Applications Open Jan. 4 for 2021 Heartland Challenge – University of Arkansas Newswire


This post is by "Venture Capital" - Google News from "Venture Capital" - Google News

Applications Open Jan. 4 for 2021 Heartland Challenge  University of Arkansas Newswire

The Word “Hacker”


This post is by Paul Graham: Essays from Paul Graham: Essays

Something about Slack (+ Salesforce)


This post is by Om Malik from On my Om

Slack logo
Photo by Stephen Phillips – Hostreviews.co.uk on Unsplash

I am sure that you have heard that Salesforce is buying Slack for a whopping $28 billion by now. And if you saw Marc Benioff in conversation with Bloomberg’s Emily Chang this morning, you could tell that Christmas came early for him and his company. With (Quip CEO) Bret Taylor and (Slack CEO) Stewart Butterfield in the ranks, it is not surprising — he has a company that can go toe-to-toe with Microsoft.

That will be the subject of a different blog post, but for now, let me talk about Slack and Stewart. I had originally crafted this piece on the day of Slack’s public offering. As an angel investor in the company, I felt compelled to write about why Slack mattered? Well, I never really published the piece. Thinking about it — it doesn’t matter: it is still relevant today, as it was then, for it is about why Slack mattered enough for Benioff to pony up more dollars than what Microsoft paid for LinkedIn.


In a galaxy far, far away, long before someone coined the phrase “Web 2.0,” pivoting wasn’t a thing. But that’s exactly what the co-founders of a little gaming company from Vancouver were doing when I first met them. Things weren’t going too well, so they were evolving the initial idea of a game into a new product — a cleverly and cheekily named photo sharing service. They called it Flickr.

The Internet was like a nuclear wasteland at the time. Flickr was like the first bloom, a flicker of hope. And all of us early bloggers became active participants in the community. I didn’t really take photos then, but the rise of camera phones helped me post slices of my life to the platform. Flickr changed the course of the web in more ways than many realize. It felt like the first real social community online, from tags to followers to embeds to likes to sharing to the very idea of online community. Its influence is seen even today in many modern products, from Facebook to Twitter to Instagram.

One of its co-founders was Stewart Butterfield. The other one was Caterina Fake. And the third key person was Cal Henderson. First, I wrote about the product on my blog. Next, I wrote about their progress. ​A​nd then, I wrote about their pending acquisition​ by Yahoo. A relationship had started to form. We stayed in touch. Nurtured by time, our professional relationship evolved into a friendship, enabled and maintained through the Internet.

Like a serpent, life carved its path. Stewart moved back to Canada and, along with Cal, started working on a company Tiny Speck. It was good to see Stewart and Cal back in the startup trenches. We stayed in touch, and I learned that they were pivoting yet again. They were going to focus on bringing a tool developed for internal communications to the market. Tiny Speck became Slack Technologies.

Meanwhile, I was also pivoting, as my role evolved from that of a writer and founder to my new position as an investor at True Ventures. Throughout, I held onto my core belief that, much like food, shelter, and clothing, we humans can’t live without communicating. It is what makes us a society. The connection between new modes of communication and major societal shifts is why I marveled at the first cell phone I ever saw. It is why I was so energized by the Internet and its seemingly endless possibilities. It’s what led to my instant love affair with Skype.

Many years ago, in a column for my old magazine, Business 2.0, I wrote:

For the longest time, the concept of work had been confined and defined by two parameters: space and time. We all used to go to a central location to work. We would work at our nine-to-five jobs, then come home, watch television, read a little, go to sleep, and start all over again.

Just as time would define our work and our life, space or location would define industries. Automobiles blossomed in Detroit. Filmmaking and television flourished in California. Fashion thrived in Paris. Publishing and advertising found a home in New York City and in these locations, business giants of the 20th century attracted hundreds of thousands of workers.

With the rise of broadband, a new factor has come into play: connectedness. Connectedness allows companies big and small to exist as a stateless entity. Today, a startup can offer a new device dreamed up and designed in California, manufactured in China and sold in Europe with support services being in India or the Philippines.

It is not just startups; companies as large as Cisco Systems and Nokia are working across different time zones, accomplishing different tasks and functioning like a beast that never sleeps. Thanks to connectedness, the old-fashioned notions of space and time are soon going to be rendered moot. How can a day end at 5:00 p.m. when half your team is spread across multiple time zones?

That thinking led to my first investment in a social collaboration software startup, Socialcast, which was eventually acquired by VMWare. The lessons we learned from Socialcast helped refine my thinking about work and the workplace. From the telegraph to the telephone to email and social software, ​the world of work has always evolved toward faster communication tools. I have no doubt that the next evolution of how we communicate and work together will heavily involve video conferencing and, eventually, VR conferencing. Zoom-boom is just a leading indicator of that behavior shift. (Related: Why we are underestimating Zoom and its impact.)

So, when I saw the early version of Slack, I was intrigued by its possibilities as a messaging platform that wasn’t really an email, but an API to carry notifications for different kinds of corporate applications. When Stewart was raising his next round of financing, he ended up working with my friend, Mamoon Hamid, then of Social Capital (now at KPCB). With the permission of our partnership, I ended up making a small personal angel investment in the company.

The company went public — at $26 a share. The stock popped, and the company is now worth $28 billion. It is amazing to see what Cal, Stewart, and everyone on the Slack team has achieved with what was initially an internal tool. Thanks for taking me along on the ride, and making me even more of a believer. There are Slack doubters. There are Slack haters. And there are Slack imitators.

What is undeniable is that Slack has the tailwind of change behind it. The workplace of today is evolving and will keep evolving. The pandemic has only accelerated that change. The workday of today is changing and will keep changing. The tools that make sense of this change will keep evolving. I was long and will always be “long” human need to communicate.

