functions" once they reached the appropriate scale: "Oh, hey, we might as well make money leasing the cars too!" "Oh hey, there's money to be made in payday advances!" [1]
With that said, (per imjared) Airbnb may have some comparative advantage in the ease with which they bring this spare capacity online via a nice interface; it could become a useful platform for allowing hotels to dump extra rooms for sale, in a way that's more pleasant for users to find.
[1] Lyft lets you get paid earlier for 50 cents IIRC.
AirBnB already owns the touch-point with customers who are looking for non-traditional places to stay. Some portion of those customers would also be open to normal hotels, and AirBnB could serve them by doing something as simple as adding another check-box in the "home type" interface. Once word got out that you can do both things in one place, there would be little reason to go through any other service and they would take an ever-larger share of all bookings. Of course, this is won't happen, because hotel operators, seeing this danger, will refuse to integrate with them. But that huge market opportunity is still there, they "just" have to build their own hotel capacity to realize it.
Correct but hotel booking process is quite diverse and all the means I have tried are fairly painless. You can call the hotel directly and book a room. You can check one of many online sites and book through them.
The article states that around $200 million is expected to go to a repurchase or secondary sale from current employees. This seems like a nice thing that airbnb might have to regularly do from here on out.
I suspect the question was asking why they would need more money? At some point you have to stop raising money, start making a profit and stop diluting shares by taking on more investment money.
Not just the future of hospitality... it's the future alternative to home ownership.
Think about it: You could literally wake up, do your morning routine, and then step out of the RV and into your workplace. You come back that night... and the next morning you step out into Yosemite Valley for some hiking. You just rent RV berths -- everything from campgrounds (Yosemite) to high-rises (in major cities).
My dream is that this gets built in a different setting: offices. Imagine self-driving desks in a giant flat warehouse without a single wall. You could pick a travel program where your desk would slowly roll around the perimeter, or just hang out in the middle. You could program it to maximize distance from any other desk if you wanted privacy. And of course the desks would be networked and their position could be overriden by a master controller that had access to the company calendar, so when it's time for the mandatory standup meeting your team's desks would automatically get together in a single spot.
... to a different RV. There's no reason for RV ownership; a self-driving RV can fulfill the sleeping / transportation roles for at least two people/families on different working schedules.
As someone who lives in an Airstream and works from home, I would have to disagree. In the context of this idea of 'the future of home ownership', the RV becomes the 'place for my stuff' in the George Carlin sense. Having my house (RV) drive itself to the next beautiful state park or national forest I want to camp in while I work or sleep or watch a movie would be amazing.
This is actually an insanely good idea, since it allows you to maximize your awake time, for enjoyment. When you are sleeping, the RV can take you to your holiday destination. Since we sleep about 8 hours a day, you can use that to gauge how far you can travel.
The only issue would be road infrastructures. Road maintenance would become a serious issue, due to the extra strain of having potentially 10s of millions of RVs on the road.
Last time I looked into RV cost of ownership numbers--which was probably when that blog post hit HN from the guy who converted a van into a RV--the RVs are really expensive to move due to fuel and wear-and-tear on the drivetrain. So even if self driving, it's probably not going to be Grand Canyon one day and Florida the next any significant fraction of the time.
It's becoming fairly normal at this point for more mature private companies, from what I can tell. If you've been at a company for 4-7 years with no IPO in sight, it can make some sense for the company to do a buyback. I know Uber has a tenure-based buyback program, Palantir did at least one in the last year or so, etc.
From the rumors I have heard, the Palantir buy-back is limited. My understanding is that most folks with options still haven't exercised the majority of them.
A company I worked for did the same, they raised some money and used some of it to purchase a portion of the employees' vested equity. In other cases the company's major investors were willing to tender to purchase employee equity to increase their stake.
Oh man. I thought I was the only one, my first interaction with the interviewer was him bemoaning the fact that my degree was not from an IVY league university, right to my face.
From what I can tell from comment history, the GP is quite young and still in school.
While I learned a long time ago that a degree (and even a master's degree, can't speak to fresh PhDs as I've not had the opportunity to work with any) from a prestigious university is not worth the paper it's printed on as far as judging someone's ability to actually ship good code, it seems that lots of SV firms hiring people right out of college think it is.
It's foolish on the part of said firms, but the answer is to take a job at a company that's not a "unicorn" and build up experience (and proof of experience, e.g. shipped products) such that one's "pedigree" is fucking irrelevant.
Honestly, if the job was just a CRUD job, and you're fresh out of college, you don't fucking want it. You need to get out of your comfort zone if you want good experience.
I've been out of college for over 10 years and I wanted the job because it was full stack at a profitable company who treated their employees well.
Unfortunately my cs degree was from a state school and I've only worked enterprisey jobs with the current misfortune of an architect title. I still have other paths to financial success like consulting or management (hell no).
Bummer. I did not actually finish my degree and as a result ended up working at a shitty, tiny company that paid at the start < 1/4 of what recent CS grads are getting these days (I was just happy to get a job that involved programming at the time).
Fortunately the problem that the company was trying to solve was actually a bit technically challenging (though quite boring from a user facing perspective) and I was able to jump to a better startup and then a better one because I had good experience.
I've only had three jobs since college, but the ability to bring value on the very first day in all three jobs has given me a great deal of credibility, even without a CS degree, and now I'm making quite a bit more than a recent CS grad, though it took me a while to get there (I'm in my early thirties).
Happened to me too. I thought it might have been an exception or some sort of a fuck up. They called me all the way to SFO to tell me that my degree is not from elite schools so I can go home. No not in some sort of an indirect way, like right to my face. The interviewer asked me where I went to school, made a face told me 'oh not from a top university?' .
I'm not sure what's driving this comment but it breaks the HN guidelines. Please stop creating accounts to break the HN guidelines with (we've banned this one, since it did so twice already).
