Sounds like this is the problem: you don't know exactly what they are doing. That doesn't mean it's not justified, and of course it doesn't mean it is :)
Yes, I really wish there were fewer top comments on Hacker News rehashing "I can't believe a software company raised so much money!"
It's not that these valuations are above criticism, it's just there's rarely any real dialectic reasoning involved. I rarely see a comment from someone with a deep, nuanced understanding of the industry and market criticizing the funding round. It's just the usual incredulity that these numbers are big, which is not a sound basis for debate.
I'd like to see honest criticism of these funding rounds (or honest defense) from people who have a great deal of knowledge on the subject.
Those of us that were in the tech business between 1998-2001 are well aware it's precisely the people claiming "deep nuanced understanding of the industry" that drove the entire community off a cliff with mindless fundraising and valuations wholly unsupportable by common sense, or any other kind of sense.
Clearly the market is different now, but basic economic laws of nature don't get repealed. The reason a valuation question is the top comment on all these stories is because the valuations appear, objectively, to have no basis in a realistic assessment of the future discounted cash flows of the business in question.
Your first paragraph is not really responding to what I actually said.
Let me repeat for you: these valuations are not above criticism. I just want to see better reasoning involved than literally balking at big numbers. It comes across as the same hysteria that drives the valuations up in the first place, just in the opposite direction.
It's really not a lot to ask to simply elevate the caliber of discussion. For example, I could respond to your second paragraph by stating that it is very difficult to claim what an objectively good valuation is without a understanding of what Airbnb's future plans are. Expedia's market cap is on the order of 17B. We have incomplete insight into Airbnb's plans for future markets.
See? That isn't so difficult. I'm not blindly attacking or defending the valuation, I'm reasoning about it instead of saying, "These numbers are big so I can't see how they possibly need them!"
Reasoning from whom? The interested parties won't tell the truth. In the cited period 1998-2001 Greenspan warned of "irrational exuberance", though he did not exactly do everything he could to stop the bubble either.
In reality, opinions from anonymous engineers who know what is being sold may be the best you can get.
Also, very few people on HN have seen the decks, metrics, or long term plans that the investors saw.
Obviously nobody can see the future, so it's totally reasonable to assume that said decks, metrics, and long term plans are total bullocks, but hey, at least they exist, and someone saw them.
A fairly simple DCF[1] based on public numbers. First the basic numbers.
From public data[2] in 2015 AirBnB did at least $360M in revenue, expecting to hit $900M by the end of that year. They never disclosed if they did hit that number, but lets assume they did.
So, 2015 Revenue is $900M.We'll assume a 8% yearly growth rate over the next 10 years. With a terminal growth rate of 4% after that.
I think we can accept 6% as a discount rate - The rate we'd otherwise get
just shoving our money in a stock market index.
and based on those numbers, we get a valuation of $19774.14 Billion.
to get a $30B valuation in this analysis they'd have to have 14% YoY growth
for 10 years. Which I think is unrealistic.
Thank you. This is the sort of reasoning I was looking for.
Now, I'd counter your argument here by stating that it appears Airbnb had over 100% growth in 2015, and Expedia and HomeAway had 24% and 20% growth respectively.[1]
Given that, is it unrealistic to assume the market can support 14% YoY growth (or higher) for the next ten years?
Why is this criticism of these funding rounds not honest?
It's a phenomenon thats seems to defy obvious business logic much like credit default swaps without owning the underlying asset, no doc mortgages, underwriting student loans for degrees fields that can't possibly pay them back ad infinitum.
The phenomenon of companies remaining private and unprofitable for close to a decade and continuing to raise astronomical sums of money is not exactly a field filled with experts. Its unchartered territory. There are no people with deep knowledge of this bewildering business strategy.
It's not rehashing when its a new news item is it?
Managing an infrastructure of peer to peer rental for >500,000 units worldwide seems like a reasonably hard task.
You're comparing apples to oranges here.
Arguably the value of the property Airbnb is a defacto manager for is higher than 500,000 cars, but they also need to expand.
Trust me, I'm totally on board with the unicorn hate here, this seems ludicrous, but I also don't know what is going on at Airbnb, so I try to think about why this might be a good investment, rather than why it might appear ludicrous :)
I'm going to bet they will be opening local offices / retail points around the world. Help less tech savvy folks list on Airbnb as well as serve as a "check in desk" to pickup keys
Cheaper, a simple locker system (nicely AirBnb theme). When renting, you get a code via text, enter it and a small locker opens up with the key. When done, you can deposit the keys in there.
You could even put up a computer next to it where you can search for immediately free rooms, pay and get the key right away, or just one friendly local guide standing around ready to answer tourist question about the city.
Put it in a convenient central location that's safe (airport, central train station).
Unless you have considerable expertise in Airbnb's core and peripheral markets, I don't think it's fair for you to say what is and is not possible for a company to need (putting aside the fact that "need" is used in the normative sense here).