So is Benioff.

PS: In case you were wondering, I don’t hold any shares in Slack.

December 2, 2020, San Francisco

Big Tech’s Small Budget M&A Effort:: The Information’s Tech Briefing


This post is by The Information Staff from The Information

Big tech is in acquisition mode, despite antitrust scrutiny. It’s just that the deals aren’t for brand name companies or of any size. This week alone we’ve seen Google acquire data management firm Actifio, Facebook buy customer support service Kustomer and Amazon reportedly in talks to snap up podcasting firm Wondery.

Each of those are tiny in comparison with Salesforce’s $27.7 billion deal this week to buy Slack, an acquisition that would likely not pass muster if done by one of the tech giants. Actifio, for instance, was last valued at $1.3 billion, suggesting it likely cost a couple billion dollars, while the Kustomer deal was reportedly worth just $1 billion. As for Wondery, a Wall Street Journal report indicated Amazon would likely pay $300 million or so.

The Information 50 Most Promising Startups – The Information


This post is by "Venture Capital" - Google News from "Venture Capital" - Google News

The Information 50 Most Promising Startups  The Information

Neuroglee gets $2.3 million to develop digital therapeutics for neurodegenerative diseases


This post is by Catherine Shu from Fundings & Exits – TechCrunch

There are now about 50 million people with dementia globally, a number the World Health Organization expects to triple by 2050. Alzheimer’s is the leading cause of dementia and caregivers are often overwhelmed, without enough support.

Neuroglee, a Singapore-based health tech startup, wants to help with a digital therapeutic platform created to treat patients in the early stages of the disease. Founded this year to focus on neurodegenerative diseases, Neuroglee announced today it has raised $2.3 million in pre-seed funding.

The round was led by Eisai Co., one of Japan’s largest pharmaceutical companies, and Kuldeep Singh Rajput, the founder and chief executive officer of predictive healthcare startup Biofourmis.

Neuroglee’s prescription digital therapy software for Alzheimer’s, called NG-001, is its main product. The company plans to start clinical trials next year. NG-001 is meant to complement medication and other treatments, and once it is prescribed by a clinician, patients can access its cognitive exercises and tasks through a tablet.

The software tracks patients’ progress, such as the speed of their fingers and the time it takes to complete an exercise, and delivers personalized treatment programs. It also has features to address the mental health of patients, including one that shows images that can bring up positive memories, which in turn can help alleviate depression and anxiety when used in tandem with other cognitive behavioral therapy techniques.

For caregivers and clinicians, NG-001 helps them track patient progress and their compliance with other treatments, like medications. This means that healthcare providers can work closely with patients even remotely, which is especially important during the COVID-19 pandemic.

Neuroglee founder and CEO Aniket Singh Rajput told TechCrunch that its first target markets for NG-001 are the United States and Singapore, followed by Japan. NG-001 needs to gain regulatory approval in each country, and it will start by seeking U.S. Food and Drug Administration clearance.

Once it launches, clinicians will have two ways to prescribe NG-001, through their healthcare provider platform or an electronic prescription tool. A platform called Neuroglee Connect will give clinicians, caregivers and patients access to support and features for reimbursement and coverage.

Salesforce’s Bret Taylor: Company Didn’t Overpay for Slack


This post is by Kevin McLaughlin from The Information

Salesforce didn’t overpay for Slack, the business messaging company it agreed to acquire on Tuesday for nearly $28 billion, Bret Taylor, Salesforce’s president and chief product officer said.

In an interview on Wednesday with The Information, Taylor said the price tag was well worth it considering the importance of the kinds of communication tools Slack provides, especially in workplaces that have been radically changed by the pandemic. While Salesforce in recent years has used acquisitions to accelerate revenue growth, Taylor said that the company won’t depend entirely on those deals to meet its ambitious revenue goals.

Arcadia Minerals, Inc begins process of identifying capital partners and joint venture operator to develop $860 Million Insitu critical minerals deposits in Wyoming – EnerCom Inc.


This post is by "Venture Capital" - Google News from "Venture Capital" - Google News

Arcadia Minerals, Inc begins process of identifying capital partners and joint venture operator to develop $860 Million Insitu critical minerals deposits in Wyoming  EnerCom Inc.

Investor Relations – BGV


This post is by Devin Miller from National Venture Capital Association – NVCA

The candidate will be expected to do the following:

  • Defining the core investor relations processes of the firm, beyond the regular financial reporting communications. This will include Annual LP meetings, participation in industry LP events and conferences, and all other types of formal and informal communications
  • Support the team on the production of various investor events globally including Annual LP Meetings, focused investor education events, other investor conferences and activities and maintain the IR event calendar. Promoting the firm’s brand, thought leadership and lighthouse investments at industry conferences or webinars
  • Manage the IR Database of all current, past and prospective LP’s and the LP reporting portal
  • Conduct research, analyze and assist with content for investor presentations and materials while ensuring the quality and consistency of all presentation content.
  • Orchestrating fundraising for flagship fund, special funds and co-investment opportunities with an eye towards achieving the optimal geographic and segment balance amongst investor groups to ensure smooth and predictable fund-raising activities

To learn more, contact: Susan@benhamouglobalventures.com.

The post Investor Relations – BGV appeared first on National Venture Capital Association – NVCA.

Venture Capital Analyst – Village Global


This post is by Devin Miller from National Venture Capital Association – NVCA

About Village Global
Village Global is a $100MM+ early stage VC firm backed by some of the world’s most successful entrepreneurs, including Jeff Bezos, Sara Blakely, Abby Johnson, Magic Johnson and Anne Wojcicki. We curate a network of angel investors who source, select, and support remarkable founders across sectors and around the world. Founders benefit from this network, plus a thriving peer community.

