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AirBnB raises funding, launches iPhone app

The start-up began as a way for budget travelers to find couches and spare rooms for low-cost crashing, but has since expanded to offer private islands and castles for rent, too.

AirBnB, the start-up that began as a couch-swapping service for young, budget-minded travelers and the people willing to rent them space in living rooms, spare bedrooms, and mattresses on floors, made several big announcements this afternoon: a $7.2 million Series A funding round on behalf of Sequoia Capital and Greylock Partners, and an iPhone app for instant lodging bookings.

The company plans to use this funding, which adds to a $600,000 seed round that it raised from Sequoia last year, to hire more people (co-founder Brian Chesky says it has 40 job openings at the moment) and improve its international operations. This involves multilingual customer support as well as ensuring that it can process transactions sufficiently for a wide array of markets.

The San Francisco, Calif.-based service has now grown significantly bigger than its Eurotrip-ish roots, with properties listed in 8,000 cities in 166 countries. A total of 700,000 bookings have been made, 80 percent of which were in the last six months. Plus, the founders explained to CNET, there are now property owners listing things that go far beyond couches and air mattresses: castles, private islands, estates for weddings, and other events. The company now envisions itself growing big enough to be considered the equivalent of an eBay for booking space and lodging.

Aiming to offer a safer and more efficient system than classifieds ads, AirBnB lets renters pick a price, processes all transactions in-house, and has a reputation system much like eBay's for both travelers and renters. The iPhone app will give users access to faster, same-day bookings as well as daily deals in the manner of a site like Jetsetter.

The two-year-old AirBnB has been an impressive success story, but nevertheless faces uphill competition from some bigger companies like HomeAway, which is large enough to buy Super Bowl ads--and, not to mention, the hotel industry itself.