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Sharing With Strangers

Heptagon Capital

Heptagon Capital
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Fund Manager at Heptagon Capital

Your author is just back from a much-needed vacation. For the second time this summer, he stayed in a stranger’s house. Little more than a decade ago, such a notion would have been inconceivable, yet now it is increasingly commonplace. Platforms such as Airbnb act as trusted intermediaries linking buyers and sellers, or in the case of holiday homes, hosts and guests. Little could be easier. Everything worked perfectly, from the booking of the venue to gaining access to the property. The amenities were as billed and our host was on hand (electronically) to answer any outstanding issues.

People, of course, have shared things for thousands of years. However, the inexorable push of technology has rendered the process increasingly easy. Fast and easily accessible broadband, cheap cloud storage and the power of social media mean that almost anything can now be shared. Think of it as an efficient allocation of scarce resource. Your author has been a user of Airbnb for over five years. Meanwhile, as a recent pet owner, Borrow My Doggy has become an invaluable service, allowing verified strangers to – as the company’s name suggests – borrow pooches, giving them the pleasure of walking a dog and the owner some often-needed downtime.

The growth potential of the sharing economy is significant, for almost anything – from lawnmowers to surfboards – can conceivably be shared. One recent report suggested that while the then-nascent sharing economy was worth $15bn in 2014, by 2025, it could be worth $335bn. We have been following the topic since early 2016 and have been impressed by growth trends. Take Airbnb as a case study. Back then, 72.4m nights and experiences were booked over the course of a year (2015). Pre-pandemic, this figure had grown over fourfold, to 326.9m (for 2019). On its most recent earnings call, Airbnb highlighted that it had enjoyed its record-ever day of guest stays. Some 4m people used the service on one night in July, equivalent to the population of Los Angeles.

Is there anything not to like about the sharing experience? Trust remains paramount, in our view. However, the cost of failing to adhere properly to standards is significant. Reputations, once damaged, may be impossible to repair. A dodgy Airbnb host or Uber driver may struggle to gain future business. Regulation may be a bigger challenge as larger operators within the sharing economy need to remain mindful of how their stakeholders are treated and taxed. Working with local authorities is also key. Most feedback your author receives is highly positive about shared experiences. Long may the trend continue. 

Originally Posted on August 31, 2021 – Sharing With Strangers

The above does not constitute investment advice and is the sole opinion of the author at the time of publication. Heptagon Capital is an investor in Airbnb. The author of this piece has no personal direct investment in the business. Past performance is no guide to future performance and the value of investments and income from them can fall as well as rise.


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