You'd think that one of the largest venture rounds since the dot-com era would happen before, not after, the public markets tanked and the U.S. economy entered crisis mode. But the new $250 million fourth round for Austin, Texas-based vacation rental listings service
HomeAway Inc., set to be announced overnight, defies the belt-tightening trend, fueling an aggressive expansion plan as others cut staff and reduce expenses. Instead of trimming around the edges, HomeAway is instead ambitiously aiming to become the next big Web brand.
The numbers are positively
Webvanesque, though HomeAway's future seems much brighter than that turn-of-the-century relic's turned out. HomeAway, which connects homeowners with vacationing renters, has now raised at least $459 million in growth equity capital, including a $160 million round in 2006 and two rounds totaling $49 million a year earlier. Expansion-stage investor Technology Crossover Ventures led the new round with a $175 million investment, alongside existing shareholders Institutional Venture Partners and Redpoint Ventures; Austin Ventures and Trident Capital also have large stakes. In addition, HomeAway has taken in a $100 million debt facility from American Capital Strategies Inc., although CEO Brian Sharples says a portion of the new money has already been used to pay off that debt. In the meantime, HomeAway's operations are generating positive cash flow.
So why isn't HomeAway a household name yet? Thus far, the company's growth strategy has been more like a private equity rollup play, lassoing together existing sites such as
VacationRentals.com,
CyberRentals.com and
VRBO.com ("vacation rental by owner") through acquisitions, rather than building a single, powerful brand name. Sharples says HomeAway has relied on word-of-mouth far more than traditional marketing techniques thus far, but it's planning to begin advertising itself far more boldly soon. Meanwhile, the company is also likely to make more buyouts, particularly as it expands geographically around the globe. (Some of the new money provided partial liquidity for certain stakeholders, including founders of companies HomeAway has acquired, Sharples said.)
Rather than choosing a PE firm as its newest investor, HomeAway elected to work with TCV, which has a hybrid investment model. The firm has previously held stakes in Expedia.com Inc. and Travelport Inc., the parent company of Orbitz.com, and has helped build consumer brand names for eHarmony Inc. and Netflix Inc. Sharples and IVP's Todd Chaffee characterized the bidding as highly competitive, though neither would discuss HomeAway's valuation.
Interestingly, neither Sharples nor any of the investors with whom I spoke seemed to think the dismal prospects for consumer spending of discretionary income in the coming months would affect HomeAway all that profoundly. In fact, Chaffee and TCV's Woody Marshall noted that renting a private vacation home is often less expensive and more enjoyable than staying in hotels or resorts, and Chaffee pointed out that some property owners are more likely to rent out their second homes during slower economic times. The company's primary revenue stream comes from $299 annual flat fees for each rental property offered on the site.
Already profitable with 2008 revenues approaching $100 million, HomeAway has a few years to decide when to approach the public markets. The company probably won't take another private round unless an unforeseen strategic opportunity arises, according to Sharples. But Chaffee says an IPO is very possible once the public markets are more stable. In the meantime, he adds, HomeAway will attempt to build awareness until its brand name is "on par with eBay or Expedia." Ambitious indeed.
-- Paul BonanosSee press release from HomeAwaySee May 2007 post from Tech Confidential concerning IVP's latest fund
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Just goes to show how utterly clueless these indulgence saturated clowns are. Hope to see them thrown out of their overpriced, securitized, tax benefited shit holes.