About The Role
You will engage in every aspect of the venture capital process, from sourcing to diligencing and supporting founders. You’ll interact with thousands of high potential startups and savvy investors as you hone your skills and build your track record. You’ll also manage projects that continually improve the way we work with founders, angels, and VCs around the world.

Responsibilities
Source and screen prospective investment opportunities
Conduct diligence and check references to inform decisions
Engage in the early stage ecosystem to discover promising founders and opportunities
Research new markets and trends to identify emerging entrepreneurs and technologies
Draft investment memos and make investment recommendations
Ensure effective, timely communication with founders, investors and other stakeholders
Track and manage deal pipelines
Support portfolio companies with helpful introdufctions and resources

Qualifications
Excellent communication and interpersonal skills
Interest in building systems and spreadsheets to track huge volumes of opportunities and transactions
Strong analytical skills and judgement
Passion for startups and the venture capital ecosystem, especially new VC models like scout programs, accelerators, software-driven VC, etc.
Curiosity about new technologies, markets, business models, and teams
Self-starter — excited to operate with lots of autonomy
Record of initiative, achievement, collaboration, and positive attitude
Eager to operate in a dynamic, fast-paced environment

Compensation:
Competitive compensation and benefits

Location
Flexible; remote OK with Pacific Time Zone preferred

For more information, contact: anne@VillageGlobal.vc.

The post Venture Capital Analyst – Village Global appeared first on National Venture Capital Association – NVCA.

Venture Capital Associate/Principal – Village Global


This post is by Devin Miller from National Venture Capital Association – NVCA

About Village Global
Village Global is a $100MM+ early stage VC firm backed by some of the world’s most successful entrepreneurs, including Jeff Bezos, Sara Blakely, Abby Johnson, Magic Johnson and Anne Wojcicki. We curate a network of angel investors who source, select, and support remarkable founders across sectors and around the world. Founders benefit from this network, plus a thriving peer community.

About The Role
You will engage in every aspect of the venture capital process, from sourcing to diligencing and supporting founders. You’ll interact with thousands of high potential startups and savvy investors as you hone your skills and build your track record. You’ll also manage projects that continually improve the way we work with founders, angels, and VCs around the world.

Responsibilities
Source and screen prospective investment opportunities
Conduct diligence and check references to inform decisions
Engage in the early stage ecosystem to discover promising founders and opportunities
Research new markets and trends to identify emerging entrepreneurs and technologies
Draft investment memos and make investment recommendations
Ensure effective, timely communication with founders, investors and other stakeholders
Track and manage deal pipelines
Support portfolio companies with helpful introductions and resources

Qualifications
Excellent communication and interpersonal skills
Interest in building systems and spreadsheets to track huge volumes of opportunities and transactions
Strong analytical skills and judgement
Passion for startups and the venture capital ecosystem, especially new VC models like scout programs, accelerators, software-driven VC, etc.
Curiosity about new technologies, markets, business models, and teams
Self-starter — excited to operate with lots of autonomy
Record of initiative, achievement, collaboration, and positive attitude
Eager to operate in a dynamic, fast-paced environment

Compensation:
Competitive compensation and benefits

Location
Flexible; remote OK with Pacific Time Zone preferred

Apply here.

The post Venture Capital Associate/Principal – Village Global appeared first on National Venture Capital Association – NVCA.

5,000+ CEOs and Founders Already Coming to SaaStr Scale NEXT WEEK!


This post is by Jason Lemkin from SaaStr

We’re gearing up for the next big digital mega-event, SaaStr Scale.

20,000+ will watch and attend, and already 5,000 founders and CEOs are already signed up. We have dozens of core sessions and almost 100 smaller workshops.

You can grab a FREE Keynote pass including tons of sessions here, including the CEOs of Okta and Airtable and much more.

Many of our smaller workshops are also nearing capacity, for example:

  • 1,021 are already signed up to join Looker on a roundtable on data literacy:
No alt text provided for this image
  • 423 are already signed up to join Google Cloud on what it takes to really go enterprise marketing right:
No alt text provided for this image
  • 615 are already signed up to join Chorus’ CEO on a roundtable on how to close big deals:
No alt text provided for this image
  • 648 are already signed up on how to manage 10,000 trials a month with BEE’s CEO:
No alt text provided for this image
  • 949 are already signed up to join $1B+ Gainsight on how to master the art and science of product-led growth:
  • 856 are already signed up to join Freshworks on how to level up customer success:
No alt text provided for this image
  • 723 are already signed up on how to use events to generate leads and revenue with Splash and Yext:
No alt text provided for this image
  • 914 are already signed up to learn from Panda Doc on how to negotiate SaaS deals:

  • 812 are already signed up to learn how to conquer SOC 2 with Vanta:

  • 809 are already signed up to join Twilio on how to build truly adaptable products:
No alt text provided for this image

And so, so much more!!

See you next week at SaaStr Scale 2020!!

No alt text provided for this image

The post 5,000+ CEOs and Founders Already Coming to SaaStr Scale NEXT WEEK! appeared first on SaaStr.

Space Perspective moves closer to the edge of space, with seed round financing and a stellar investment team – Space Ref


This post is by "Venture Capital" - Google News from "Venture Capital" - Google News

Space Perspective moves closer to the edge of space, with seed round financing and a stellar investment team  Space Ref

The Sharing Economy come home: The IPO of Airbnb!


This post is by Aswath Damodaran from Musings on Markets

On Monday, November 16, Airbnb filed it’s preliminary prospectus with the SEC, starting the clock on its long awaited initial public offering. On the same day, rising COVID cases caused more shut downs and restrictions around the world, creating a clear disconnect. Why would a company that derives its value from short term rentals by people who travel want to go public, when a out-of-control virus is causing its business to shut down? In this post, I will argue that there are good reasons for Airbnb’s IPO timing, and make my first attempt at valuing this latest entrant into public markets.

