Airbnb Raises $1.5 Billion in One of Largest Private Placements

Home-rental service valued at $25.5 billion

By Telis Demos

Updated June 26, 2015 9:01 p.m. ET

Home-rental service Airbnb Inc. has completed one of the biggest private-funding rounds ever, raising $1.5 billion, in a deal that values the company at $25.5 billion, according to people familiar with the matter.

Leading the round were private-equity firm General Atlantic Inc., Hillhouse Capital Group of China and investment firm Tiger Global Management, which are collectively buying about a third of the shares allocated for the round, the people said.

The deal, on which Morgan Stanley served as adviser, included Singapore’s Temasek Holdings as well as venture-capital firms Kleiner Perkins Caufield & Byers, GGV Capital, China Broadband Capital and Horizon Ventures.

Also investing were several public “crossover” investment funds that are taking stakes in private companies ahead of initial public offerings. Mutual-fund firms Wellington Management and Baillie Gifford bought in, while T. Rowe Price Group Inc. and Fidelity Investments increased their stakes, the people said.

Some details of the deal were earlier reported by the Financial Times.

Only three venture-backed companies have raised as much or more equity funding in a single private placement, according to Dow Jones VentureSource. Car-hailing service Uber Technologies Inc. collected as much as $2.8 billion in a round this year, while Chinese e-commerce giant Alibaba Group Holding Ltd. raised $1.6 billion in 2011. Facebook Inc., meanwhile, raised $1.5 billion ahead of its IPO in 2011, including $1 billion worth of shares sold directly to wealthy individuals outside the U.S.

At $25.5 billion, Airbnb’s valuation would rank third on the list of venture-capital backed startups valued at $1 billion or higher, behind Chinese smartphone maker Xiaomi Corp. and Uber.

The Wall Street Journal reported last week that Airbnb’s revenue is expected to exceed $900 million this year, and then is projected to reach $10 billion in 2020. The company recorded revenue of $250 million in 2013, people familiar with the matter have said.

Airbnb’s website has more than 1.4 million listings of rooms, apartments, houses and exotic locations for rent. The company makes revenue by taking a 3% cut of each booking on its website, along with a 6% to 12% service fee from guests.

With Morgan Stanley’s involvement, the Airbnb deal is a landmark for banks’ push to advise on the giant private rounds that are helping companies delay IPOs.

Morgan Stanley recently expanded its private-stock team, as have other banks, in anticipation that more companies will raise capital from many of the same institutions that buy into IPOs. 

Several recent deals have used bankers, including Spotify AB’s $526 million offering via Goldman Sachs Group Inc., and Credit Karma Inc.’s $175 million round via Goldman and J.P. Morgan Chase & Co.