Shortly after graduating from the Rhode Island School of Design (RISD) in 2005, Joe Gebbia and Brian Chesky moved to San Francisco to pursue their careers in design. Like most recent graduates, they were on a tight budget and had to meet each month’s rent. To meet these payments, Joe and Brian were constantly looking for creative ways to pay the rent. They knew that a design conference that was taking place in October had left all the hotels fully booked, leaving some attendees with no place to stay. And soon enough, an idea arose: home-sharing. Unlike traditional hotels, the concept of home-sharing involved offering what you have (the fundamental principle of the “gig-economy”). Joe and Brian decided to offer 3 attendees to the conference air mattresses in their apartment. And thus Airbnb was born.
During their stay, Joe and Brian had a great experience getting to know each of their 3 guests on a personal level. This experience was so amazing, not just because they were able to make money, but because they were able to build invaluable connections and share new experiences with new faces. Both Joe and Brian did not want the fun to end there, so they decided to do it again. Only this time, they would do it full time. Soon after this decision, Nathan Blecharczyk was added to the team, bringing the tech skills that Joe and Brian lacked. However, starting starting Airbnb was going to be more difficult that anyone of them had originally thought.
“I think what’s interesting about airbnb that people don’t realize is that it was not this huge success from the beginning. It actually had a very long path becoming that huge success”
-Liz DeBold Fusco
As they were starting up, they ran into the problem of gaining momentum. AirBed and Breakfast, as it was once called, did not get a strong response from the public. In fact, it was quite the opposite. People were doubting the level of safety that comes with sharing their homes with a stranger. Aside from this, the company only had two bookings on its website after a year of operation. People were not willing to use the platform because no homes were being offered, and homeowners were not willing to use the platform because no guests were booking nights, creating a “chicken or egg” scenario. This new venture landed the founders in debt, so they were strapped for cash. Their future could not have looked worse.
However, instead of giving up, the founders pressed on. They completely redesigned the website to attract more attention and increase bookings. They ignored the doubters and addressed the issue of financing which was needed to keep the company afloat. The problem with funding was the timing of it. The company had just so happened to be starting at the same time as the 2008 financial crisis.
“2008 was really the first year when they were fully up and running, but you know, [in] some of their soft launches earlier on, it wasn’t immediately clear that it was going to be successful”
-Liz DeBold Fusco
Because of the onset of the Great Recession, not many people were willing to invest in “riskier” tech startups. This forced Joe, Brian, and Nate to look for other avenues of financing to allow Airbnb to scale and operate. Since their name was AirBed and Breakfast, the founders wanted to live up to the “breakfast” part of their name. They knew that the Democratic National Convention was being hosted in Denver, and wanted to provide attendees with breakfast during their stays. But instead of perishable foods like eggs, they came up with cereal.
The founders came up with two cereals, Obama O’s and Cap’n McCains. They tried to sell the idea through big names like General Mills and Kellogg’s. They said no. So then they tried their luck with local cereal, also to no avail. Eventually, they found someone who was willing to print out cereal boxes, but the founders would have to perform the assembling themselves. After lots of hard work, the group was able to sell enough cereal boxes to bring in $30,000, becoming true cereal entrepreneurs.
As successful as their cereal boxes were, Airbnb looked to other sources of funding. After a handful of rejections and misfortune, they tried their luck with the accelerator, Y-Combinator. Throughout the entire pitch, Y-Combinator was “not so impressed, but then when they heard about the cereal boxes, they were like, ‘Oh, all right, actually, nevermind. We are very interested in you guys.’ They were interested in the cereal boxes” (Liz DeBold Fusco). As the pitch was coming to a close, one of the founders showed the group of investors their cereal boxes, and that was the main selling point that got Y-Combinator on board. If the founders were able to think outside the box like this, then Y-Combinator believed they were more than capable of leading Airbnb to success. In the end, they ended up with $20,000 in funding.
As word spread about Airbnb after the convention and with the aid of their new partner, Y-Combinator, the group wanted to get feedback directly from their users as well as meet the community that made them successful. They flew to New York to meet their largest market. There, they noticed that many of the hosts were not getting many bookings because they did not have “professional pictures” taken of their homes. So the founders bought a camera and went host to host offering to retake pictures of their homes to increase their bookings. While there, the founders and hosts built a close relationship with each other, which is something that still continues into today. From there on, Airbnb scaled and scaled, eventually transforming into how we know it today.
Today, the Airbnb that we know still has the same ethos of creativity and determination that could be seen 10 years ago. In fact, many hosts will continue sharing their homes to get that same experience that Joe and Brian shared with their first 3 guests in their San Francisco apartment. Hosts may initially accomodate guests for economic opportunity, but many will continue to remain a part of the community due to the experiences that can’t be found anywhere else. This sense of initiative and empowerment that today’s users feel can be traced back to the origin story of Airbnb.
Many community members also share the same sense of determination and entrepreneurship. If you look at those who decide to become hosts on Airbnb, you will realize that they are also entrepreneurs in some way. They be small business owners, tech startup founders, or just regular people looking to make a difference in our world. The primary reason that so many hosts become/are entrepreneurs is due to the economic empowerment and ethos of determination and creativity ingrained in the Airbnb story. Also, entrepreneurs love to interact and network with people, and there is no better way to experience such a thing than by becoming involved in Airbnb.
Whether or not Joe, Brian, and Nate had planned on Airbnb being as big as it is today, the results speak for itself. Now, the company has become a cultural phenomenon to the point where it is ingrained in the vernacular to the likes of Google or Uber. As of now, the company offers locations in thousands of cities all across the globe and has a valuation in the billions. Without a doubt, Airbnb has come a long way from the apartment in San Francisco.
If you want to learn more about Airbnb, see their website here. To see our interview with FutureFuel click here. If you’re interested in the most recent business secrets, check out our Business Knowledge page. If you want to stay up to date with the most recent BWS news, follow us on Instagram!