Vacation rental Web startup reaps $250M investment

The listing service, HomeAway Inc., said Tuesday that with its latest round of private financing, it has raised $405 million since it launched in 2005.

Austin, Texas-based HomeAway tapped venture capital firms Technology Crossover Ventures, Institutional Venture Partners and Redpoint Ventures for the latest round. HomeAway did not disclose what stake these investors now hold in the company, but said the infusion still represents a minority investment.

HomeAway's CEO and founder, Brian Sharples, said that given the state of the economy, he was nervous about clinching the most recent round of funding. But investors got to see that HomeAway is still performing well "in a pretty bad quarter of economic news," he said.

The company's revenue comes from people who typically pay $299 a year to list a vacation property for rent. Sharples said HomeAway's sites, which include VacationRentals.com and GreatRentals.com, will end the year with about 325,000 paid listings, up from 257,000 last year.

Sharples said the company's growth was initially propelled by a boom in building, construction and home purchasing. Now, HomeAway is benefiting as owners of vacation homes seek an extra source of income by renting out their places during the economic downturn. And consumers are more interested because it can be cheaper for a family, for example, to rent a house for a week than hotel rooms in many popular destinations.

"We've always had a hunch that more people would start renting if times got tough," he said.

Sharples said the company used $88 million of the latest financing to finish paying off debt, and it will use some funds to ramp up marketing. HomeAway will also buy back shares, which is a way to reward workers with vested stock options at a time that doesn't seem ripe for taking the company public, Sharples said.

In addition, HomeAway might use the venture capital to pick up new Web properties in overseas markets. The company's vacation-rental listing stable includes sites that serve Britain, Germany and France, but it has no presence in places like Australia, Asia or the Middle East.

Technology Crossover Ventures, which also helped finance online travel companies Orbitz Inc. and Expedia Inc., contributed $175 million to the latest round of funding. Institutional Venture Partners provided $45 million and Redpoint Ventures put in $30 million.