What Airbnb and DoorDash Didn’t Teach Us: The Information’s Weekly Newsletter

This was a week full of major tech news, from the Federal Trade Commission and states suing to break up Facebook to the explosive Airbnb and DoorDash IPOs. As for Facebook, if you just want to know the outcome, tune back in a decade from now. But we’ll be following all the developments and their significance for the company and industry until then.

The story of the week from our team—a piece followed by Bloomberg, The Verge, Business Insider, and many more—was Wayne’s article about how Apple ignored Chinese labor laws to build its devices faster. The detail in this article is staggering, and I hope you find it interesting.

Also, we’ve announced the dates for our third annual Women in Tech, Media and Finance conference: September 22 and 23. We’re planning for it to be virtual but we will add some in-person elements if feasible. Jessica Toonkel and I are already thrilled to see how it is coming together and would be happy to answer any further questions about it.

What Airbnb and DoorDash Didn’t Teach Us

It is not every day that tech investors are surprised by how the market is valuing tech darlings like Airbnb. But shock was in the air on Thursday, when I began receiving a series of texts from tech investors saying “Wow,” “What’s going on?” and “This is crazy.”

Because while Airbnb certainly has the potential to be an even more massive company, the notion that it would be valued at as much as $106 billion (where it peaked after a big pop on its opening) is staggering. It ended Friday around $90 billion, or $139 a share.

Recall that in the depths of the pandemic the company raised rescue debt financing from Silver Lake and Sixth Street that included the right to buy equity in the company at around $30 a share. Airbnb’s revenues were $4.8 billion last year, with a $674 million loss.

And yes, there’s the pandemic, which has wiped out certain types of travel (vacations) and boosted others (local getaways or relocations). But Covid-19’s long-term impact on travel and on preferences for Airbnb versus hotels is far from clear.

The same is true for DoorDash, the food-delivery business that Martin has pointed out is undoubtedly seeing pandemic inflation due to restaurant closures. Yet DoorDash almost doubled its share price on its opening day and is now worth more than most restaurant chains, except for Starbucks and McDonald’s.

When Amir interviewed DoorDash CEO Tony Xu this week, he seemed to have been a little surprised himself. “Everyone is entitled to their opinion,” he said.

It’s Anyone’s Guess

Investors, even those usually confident at prognosticating, were throwing up their hands about what these high-flying IPOs told us about the future. Investor Mark Cuban told a colleague of mine: “I have no idea what comes next.”

He continued: “All I can tell you is that when the internet bubble hit, those valuations went on for four more years. And with interest rates where they are, this could go longer. Where else are people going to put money?”

Another point worth remembering: Most of today’s tech businesses have nowhere near the burn rates of the companies that imploded in the dot-com bust.

But it does seem like something is amiss, and I think part of it may be overestimating Covid’s positive impact. Because as much as Covid has accelerated digital companies and their growth, I believe some of that will be short-lived.

Zoom will face growing competition. DoorDash will too. And once the virus has vanished, I don’t expect people will be afraid to stay in hotels again.

On the margin, I think Covid will have exposed more people to tech and tech-enabled services, which will be good for tech companies long-term—but probably not as good as many investors expect. As Amir wrote this week, to justify its opening-day closing price, DoorDash would need $1 billion in annual profit by 2024. That figure is currently around zero.

But there are some businesses out there that I think will have steeper demand gains from Covid-19. Those are the companies that serve a lot of these businesses with their underlying tech.

I keep coming back to payment companies like PayPal and Stripe, which have seen huge demand, as Stripe CEO Patrick Collison told me. I think they are long-term winners, and their gains seem more permanent because they are spread out across a greater variety of companies, including traditional businesses shifting into digital mode, such as brick-and-mortar retailers turning to e-commerce. Our team will have more reporting on other winners soon as part of our upcoming predictions.

So back to what to make of this week in tech IPOs, which capped a very strong several months.

I think it’s just confirmation of the barbell effect we’re seeing for businesses. Some select companies are seeing strong growth and investor interest, while others are really struggling. And the scarcity of top performers is inflating their value.

It’s a great place to be for a select few—and a troubling place to be for the rest of the business world.

Upcoming Events:

February 4, 2021: The Information’s Future of Startups: Lessons for Next-Gen Disruptors (daylong virtual conference)

This Week's The Information Articles:

• Airbnb’s Biggest IPO Winners by Cory Weinberg
• Record Number of U.S. Firms Invested in Europe Tech This Year by Mark Di Stefano
• Shaved Heads, 84-Hour Work Week as China Tech Gets Into Groceries by Yunan Zhang
• 2020’s Biggest VC Winners by Kate Clark and Ross Matican
• Apple Turned Blind Eye to Supplier Breaches of Chinese Labor Laws by Wayne Ma
• Laid-Off Airbnb Employees Lost Mountain of Canceled Stock by Cory Weinberg
• DoorDash CEO on 85% IPO Stock Pop: ‘Everyone Is Entitled to Their Opinion’ by Amir Efrati
• Facebook’s Big Risk From Antitrust Suit Is Losing WhatsApp by Alex Heath and Christopher Stern
• On the Market: Entertainment Veterans From Old and New Media by Jessica Toonkel and Tom Dotan
• Airbnb’s Blockbuster IPO Cements Bond Among Founders by Cory Weinberg
• After Slack Deal, Dropbox, Box, MongoDB Could Be Next Acquisition Targets by Nick Wingfield and Kevin McLaughlin
• OnlyFans Is Not Only Popular, But Hugely Profitable by Tom Dotan
• The Information’s 411 — IPO My God by Tom Dotan
• What Airbnb and DoorDash Didn’t Teach Us by Jessica E. Lessin