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Billion Dollar Unicorns: Airbnb is in no Rush to IPO

Posted on Tuesday, Apr 4th 2017

airbnb

Earlier this month, Snap became among the first few Billion Dollar Unicorns to go public this year. Many anticipated that its successful IPO will prompt some of the other bigger Unicorns, like Uber, Lyft, and Airbnb to test out public waters as well. However, the companies are still cautious. Recently, San Francisco-based Airbnb announced plans that it will go public, but not soon.

Airbnb’s Financials

Airbnb has always kept its financials confidential. It earns revenues by charging a 3% fee from each booking and a service fee ranging from 6%-12% from guest fees. Last year, it diversified its operations and began earning revenues through additional services such as customized tours. Unlike other startups, Airbnb is known to be cost efficient. It is its prudence along with the revenue focus that has finally helped it turn profitable. Analysts estimate that Airbnb was trending at revenues of nearly $1.7 billion for the year 2016. Airbnb did report that it turned profitable in the second quarter of 2016. Analysts estimate that Airbnb earned $100 million in profits last year. It expects to maintain profitability in 2017 at the EBITDA level. It is rumored to be forecasting EBITDA of $450 million on $2.8 billion in revenue for 2017 and estimates to earn $8.5 billion in revenues by the year 2020. The numbers are impressive considering the legal trouble that Airbnb has been facing in both domestic and international markets.

It has been venture funded so far and has raised $4.4 billion from investors including Andreessen Horowitz, Ashton Kutcher, Baillie Gifford, China Broadband Capital, CrunchFund, Dragoneer Investment Group, DST Global, Elad Gil, Fidelity Investments, FirstMark Capital, Founders Fund, General Atlantic, Anton Levy, General Catalyst Partners, Joel Cutler, GGV Capital, Glenn Solomon, and Greylock Partners. Its latest round of funding was held last month when it raised $1 billion at a valuation of $31 billion. It was valued at $30 billion in 2016 and at $25.5 billion in 2015.

The latest funding round confirmed suspicions that Airbnb was delaying its IPO. Airbnb’s management revealed that it is preparing to go public, but also realizes the amount of work needed to turn into a successful listed company. It anticipates that it will be ready to go public by next year, but hasn’t yet formalized a timeline for listing.

Airbnb’s Investments

Airbnb continues to invest its assets in other business offerings. It recently invested $13 million in restaurant reservation startup Resy. New York-based Resy is similar to OpenTable, but is much smaller. It has tie-ups with over 1000 restaurants in 50 cities and helps people book local restaurants through its app. Airbnb plans to integrate Resy’s services into its own app in the coming months to strengthen its local trips experience service.

Additionally, in February this year, Airbnb announced plans to buy the payments startup Tilt. Tilt was founded in 2012 to offer peer-to-peer money transfer capabilities. Tilt’s service has helped more than 500,000 groups split bills via its system. It has also developed the ability to handle cross-currency payments. It also has crowdfunding capabilities to support individual and group causes. Airbnb is estimated to have paid $50 million for the acquisition. While talent has been a reason for the acquisition, Airbnb is also expected to leverage Tilt to expand its travel offering and complement trip-booking.

Airbnb appears to be taking the right measures toward success. Sources say that its ten-year goal is to be the first online travel company with a market valuation of $100 billion. Compare that with the likes of giants like Marriott and Hilton which together account for a market cap of $53 billion. It is also a significant goal when compared with other online travel players like Priceline and Expedia. Priceline, for instance, has a market capitalization of $87.2 billion and Expedia is at $19 billion.

More investigation and analysis of Unicorn companies can be found in my latest Entrepreneur Journeys book, Billion Dollar Unicorns. The term Unicorn was coined in a TechCrunch article by Aileen Lee of Cowboy Ventures.

Photo credit: Gustavo da Cunha Pimenta/Flickr.com.

This segment is a part in the series : Billion Dollar Unicorns


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