Successful start-ups. Airbnb

Airbnb is a room-letting website. The opportunities it creates are seemingly limitless from both sides of the letting spectrum; you can instantly log in and book a night at someone’s house on the other side of the globe, while, equally, you can rent out a space in your house to keen travellers who, for one reason or another, do not find hotel accommodation suitable.

Having learnt a lesson (or rather lessons) from its past shortcomings, Airbnb now offers services of a professional photographer to its hosts and provides excellent customer support, which includes $1 million Host Guarantee. In 9 years from when the original idea was created, now every two seconds someone books through Airbnb.

How it all started

In 2007, Brian Chesky and Joe Gebbia could not afford to pay rent for their apartment in San Francisco. They came up with a simple and brilliant idea how to utilise the resources they already had to gain some extra cash. In the face of a design conference to be soon held in San Francisco, Chesky and Gebbia decided that they will put three airbeds into their apartment and rent the spaces out, additionally luring in potential guests with a promise of a home-cooked breakfast. The guys later admitted that since they did not want to list on Craigslist as they thought it too impersonal, their inner entrepreneurial spirit led them to setting up their own website: airbedandbreakfast.com. After they hosted their first 3 guests, they started receiving emails from people from around the globe in which they were asked when the website will be available in other major cities. This is how it all started. But, even though the original idea of flat-sharing to address the challenge of limited hotel space and growing hotel costs did not change, Chesky and Gebbia faced a variety of problems on their way to the top. As we know, learning from others’ mistakes and how they addressed them is the best way of learning; it allows you to avoid the common pitfalls and anticipate potential problems with solutions at hand.

Give away cereal, not equity

A year later, already with software engineer Nathan Blecharczyk on board, Chesky and Gebbia were thinking of ways how to raise capital. Taking advantage of the election season, they bought large quantities of cereal and designed boxes with presidential candidates’ themes; “Obama O’s” and “Cap’n McCain’s” which they then sold to eager supporters at convention parties for $40 each. They managed to sell around 800 boxes, raising almost $30k in funds.

This is not to say that Airbnb did not reach out to investors. When you take a closer look at how the company developed, the scale of funding is impressive to say the least. In the next year, the guys received first $20k in funding from Paul Graham, the co-founder of Y Combinator. Further along the way, Airbnb acquired $600k from Sequoia Capital and Y Ventures in the seed round and in November 2010 another $7.2 million was raised in Series A funding round. Series B round of funding, that took place in July 2011, brought Airbnb further $112 million from Andreessen Horowitz, General Catalyst Partners, Digital Sky Technologies, Ashton Kutcher, Jeff Bezos and CrunchFund, leading to a subsequent valuation of $1.3 billion. In June 2015, Private Equity funding round led by General Atlantic resulted in further $1.5 billion pumped into what originally started as 3 airbeds packed into a room. Nonetheless, it is worth bearing in mind that, in the face of adversity, the founders of Airbnb were not afraid to go the unconventional route and lift up the company with proceeds from cereal sales.

Photographers and Robbers

In the summer of 2009, when the guys were on a search for new office space, they stayed exclusively in Airbnb listings. They realised that the New York market was not doing too well and identified the major problem that was hampering their growth there; prevalence of bad quality photographs. What was supposed to distinguish them from Craigslist, higher credibility and less remote experience, was suddenly failing because booking users were not ready to pay for what the could not clearly see. Instead of sending emails to hosts, encouraging them to improve the quality of their listings’ photos, the guys rented a professional camera and took photographs of as many NYC listings as possible, almost tripling the number of bookings there in subsequent months. The visible success of this move led to launching of the Airbnb photography scheme in 2010.

In June of 2011, an Airbnb host wrote a post on her blog in which she described her house being devastated by a renter who booked it through the site. The story quickly caught the eye of international press and it seemed like it would be a difficult PR crisis to recover from for Airbnb. However, despite being widely reported, the event marked a beginning of a new successful Airbnb policy, $1 million Host Guarantee backed by Lloyds of London.

And they lived happily ever after

As of autumn 2015, Airbnb has 50 million users and 640 000 hosts offering their listings in 57 000 cities in 150 countries.

Miłosz Palej