Airbnb, a marketplace for people looking to rent homes for short-term stays, is aiming to raise another $1 billion in funds from investors, according to the Wall Street Journal.
If successful, the new round of financing would give Airbnb a $24 billion dollar valuation, more than even a large hotel chain like Marriott, which is valued at $21 billion.
According to reports, $24 billion would be more than twice Airbnb’s last valuation of $10 billion, which it just earned in April 2015 after raising $500 million.
The reason for the astronomical valuation number is because Airbnb sees itself earning $10 billion in revenue by the year 2020, and $3 billion of that amount would be profit for Airbnb before interest, taxes, and other expenses are applied.
Though Airbnb is being out the competition when it comes to valuation, it only has an approximate 1 percent share of lodging markets worldwide.
For Airbnb to reach its goals, it would need to increase the 1 percent share to about 10 percent over the course of only five years.
In 2014, Airbnb lost about $150 million, despite the $900 million in revenue a source close to the company says it is expected to bring in. The amount of loss is expected to rise in 2015, with final numbers around $200 million.
The primary reasons for the operating loss are costs that are coming from expansion.
Airbnb is still facing battles with regulators over lodging laws and taxes, all while trying to take its service to new parts of the world.
Almost 75 percent of rentals were deemed illegal in New York City, causing about 2,000 of Airbnb’s listings to have to be removed. San Francisco and Berlin were other cities where Airbnb faced major restrictions due to regulations.
Should the new funds be raised and lead to the $24 billion valuation, Airbnb would become one of the highest-valued start-up companies in the United States.
It would be second only to Uber, a popular transportation service offered through a mobile app, which could see a valuation up to $50 billion.
Companies like Airbnb and Uber are prime examples of how quickly these on-demand start-ups are growing, primarily due to the interest they receive from investors.
While the funds they seek and the valuations they claim might seem high, those two elements are what is needed to compete with and eventually overcome existing industries such as transportation and lodging.
Airbnb was founded in 2008 and has grown to have service in 34,000 cities within 190 countries. According to the website, more than 25 million people around the world have signed up to use the lodging service.
[Photo by Justin Sullivan/Getty Images]