Setting the Table

As with any valuation, the first step in valuing Airbnb is trying to understand its history and its business model, including how it has navigated the economic consequences of the COVID. In this section, I will start with a  brief history of the company, move on to reviewing its financials leading into 2020, and then look at how it has performed in 2020. I will end the section by looking at information disclosed in the recent prospectus filing that provides insights into the company’s journey to its initial public offering.

Timeline of Airbnb

Airbnb’s roots go back to 2007, when during an industrial design conference in San Francisco, Brian Chesky and Joe Gebbia realized that there were opportunities for homeowners to rent their homes to visitors, and created a company called AirBed & Breakfast. Joined in 2008, by Nathan Blecharczyk, a Harvard graduate and technical architect, AirbedandBreakfast.com was born and later renamed Airbnb. In subsequent years, the company grew, with multiple rounds of funding from venture capital. Along the way, investors in the company rapidly escalated their pricing of the company from $1 billion in 2011 to $10 billion in 2014 to more than $30 billion in 2016. The time line below captures some (but not all) of the highlights in Airbnb’s history:

While the company has been able to hit new milestones of growth each year, there are two challenges that it has faced along the way, that need to be incorporated into any valuation you attach to the company today. 
  1. Legal Challenges: The company has faced multiple challenges from cities that feel that its business model violates local zoning laws and regulations, and evades taxes. While you can attribute some of this pushback to hotel company lobbying and the inertia of the status quo, there is no doubt that Airbnb, like Uber, pushes regulatory and legal limits, taking action first and asking for permission later. While Airbnb has found a way to co-exist with laws in different cities, the restrictions they face vary widely across the world, with some locations (like New York) imposing much more stringent rules than others.
  2. Acquisitions: As the number of hosts and guests on Airbnb have climbed over the years, the company has invested in building a more robust platform for its rentals. While some of that money has been spent on internal improvements, much of it has been spent acquiring more than two dozen companies, most of them small, technology businesses. 

Business Model

Airbnb’s primary business model connects hosts who own houses and apartments with guests who want to rent them for short term stays, while providing a secure and easy-to-use platform for search, reservations, communications and payments. That said, though, it is worth peeking under the hood to see how this business model plays out as revenues and earnings. In the picture below, I look at the Airbnb business model, both in its original form (which still holds for hosts renting their own houses or apartments) and professional hosts (who own multiple units or even operate small hotels), a model it introduced recently and is still transitioning into:

In both versions of the model, Airbnb’s revenues come from fees collected on rentals, with both the host and the guest paying in the individual host version, but only the host paying in the professional host version. In 2016, Airbnb extended the model, allowing hosts to offer experiences to their guests, for a fee, with Airbnb keeping 20% of the payment. While the concept was heavily promoted, it has been slow to take off, with only $10 million in sales in 2017, but Airbnb has not given up, hiring Catherine Powell, a Disney theme park executive in 2020, to revamp the business.

The Financials, leading into 2020

The proof of a business is in the numbers, and Airbnb, in addition to posting impressive numbers on hosts, listings and guest nights, has also seen financial results from that growth. In the graph below, I look at gross bookings (the total amount spent by guests on their rentals), revenues to Airbnb from these booking (in dollar values and as a percent of gross bookings) and operating profitability, in dollar and percentage terms:

Source: Airbnb Prospectus (November 16, 2020)

Taking a closer look at the numbers, here are some preliminary features that stand out:

  1. Growth is high, but the rate is declining: It may seem churlish too take issue with a company that has grown its revenues more than five fold over a five-year period, but as the company’s base gets bigger, its growth rate, not surprisingly, is also declining. By the start of 2020, Airbnb had already become one of the largest players in its market of vacation and travel rentals, a sign of success, but also a crimp on future growth.
  2. Airbnb’s revenue share has stayed stable: As gross bookings have increased, Airbnb’s share of these bookings has remained stable, ranging from 12-13% of overall revenues. Note that the shift to the new business model for professional hosts (where Airbnb keeps 14% of the transaction revenue) is relatively recent, and it will take some time for that change to play out in the numbers. In addition, growth in the experiences business will also push this metric upwards, since Airbnb keeps a 20% share of those revenues.
  3. The company is edging towards profitability: To Airbnb’s credit, it is closer to profitability than many of its high profile sharing-economy predecessors (such as Uber and Lyft) and the fact that it was able to report positive operating profits, albeit fleetingly in 2018, without playing the adjusted earnings game (where companies add back stock based compensation and other items to their bottom line to claim fictional profitability) puts them ahead of the pack.
In summary, coming into 2020, Airbnb was delivering a combination of growth driven by disruption and a pathway to profitability that made them a prime candidate for a public offering.

The COVID effect

I don’t think anyone expected 2020 to be the year that it was, and even in hindsight, it has been full of unwelcome surprises for individuals and businesses. While there were news stories about the virus for the first few weeks of 2020, they centered either on China or passengers on cruise ships that had been exposed to the virus. Once the virus made its presence felt elsewhere, in February and March, countries responded with partial and full economic shut downs that hurt all businesses. The travel business was particularly exposed, as people curtailed flying and traveling to distant destinations, and Airbnb was hurt badly in 2020, as can be seen in the graphs below:

Source: Airbnb Prospectus

The graph to the left looks at the effect of COVID on gross bookings and cancellations (in millions of nights), with the net bookings representing the difference. Note that cancellations exceeded bookings in March and April, at the height of the global shutdown, but have come back surprisingly well in the months after. In the graph to the right, you can see the effects on the financials, in a comparison of first nine months of 2019 to the first nine months of 2020, with gross bookings dropping 39% and operating losses almost tripling over the period.

