Benzinga - by Chris Katje, Benzinga Staff Writer.
Online short and long-term vacation rental company Airbnb Inc (NASDAQ:ABNB) is one of the most recognizable travel companies today.
Years ago, when the company was looking for finance to grow, investors rejected Airbnb and its concept. Here's a look back at what could have been.
What Happened: Airbnb went public in 2020 with one of the most anticipated IPOs in years. The company was valued at $47 billion at the time.
In its early days, before its IPO, the company needed funding to grow the business and expand the concept.
Founded by Brian Chesky, Joe Gebbia and Nathan Blecharczyk, Airbnb began with a concept of renting out portions of an apartment during a conference as a way for short-term rentals to help pay rent.
A post shared by Jon Erlichman on X, formerly known as Twitter, showed the struggle the company had at convincing investors to invest in the company.
"In 2008, Airbnb's founders needed funding. They wanted $150,000 for a 10% stake. They emailed 7 investors. 5 sent back rejections. 2 didn't respond," Erlichman tweeted.
Erlichman shared the rejection letters in the tweet, which are listed below.
- "Thank you for the introduction. Brian good to meet you — while this sounds interesting it is not something we would do here — not in our area of focus, do wish you best of luck."
- "Apologies for delayed response. We've had a chance to discuss internally, and unfortunately don't think that it's the right opportunity for (redacted) from an investment perspective. The potential market opportunity did not seem large enough for our required model."
- "It's not in one of our prime 5 target markets so it's a long shot for our involvement. Also, since it's not an area where we are currently investing, getting us involved doesn't give you the expertise that would be best for your company."
- "I really like the progress you guys have made, but between issues outstanding with ABB and my current time commitments to other projects, specifically investments, I'm not going to be able to proceed with an investment at this point."
- "We decided yesterday to not take this to the next level. We've always struggled with travel as a category. We recognize its one of the top e-commerce categories but for some reason, we've not been able to get excited about travel related businesses."
Why It's Important: Airbnb is now valued at a market capitalization of $105 billion, which means the 10% stake today would be worth $10.5 billion.
Turning $150,000 into $10.5 billion is a nice return. While some of the investors may regret not investing in Airbnb, several also hinted at not having experience or wanting to invest in the travel sector.
Airbnb would go on to raise funding from Sequoia Capital and Y Combinator.
Replying to Erlichman's post, Y Combinator co-founder Paul Graham said Airbnb had a handshake deal in 2008 for $100,000 invested for a 10% stake. Graham said the investor "welched after the stock market crashed."
Graham said "Thank God!" that the investor didn't take the deal as Y Combinator ended up a winner from the company's growth.
Read Next: Airbnb’s Founders Sold $30,000 In Cereal Boxes Inspired By Obama And McCain During Company’s Early Funding Days
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