Airbnb In Advanced Talks to Raise Funding at a $10 Billion Valuation
Private-Equity Firm TPG Likely to Lead Funding Round for the Online Home-Rental Marketplace
Airbnb Inc. is in advanced talks to raise funds that would value the online home-rental marketplace at more than $10 billion and place it among the world's most valuable startups, according to several people familiar with the process.
Private-equity firm TPG is likely to lead the round, which could total between $400 million and $500 million, said two of the people.
At $10 billion, Airbnb would be valued more highly than some large hotel operators with which it competes. Wyndham Worldwide Corp. WYN -0.67% , which manages 7,500 hotels under the Wyndham, Ramada and other brands, has a market value of $9.4 billion. Hyatt Hotels Corp. H -0.94% is valued at $8.4 billion.
The service has become a cheap alternative to hotels for millions of tourists, a source of income for homeowners and a target for regulators wary about safety, oversight and tax collections.
Last October, New York Attorney General Eric Schneiderman subpoenaed Airbnb for information on its 15,000 hosts in the state, to determine if any are violating a 2010 state law that prohibits renters from subletting their homes for less than 30 days if they're not present. The company is contesting the order in court. Hotel operators argue that the rentals unfairly skirt lodging taxes.
Airbnb is benefiting from soaring investor interest in mobile and Internet-based business models, which is propelling a wave of initial public offerings and eye-popping valuations for private companies. Facebook Inc. FB -1.74% recently agreed to acquire closely held text-messaging service WhatsApp for $19 billion.
In the past 12 months, at least 21 companies have raised new funds that valued them at $1 billion or more. At the top of that list, online-storage provider Dropbox Inc. and Chinese mobile-phone maker Xiaomi notched $10 billion valuations, while data-mining specialist Palantir Technologies Inc. was valued at $9 billion. Uber Inc., an on-demand car service, is valued at $3.8 billion, following an investment last year led by Google Ventures, with TPG participating.
Airbnb and Uber are part of the so-called sharing economy, in which people offer resources or services, such as cars, spare bedrooms, or extra time, to others for a fee. The companies need investments to expand into new regions, staff international offices and ward off competitors. One of Airbnb's largest competitors is vacation-rental service HomeAway Inc., AWAY -0.24% a public company valued at $3.9 billion.
Airbnb's valuation has quadrupled since it raised funds less than two years ago, a period in which the company expanded its rental service to more than 160 countries.
Airbnb last raised funding at a valuation of $2.5 billion in 2012, from venture-capital investors including Peter Thiel's Founders Fund, Andreessen Horowitz and Sequoia Capital. Before the current talks, the company had raised more than $300 million. It received a $600,000 seed investment from Sequoia in 2009, and the next year raised $7.2 million in a round led by Greylock Partners.
Airbnb co-founder and Chief Executive Brian Chesky wants to expand the service beyond room rentals by adding more hospitality services. Earlier this year, for instance, Airbnb began testing a cleaning service for hosts in certain neighborhoods in San Francisco and New York. Last fall, it hired Chip Conley, the founder of Joie de Vivre, a boutique hotel chain, to lead an effort instructing the company's 350,000 hosts on the finer points of hospitality.
"We are actively looking to build specific services," Mr. Chesky said in an interview with the Wall Street Journal in January. "We need to offer more."