The Prospectus Revelations

If Airbnb had broached the idea of a public offering in March and April, where the numbers were not just dire but potential catastrophic, it is likely that they would have been laughed out of the market. There are two factors that may have led Airbnb to reassess their prospects and file for a public offering now. 

  • It’s relative:  The first is that it was not just Airbnb that felt the pain from the economic shut down. As we will see in the next section, the hotel and travel booking businesses were damaged even more than Airbnb, because of their large asset bases and debt levels. In relative terms, Airbnb might emerge from the COVID crisis, than going into it. 
  • Rebound:The second is that business returned stronger than most had anticipated in 2020, with third quarter numbers coming in above expectations, and markets rebounded even more strongly with stocks recouping all of their early losses. When Airbnb filed its prospectus with the SEC on November 16, I don’t think that there were many who were surprised at the timing. 

While Airbnb’s general financial performance has been mostly public for the last few years, the prospectus provides more detail as well as guidance on governance and the terms of the offering.

  1. Pathway to Profitability: Digging through Airbnb’s financials over the last five years, and breaking down the expenses, here is what we see:
    Source: Airbnb Prospectus (Nov 16)
    Note that, at least through the most recent years, there is little evidence of economies of scale, since the direct operating costs have stayed at between 40-42% of revenues and the other costs have, for the most part, been rising. In 2019, the company also reported a substantial restructuring charge that presumably was one-time and extraordinary, but that item bears watching, since it has become a convenient vehicle for companies to hide ongoing operating expenses.
  2. Use of Proceeds: While the details are still being worked out, it is rumored that Airbnb is looking to raise about $3 billion in proceeds on the offering date, and that while some of the proceeds will be used to retire existing debt, most of it will be held by the company to cover future investment needs.
  3. Share classes: In keeping with the practices of tech companies that have gone public in recent years, Airbnb has shares with different voting rights: class A shares with one voting right per share, class B shares with 20 voting rights per share, and class C & class H shares with no voting rights per share. Not surprisingly, the class B shares will be held by founders and other insiders, allowing them control of the company, even if they own well below 50% of all shares outstanding. It is the class A shares that will be available to shareholders who buy on the offering day, and will remain the most liquid of the share classes thereafter. It is not clear why there are class C shares, other than to give founders, who already have control, even more control in future years, if they feel threatened. 
  4. An ESG twist: It should come as no surprise that in an age where companies are valued on their “goodness”, Airbnb is signaling it’s intent to be socially responsible, with Brian Chesky making explicit the corporate values for the company, including “having an infinite time horizon” and “serving all of our customers”. In addition, the proceeds from the non-voting class H shares will be set aside is an endowment to serve Airbnb hosts, though it is not clear whether the primary intent is to give hosts a stake in the company’s success, or to help them out during periods of need. I remain skeptical about ESG, but will hold off on passing judgment on whether this is just a public relations ploy.

The Hospitality Business

To value Airbnb, we need to start with an assessment of the market that it is targeting and then understand the competition that the company faces. In this section, I will start with a look at the market size and then examine the hotel and booking companies that comprise its competition.

The Market (TAM)

There are two ways in which I can describe Airbnb’s total addressable market. One is to look the hotel business globally, which generated in excess of $600 billion in revenues in 2019, with the following characteristics:

The hotel business is large, but its growth has slowed over the last five years, and it remains concentrated, with the top five hotel chains accounting for a larger and larger portion of the overall market every year since 2014. While the US remains the largest market, geographically, Asia is the center of growth, with China leading the way. 

There are some who believe that the conventional hotel market understates the potential market for a sharing economy company like Airbnb, since it can increase the supply of rental units without major new investment, and perhaps induce new entrants into the business. After all, the ride sharing companies have doubled or even tripled the size of the car service business in the last decade, using this template. It should come as no surprise that Airbnb believes that its total addressable market is much bigger than the hotel business. In 2011, in its infancy as a company, Airbnb estimated that its total addressable market at the 1.9 billion trips that were booked in 2010, and its share of that market at 10.6 million trips, as can be seen in this graph from the company in an early VC pitch:
In its prospectus, driven partially by its past success, and partly by the need to justify a large market cap, Airbnb has expanded its estimate of market potential to $3.4 trillion, as evidenced in this excerpt from the prospectus:

We have a substantial market opportunity in the growing travel market and experience economy. We estimate our serviceable addressable market (“SAM”) today to be $1.5 trillion, including $1.2 trillion for short-term stays and $239 billion for experiences. We estimate our total addressable market (“TAM”) to be $3.4 trillion, including $1.8 trillion for short-term stays, $210 billion for long-term stays, and $1.4 trillion for experiences.

In my view, Airbnb’s targetable market falls somewhere in the middle, clearly higher than just the hotel business of $600 billion, but below Airbnb’s upper end estimate of $2 trillion for this business. That is because there are parts of the world, where the Airbnb model will be less successful than it has been in the United States, either because of consumer behavior or regulatory restrictions. Given how much trouble Airbnb has had in the experiences business, I think Airbnb’s estimate of $1.4 trillion for that business is more fictional than even aspirational.

The Players

To make a judgment on Airbnb’s future, we need to understand two peer groups. The first is the hotel business, since it is the business that is most at risk of being disrupted by the Airbnb model. The other is the online travel booking business, where there are large players like Expedia and Booking.com which have, at least for segments of their business, made their money by acting, like Airbnb, as intermediaries or brokers connecting guests with hospitality offerers. 

