Airbnb IPO Winners: VCs and Founders Who Benefited

Following a challenging period for the travel sector, Airbnb’s initial public offering (IPO) documents have now been released. It’s evident that the home-sharing service retains considerable potential, with a number of venture capital firms and the company’s creators poised to realize substantial gains.

My associate, Alex Wilhelm, has published an analysis of Airbnb’s financial standing and key performance indicators. While the picture is complex, the results appear more robust than anticipated considering the widespread downturn in tourism caused by the pandemic. Revenue streams are becoming more stable, growth is accelerating, and booking numbers are not as severely impacted as feared.

Therefore, let’s address the most compelling aspect of these significant startup IPOs: who stands to profit the most?

Principally, Airbnb’s founding team – Brian Chesky, Nathan Blecharczyk, and Joe Gebbia – collectively maintain a significant 41.95% ownership of the company, as detailed in its S-1 filing, with Mr. Chesky holding a slightly larger share than his co-founders.

Notably, the founders actually control a greater percentage of the company – individually – than any other venture capital investor with the exception of Sequoia.

What is the estimated value of their holdings? Airbnb’s valuation has fluctuated between $18 billion and $35 billion throughout the year amidst the disruptions of COVID-19. This represents a considerable range, and the public markets will ultimately determine the final valuation in the coming weeks and months. Based on this valuation range, the combined stakes of the three co-founders are estimated to be worth approximately $2.5 billion to over $5 billion.

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It’s certainly advantageous to be the owner of multiple highly valued companies.

Regarding venture capital investors, two firms are poised for particularly substantial returns, while a broader group will also benefit, albeit to a lesser extent.

First and foremost, Sequoia holds approximately 15.84% of the company, representing a value between $2.8 billion and $5.5 billion based on previous valuations. Crucially, the majority of this investment was made through its early-stage funds (specifically, Sequoia’s twelfth fund) during the company’s initial funding rounds. This means that Sequoia’s stake is not only substantial in value, but the firm will also achieve an exceptional return on investment that will be a benchmark for the industry. A smaller portion of their stake is held through growth funds.

Secondly, Founders Fund possesses the second-largest VC stake disclosed by Airbnb, at 5.13%, valued between $900 million and $1.8 billion prior to the IPO. These investments were distributed across three of the firm’s funds: its second, third, and fourth. Founders Fund has historically incorporated both early- and late-stage investments within its funds, and it is also expected to realize a significant return from this IPO.

Beyond these two, a number of other venture capital firms have investments, though with considerably smaller ownership percentages. DST Global owns 2.73%, Silver Lake holds 0.97%, Sixth Street has 0.77%, “Jonathan Poulin and Affiliated Entities” owns 0.44%, General Catalyst controls 0.29%, and Accel owns 0.18%. Accel’s stake is estimated to be worth between $30 million and $60 million – a respectable return (and a strong multiple on its initial investment), but significantly less than the holdings of others.

The reason for these smaller stakes among other VCs is primarily that Airbnb experienced rapid growth in value, and these investors did not secure the larger ownership percentages typically associated with the size of their investments. Consider the following chart illustrating Airbnb’s share price progression over time:

This represents an increase in price from $0.01 to $52.50, making it difficult to acquire comparable ownership at the higher valuations.

In conclusion, this represents a positive outcome for the three founders and two investment firms, and a favorable result for a significant number of other investors.