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AIRBNB: 3 BROKE MEN ESTABLISHED 38 BILLION DOLLAR COMPANY


Have you ever thought of becoming an entrepreneur?

Or have you ever planned to open a company with your friends?

Opening a startup nowadays is not something new.

As it has become like a trend for millennial to do so.

You might have come through certain people who have opened a startup but couldn't succeed in that.

Maybe they lack in their idea, or maybe they don’t resources to start it or maybe they just gave up.

Well, according to Brian Chesky the CEO of Airbnb, You have to be like a kid when you start a startup, as in this sense, you are curious, you are open-minded and you are welcoming.

Having an aim set for your goal is what brings success closer.

Ideas are what matters the most.

Well, on this note, see how 3 broke boys with an amazing startup idea which faced so many challenges and now has become a 30 billion-dollar company.

Let’s see how airbnb begin….

BROKEN WITH CASH NOT WITH IDEAS 

Rhode Island School of Design in 2004, brought together two friends which became the best of friends and thus the founders of airbnb, Brian Chesky and Joe Gebbia.

 Brian and Joe always thought that they would build a company together.

With the completion of their graduation in 2005, Brian moved to Los Angeles and started working as an industrialist designer and strategist at 3DID.Inc.
Whereas, Joe started to work in Chronicle Books in San Francisco.

Later, in 2007 Joe started convincing Brian to quit his job and come back to San Francisco, as they both were not happy with their particular jobs.

After getting finally convinced, Brian quitted his job and he moved back to San Francisco.

He planned to share the apartment with Joe.
After coming to San Francisco Joe told him that the rent was $1,150.
With $1000 in his bank, he couldn’t afford to pay rent.

While discussing the problem of paying rent, they came to know about the International Design Conference. This conference was coming to San Francisco at the end of the week.
When they researched further, they got to know that all the hotels were sold out.

With this, they founded an opportunity/idea. Joe had 3 airbeds with him, and thus they decided to rent out these air beds to people in their apartment.

And within 30 minutes of their discussion of about this idea, they ended up launching a website called airbed&breakfast.com.

Initially, they planned to keep the website name as designbed&breakfast.com.
Then they realized that they don’t have any furniture to rent so they decided to go with airbeds only.

Joe and Brian being the designers themselves, said: “You’re a designer, you can redesign everything around you”. And, well they did.

Designers coming for conference needed a place to stay and they needed money, and with this, 3 people rented airbeds for $80.

One was a woman of 35years old from Boston, One was a father of five from Utah and one was a guy from India.

Different people with different areas came as strangers but left as friends.

With this, they initially thought of making this facility available for people who are attending conferences.

Also, many conferences were being held, like the South by Southwest Conference (tech conference) was coming to San Francisco.
They found this opportunity and thought why not build a site which would provide air beds solely to conferences. 

Later Brian asked Joe that whether he knew any engineer and with this, we meet the 3rd co-founder of later known as Airbnb, Nathan Blecharczyk.
He was graduated from Harvard University and he also was a computer scientist.

And thus, with their core idea of “what if a person could book someone’s home the way a hotel is booked, anywhere in the world”, they started their journey….

And, thus this led to the second launch of their website as “air beds for conferences” in 2008.
One lesson which they learned here, is that “all stupid ideas are often big ideas”. And with that notion, they never stopped at one product, they continue to launch until they got customers.

Inspired by Steve Jobs, Brian said that ‘when Steve Jobs launched the iPod he said no matter where he was in the iPod he wanted to make sure he was 3 clicks away from a song”.

site

This struck Brian’s mind. And thus they wanted a 3-click-book-it-button rule.
They now created a home page with a search bar, listings of home, reviews, payment systems and customer services.

TIME TO GRAB OPPORTUNITIES

Challenges and opportunities are two main ladders for success.
If you face them with full confidence and with all possible efforts, success will come to you.
There is no winning or losing in such situations, as every step in life teaches us something.

Well, this is what happened to them.

Their situation was getting worse, as barely-there was any customer.  Along with this, they were under $30,000 credit card debt.

With dealing with tension and stress, finally, an opportunity knocked up for them.

And, this was the coming of Democratic National Convention.(A Democratic National Convention was held when Barack Obama was coming to Denver for the Presidential nomination.)
It was not only about Barack Obama coming but along with him, 80,000 people were coming for which there were only 27,000 hotel rooms.

With this, the trio founded a great opportunity.

Now, for people to know about them, they contacted the New York Times and CNN for that.
But they rejected to promote them as they were like ‘this is crazy no one will stay with other people’.

But they didn't give up as they contacted local newspapers, but they also ignored them.

Lastly, they ended up contacting individual bloggers and somewhat got promoted.
They even set up various shops at such conferences to promote themselves.

This time they got 80 bookings. Expectations were more than that. But still, they somehow managed.

From getting 1-2 bookings to getting 80 bookings they were somehow fine about it.

But, following the weekend, there were no bookings at all. By this time they were barely earning $200 per week.

With no customers and increasing debt, they were hitting at the rock bottom.

But they founded their way back.
One morning while having cereals they thought that maybe the Airbed is not working then why not we sell breakfast instead of that.

This idea came out of fun, but when they seriously thought about it they were like “Let’s get in the breakfast business”.

They ended up selecting cereal as their core.

Being the designers themselves, and with the advantage of presidential elections, they founded their idea.
They decided to make presidential themed breakfast which they handcrafted themselves.

One was the Barack Obama themed cereal box called the Obama O’s.
The second was John McCain themed cereal box called the Captain McCain’s.

food

They found a guy in Berkley, who was also an alumnus of RISD, who accepted to print 1000 boxes.

Brian and Joe sold $40 a box and thus, they ended up selling $30000 of cereal.