1. The Hotel Business

The hotel business is both large and diverse, composed of hotels that range the spectrum from luxury to budget. To get a measure of the business, I have listed the 25 largest publicly traded hotel companies (in market capitalization) in the world below, with Marriott topping the list, with revenues of about $21 billion in 2019:

The conventional hotel business is an asset-heavy business, with a significant real estate component to its value, and while some hotel companies have stayed with that model, others have moved on to a more capital-light model, where the real estate is owned by a separate entity (both in terms of ownership and control) and the hotel companies operates primarily as an operator. Marriot, for instance, follows the latter model, with the Marriott REIT owning the real estate, and Marriott collecting operating revenues from running the hotels. In addition, the global economic shutdown precipitated by COVID has wreaked havoc on hotel company revenues and profits, with revenues down about a third (in annualized terms) in the last 12 months, relative to 2019. 

2. The Travel Booking Business

While the hotel business is the one being disrupted the most by Airbnb, it is the travel booking business that is closest to the Airbnb business model. That business is also dominated by large players, with Expedia and Booking.com being the biggest. In the table below, I look at the revenues and operating income at these companies in 2019 and the last 12 months:

While Expedia and Booking.com both generate revenues from operating as middlemen between travelers and hospitality providers, just like Airbnb does, there are two key differences:

  1. Other businesses: Both Expedia and Booking.com also operate in other businesses that drive revenues and margins. First, they generate revenues by buying blocks of hotel rooms at a discount from hotels, and then reselling them at a higher price, in what they call the “merchant” business. Second, they also derive revenues from online advertising by hotels and travel providers. Expedia gets a much larger share (47%) of its revenues from the merchant business than Booking.com (25%), which may explain its lower margins.
  2. Status Quo vs Disruption: Both Expedia and Booking.com were designed to make money off the status quo in the hospitality business, and derived all of their revenues until recently from existing hotels and airlines. In reaction to Airbnb’s success, both companies have tried to expand into the home and apartment rental businesses, but these listings still represent a small fraction of overall revenues.

The Valuation

To value Airbnb, I will follow a familiar script, at least for me. I will start by telling my Airbnb story, based upon the market it is in and its competition, current and potential, and then use this story as a launching pad for my valuation of the company. I will complete the valuation by looking at its sensitivity to key value drivers and bring in uncertainty into the equation.

Story and Numbers

I believe that Airbnb will continue to grow, while finding a pathway to profitability. Airbnb’s growth in gross bookings will come not only from disrupting and taking market share from the hotel business, bad news for conventional hotel companies and travel providers who serves them, but also from continued expansion of non-conventional hospitality providers (home and apartment owners). As it grows, Airbnb’s share of those gross bookings is likely to plateau at close to current levels, but its operating margins will continue to improve towards travel booking industry levels, as product development, marketing and G&A costs decrease, not in dollar terms, but as a percent of revenues. While Airbnb is enthusiastic about the experiences business, it is likely to remain a tangential business, contributing only marginally to revenues and profitability. Since Airbnb has a light debt load and is closer to profitability than most of the sharing-economy companies that have gone public in recent years, I will assume that their risk will approach that of the travel business, and that the risk of failure is low. In terms of inputs, this story translates into the following:

  1. The COVID After-effects: The comeback from COVID will be slow in 2021, with Airbnb seeing revenues return, albeit to less than 2019 levels, while continuing to lose money (with operating margins of -10%).
  2. Growth in Gross Bookings: In 2019, Airbnb’s gross bookings grew 29.25%, lower than the growth rate in prior years, reflecting its increasing scale. After its recovery from COVID in 2021, gross bookings will continue to grow at a compounded annual growth rate of 25% between 2022 and 2025, and growth will drop down over the following years. In 2031, I expect Airbnb’s gross bookings to climb above $150 billion, about 60% higher than Booking.com’s gross bookings in 2019 and 40% higher than Expedia’s gross bookings in that year.
  3. Revenues as percent of Bookings: Over the next decade, revenues as a percent of gross bookings will increase only mildly from current levels (12%-13) to 14%, sustained by the new host model for professional hosts and the supplemental benefits from Experiences business. 
  4. Target Operating Margin: This will be a key component of Airbnb’s story, and I will assume that the operating margins will improve over the next decade to 25%, lower than Booking.com’s 2019 operating margin of 35.48%, but higher than the margins for Expedia or the hotel business.
  5. Sales to Invested Capital: While Airbnb has a capital-light model, it’s platform requires new investments in either product development and acquisitions. In 2020, Airbnb’s sales to invested capital was 1.82, but the invested capital was negative in the prior year, making it unreliable, and  Booking.com had a sales to invested capital of 1.91 in 2019. I assume that Airbnb will be able to generate $2.00 of revenues per dollar of invested capital in the next decade.
  6. Cost of Capital & Failure Risk: For the cost of capital, I will assume that Airbnb’s cost of capital will be 6.50%, close to the cost of capital of hotel companies, to start the valuation, but over time, it will rise to 7.23%, reflecting an expected increase in the treasury bond rate from current levels to 2% in 2031. While Airbnb has flirted with profitability and has little debt, it still remains a young, money losing company, and I will assume a 10% chance of failure.
  7. Share Count: Getting the share count for a company on the verge of going public is always tricky, as preferred shares get converted to common shares, options and warrants are outstanding and additional shares are issued on the offering date. For Airbnb, there is the added complication of a 2 for 1 stock split which occurred only a few weeks prior to the offering. For the moment, therefore, the share count is still a number that is in progress, but the next update on the prospectus should provide more clarity. (Right after I posted this, Airbnb updated their prospectus to reflect a more accurate share count. The value per share should now be closer to the right value)
With these inputs, my valuation of Airbnb is captured in the picture below:

Download spreadsheet

The value that I derive for Airbnb, with my story and inputs, is about $36 billion, with $3 billion in expected proceeds from the IPO augmenting the value and netting out the value of options outstanding. The per share value based upon the latest share count is about $48/share.

