Airbnb Raises Over $100 Million in Funding Round

Airbnb Inc. has raised over $100 million in a new round of funding that has closed, according to a person familiar with the matter. The round was done at the same $25.5 billion valuation where the company raised billion of capital over the summer.

The home-rental service showed off solid growth to investors as it sought to fill its coffers with the fresh capital.

Airbnb generated $340 million of revenue in the third quarter, on bookings of $2.2 billion, according to an investor slide-deck presentation reviewed by The Wall Street Journal. Both figures roughly doubled from the same period a year ago.

The presentation says the San Francisco company is performing ahead of plan, forecasting revenue of $900 million this year after previously projecting $825 million during a fundraising completed in July. The Journal reported in June that the company was already targeting $900 million for the year by that point.

The climate for later-stage fundings of highly valued companies has cooled in recent weeks amid a tepid IPO market. At the same time, firms such as Fidelity Investments and BlackRock Inc. have marked down the value of some of their private investments in companies such as Dropbox Inc., Snapchat Inc. and Zenefits Inc.

As of Aug. 31, mutual funds from Fidelity, Vanguard Group and Morgan Stanley still carried their Airbnb shares at the price where the company sold the shares in the July funding round. Airbnb's challenge in attracting investors is primarily the steep price of the shares, rather than questions about the ultimate potential of its business, according to two investors privy to the company's financial details.

It will take a couple of years for the business to grow to a point that justifies the current valuation, these people say. Meanwhile there is risk to holding the shares since there is no public market for them.

Airbnb generates revenue by taking a 3% cut of each booking along with a 6% to 12% service fee from guests. Based on the third-quarter numbers, it appears the company is collecting a maximum fee from guests, with revenue running at about 15% of bookings.

One item missing from the company's slide-deck presentation: any mention of the bottom line. That may be due to the steep losses the company is racking up as it spends money on growth. This year, Airbnb expects an operating loss of about $150 million, the Journal reported in June. A person familiar with the matter said the company expects 2017 will be the first full year it generates an operating profit.

The company might have grown faster had it been able to attract more property owners to list rooms on its site. In the year leading up to this past April, the growth rate of "new active listings" slowed, according to the presentation. Growth of new listings has reaccelerated since then, however, in part due to increased marketing efforts, according to the document.

Airbnb ended the quarter with more than 1.7 million total active listings, the company said. The figure was around 1.4 million at the end of May, according to YipitData, a research firm that tracks Web data for institutional investors.

The company is focused primarily on maximizing room nights at this stage, said the person familiar with the company's thinking, as opposed to revenue. Since over 70% of nights booked is outside the U.S., a strong dollar weighs on revenue, this person said.

By Rolfe Winkler