With this, they started funding their airbed&breakfast.

But by the end of November 2008, they were back again to being broke.

Now at this time, they started to doubt themselves, as people, their mentors, even their families got worried about them.

Y COMBINATOR: A TURNING POINT FOR THEM

In life, there are some stages which completely turns your life upside down.
It might be good it might be bad, but such situations do happen in one’s life.

It did with them also.

With a recommendation of many people, they went to Y Combinator.
(Y Combinator is a startup accelerator, which funds as well as guides the startup.)

combinator

One of the co-founders of Y Combinator was Paul Graham.
When they met to meet him for the interview, Paul considered their idea as a terrible one.

He was like “Do people actually rent their own house, and if yes then what’s wrong with them?”

Listening to such statement Brian and Joe felt that they were losing the interview.

But then at the end of the interview, Joe handed Paul with a box of their cereal and told him that this is how we funded our company.

This impressed Paul a lot as he said, “If you can convince people to pay you $40 for a $4 box of cereal, maybe you can get strangers to stay in other strangers home as well”.

And with this, Y combinatory became a turning point for them.

It created a structure for them to work properly and full time and also to live together. They used to wake up at 8 am and work till midnight for every single day of the week.

Paul Graham also advised them with something which completely changed their business thinking.
He said, “It’s better to have 100 people that love you, 100 customers that love you, than a million customers that sort of like you”.

To get love from those 100 people is hard, as 100 people might like you, but for them to love you, one needs to meet and understand them and their problems. Due to which they used to go door to door and would meet each of their hosts and they lived with them and even wrote reviews for their places.

Sometimes there were houses which were amazing but in photos, they looked terrible.
And when they asked the hosts they said that some of them couldn’t figure to get photos onto the computer.

This got the founders with an idea of hiring a photographer who would solve this problem.

As photos played a very important role. IF people couldn't find the house appealing enough to stay, they automatically would decline it.

And with this, by April 2009 they got people who loved them and people started booking more and more. 

Then came the ‘Demo Day’ as stated by Paul, demo day is whatever you have been working and improving with all the great mentorship has to be presented to the venture capitalist.

Paul told them to be ‘Ramen profitable’ (Ramen profitable means when a startup is earning enough to reach the demands of the founders).

With this Sequoia Capital got interested and invested $600,000.
This investment was quite a big leap for Brian and Joe.

As this moment led to the development from building a product to building a kind of company…

EXPANSION, CONTROVERSIES AND GROWTH

People were loving their work, and they started to recommend others about them.  And with this growing network, they became popular.
They started hiring people and used there 3 room apartment as their office.
From 3 people it was growing to 16-17 people in that apartment.

Meetings were held in washrooms or stairwells.
Space was becoming an issue due to which Brian gave up his bedroom for meetings and started living by being the guests to its hosts.

With due course of time and they expanded into a big company and it changed its name to a shorter form known as AIRBNB (Air Bed and Breakfast).

A big hit for their company happened when Barley Manilow’s (a pop-star of the 70s) drummer rented an entire house.
This led to the company’s growth.
Within one year in 2010, an investment of 7.2million in a round from Sequoia Capital and Greylock Capital happened.

Later in 2011, they hit their 1million bookings and raised to 12 million dollars from Marc Andreessen (founder of Netscape) and others and it was a 1 billion dollar valuation.

With their amazing expansion, they got hit by controversies as well.

One controversy was when one lady had rented her house and when she came back her entire house was trashed and everything was stolen.
When she asked for the help of AIRBNB, they refused to do so as they said that the host has rented her apartment on her own risk.

But getting after getting backlashes from public and media they finally agreed to help. With this, they launched a 50,000 dollar insurance program for the people who are hosting.

Another incident was when somebody rented their place out and when they back they found all kinds of drugs left in there.
This was also a major concern of hosts.
But like every controversy they got over this too. Controversies never stopped them from growing.

Later by the end of 2012, they now have raised 112 million dollars with a total of 5 million bookings.
This year they had sold more than the nights of Hilton.

People were shocked that only a 3-year-old company had kicked out Hilton and sold more nights than them.
Well with that they continued to expand and within 2013 they now had raised 200 million dollars from the Peter Thiel Fund and Founders fund.

And with this, they had reached with their 10 million dollar bookings and within one year they had raised 500 million dollars at a 10 billion dollar valuation.
By now their valuation had reached in double-digit billion clubs.

2014 was also a year when they changed their logo, which also faced quite controversial feedbacks.

logo

They also expanded their insurance program from 50,000 to 1 million dollars.

By 2015 they had raised 1.5 billion dollars from the General Atlantic, Hill house capital and the great Kleiner Perkin, with a valuation of 25 billion dollars

2016 they raised 850 million dollars from Capital G which is Google capital.

They have been working so well, that they have got the investments from venture capitalists, J.P Morgan Chase, Jeff Bezos, Morgan Stanley and many more.  

Till 2017-18 it had reached its valuation to 31 billion and currently, in 2019, it holds valuation of about 38 billion.

Once they had no money to pay the rent and now they had more than 26 offices around 18 countries with San Francisco is it’s headquartered. 

Who would have thought that after being completely broke they will ever become billionaires?

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BOTTOM LINE

Believing in yourself and having faith in your idea that it will work someday is what creates a ladder to success.

Story of Airbnb has inspired many entrepreneurs who are willing to take risk and believe that with dedication and passion success will come to them.

Just like this trio who started when they have nothing when they were completely broke but they wanted to do something and they continued to keep their core idea in use.

Such kind of dedication is very important.
As life and situations may bring you down but only your faith, passion and dedication will help you cross over these hurdles.

They did and they are continuing to do so…

By Anjali