Airbnb faces new controversy, this time over financing

Just when we thought the controversies about Airbnb had softened and reports of crack pipes and damages had become old news, the website that connects travelers with local spaces to rent has reemerged into the news, this time thanks to a leaked venture capitalist’s email.

Former Facebook executive and major in Social+Capital Partnership Chamath Palihapitiya sent an email to Airbnb CEO and co-founder Brian Chesky. The email, a combination of advice and insult, details Palihapitiya’s feelings about the way that millions of dollars are being distributed as dividends to a select few (with the founders getting the bulk of it).

Here’s a screenshot of the email from AllThingsD, then our comments below:

There are two major problems here.

First, a company that has received what most in the industry would consider to be an exceptionally “sweet” deal in favor of the startup should be sharing the wealth and using the capital to keep and acquire employees as Palihapitiya points out. There is much less true talent than there are positions in the field and this was an opportunity for Airbnb to make a play for the best of them.

Instead, they are now publicly being shown to have self-serving motives at the top. It shows a distinct lack of faith in the vision and future of the company – why take such a large chunk of the funding in a “cashout” scenario this early in the game if the company can be worth billions in the near future as investors hope?

What’s worse, Palihapitiya broke a cardinal rule of investing. If you’re going to be given sensitive financial information about a startup seeking funding, you cannot let it leak. It’s that simple. Whether it was carelessness (likely) or a blatant and strategic leak (unlikely, but not out of the question) Palihapitiya has put a black mark on his company. While investors normally have the upper hand in negotiations, this will keep Social+Capital Partnership out of important conversations, particularly when the startups feel they really have something special to get funded.

We will see how this plays out, but one thing is certain. CrunchFund, an investor in Airbnb, and Michael Arrington aren’t happy about this. Not at all.