Airbnb just just finished raising funding to the tune of $113 million from Andressen Horowitz and DST Capital. The website aims to hook up people with a spare bedroom or even a second home with people looking for cheap accommodation in that city. In theory a great idea and one that I am sure many will find very valuable.
However this is nothing new as I have previously myself used websites which specialise in renting out holiday villas and cottages in Spain and Britain. The good thing about these sites was that the operators of the site would personally look at every let that was on their books and as a client you could be sure that you knew exactly what you would get. I am not sure what Airbnb's model for home verification will be, but this is bound to be very important. Maybe the social media aspect of the site will somehow aim to fill the gap here. However given their stated aim of wanting to be all over the world I think it will be very difficult to provide quality control.
There are also some concerns about issues such as local taxes and regulations that this site may not be complying with - apparently there may be issues in New York with bed tax not being paid. I am sure these will be worked out over time however. Also if the main selling point is the cheapness of the site - then of course it is worth pointing out that couchsurfing is completely free. I think Airbnb will also face a lot of copycats and me too websites which will start eating into their market and may well force their commission rates down. Add to this the company seems have some past history with some dubious shenanigans.
The main question is however the valuation that has been put on this site. The recent funding round puts the market value of this company at $1.3 billion. Let us say that the company has been valued at 10x revenue - this would mean that the company needs to be turning over $130 million a year. As we know that they take 10% charge from the rentals of properties this would imply that the $1.3 billion worth of property must be rented out every year. If we now assume that the average rental may be in the region of $50 per night then we are looking at somewhere in the region of 26 million nights being sold per year through this site. Thats a lot of nights. From what I have read they are selling somewhere between 1 million and 2 million. So the growth will have to be absolutely stratospheric before this valuation can be justified. To me this looks like irrational exuberance on the part of VC's and the bubble seems to be forming - yet again.
Tuesday, 26 July 2011
Monday, 25 July 2011
Moody's cuts Greek rating
Moody's has cut the rating of Greek debt to Ca from Caa1 - pretty much on the edge of default.
The EU debt swap deal essentially means that private sector creditors would lose somewhere in the region of 20% of their current value.
I am sure many would find fault with the ratings agencies for their actions now and refer to their triple A ratings of CDO toxic garbage that precipitated the initial credit crunch. However I think this is the correct course of action - we can't blame the ratings agencies for being too lax on the one hand with ratings and then also find fault when they are too harsh.
There should be reform to the whole ratings model but that is more to do with how the agencies make money and who pays the - essentially thats a discussion about the incentives that drive them and what the best model might be. I will dedicate a whole post to that topic soon.
The EU debt swap deal essentially means that private sector creditors would lose somewhere in the region of 20% of their current value.
I am sure many would find fault with the ratings agencies for their actions now and refer to their triple A ratings of CDO toxic garbage that precipitated the initial credit crunch. However I think this is the correct course of action - we can't blame the ratings agencies for being too lax on the one hand with ratings and then also find fault when they are too harsh.
There should be reform to the whole ratings model but that is more to do with how the agencies make money and who pays the - essentially thats a discussion about the incentives that drive them and what the best model might be. I will dedicate a whole post to that topic soon.
Saturday, 23 July 2011
Will the UK Telegraph issue a retraction for blaming islamic jihadists?
First of all I would like to express my deepest sympathies to all those affected by these 2 horrible atrocities.
Whenever something like this happens media outlets are quick to jump to conclusions and play the blame game - potentially inflaming an already tense situation.
The Telegraph trotted out an Islamic jihad expert pretty soon after the Oslo bombings to lay the blame squarely on some form of Islamic militant group or other.
The Guardian has got a far more sensible interpretation.
Turns out now that the bombings were the work of an islam hating ultra right winger. See the news from a Norwegian source.
The telegraph needs to issue a full retraction and stop employing so called experts to write silly pieces for them.
Whenever something like this happens media outlets are quick to jump to conclusions and play the blame game - potentially inflaming an already tense situation.
