Airbnb Raises US$212m in Series B, Giving US$1.3bn Valuation

In a press release yesterday, Airbnb announced “Airbnb, the leading online community marketplace that lets anyone discover and book unique spaces from people around the world, today announced that it has received $112 million in Series B financing from Andreessen Horowitz, DST Global, and General Catalyst, bringing the company’s total funding to $119.8 million. The capital will be used to fuel growth, accelerate the hiring of a world-class team and strengthen the Airbnb community at the local level.” Now the start-up is in good company, with other investor portfolio companies, Facebook, Zynga, Twitter, Groupon.

Since Airbnb is the new darling of the start-up world in the Silicon Valley, I decided to use the service on a recent trip to Korea. The process was simple. I logged in, typed ’Seoul’, set my budget and selected Wifi as a requirement. At least 20 listings popped up. I messaged a few of the one’s I liked and decided on one, mainly because the guy was into start-ups.

I’ve used Couchsurfing, a similar free version, a few years ago when I travelled to Japan with a few friends, but only used it to meet people, not stay with them. I was a little apprehensive about staying at a stranger’s place and leaving my stuff there. It was such apprehension that Y-Combinator front man, Paul Graham originally believed would inhibit Airbnb from becoming a big business. But he fell in love with the founders – Brian Chesky, Joe Gebbia and Nathan Blecharczyk, more than the idea so decided to take them in. Lucky he did! Fast-forward only 3 years from its founding in 2008, now Airbnb (according to its front page) has 16,737 people to rent from in 186 countries and is handling 10,000 guests a night all over the world, from beds on the floor to a Giraffe Manor in Kenya and is generating healthy revenue growth of 30% month on month, justifying the monstrous US$1.3bn valuation. Airbnb makes money by taking commission from the transaction.

The New York Times reported on the trend for people to use Airbnb to earn decent money from renting out their spare space. Lisa Marion, 26, earns about US$1,800 per month from Airbnb while she starts her own business. She intends to use the money to make renovations to her house like adding new paint and buying new furniture.

Of course attractive business models from America attract clones. Not just in China but also within America and Europe. Last month, German based Wimdu closed a US$90m fundraising from Rocket Internet and Kinnevik. In China, Airizu, the Chinese arm of Wimdu is trying to attack the large market. When Airizu first launched, we reported on the classic C to C (copy to China) approach where the website looked identical. I just had another look and at least they’ve made it look more Chinese now. I guess that is what you call ‘innovation’ in China.

In China, Airbnb faces a very unique market that does not work the same the rest of the world. One of the biggest issues is trust. Many Chinese don’t even trust each other, so it’s a stretch for them to trust foreigners staying at their place. Another issue is that local police authorities require Chinese and foreigners to register where they are staying when they travel. With normal apartments being converted into short-term hotels, this process becomes tricky to manage.

The story of Airbnb’s journey is stuff of legendary start-ups. When they first started, things weren’t so easy and money wasn’t coming they even created and sold breakfast cereal named Obama-O’s during the time of the Obama US federal election campaign. Now this US$212m round of funding is equivalent to selling 2.8m boxes of Obama O boxes, when they were trying to stay alive.