How Early Airbnb Investors Raked In A 499,900% Return On IPO Day From A Simple Idea To Pay The Rent

Airbnb Inc.‘s initial public offering (IPO) on Dec. 10, 2020, had the hotel industry bracing for impact as the online marketplace shattered records and claimed its position as one of the most valuable IPOs in history.

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The hospitality industry could only watch in awe as the sharing economy giant’s market value soared. Shares in the company opened at $144.71 on the Nasdaq Stock Market, 113% above its initial offering price of $68 per share. By the end of the day, Airbnb’s market value had reached $100.7 billion, securing its place in the history books as one of the largest and most valuable IPOs ever.

But this fairy-tale story of rags to riches didn’t happen overnight. It all started in 2008 when three friends — Brian Chesky, Joe Gebbia and Nathan Blecharczyk — began renting out air mattresses in their San Francisco apartment during a design conference. They soon realized they were on to something bigger than a mere rent supplement and founded Airbnb. They raised $600,000 in seed funding the following year at a $20 million valuation, with investors including Sequoia Capital and Y Combinator.

In just a decade, Airbnb disrupted the hotel industry, expanding globally and raising over $6 billion in funding, culminating in its IPO in 2020. Its valuation had skyrocketed from $20 million to $47 billion, an increase of 235,000%. The jump from the seed valuation to the peak IPO valuation of $100 billion was even more remarkable, clocking in at 499,900%. Not bad for a startup that began with an idea to make a few extra bucks to pay the rent.

The founders of Airbnb faced rejection and came up with inventive ways to keep their business afloat, including creating their own version of Obama O’s cereal to raise money. Their perseverance paid off, and they turned their simple idea into a company that has the hotel industry running scared. They saw an opportunity to turn their loft into a designer’s bed and breakfast for a big design conference, complete with a sleeping mat and breakfast. And the rest, as they say, is history.

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Startup Investing for the Masses

AirBNB was a massive success and major disruptor for a number of industries. This is great news for Y-Combinator and Sequoia Capital, because they invested in the early stages of the companies growth. If you had invested $1000 when Y-Combinator did, it'd be worth nearly $5 million. But purchasing shares right at IPO would have resulted in a net loss today.

When AirBNB was raising funds in 2008, it was illegal for retail investors to invest in startups. Now, thanks to changes in federal law, anyone can invest in high-growth startups on platforms like StartEngine. The platform offers nearly 100 different startups that anyone can invest in, including investing in StartEngine itself. This is a type of high-risk, high-reward investing, but can be a solid diversification option for investors with a long-term investing mindset.

See more on startup investing from Benzinga.

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