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- Unheard Roots of Airbnb (PT.2) 🛖
I was gonna ask ChatGPT to give me a funny greeting but I’ll go with a simple welcome back.
Keep the boring human spirit :)
This is part 2 of the story of how a side hustle turned into a $75 billion giant.
(Read Part 1 so you’re not totally confused)
The side hustle stages 🤑
If you recall from part 1, after moving to San Fransisco to become an entrepreneur Brian Chesky realized he could not afford rent.
An opportunity presented itself when Brian and his friend Joe Gebbia realized a huge design conference was coming to San Fransisco and all of the hotels in the hotels tab of the conference website were booked.
Joe Gebbia had a couple of airbeds that weren’t being used so Brian decided to offer airbed & breakfast services to designers attending the conference.
And their idea worked - people actually booked the airbeds and Brian had 3 random designers sleep in his apartment
But the coolest part was Brian actually made money through the bookings.
Lesson #1: Huge lesson here on the value of perspicacity. Most people don’t pay enough attention to realize there are opportunities all around them. Maybe not 75 billion dollar opportunities but problems to turn into startups. Next time you’re going through the world and come across a major or even minor inconvenience, consider creative ways you could solve it.
Lesson #2: Another important lesson here on speed. As soon as Brian spotted an opportunity, he tested if he could make money with it and turn it into a business. Being able to execute with speed is an underrated skill in todays world.
The Airbedandbreakfast[.]com days 💻
The website you see above is the website of Airbnb on March 6th, 2008.
The very first thing Brian & Joe did after realizing they could make money by renting airbeds was build a website.
Then they went straight into fundraising mode - you know because growing these types of startups takes a lot of money.
And guess what? Every investor thought Brian & Joe were crazy for thinking strangers would stay with strangers.
“The first investor Joe and I ever met was in University Cafe - An investor walks in, he goes to get a smoothie, he sits down and never picks his head up. He’s drinking a smoothie, he’s on a straw sipping his smoothie. We’re pitching him, halfway through the presentation he gets up because he has to move his car. We still haven’t seen him since.”
And then there were obviously the brutal rejection emails like the one below.
Lesson #3: This is going to sound like cliche advice but you can never take rejection too seriously. Brian & Joe were told they were crazy probably hundreds if not thousands of times by investors, parents, friends, etc. If they had taken it seriously, they would have not reached life changing amounts of success in 14 years.
Making money off politics & elections 💸
While pitching investors, Brian & Joe continued to host conference goers.
In fact, they launched in 2008 right around the elections so they were able to host people who were attending the Democratic & Republican National Conventions.
The weekend of the national conventions Airbnb was able to get a record 80 bookings.
“That was when Barack Obama was running for president. It was like a huge movement. And that weekend we launched and we got like 80 bookings. I thought at this point we’ve made it, we’re huge.”
In fact, things went so well blogs started covering Airbnb. They were getting lots of bookings and the momentum was making Brian & Joe feel like the Beatles of tech.
“Like a bunch of blogs covered us. I’m like we’re the Beatles of tech right now.”
Valley of Despair Hits 😣
Despite building momentum with the Democratic & Republican National Conventions, things died down.
“And then all of a sudden the next weekend for Senator McCain we got two bookings. Then the week after we got no bookings.”
Lesson #4: Never forget startups have ups and downs. You can be up one day and completely down the other. Never make the mistake of attaching your motivation to the fluctuations. Continue building even when things slow down and stagnate.
Feeling frustrated with the stagnation of momentum, Brian & Joe came up with a crazy idea to fund the company.
Selling cereal - they literally became “cereal” entrepreneurs (you will hear Brian Chesky use that pun quite a bit).
The idea was “we’re a bed & breakfast service but the beds aren’t selling so we might as well sell breakfast”.
Lesson #5: Scrappiness is not optional in the early days of startups, it’s required. Creative & unconventional problem solving is a skill all elite entrepreneurs have to some degree. Brian & Joe made $30,000+ off of selling cereal to fund Airbnb. If future billionaires can do it, you can be scrappy.
Making bank off cereal 🥣
Since the elections were all people talked about at the time - Brian & Joe decided to sell election themed cereal.
Obama-Os and Captain McCains (since John McCain, the guy running against Obama, was a captain in the navy back in the day).
Brian designed the boxes and called General Mills to ask if they could print it for them.
General Mills did not take Brian & Joe seriously so they decided to call other small cereal companies to ask if they could print the boxes.
Some small unknown company agreed and they received a thousand cereal boxes.
“So we end up getting a thousand boxes of cereal and we hand-glued them ourselves. I remember hand-gluing cereal boxes, these collectible breakfast cereal, thinking I wonder if Mark Zuckerberg ever glued cereal boxes.”
Brian & Joe charged close to $40 per box and made close to or more than $30,000 selling election themed cereal.
And used that money to fund Airbnb since every single investor laughed Airbnb off 🥺
Impressing Paul Graham 🤯
There was one investor Joe & Brian pitched that ended up changing the fate of the company.
That investor was Paul Graham, the guy behind Y-Combinator.
For anyone who lives under a rock - Y-Combinator is the most famous & well established startup school in Silicon Valley.
With portfolio companies like Dropbox, Stripe, Reddit, etc it’s portfolio exceeds 100 billion dollars in value.
When Joe & Brian went into pitch Paul Graham, Pauls first question was “people are actually doing this?” (staying in strangers homes) and the follow up question was “what’s wrong with them?”.
As Brian & Joe were about to leave thinking this would be another rejection - they showed Paul Graham the cereal boxes they had sold and told him they made $30,000 off of them to fund the company.
This caught Paul Graham off guard. He was so impressed the duo could get people to pay $40 for $4 boxes of cereal, he thought if they could make that work, they could make Airbnb work.
Y-Combinator & Fundraising during a recession 📉
“It’s the first day of Y-Combinator, it’s January 2009. By the way I want to set the stage for you, you remember what was going on in 2009? Like the economic crisis, the great recession. The economy was so bad and Y-Combinator has a thing called demo day. So the end of three months, all these investors come. Paul Graham sends us an email before Y-Combinator starts. He says the economy is so bad we don’t know if any investors will show up for demo day.”
Just as things were getting a little better for Airbnb, Brian & Joe learned investors might not even come to demo day due to how bad the economy is.
Despite being told they did not need to participate, Brian & Joe went head on into the program.
During Y-Combinator, Brian received the most important piece of advice he would ever receive.
“Focus on getting 100 people that love you rather than getting a million people that kind of like you and I think this was a profound piece of advice and may have been the best piece of advice I’ve ever gotten.”
100 people that love you 👥
Brian Chesky has a famous saying called the “7-star experience”. It’s this idea of building something that exceeds expectations and gives the customer the best possible experience.
On an app like Uber when you give 5 stars, it basically means nothing bad happened. But what would a 6 or 7 star experience look like?
At the core of this idea of designing a 7 star experience is building for a small group of people first.
“The first thing is, how do you know how to make something for a million people? I don’t know where to start.”
When you put scale at the core of your product in the early days, you build something no one loves and everyone kind of likes.
It’s kind of like the saying “trying pleasing everyone pleases no one”.
“But if I pick one person in the audience and I study you and I take you on a journey and say how do we improve this part of the journey? How do we improve that part of the journey? You can actually do something really personal and if you design something, keep iterating until they love it and don’t stop improving until that one person loves it.”
This idea of building for a small group of people to love you is literally was at the core of Airbnbs product in the early days.
“And what ends up happening is two things. One, you design this perfect experience. The second thing is when people love your service, they become your marketing department.”
For Airbnb, this meant giving conference goers around the world the best experience possible when it came to finding a place to stay in a new city.
In order to perfect the user experience, Airbnb hired storyboard artists from Pixar and started creating these storyboards of an Airbnb users experience and how it can be worth 6, 7, or even 8 stars.
“Most people try to design something thats just good enough. But if you can add that six or seven star, if you can design something really amazing, and you use the handcrafted part of your brain to create the perfect experience. Then you can reverse engineer how to industrialize this millions of times over.”
Some other ways the Airbnb founders tried to maximize their user experience includes flying across country to stay with hosts and borrowing cameras from their photographers friends to help hosts take better photos.
Talk about doing things that don’t scale :)
Other growth strategies 📈
Word of mouth was by far one of the strongest drivers of growth for Airbnb.
Getting press was probably the second largest contributor to the growth of Airbnb.
The Airbnb team reached out to a lot of publications early on for coverage but were dismissed by most (we’re talking about big publications like CNN, New York Times, etc).
What the founders eventually ended up doing was reaching out to the smallest blogs they could find and getting covered on them.
Being featured in small blogs ended up creating a snowball effect and local media started covering Airbnb which led to larger national publications discovering & covering Airbnb.
Eventually Airbnb was all over the news and started onboarding new hosts & users who discovered them through news stories.
One last thing…
I know people on the internet say stuff all the time and never have sources to back them up.
So for those of you who are wondering where I got my information from, here is a playlist of interviews I got this information from.