Value Drivers and Dealing with Uncertainty
There are two key drivers of Airbnb’s value. The first is the growth rate in gross bookings and the resulting expected dollar value in 2031, with value increasing with expected gross bookings. The other is the target operating margin, in 2031, with higher margins translating into higher value. In the table below, I list out the value of equity in Airbnb for variants of gross booking growth and operating margins:
Rather than view this table as anything goes, I would use it to make break even assessments, given what Airbnb trades at. For instance, if the market capitalization of Airbnb today is $60 billion, you would need it to deliver gross billings of $200 billion in 2031, with an operating margin of close to 35%. There is ample room for disagreement on Airbnb’s value, since there are plausible combinations of revenue growth and margins that deliver very different equity values. To more explicitly capture the effect of this uncertainty, I replace my point estimates of gross bookings growth, target margin and cost of capital with distributions, run simulations and capture the consequences in a value distribution:

Download spreadsheet

In short, there is nothing sacrosanct about my value judgment for Airbnb and if you disagree with me, even strongly, I understand your point of view. In fact, it is these differences that allow for buyers and sellers to co-exist in the market.

Previewing the IPO

While we can debate what Airbnb’s value truly is, an IPO is a pricing game. Put simply, rather than operate under the delusion that it is value that drive decisions, it is healthier to recognize that bankers price IPOs, not value them, for the offering, that much of the trading on the offering day and the weeks thereafter is driven by traders, trying to gauge mood and momentum. In this section, I will look at the contours of this pricing game for Airbnb, and implications for investors who may be more concerned about value.

An IPO is a Pricing Game
To price an IPO, traders look at two places for guidance. The first is the VC pricing of the company in the rounds leading into the public offering. The second is the market pricing of publicly traded companies in the peer groups, companies that investors will compare the company to, in setting prices. 

1. Venture Capital Pricing:  As mentioned earlier, Airbnb has raised more than two dozen rounds of venture capital over its lifetime, and has been reprised multiple times. In the graph below, I look at the trend lines in Airbnb’s pricing, based upon VC assessments:

The pricing attached to Airbnb climbed dramatically in the first few years, reaching $31 billion in 2016, but then settled into a period of stagnation. In April 2020, at the height of the COVID crisis, the company raised more capital from VC investors, who reduced its pricing to $26 billion. 

2. Peer Group Pricing: To price Airbnb, relative to publicly traded companies, I have computed pricing multiples for hotel and booking companies in the table below:

Applying any of these multiples to Airbnb’s current operating metrics (revenues, EBITDA or net income) will yield valuations that are too low, because the company is still growing and finessing its business model. To get a more realistic pricing, I apply the multiples to Airbnb’s expected values for these metrics in 2025, and then discounting the future values back to today.

In summary, these numbers yield a much higher pricing for Airbnb’s equity, if it is priced similarly to Booking.com, and a much lower pricing, if Expedia is used as the comparable.

Investment Judgments

In the coming weeks, Airbnb will update its prospectus to reflect more details on its IPO, and bankers will set an offering price per share, based primarily on the feedback that they get from potential investors to different  I may be jumping the gun here, but given how well the market has treated capital-light and technology companies this year, I would not be surprised if the market attaches a pricing of all above my estimated value for Airbnb’s equity. As a market participant, you have three ways of participating in the Airbnb sweepstakes:

  1. Get in on the offering: Given the propensity of bankers to under price offerings, and given how the market has been behaving in the last few months, you can try to get a share of the shares at the offering price. This game gets easier to play if you are on the preferred client list at Morgan Stanley or Goldman Sachs, and are allowed access to the offering, but much more difficult, if you are not. Even if you do get in on the offering, there is no guaranteed payoff, because bankers do sometimes over price IPOs, as they did a few times in 2019.
  2. Play the trading game: In the trading game, value is a minor factor, at best, in whether you succeed. Your success will depend upon gauging the market mood and momentum on Airbnb and getting ahead of it and paying attention to what I call incremental information, small news stories that may have little or even no effect on value but can be consequential for momentum. 
  3. Be an investor: If you are truly a value investor, you should not be ruling out Airbnb just because it is money-losing or a young company facing multiple uncertainties. Instead, you should value Airbnb yourself, and draw up decision rules well ahead of the offering. Since I have my estimated  value for Airbnb at $36 billion, I will go first, using the valuation results, by decile, that come from my simulation: 
  • If equity is priced at <$28 billion (20% percentile): A bargain
  • If equity is priced between $28 & $33 (40th percentile) billion: A solid buy
  • If equity is priced between $33 (40th percentile) & $38 billion (60thpercentile): A fair value
  • If equity is priced between $38 (60th percentile) & $44 billion (80thpercentile): Too richly priced
  • If equity is priced > $44 billion: Over valued

As I have argued in prior posts, it is not my preference to sell short on stocks like Airbnb, even if I believe the they are significantly over priced, given how much more powerful momentum is than any fundamentals in driving stock prices.

Charting The Growing Generational Wealth Gap


This post is by Omri Wallach from Visual Capitalist

Charting The Growing Generational Wealth Gap

The Growing Generational Wealth Gap

As young generations usher into adulthood, they inevitably begin to accumulate and inherit wealth, a trend that has broadly remained consistent.

But what has changed recently is the rate of accumulation.

In the U.S., household wealth has traditionally seen a relatively even distribution across different age groups. However, over the last 30 years, the U.S. Federal Reserve shows that older generations have been amassing wealth at a far greater rate than their younger cohorts.

As the visual above shows, the older have been getting richer, and the younger have been starting further back than ever before.

By Generation: Baby Boomers Benefit & Millennials Lag

To examine the proportion of wealth each generation holds, it’s important to clearly define each age group. Though personal definitions might differ, the U.S. Federal Reserve uses a clear metric:

Generation Birth Years Age (2020)
Silent Generation & Earlier 1945 and earlier 75+
Baby Boomers 1946–1964 56–74
Generation X 1965–1980 40–55
Millennials 1981–1996 24–39

Relative to younger generations growing up, the Silent Generation and Greatest Generation before them have seen a decreasing share of household wealth over the last 30 years.

