Question
Is Airbnb's $1 billion valuation ridiculous? By my counts, they seem to have only done about $15-20M in revenue, yet are commanding a $1B+ valuation. They are growing quickly, but shouldn't the valuation have been in the low hundreds of millions?
Answer
It is very rare indeed that a Web startup has a clear and distinct impact on the mainstream world, shows clear evidence of a strong revenue stream and a big market disruption opportunity.
I also used Airbnb thrice on a road trip recently, and was deeply impressed by the business opportunity and the discipline and thoughtfulness with which they've gone after it. From details like getting the iPhone app just right, to getting price positioning and social culture right, they've done it all right.
So I don't think it is over-valued at all. Given that this is the only game in town properly positioned to severely disrupt the huge hotel industry, AND create a whole new kind of travel market, there is something very worthwhile here.
In one of my Quora posts, I estimated that Airbnb could take away 25% of the hotel market eventually, if they grow right. Plus, they'll create a new market at least that size, by monetizing currently free behaviors like couchsurfing, intermittent paying-guests (for people who routinely visit an area but don't live there, and need a cheap time-shared room) that have room for value addition but will always remain under the threshold of economic viability for the hotel industry to go after.
I also used Airbnb thrice on a road trip recently, and was deeply impressed by the business opportunity and the discipline and thoughtfulness with which they've gone after it. From details like getting the iPhone app just right, to getting price positioning and social culture right, they've done it all right.
So I don't think it is over-valued at all. Given that this is the only game in town properly positioned to severely disrupt the huge hotel industry, AND create a whole new kind of travel market, there is something very worthwhile here.
In one of my Quora posts, I estimated that Airbnb could take away 25% of the hotel market eventually, if they grow right. Plus, they'll create a new market at least that size, by monetizing currently free behaviors like couchsurfing, intermittent paying-guests (for people who routinely visit an area but don't live there, and need a cheap time-shared room) that have room for value addition but will always remain under the threshold of economic viability for the hotel industry to go after.