Thank You

Yesterday I graduated from Columbia Business School ending a two decade educational journey that started on the west coast and end here on the east coast. These past two years have been two of the best years I’ve had both personally and professionally. And so I just want to take a moment to say thank you.

My experience at CBS has been inextricably tied to New York City. Some of the best professional opportunities I’ve had were a result of being here in the city. During my first year, the guys at Gotham Ventures were nice enough to give me the opportunity to learn the ropes and get an insider’s perspective on the venture business. That experience was only enhanced during my second year when I worked on a variety of projects with Bessemer Venture Partners. Lucas and Brian – thank you both for taking a chance on me.

Back on campus, there were two organizations that really shaped my MBA experience. The first, InSITE Fellows, is one of the most innovative student groups I’ve come across. Before I even stepped foot on campus, I knew I had to join. Huge thanks to the year above me for letting me in and the current fellows for being the smartest yet also most humble group of soon-to-be founders, investors and technologists I know. And a big thank you to the folks at 2U, Betterment and the many other startups I was fortunate enough to work with.

The second group was my cluster—Cluster E. I really couldn’t have asked for a better group of people to spend time outside of class and work with. Within my cluster we had a diverse mix of veterans, attorneys, teachers, entrepreneurs and of course…bankers and consultants. I’m amazed by how talented, but at the same time, down to earth everyone was. It was an honor to get to know all of you and I know this is just the beginning of many long friendships.

Finally, I have to thank my family, with-out them I wouldn’t be here today with this degree in hand. Mom, Dad and Andrew thank you for your support throughout these two years and throughout my entire life. Mom you have been my rock since birth—I’d be nowhere without you. Liza you have been my biggest cheerleader since our Cornell days; I can’t thank you enough. And to my extended family—I couldn’t have asked for a better group to celebrate the weekend with. I only hope that I can shower you all with as much love and support as you have showered me with.

And lastly, thank you Columbia Business School. What an amazing place #attheverycenter. Next stop, McKinsey & Company but not before one last stretch of traveling and relaxing with friends and family.

Airbnb and the Problem with Later Stage Investing in Today’s Environment

A couple of months ago several news sources reported that Airbnb was raising $1B at a $20B (pre-money) valuation. This article on TechCrunch sums up the story pretty well.

I have a lot of respect for Airbnb as a business and the tremendous growth of the company in just 7 years. Airbnb currently boasts 1M+ listings across 34,000 cities and 190 countries. Though still a private company, revenue estimates for 2014 were said to be over $400M w/ yoy growth of 65%. Not bad for a company many famously passed on (including Fred Wilson) or wrote off as completely absurd. I’m confident the founders and early investors will be handsomely rewarded when the company eventually goes public.

I do, however, have concerns with the current massive round that Airbnb is raising. And it’s a concern I believe should be shared by many of today’s unicorns and, in particular, their later stage investors. If I were a prospective later stage investor in Airbnb’s $1B round, I would not invest at this stage and at that valuation. My thoughts can be summed up in three points:

  • A $20B valuation overinflates the true value of the business, which by my analysis is closer to ~$10.2B. This high private valuation will hinder returns for later stage investors—it’s a problem I think many of today’s later stage investors in unicorns are going to face. The infographic in this Forbes article shows a similar story with one of the more recent unicorns to go public: Box.
  • Airbnb has important competitive advantages in terms of network effects and customer captivity—they may even have a bit of a regulatory advantage thanks to their scale. The problem is that Airbnb has nothing that will allow it to be a complete “winner-takes-all” business. At the very least, it will have to share TAM with its most direct competitor, HomeAway, not to mention all the major hotel chains that have been around for decades.
  • There are a number of unknowns that make Airbnb a risky business to invest in including: macro-economic tourism and vacation trends, the decentralized nature of regulation and an uncertain cost structure that is likely to erode margins. Some of these unknowns could be very detrimental to Airbnb’s growth and continued success as a business.

For a more in-depth analysis of the investment opportunity, I’ve put together an investment recommendation deck below: