Brandon Donnelly

Daily insights for city builders, delivered every morning at 6 AM ET. I’m Brandon Donnelly — a Toronto-based real estate developer and founder of Globizen. I’ve been writing here since 2013.

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Tag: tech ipo

  • Airbnb’s S-1 is now public

    Airbnb’s IPO documents recently went public.

    Not surprisingly, their business as a travel company has been heavily impacted by COVID-19. Last year, the platform saw 326.9 million nights and experiences booked, with 251.1 million being booked in the first nine months of 2019. This year, nights and experiences are down to 146.9 million for this same nine month period. Revenue is correspondingly down from $3.7 billion for the first nine months of 2019, to $2.5 billion for the first nine months of this year.

    But what is also clear from their data is that people still really want to travel and have new experiences. As soon as April passed and the Northern Hemisphere entered the normally busy Q3 travel season, domestic travel began to quickly ramp back up. For many, this likely took the place of international travel. See above chart.

    Of greater concern might be all of the regulation that now surrounds short-term rentals. As of October 2019, about 70% of the platform’s top 200 cities (by revenue) had some form of regulation impacting short-term rentals. But at the same time, no one city accounts for more than 2.5% of the platform’s revenue. So there’s strong geographic diversification.

    If you’d like to take a look at the company’s S-1, you can do that over here. And for those of you who might be curious, these are Airbnb’s top 10 cities based on revenue:

    1. London
    2. New York City
    3. Paris
    4. Los Angeles
    5. Rome
    6. Barcelona
    7. Tokyo
    8. Toronto
    9. San Diego
    10. Lisbon

  • Systemizing Airbnb

    Wired recently published a long read called, “I stumbled across a huge Airbnb scam that’s taking over London.” Apparently the people who do these sorts of things on the platform (things that are both illegal and questionable) call it “systemizing.” This is the process of trying to create scale. Secure lots of units. Create a bunch of fake/duplicate accounts. And try and maximize revenue.

    This obviously runs counter to Airbnb’s mission of “authentic places”, “community”, and “local hosts.” But as Benedict Evans points out in his latest newsletter, “where there is money and people, there will be scams.” And Airbnb is obviously doing everything it can to quash this kind of activity, especially as it prepares for a possible IPO this year. The company has a policy of zero tolerance.

    Fraud and government regulation are likely to be the two biggest kinks to work out as the company gets ready for public consumption. I am sure an equilibrium will be found; it’s just going to take some time and a few lawyers. It goes to show you just how challenging startups can be when you combine digital (tech) and physical (real estate).

  • Software developers are half of the homebuyers in San Francisco

    A couple of months ago I wrote about the relationship between IPOs and home prices. It was in response to the current wave of tech companies — most of which are headquartered in San Francisco — that have gone public or are expected to go public this year (2019). What impact will this have on the city’s housing market?

    I cited this academic study on the topic, which already discovered a “positive and significant association between local house price changes and firms going public.” But today I stumbled upon another interesting study by a San Francisco real estate agent, name Deniz Kahramaner, who happens to also be a Stanford-trained data scientist.

    What Kahramaner wanted to figure out was, who tends to buy residential real estate in San Francisco?

    So he started with title data and then scraped the internet to try and match up individual buyer names with specific companies and industries. Since not everyone has some sort of public profile and because real estate is sometimes held within a company, he was only able to traceback about 55% of home purchases in San Francisco last year.

    Still, the data looks pretty clear. About half of the homes bought in 2018 were by individuals whose employment has roots in “software.” The next biggest buyer segment was “finance.”

    The other interesting thing about this data set is that it shows where people have been buying (at least last year). Historically, the north end of the city has been the wealthiest, but the above data shows things moving in a southeasterly direction. Though, it remains to be seen what all of this will look like when the dust settles after this current crop of tech IPOs.

    Chart: The Atlantic

  • IPOs and home prices

    Fred Wilson made an interesting remark in his recent post about the current “IPO bonanza” that is taking place in the tech space. He is, of course, talking about the recent IPO of Lyft, the recent S-1 filings from Pinterest and others, and the expected filings from Uber, Airbnb, and so on.

    After listing the benefits of going public, he went on to say that this bonanza will surely also mean that it is going to become even more unaffordable in the Bay Area. Part of this is perhaps self-serving, since he operates a VC firm out of NYC. (Take your money and move to NYC.)

    But the data suggests that there is truth to this.

    When Twitter when public in 2013, it was estimated that it created some 1,600 millionaires. This is great for the local startup ecosystem as many of these beneficiaries could go on to found their own companies and create a whole new batch of jobs. The money gets recycled.

    But what does it do to the local housing market — especially a supply-constrained one like that of the Bay Area where it is difficult to build?

    In 2018, Barney Hartman-Glaser, Mark Thibodeau, and Jiro Yoshida penned a paper called, Cash to Spend: IPO Wealth and House Prices. In it, they looked at the impact of IPOs on local home prices in California from 1993 through to 2017.

    What they found, among other things, was a “positive and significant association between local house price changes and firms going public.” The price increases were also found to be the greatest the closer you get to the headquarters of the firm that just went public.

    If you’d like to download a copy of the paper, you can do that here.

  • Snap Inc.

    Snap Inc. (Snapchat) nailed the launch of Spectacles. I want a pair.

    If you haven’t been following, it all started with a pop-up vending machine in Venice Beach. But like Snapchat itself, it was an ephemeral installation that eventually disappeared, moving on to Big Sur, California. At the time of writing this post, the countdown is on to discover where the vending machine will pop up next. It’s a viral marketing play that aligns very well with their brand.

    But there’s even bigger news.

    Earlier this week it was revealed that Snap Inc. has filed for an initial public offering. It plans to go public by as soon as March 2017 and expects to be valued somewhere around $25 billion. Remember when everyone flipped out because Evan Spiegel had rejected Facebook’s acquisition offer of $3 billion?

    Here’s their revenue story from Vanity Fair:

    Last year, Snapchat brought in $59 million in revenue—a low number that reflected the embryonic stage of its business. This year, however, Snapchat predicts it will generate revenues between $250 million and $350 million. And in 2017, the company estimates it will reach revenues between $500 million and $1 billion, based on “bullish sales targets.”

    I’ve been a Snapchat fan for awhile now, so I am thrilled to see the company going public. As Fred Wilson wrote on his blog this morning: “Snap is a great company led by a creative and ambitious founder and they have a loyal and growing use base. I think Snap can be an excellent public company.”

    If you’ve got people’s attention, you can figure out how to monetize it.