The news that Airbnb's price was set to double in its long-awaited public offering left its CEO and founder Brian Chesky literally speechless.
The travel startup had entered the year as an IPO darling with set plans to go public that spring. It'll exit the year as an IPO darling, too. The company's share price more than doubled in its trading debut, from the $68 price set the night before to $146 at opening. It ended up closing the day slightly below open at $144.71, up 112% in its blockbuster debut and giving it a market cap of over $86 billion. But its rebound and path to the public markets has surprised even its founders.
"I'm kind of overwhelmed with gratitude, because we did not expect to be at this place given how this year took a surprise turn back in the spring," Airbnb's co-founder Nate Blecharczyk told Protocol. "We had intended to go public earlier this year, and all that was put on hold when March and April came, as a result of the pandemic. If you'd asked me then would we be in a position to go public before the end of the year, I would've been shocked that that was possible."
The path from March to its December IPO includes some of the hardest months the business and the broader travel industry has endured after trips halted amid a pandemic. "One of the hard things about the pandemic has been the fact that it wasn't obvious how long it would go on for and how severe the impact would be. So, in March and April, we were anticipating the worst. We had lost 80% of our revenue in two weeks. And we couldn't really confidently say when that was going to improve," Blecharczyk said.
Airbnb instituted weekly board meetings from March 5, the day Sequoia released its infamous "Black Swan" memo, to May 5. "People who are prepared, they slam on the brakes, they assess the situation until they can see clearly and then they accelerate out of the turn," said Sequoia partner and Airbnb board member Alfred Lin. "We saw Airbnb and DoorDash [another Sequoia investment] do that."
To stay alive, Airbnb quickly raised $2 billion in debt deals. It also had to lay off around 25% of its employees, canceled summer internships and ended up shuttering some of its experimental units like Flights to focus on its core home-sharing business.
"One of the most important things we learned is you can have large ambitions, but you need a unifying strategy across different ideas, rather than separate ideas," Lin said. "These kinds of crises force founders to focus, and they went back to what was most important to them."
Slowly, travel started to rebound, just in a way that was different than before the pandemic. Airbnb saw that people were looking to stay in areas within driving distances near their house and for longer-term rentals, an area that Airbnb doubled down on, much to the chagrin of housing critics. It also reminded the founders of Airbnb's founding days in the last recession where it saw a lot of people who lost their jobs turn toward hosting guests to make extra money.
Airbnb's most recent financial statements show that revenue in the last quarter remains depressed from last year, but is only down 19% year-over-year — much lower than the more than 60% decline faced by competitors like Marriott. But it was still a profitable quarter for the company.
"The scale of their ambition is huge," Lin said. "What the pandemic taught them is to be focused, and I think that's not going to change."
While there are hopes to rehire some of the employees who were laid off as the industry rebounds, Airbnb doesn't plan to immediately dive back into some of its previous ambitious projects in 2021.
"Things like flights, etcetera, are interesting opportunities longer term, but I don't think that's really what's most important right now," Blecharczyk said. "They aren't perishable opportunities, so maybe in the future, someday, but for the foreseeable future, we're going to be focused as a company, and we think there's a lot of opportunity in our core business."
Now that the company's public, Blecharczyk doesn't expect much to change in terms of its operations, but he does hope that the public perception and investor sentiment may realize how much Airbnb has gone mainstream. In fact, some of the IPO buzz around the stock may be a result of investors expecting the startup to enter a major index in the next few years, according to CNBC.
"I think it's a milestone moment and a continuation of Airbnb going mainstream. I've been thinking about that a lot today, because 13 years ago, it was such a crazy idea that people laughed at us," Blecharczyk said.
Now, instead of laughing, people are investing, not only in the belief that a future COVID-free world will mean more travel, but also that they'll be doing it on Airbnb.
"To see the enthusiasm for the future of the company today, whether that be from investors or just in general, it's truly surreal to me," he said. "It takes my breath away a little bit because for so long we've been something that people are skeptical about because it's such a new thing and required so much trust."