Product Overview

In late March 2020, Marc Grayson, VP of finance at Airbnb, Inc. (Airbnb), recognized that the COVID-19 pandemic would pose a significant threat to Airbnb’s business. The travel industry had been severely impacted, and the board felt that the company needed additional liquidity to weather the storm. Fiscal year 2019 had already been challenging for the company with decreased revenue growth, increased expenses, and a significant net loss. 2020 looked like it would be much worse. In September 2019, Airbnb also announced its intention to go public in 2020. But now the company needed to put those plans on hold and focus on strengthening the company’s balance sheet to get through the pandemic. In the first quarter of 2020, Airbnb loosened its cancellation policy, cutting extenuating circumstances. This led to significant declines in gross nights and experiences booked, average daily rate, and monthly gross booking value. Airbnb cut its marketing budget, executives took salary decreases, and the company was contemplating laying off 25% of its workforce. To address the liquidity needs during the pandemic, the board is faced with deciding whether to accept a venture debt funding deal with Silver Lake Partners (Silver Lake) and Sixth Street Capital (Sixth Street). The central part of the case is estimating the returns to the private equity (PE) consortium and company’s shareholders.

Learning Objectives

- Familiarize students with classic venture debt instruments and how they fit into the spectrum of venture capital investments. If course content covers both VC and PE investments, the case also helps seamlessly transition from the topic of VC investments to the topic of growth financing. - Give students an opportunity to examine the deal from investors’ and founders’ perspectives. - Examine the relationship among the terms of the deal, exit scenarios, and the returns to venture debt investors.