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Hold the road-show, for Airbnb, the path to an auspicious IPO first wends through the courts.
The company’s 120 or so in-house lawyers are fighting a guerrilla-style regulatory war all over the country. Going street by street in Boston, New York and Miami Beach, among others, to do away with niggling local rules that might hamstring growth or suddenly cancel a swath of the 7 million properties on its platform. (Bloomberg’s deep-dive has a great map of how constraints crimped Airbnb supply in San Francisco).
This is pretty standard stuff in unicorn-land. The blocking and tackling of government regulations weren’t built for a peer-to-peer world; the constraints on companies like Airbnb and Uber are often like a grid of street-lights to a fleet of flying cars. Generally, these tech darlings try to circumvent skirmishes by funneling money into campaign contributions and K Street lobbying shops. They get behind the front line as well, by mounting a stiff defense when places try to shut them down.
Airbnb, however, is doing all that, as well as something slightly different. It’s going on the offense — suing cities and states to bigfoot conflicting rules that may one day nip at its heels. It’s that old Sun Tzu saw: “Attack is the secret of defense.” If the attack involves a phalanx of Ivy League JDs, all the better. (Indeed, the company is still looking for lawyers.)
The downside, of course, is that Airbnb is essentially knocking down barriers to entry and footing the legal bill for would-be competitors like VRBO. But the math is hard to argue with. One estimate says regulatory constraints could drag the company’s value down by 10 percent. That equates to about $3 billion. The $60 million a year it is spending on legal fees suddenly seems like a stellar investment. And in some cases, Airbnb has enlisted its rivals as co-plaintiffs.
Leaning litigious may even be winning battles the company didn’t know it had. Airbnb, like any good negotiator, is signaling upfront what’s important to it and how much pain it’s willing to suffer. None of which is lost second-cities trying to decide whether to take a swing. Of course, that pain threshold differs greatly between a company drowning in VC cash and a city sizing up its legal budget. Again from legal analyst Mr. Tzu: “The wise warrior avoids the battle.”
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