The Next WhatsApp?

By Wayne Mulligan, on Thursday, April 24, 2014

Every so often a “Big Bang” occurs in the start-up world...

A new company emerges that gives birth to an entirely new industry.

These companies reach such scale that they create a universe of other businesses in their orbit.

We call these Big Bang companies, “platforms.”

Facebook, Apple, Google… each of them is a platform.

And not only did they generate tremendous returns for their early investors – they also created big returns for the companies in their orbit.

Today, I’ll show you a company that’s fast becoming the next platform.

... And I’ll also show you a business you can invest in right now to profit from it.

What’s a Platform?

Platforms are like the concrete foundation of a giant shopping mall.

Once the mall gets some buzz and starts to look like a “winner” in terms of its ability to drive foot traffic, other shops will come build their businesses on top of it.

Apple is one such platform: more than 1 million businesses – “apps” – have been built for its iPhone App Store.

Facebook is another one: nearly 1 million applications have been built on top of it.

These new businesses would never have existed without Apple and Facebook… and billions in shareholder value would never have been created.

Although it’s challenging to tell which platforms will emerge as the “next big thing,” once you spot a winner, there’s still a way to profit from it:

Invest early in the companies that are built on top of them.

Imagine having invested early in WhatsApp (built on top of Apple and sold a few months ago for $19 billion) or Zynga (built on top of Facebook)? Your stake would be worth a fortune.

There’s a new platform emerging right now...

The Travel Platform

If you’ve been a regular Crowdability reader, you’ll know we’re fans of Airbnb.

Airbnb is basically a peer-to-peer hotel. The site allows regular people to rent out rooms (or their entire home) to travelers. Airbnb facilitates the transaction and takes a cut of the sale.

The site launched just four years ago but already commands a $10 billion valuation. That’s 25% higher than Hyatt’s market cap!

This isn’t surprising considering the company currently has over 500,000 rooms on its site (Hyatt has only 147,000) and is expected to hit 1 million by year-end.  This will make it the largest “hotel” in the world.

Which is why I believe Airbnb is the next big platform.

That might sound strange. Airbnb isn’t a traditional tech company in the way that Apple and Facebook are. But I believe we’re going to see many, many businesses built on top of the foundation built by Airbnb.

Here’s why...

Like all successful platforms, Airbnb has two key ingredients:

  1. It’s a network – Although Airbnb isn’t a social media site, it’s still a network of people. They’re not on Airbnb to chat with friends and play games, but people still use Airbnb to find one another and communicate.
  2. Not all things to all people – I don’t say this as knock against Airbnb. I love the service from a customer perspective. But if you’re a landlord on Airbnb, you’ll know that it takes considerable effort to manage your “mini hotel.”

For example, hotels need many services in order to make things run efficiently:

Maintenance and cleaning staff, billing and scheduling systems, concierge, etc.

The same way Apple doesn’t make all of the apps for the iPhone, Airbnb can’t provide all of these services to its users. Employing people to clean toilets?  It would ruin the company’s profit margins and it’s simply not its core business.

Platform companies are better served by opening up their network to the market and allowing other companies to build on top of them.

How to Profit From the Platform

I believe Airbnb could become the preeminent platform in the hospitality industry. And while it’s unlikely you’ll find Airbnb on an equity crowdfunding site, there is a way to benefit from its growth:

Invest in the companies that are being built on top of its platform.

In fact, there’s a company raising money right now that’s building its business on top of Airbnb.

It’s called SuperHost.

SuperHost gives Airbnb landlords a simple tool to better manage their Airbnb rental properties. People can easily manage their rental calendar, communicate with their tenants and even arrange cleaning services for their “hotel.”

The company has raised almost $500,000 from top-tier investors. It’s also participated in the prestigious Y Combinator start-up incubator (it’s like an Ivy League school for start-up companies).

You can find SuperHost on WeFunder (one of the high-quality platforms we cover on Crowdability) and can view the deal details here »

SuperHost is one of many companies we’ll likely see in the next few years as Airbnb continues to grow. And for the ones that appear on an equity crowdfunding platform, you can be sure we’ll showcase them in our Monday Deals Digest.

Remember, start-up investing is risky. So if you decide to move forward, treat this investment as just one of many in your portfolio. Only invest a small amount in each and diversify as much as possible.

(As a reminder, Crowdability does not have a financial relationship with SuperHost or WeFunder. Crowdability is an independent provider of equity crowdfunding research and education.)

Happy investing!

Best Regards,
Wayne Mulligan
Wayne Mulligan


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Tags: Equity Crowdfunding Airbnb Early-stage Investing Wefunder

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