The chart above shows the number of guests AirBnB has hosted each summer for the last five years. It was on Techcrunch this morning.
It’s an amazing chart. AirBnB has delivered on the proverbial hockey stick growth that I imagine they had in their pitch deck back in 2010. They’ve lived the dream.
We can draw lessons for this for new startups. In particular for founders who plan to emulate the success of AirBnB.
First, two facts:
- If you do the maths then 353x growth in five years works out at 3.2x per year, compounded
- Also note that growth gets harder with size – eyeballing the chart suggests AirBnB was in the 2-3x range for the last couple of years
This means that founders who want to grow as fast as AirBnB should be growing at well over 3.2x in their early years. For very young companies the forecasts should show this level of growth, whilst companies at Series A or later will have to have shown this level of growth in the past as well as in their forecasts.
Not every company needs to have the ambition of reaching AirBnB’s $25bn valuation (although that’s what the biggest and best funds are looking for) but if you want to get to any kind of scale in five years then the maths shows that 3x growth is what you need in the early years. We advise our partner companies that 20-30% growth per month puts them in good shape to raise a Series A. These companies are typically in their first or second year and therefore growing off a small base, and they don’t usually manage this level of growth every month for a twelve months in a row, but if they did it would make them 9-23x up over the year.