The Telegraph trotted out an Islamic jihad expert pretty soon after the Oslo bombings to lay the blame squarely on some form of Islamic militant group or other.
The Guardian has got a far more sensible interpretation.Turns out now that the bombings were the work of an islam hating ultra right winger. See the news from a Norwegian source.
The telegraph needs to issue a full retraction and stop employing so called experts to write silly pieces for them.
Greece : Delaying the Inevitable?
As I start my new blog, I think it is probably fitting to start with some sort of comment on the Greek debt crisis as this is clearly the single most important issue at the moment.
My view is that default with an exit from the Euro would have been the best way forward for the Greeks. However the EU Cabal have chosen to kick the can down the road and delay the inevitable.
Why inevitable? Well Greek debt stands at somewhere in the region of 140% of GDP. Even if Greece managed to fun this debt at 10% p.a. it would mean that 14% of its GDP per annum goes purely on servicing the interest payments. With those sort of numbers I do not see how Greeece can possibly go from deficit to surplus by 2014 as the EU / IMF etc predict thanks to their austerity measures. Clearly there is the selling of Greek state assets which will be privatised in the coming months and years - but this nothing short of a German takeover of Greek assets on the sly. Ultimately this is bound to hurt the Greek nation socio-economically - especially when you take into account the massive cuts across the board that we are bound to see as a result of austerity.
An analogy would be to imagine that you have an annual income of 40,000 and some credit card company gave you a credit card with a limit of 60,000 (very foolishly). You then proceed to max out the credit card and pretty soon cant pay the monthly amounts and thanks to the high interest the amount keeps going up even without any new spending. So in effect the credit card company says you cant spend money on anything other than the minimum payment - never mind that you probably cant afford your rent or maybe even food. Soon the also send the repo man in to start taking back your more expensive items in the house so they can claw some of their money back. You are stuck in a debt trap you have very little chance of getting out of. The credit card company will probably recover a large part of what they lent you even if not all and most likely you will end up penniless and destitute.
I paint a pretty extreme scenario above but that is pretty close to what is happening with the sovereign debt crisis at the moment. The borrowers were clearly living beyond their means, but by the same token those who lent did not conduct their due diligence properly and are now refusing to pay the price for their actions.
My view is that default with an exit from the Euro would have been the best way forward for the Greeks. However the EU Cabal have chosen to kick the can down the road and delay the inevitable.
Why inevitable? Well Greek debt stands at somewhere in the region of 140% of GDP. Even if Greece managed to fun this debt at 10% p.a. it would mean that 14% of its GDP per annum goes purely on servicing the interest payments. With those sort of numbers I do not see how Greeece can possibly go from deficit to surplus by 2014 as the EU / IMF etc predict thanks to their austerity measures. Clearly there is the selling of Greek state assets which will be privatised in the coming months and years - but this nothing short of a German takeover of Greek assets on the sly. Ultimately this is bound to hurt the Greek nation socio-economically - especially when you take into account the massive cuts across the board that we are bound to see as a result of austerity.
An analogy would be to imagine that you have an annual income of 40,000 and some credit card company gave you a credit card with a limit of 60,000 (very foolishly). You then proceed to max out the credit card and pretty soon cant pay the monthly amounts and thanks to the high interest the amount keeps going up even without any new spending. So in effect the credit card company says you cant spend money on anything other than the minimum payment - never mind that you probably cant afford your rent or maybe even food. Soon the also send the repo man in to start taking back your more expensive items in the house so they can claw some of their money back. You are stuck in a debt trap you have very little chance of getting out of. The credit card company will probably recover a large part of what they lent you even if not all and most likely you will end up penniless and destitute.
I paint a pretty extreme scenario above but that is pretty close to what is happening with the sovereign debt crisis at the moment. The borrowers were clearly living beyond their means, but by the same token those who lent did not conduct their due diligence properly and are now refusing to pay the price for their actions.
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