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Comment by CPLX | Hacker News Reader

I mean I know the stock answers and so on already, but seeing these kind of articles makes me wonder why the hell companies that are so mature, and theoretically at least should be spinning off tons of operating cash, feel the need to raise these really astronomical sums of money.

It's hard to see why the savviest long term strategy isn't just to keep booking billions of dollars worth of lodging bookings, keep their cut, and use it to grow the company.

The last time I saw financing in the tech industry seem so out of step with basic economics was 2001. Not for startups in general necessarily, but for these super-giants like Airbnb and Uber something seems really wrong.

When exactly do they have to start acting like normal boring businesses that are supposed to be good at something, and then make their money doing that thing?

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No kidding! I don't get this mentality that's sprung up in the last however many years to just keep taking funding. What's the point??

Imagine if Apple announced today it was "taking on funding to raise its valuation to $800 billion." What a thought!

Because they can raise a large amount of money at a modest dilution, it's really that simple. It's a way of guaranteeing their seat at the table, whether that's in regards to hiring or acquisitions or otherwise. When you're going up against huge companies like Priceline.com ($60b market cap, $3.3b cash, $9b sales, $2.5b profit) and Expedia ($15b market cap, $2.1b cash, $6.6b sales) - the more cash the better. Further, who knows if these relatively easy capital raising days will last (for Airbnb types at least), or whether we're rolling into a recession.

Oh yeah, and because they wouldn't be worth $30 billion if they were publicly traded. They're raising money far beyond what their business is going to be worth at any point in the next five years based on comparables to either Priceline or Expedia.

> Oh yeah, and because they wouldn't be worth $30 billion if they were publicly traded. They're raising money far beyond what their business is going to be worth at any point in the next five years

Indeed. And therin lie the seeds of a problem that could literally destroy the company, or at least incinerate the stake of the current founders and major shareholders. Hence the question.

If the goal of Airbnb's investors/BoD was to grow a viable business, this would be a reasonable question - but their job is to increase the value of their (and their LPs') existing investment as much as possible, usually within a fixed time window.

For employees in the tech sector, this misalignment of incentives is one of the ugliest lessons to learn.

If this is the case, raising funding based on ever increasing valuations sounds like a Ponzi scheme to me, albeit a very inefficient one.

The first advantage is that it dries up funding for any potential competitors.

The second is that businesses face a sudden jump in their need for capital as they shift focus to their global operations.

Getting investors who can help with regulation challenges in certain cities seems worthwhile.

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