Airbnb raises US$1b to stockpile cash in pandemic

San Francisco

AIRBNB has raised US$1 billion in new funding as it grapples with devastation from the novel coronavirus pandemic and as some technology startups take extra measures to stockpile cash during the outbreak.

Private equity giant Silver Lake and investment firm Sixth Street Partners led the investment, which was a mixture of equity and debt.

Airbnb, a home rental startup that was previously valued at as much as US$31 billion, also lowered its internal valuation to US$26 billion last month.

"The new resources will support Airbnb's ongoing work to invest over the long term in its community of hosts who share their homes and experiences," the company said in a statement.

Airbnb's business has been hobbled during a shutdown in global travel caused by the spread of the novel coronavirus.

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It is a delicate time for the company, one of the largest and most prominent startups to emerge from Silicon Valley in the last decade.

Airbnb had said that it plans to go public later this year, but that may be in limbo because of stock market volatility and uncertainty caused by Covid-19.

Airbnb's new funding points to some of the tactical measures startups are taking as they navigate the difficult period.

In the last month, numerous startups have laid off or furloughed staff, and cut spending and expansion plans in moves that signal the end of a long-running boom for the industry. Well-funded travel startups, including Sonder, Lyric and TripActions, have been hit especially hard.

Airbnb, too, enacted a hiring freeze, slashed its US$800 million marketing budget, and cut the pay of its top executives last month.

The company raised more money even though it has US$3 billion in cash on its balance sheet and access to a US$1 billion line of credit.

A company spokesperson declined to comment on what the new funding meant for an initial public offering. Airbnb is under pressure to go public before some of its early employees' shares begin to expire later this year.

The difficulties Airbnb is facing have become increasingly apparent over the past few weeks.

The company has contended with frustrated customers who demanded refunds for cancelled trips, while also trying to find ways to support its "hosts" (the people who rent out their homes on its site).

Many of its hosts have had their bookings drop to zero over the past few months. The financial struggles of short-term rental operators have manifested themselves in online petitions and threats of lawsuits against the company.

On March 30, Airbnb's chief executive officer Brian Chesky held a video call with the company's hosts in which he said the past few weeks had been a "wake-up call".

He announced a US$250 million fund to compensate hosts for a portion of their booking cancellations, as well as a US$10 million pool of grant money for its "superhosts", paid for by Airbnb's founders and employees.

"I'm sorry we didn't consult you as partners," he said on the call.

In its funding announcement, Airbnb said it would now focus on travel that is closer to home and long-term stays, including students and people on extended work assignments.

"The desire to connect and travel is an enduring human truth that's only been reinforced during our time apart," Mr Chesky said in a statement.

He added that, practically speaking, the way we connect and travel "will evolve as the world changes". NYTIMES