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The latest company to show big losses is — surprise — Airbnb

February 13, 2020, 2:26 PM UTC

This article originally ran in Term Sheet, Fortune’s newsletter about deals and dealmakers. Sign up here.

Losing money has been quite the tech trend in recent months. This time, home-sharing platform Airbnb is under scrutiny, a surprise given the numerous headlines lauding it for turning a profit on the road to IPO. 

Until recently, Airbnb was the rare Silicon Valley unicorn that had somehow cracked the code—somehow figured out a way to make money! Over its 12-year history, Airbnb proved to be much more conservative in its spending compared to other fast-growing startups.

But the Silicon Valley darling valued at $35 billion may be falling from grace. Airbnb had a net loss of $322 million in the first nine months of 2019, down from a profit of $200 million during the year-earlier period, according to a new report from The Wall Street Journal.

And that’s not all. My colleague Aric Jenkins astutely points out that these losses don’t even reflect new spending that the company committed to late last year on safety control across its network of rental homes.

Jenkins recently took an inside look at Airbnb as it tries to implement safety changes and stake its claim as the ultimate one-stop-shop travel company. In a new analysis, he notes that Airbnb’s safety spending could very well eat into future profits. 

Hunter Walk, a partner at seed stage venture fund Homebrew, has written about Silicon Valley’s desire for “software margins”—high gross and net profits due to fixed development costs and ability to scale, often found in tech companies whose main product is a “platform.” The tradeoff of pursuing those margins is that engineering efforts are often focused on growth and revenue, rather than operational issues like safety standards. 

“There are a host of innovative and valuable startups—Airbnb included—which touch the physical world in ways that traditional software companies never had to deal with,” Walk tells Fortune. “The complexity of trust and safety when dealing with housing or transportation is far greater than staffing a call center to just deal with enterprise software bugs, and accordingly we should assume it might cost more too.”

In other words: This might just be the beginning of a new economic reality for Airbnb, as the company sacrifices software margins while addressing the expenses of protecting the people using its platform.

We don’t know how Airbnb’s public market debut will go, but we certainly know that investors are raising eyebrows at companies with losses and no clear path to profitability. With Airbnb under even more examination following the meltdown of WeWork and the underwhelming performances of other newly public tech companies, we’ll have to see if Silicon Valley’s tech darling can win the validation of the public investor.

Read more at Fortune.

PODCASTING $$: Spotify will pay nearly $200 million to acquire Bill Simmons’s The Ringer, according to a regulatory filing. The music-streaming giant will pay between €130 million ($141 million) and €180 million ($196 million). The final price is subject to closing costs and deferred payments. Read more.

Polina Marinova
Twitter: @polina_marinova
Email: polina.marinova@fortune.com 

VENTURE DEALS

- Headspace, a Los Angeles-based app focused on mindfulness and meditation, raised $93 million in Series C funding. blisce/ led the round, and was joined by investors including Waverley Capital, Times Bridge, The Chernin Group, Spectrum Equity and Advancit Capital.

- CybelAngel, a Paris-based digital risk management company, raised $36 million in Series B funding. Prime Ventures led the round, and was joined by investors including Tempocap, Bpifrance and Open CNP.

- BlockFi, a Jersey City, N.J.-based financial services company focused on products designed for cryptocurrencies, raised $30 million in Series B funding. Valar Ventures led the round, and was joined by investors including Morgan Creek Digital, PJC, Akuna Capital, CMT Digital, Avon Ventures, Castle Island Ventures, Purple Arch Ventures, Kenetic Capital, Winklevoss Capital, Arrington XRP Capital, and HashKey Capital.

- Ramp, a New York-based fintech firm that offers corporate credit cards, raised $25 million in funding. Investors include Keith Rabois, Coatue, BoxGroup, Conversion Capital, Soma Capital, and Backend Capital. Read more at Fortune.

- Radar, a Brooklyn-based location data infrastructure platform, raised $20 million in Series B funding. Accel led the round.

- Praetorian, an Austin-based cybersecurity company, raised $10 million in Series A funding. Investors include Bill Wood Ventures and McKinsey & Company.

- Databook, a Palo Alto, Calif.-based AI-powered, enterprise customer intelligence platform, raised $5 million in seed funding. Threshold Ventures led the round. 

- Talage, a Reno, Nevada-based SaaS-based digital insurance platform, raised $5 million in Series A funding. Merus Capital led the round, and was joined by investors including Calibrate Ventures, WTI and Hallador Investment Advisors

- Open Raven, a modern data security platform, raised $4.1 million in funding. Upfront Ventures led the round.

- Double Loop Games, a San Francisco-based developer of mobile games, raised more than $2.5 million in seed funding. LVP led the round, and was joined by investors including 1Up Ventures.

PRIVATE EQUITY DEALS

- Post Capital Partners made an investment in Agile Sourcing Partners, Inc, a Corona, Calif.-based supplier of integrated materials and services. Financial terms weren't disclosed. 

- Service Champions, a portfolio company of CenterOak Partners acquired Bell Brothers Plumbing Heating and Air, a Sacramento, Calif.-based provider of residential air conditioning and plumbing services. Financial terms weren't disclosed. 

- L Catterton made an investment in Butternut Box, a London-based fresh food delivery brand for dogs. Financial terms weren't disclosed. 

IPOs

- Revolution Medicines, a Redwood City, Calif.-based biotech developing targeted cancer therapies, raised $238 million in an offering of 14 million shares priced at $17, the high end of its $16 to $17 range. The firm posted revenue of $20.2 million and losses of $48.8 million in 2018. Third Rock Ventures (29% pre-IPO), The Column Group (19%), and Sanofi Research Invest (8%) back the firm. It plans to list on the Nasdaq as “RVMD.” Read more.

- Lojas Quero-Quero SA, a Brazilian home improvement retailer, filed for an IPO in the country, per Reuters. Advent International Corp backs the firm. Read more.

EXITS

- Apax Partners agreed to acquire Cadence Education, a Scottsdale, Ariz.-based provider of early childhood education in North America, from Morgan Stanley Capital Partners. Financial terms weren't disclosed. 

PEOPLE

- Logan Bartlett joined Redpoint as a managing director.

- Andrew Atherton was promoted to managing director at Union Square Advisors.

- Sofinnova Partners named Robert Carroll as partner and head of investor relations.