Airbnb to Raise Nearly $1.0 Billion in Financing

Airbnb Seeking FinancingAirbnb Inc. is seeking to raise funds. If the financing closes, the Silicon Valley elite startup will more than double its valuation from just over a year ago.

Airbnb, which lets users list their homes and apartments for short-term rentals, is looking to raise $1.0 billion in venture capital.

According to The Wall Street Journal, the company’s representatives told prospective investors the startup expects $850 million in revenues this year compared to $250 million in 2013. (Source: The Wall Street Journal, June 17, 2015.)

Airbnb is a two-way marketplace; customers can rent the place to stay using the website while hosts use it to rent out to those temporary renters. Interestingly, at the end of the contract, the renter and the host have the opportunity to review each other.

However, the issue is that the reviews are not anonymous, potentially pressuring people to post reviews that lean positive.

Airbnb’s site performed significantly better than expected recently. This raised the projection to more than $900 million, said a person familiar with the matter. Airbnb generates revenue by taking a three percent cut of each booking along with a six percent to 12% service fee from guests.

Currently, the company is using cash to expand and forecasts an operation loss of about $150 million this year.

Airbnb’s Outlook

Analysts assume that Airbnb’s online marketplace can increase its market share in the hospitality industry from hotel operators and online booking sites such as ThePriceline Group Inc. (NASDQ/PCLN) and Expedia Inc. (NASDAQ/EXPE).

On the other hand, the company’s revenue is then expected to grow to $10.0 billion in 2020, according to the people who viewed the projections. Analysts also foresee Airbnb’s business model becoming profitable, topping $3.0 billion of earnings before interest, tax, depreciation, and amortization (EBITDA) in 2020.

While there has not been any indication that the company would file for an initial public offering (IPO), rapid growth over the past few years has attracted ambitious investors.