Big news in the vacation rental industry. Yesterday Home Away announced another large round of financing. They raised an additional $250M. Techcrunch released a blog entitled “Monster Round For HomeAway: $250 Million, At An Absurd Valuation“. Below is the post, please click through to read the comments.
Austin, Texas based HomeAway
, a vacation home rental service, has raised a $250 million round of financing. This comes on top of $209 million previously raised over two rounds.
The new financing was led by Technology Crossover Ventures, with existing investors IVP and Redpoint Ventures participating as well. The financing is the largest minority investment of a U.S. Internet company in the last eight years, according to Venture Source.
The pre-money valuation was around $1.15 billion, say a couple of sources, and at least $50 million of the round went off the table to earlier investors. The company was founded in 2005 and has grown primarily through acquisitions: They’ve acquired at least eleven vacation home rental sites, including VRBO, VacationRentals.com, Abritel.fr and OwnersDirect.co.uk.
The company has revenues of around $150 million and $50 million in ebitda. In addition to cashing out some of the investors, our guess is that the additional funding will likely be used for further acquisitions.
It’s also clear that the round was seriously overvalued. Ebay was rumored to have mulled over an acquisition earlier this year at $1.5 billion, but it never came through with a firm offer. It’s not clear who else could be a buyer at this valuation. Also, since HomeAway has acquired just about everyone in the market, there’s little room for
additional growth via acquisitions. 20x ebitda is a public company valuation for a company with real growth potential. Our guess is these new investors may take a bath.
What does this mean to the industry? Time will tell but my guess is they have a few things in mind:
1. Online booking tool/service for RBOs (Rent by owners). Either they will build it (or it’s built) or they will buy someone that is doing it well.
2. Make a bigger push into the property management segment of the industry.
3. Rollout premium services for existing clients, one of which might include an advertising engine for RBOs that currently just post their property profiles.
4. Market, market and market vacation rentals. Home Away has done a tremendous job to date raising the awareness of the industry in the US and beyond but by no means are vacation rentals mainstream. With $250M they should be able to push it even further.
5. Buy up little niche companies that can bring more cash to their bottom line. That’s what they’ve done in the past and there’s no reason it won’t happen again.
Those are a few thoughts. Please add your comments below. More to come….
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November 11th, 2008 at 11:29 am
More information here: http://news.cnet.com/8301-1023_3-10093658-93.html
“Vacation home rental site HomeAway announced Tuesday it received a substantial $250 million fourth round of funding.
HomeAway, which has raised $405 million to date in private equity, received its latest round from lead investor Technology Crossover Ventures, along with existing investors Institutional Venture Partners and Redpoint Ventures.
HomeAway’s $250 million third round represents the largest U.S. venture stake for an Internet company over the past eight years, according to Venture Source.
Companies that tend to raise sizable venture rounds in excess of $100 million tend to be in capital intensive industries, such as networking company Santera Systems and telecommunications company Vonage, compared with Internet companies that require less capital to operate–and hence have comparatively smaller funding rounds.
HomeAway plans to use the proceeds from its latest round to make additional strategic investments, as well as eliminate all its debt and bolster its marketing efforts.
Over its brief three-year history, the company has grown through acquisitions of other vacation rental sites such as CyberRentals.com in the U.S., Holiday-Rentals.co.uk in the United Kingdom, and Germany’s FeWo-direkt.de.
“We are very pleased to secure this major round of funding, particularly during the current financial crisis that is increasingly restricting access to capital for many companies,”" Brian Sharples, HomeAway’s CEO, said in a statement.”
November 11th, 2008 at 1:00 pm
An AP writer describes the deal:
http://www.denverpost.com/nationworld/ci_10955396
November 11th, 2008 at 1:02 pm
This is very interesting that Homeaway would need this much financing. Many small tech start ups of the past could not come close to this kind of money.
Other travel agencies out there work with smaller property management companies. The biggest problem faced is that there is no standardized software in the travel industry and trying to see availability of all properties becomes an extremely tough chore…leaving the telephone the most reliable technology to see real-time availability information.
I believe that Homeaway is probably getting the framework setup to be able to see everyone’s availability for free, then at some point they will offer a premium service that people will subscribe to where they will take bookings for individual owners. It’s sort of like a “Global Property Management” system.
The key to all of this the software…either programming it yourself or acquiring someone that already has it, then scaling it to be big.
SummitCove Software Solutions, grown from SummitCove.com has created it’s own scalable software system for property managers to use. At the same time, a higher entity can see real-time availability information from multiple property management companies and book properties in all areas where their free software is already deployed.
Cool stuff…
November 12th, 2008 at 11:06 am
Mike - this was an interesting article and the comments are worth a look too. My concern is for the vast number of owners whose properties are just lost amongst so much competition. The niche sites -such as yours - may well win out as renters become more sophisticated in their searching. I appreciate they have had a strong hand in making our industry front page news, but worry about the cookie cutter feel about it all.
November 12th, 2008 at 3:05 pm
This is huge news! My hope is that this is the first in a long line of housing news. I truly believe that this is the turning point in the housing market and our economy. Things are starting to look up!
November 13th, 2008 at 8:00 pm
Another story this time from the WSJ blog — http://blogs.wsj.com/deals/2008/11/12/internet-company-raises-250-million-in-this-market/trackback/
Gives more insight into why they went for VC funding vs. public.
““It’s pretty tough to obtain capital right now, but it’s the opposite if you have a company that has strong earnings. I’ve never seen so much competition for financing,” said CEO Brian Sharples said.”
November 13th, 2008 at 8:43 pm
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