However, the numerical levels have been relatively stable. For these combined generations, total wealth has gone from $16 trillion in 1989 to $19 trillion in 2019, with a peak of $27 trillion in 2007. Considering this cohort has understandably shrunk over time—from an estimated 47 million to 23 million in 2019—their individual shares of wealth have actually increased.

Immediately following are the Baby Boomers, who held more than half of U.S. household wealth towards the end of 2020. At $59 trillion, the generation holds more than ten times the amount held by a comparative number of Millennials.

Generation Wealth (2019) Population (2019) Wealth/Person
Silent Generation & Older $18.8 Trillion 23.0 Million $817,391
Baby Boomers $59.4 Trillion 71.2 Million $834,270
Generation X $28.6 Trillion 65.0 Million $440,000
Millennials $5.0 Trillion 72.6 Million $68,871

With $29 trillion held in 2019, Generation X has also been gaining in wealth over the last 30 years. It’s good enough for five times the wealth of Millennials, though at just $440k/person, they’ve fallen far behind Baby Boomers in rate of growth.

Finally, trying to catch up to their older cohorts are Millennials, who held the least amount of household wealth ($5 trillion) for the greatest population (73 million) in 2019, an average of just under $69k/person.

For a direct comparison, it took Generation X nine years to climb from their start of 0.4% of household wealth in 1989 to above 5%, while Millennials still haven’t crossed that threshold. But it’s not all doom and gloom for Millennials. Their rate of growth is starting to rise, with the generation’s level of wealth climbing from $3 trillion in 2016 to $5 trillion in 2019.

By Age: A Growing Share for 55+

Though the generational picture is stark, the difference in U.S. household wealth by age makes the picture of shifting wealth even clearer.

Until 2001, the shares of household wealth held by different age groups were relatively stable. People aged 40-54 and 55-69 held around 35% each of household wealth, retirees aged 70+ hovered around 20%, and younger people aged under 40 held around 10%.

Since that time, however, the shift in wealth to older generations is clear. The 70+ age group has seen their share of wealth increase to 26%, while the share held by ages 55-69 has grown from 35% to almost half.

But not all ages are seeing an increasing slice of wealth. The 40-54 age group saw its share drop sharply from 36% to 22% between 2001 and 2016 before starting to recover towards the end of the decade, while the youngest cohort now hover around just 5%.

Breaking down that wealth by components is even more eye-opening. The 39 and under age group holds 37.9% of their assets in real estate, the largest share amongst any age group (and concentrated in the hands of fewer people) while older age groups have their wealth spread out across real estate, equities, and pensions.

Assets Held by Age (Percent of Total, 2020) 70+ 55–69 40–54 ≤39
Real estate 21.6% 20.5% 27.6% 37.9%
Consumer durables 3.8% 3.6% 5.2% 9.4%
Corporate equities and mutual fund shares 24.6% 23.1% 18.6% 8.1%
Pension entitlements 16.3% 25.0% 21.9% 21.0%
Private businesses 7.9% 9.7% 12.1% 8.1%
Other assets 25.8% 18.1% 14.7% 15.5%

But the difference is as much in assets as it is in opportunity. In 1989, Baby Boomers and Generation X under 40 accounted for 13% of household wealth, compared to just 5.9% for Millennials and Generation Z under 40 in 2020.

Will the Tide Turn for Generation Z?

As new and accumulated wealth has been built up in older generations, it’s a matter of time before the pendulum starts to swing the other way.

The Millennials age group are expected to inherit $68 trillion by 2030 from Baby Boomer parents. Of course, that payout isn’t going to be even across the board, with wealthier families retaining the bulk of wealth and the majority of Millennials laden with debt.

And with Generation Z (born 1997-2012) starting to come of age, the uneven playing field is making it hard to begin accumulating wealth in the first place.

Since it is in the best interest of societies to have wealthy generations that can drive economic growth, potential solutions are being examined all over the political sphere. They include different taxation schemes, changing estate laws, and potentially cancelling student debt.

Whatever ends up happening, it’s important to track how the distribution of wealth changes over the coming decade, and begin accumulating your personal wealth as best as you can.

Subscribe to Visual Capitalist


Thank you!
Given email address is already subscribed, thank you!
Please provide a valid email address.
Please complete the CAPTCHA.
Oops. Something went wrong. Please try again later.

The post Charting The Growing Generational Wealth Gap appeared first on Visual Capitalist.

Apty Raises $5.4 Million in Post-Seed Funding – PRNewswire


This post is by "Venture Capital" - Google News from "Venture Capital" - Google News

Apty Raises $5.4 Million in Post-Seed Funding  PRNewswire

Founder’s new venture means CEO change at Nikola Labs – Columbus Business First


This post is by "Venture Capital" - Google News from "Venture Capital" - Google News

Founder’s new venture means CEO change at Nikola Labs  Columbus Business First

Florida firm lands investment to fund tourist space balloon flight – Orlando Business Journal


This post is by "Venture Capital" - Google News from "Venture Capital" - Google News

Florida firm lands investment to fund tourist space balloon flight  Orlando Business Journal

The Journey of Electronic Bottles and the Ocean Plastic Crisis


This post is by Matt Simon from Feed: All Latest

Researchers loaded containers with trackers and released them in the Ganges and the Bay of Bengal, giving new insight into how plastic pollution travels.

The number of Black female founders who have raised more than $1 million has nearly tripled since 2018 – Fortune


This post is by "Venture Capital" - Google News from "Venture Capital" - Google News

The number of Black female founders who have raised more than $1 million has nearly tripled since 2018  Fortune