Airbnb announced a $1 billion debt and equity investment from Silver Lake and Sixth Street Partners. From the funds, $5 million will go to the recently announced Superhost Relief Fund, boosting the total to $15 million to provide financial assistance to Superhosts.

Recently Airbnb has lowered its internal valuation to $26 billion from the $31 billion it raised money at in 2017.  The company has raised a total of about $5.4 billion. Silver Lake and Sixth Partners are new investors in Airbnb.

The valuation and terms for the latest round of funding were not disclosed, but a source told CNBC that “there is no rachet or any other coercive terms. It’s attractive for Airbnb.” How this new funding impacts Airbnb’s plan to go public is still not clear. 

[Update: The WSJ reports that the new $1 billion investment comes at a steep price for Airbnb. The company will pay over a 10% interest rate for the funding and the investors will also get warrants that can be converted into shares at a valuation of $18 billion. This valuation is nearly half of the last funding round. Airbnb has also verbally committed to reduce its fixed costs and bolster its management team.]

Airbnb signaled it will focus on three core products – hosts, longer-term stays and experiences. Here’s why we think the company is pursuing this strategy:

  • Hosts remain fundamental to Airbnb’s business. The supply pipeline remains crucial for the retention and defensibility of its business. The array of hosts allow Airbnb to offer one-of-a-kind properties, a strong value proposition for the company. 
  • Longer-term stays is a smart move for Airbnb during the coronavirus crisis as the demand for local and long-term lodging is stronger. A strategy to diversify from short term stays also helps mitigate the impact of short term rental regulations imposed by many cities.  
  • Experiences taps into the still booming experience economy, a trend of people wanting less “things” and “doing stuff” more. People today perceived doing things with locals as more meaningful and highly valued. Experiences is complementary to its lodging business and provides an additional revenue stream for hosts. Again, Airbnb is leveraging its diverse community of hosts to offer one-of-a-kind experiences at a scale that is hard for other companies to compete.

Silver Lake is a savvy investor who knows the space well. Its Co-CEO Egon Durban astutely notes how Airbnb’s unique platform “unlocks one-of-a-kind stays and experiences at scale.”

Durban is bullish and the private equity firm is in it for the long haul. He said, “While the current environment is clearly a difficult one for the hospitality industry, the desire to travel and have authentic experiences is fundamental and enduring.”

This echoes Airbnb Co-founder Brian Chesky’s belief that the core human truth has not changed because of the crisis: “The desire to explore, connect, have new experiences and have a comfortable place to call home are universal and enduring.”

photo credit: airbnb

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