Venture Capital: The Story Of Sequoia’s Insane Returns On Airbnb
After listing Thursday, Airbnb is trading today at $148.
Do the math on this. Venture capital firm Sequoia paid $585,000 for 58 million shares in Airbnb (NASDAQ: ABNB) in 2009, equivalent to about 1 cent per share. Airbnb listed yesterday, and its shares closed their first day of trading at $144.71.
Sequoia’s initial investment of about half a million became worth $8.4 billion in slightly over a decade. Is it any surprise that probably the adjective used most often to describe Sequoia is ‘storied?’
Sequoia and Airbnb
Sequoia kept investing in the home rental platform over the years, finally spending about $280 million for 82 million shares. As of date, that stake is worth slightly over $12 billion. (Markets Insider)
Sequoia’s average holding cost per share of Airbnb is reportedly $3.40, worth $148 each today, or 43.5X gains.
When Sequoia made that momentous seed investment in 2009, Airbnb had barely 2,500 listings on its site and just 10,000 registered users.
Fast forward to end-September – those numbers read 5.6 million listings and 4 million hosts.
“Never let a good crisis go to waste.”
Airbnb’s shares earned a massive listing pop because the IPO price was just $68.
Is the market overvaluing the stock at $148?
Founder Brian Chesky did not want to be drawn into market fluctuations in an interview. “I can’t control the stock price, but I can control the story,” he said.
But the highly successful IPO is only the half of it. The real deal is how the home share platform emerged from the damage wrought by the virus and resurrected revenues by pivoting to customers’ new needs.
“Today is a momentous day for Airbnb because it marks one of the most incredible turnaround stories in business history,” Sequoia said in a congratulatory letter to the three Airbnb founders after the IPO. “Airbnb consistently reaches for higher heights from the trenches, and this global pandemic was no exception.”
“Congratulations,” wrote Sequoia. “We’re very fortunate to be part of your journey, and we can’t wait to see how you “embrace the adventure” ahead.”
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