How AirBnB Became a Billion Dollar Company

AirBnB is not a "Billion Dollar Company." Investment is not revenue or profit. The revenue numbers I heard are in the 5-10 million range.

When AirBnB posts a billion dollars in revenue, then it will be a "Billion Dollar Company."

It's interesting that a lot of the recent billion dollar internet companies have some sort of gray/black hat streak. Off the top of my head:

Groupon: "we've already seen businesses complaining that the Groupons didn't make them money, or that Groupon sales people suggested they raise their prices substantially just before the Groupon 'discount'." http://www.theatlantic.com/business/archive/2011/05/why-does...

Zynga: "I Did Every Horrible Thing In The Book Just To Get Revenues" http://techcrunch.com/2009/11/06/zynga-scamville-mark-pinkus...

Since I've already derailed this, also what's up with everyone saying "I could care less" when they mean "couldn't"?

Sorry, you're absolutely wrong.

The value of X, for any X at all, is what someone else is willing to pay for it. That is how markets work. Any kind of market. And it works for everything from pricing apples to pieces of art to companies.

If people are willing to pay $1 billion for your company, it is a billion dollar company. If nobody is willing to pay you a dime for it, it is worth nothing. Your revenue is an input factor into what people are willing to pay, but doesn't determine the price.

If you study financial theory, the theoretically correct price for a company is the "expected present value of future revenue". Meaning that if you look at all future revenue that it should ever make, divide that revenue by a discount factor for the fact that a dollar tomorrow is not worth a dollar today (and further discounts for risk), that number should be the present value of the company.

So a company with little revenue and good growth prospects may be worth much more than a company with great revenue which is going off of a cliff. It is worth this both in practice and in theory. And anyone who says otherwise simply doesn't understand how to value companies.

Note that in practice, in illiquid markets (which stock in privately held companies always is) the variance of market value from the theoretical relationship becomes wider. We still price companies based on what someone, somewhere, was willing to invest in it. We do that because someone educated people, who is paid to get this right, with possession of more facts than we probably are, decided that this was a reasonable price after doing research. They may be wrong, but the last price paid is the best market indicator of the value of the company.

>CA has a specific law that pre-empts CAN-SPAM

A state law cannot pre-empt a federal law; when a federal law and a state law are in conflict, the federal law takes precedence over the state law. (U.S. Constitution, Article VI, Clause 2.) Notably, the CAN-SPAM Act expressly pre-empts any state law that "expressly regulates the use of electronic mail to send commercial messages, except to the extent that any such statute, regulation, or rule prohibits falsity or deception in any portion of a commercial electronic mail message or information attached thereto" (15 USC 7707). (So, a CA law against fraudulent email would survive pre-emption by CAN-SPAM, but a CA law against simple bulk spamming would be pre-empted by the federal law.)