The real story about how Airbnb was founded - Nathan Blecharczyk Co-founder Airbnb - Startup Success

good morning morning I titled this presentation today be a serial entrepreneur that's serial of a c4 like breakfast cereal I'll explain that in about 15 minutes what you should know though that be a serial entrepreneur is a core value at Airbnb it means not only be an entrepreneur but be creative and be scrapping do more with less and it's a big part of our story and this morning what I'm going to share is the Airbnb founding story there's three of us that started this company together myself Nathan Joe on the left and Brian on the right and we were all roommates at one time we lived here in San Francisco this apartment and in October of 2007 the rent on this apartment was increased 25% and I and another roommate decided we had had enough and I was moving out so Brian who is not yet living in the apartment he was in Los Angeles Joe called Brian and said why don't you come to San Francisco to be an entrepreneur so Brian quit his job in Los Angeles drove to San Francisco and upon arrival was told that the rent would be $1,150 but Brian only had a thousand dollars in his bank account and had just quit his job so he had a math problem so the two of them are both designers and it just so happened that there was a design conference that was coming to San Francisco the following weekend and they got the idea to rent out one of the extra bedrooms as a bed-and-breakfast well there is no bed in this bedroom but Joe had an air bed in the closet of calling it a bed-and-breakfast they called it an air bed and breakfast and they created a really simple web page using WordPress just the blog to put up an advertisement they wrote to a number of local bloggers who gave them links and within a day they had three people who wanted to stay with them there was a 35 year old woman from Boston a father of four from Utah and a man from India and that weekend they made not only $1,000 but they showed their guests around the city and they all went to the conference together and made wonderful friendships so much so that the man from India invited them to his wedding two years later and so fast forward a couple months it's now January 2008 and I had just quit my job and the three of us decided we wanted to start a company together and the guys told me the story that had happened in October and we reflected on that and we said there must be other people and other situations where this concept would be a good idea and so we set out to build a website and what we did was actually very simple it's different than what you see today but basically it was a directory of events where locals could put up their spare bedroom just for the event and those coming in from out of town could look it up and basically give you a phone call it was a directory it was a glorified Craigslist basically very simple site it only took three weeks to build and we decided to launch it for South by Southwest in 2008 March 2008 we thought this is where Twitter had launched a year before this was where we were gonna make our big launch so we finished the site about a week and a half before the event we got about a dozen properties on the website and I think two or three people might have actually used it one of the which was Brian himself so Brian flew down to Austin Texas and his host picked him up at the airport to his house and the guy's wife had made Brian dinner really nice the the air bed was set up with a chocolate on the on the pillow wonderful hospitality well at the end of the night the host asked Brian do you have the money because this was before we accepted payment through the website and so Brian said oh I forgot him to go to the ATM can I bring it to you tomorrow and the guy said hey no problem so the next night before bed the host asked Brian again were you able to get that money for me and Brian had forgotten again to go to the ATM now at this point the host started to get a little suspicious of Brian he said who is this guy that I don't really know that I met on the Internet who's sleeping on my bed and the hospitality began to wore off and we thought to ourselves afterwards how nice would it be if you could just take care of the money up front so when you arrive you can really focus on the hospitality there is another thing we learned from this event which was that afterwards people would ask us I'm going to London but not for an event can I use your service we said of course not you can only use it for events because that's how you build trust if they don't know why you're coming to town who will let you into their house but then we really got to thinking and we came up with a new vision for air bed-and-breakfast and that was why don't we just try to make it just as easy to book someone's home as it is a hotel with this motto three clicks to book it basically you would go to our home page type in a destination see some search results and hopefully find something you like and if you liked it you can click book yet three clicks of the book it and these are all screenshots from the early days and so this is what we set out to build later in the summer of 2008 and we had to figure out how are we gonna launch this new concept this new website and we decided why don't we use an event once again and that summer everybody was talking about the Democratic National Convention which is going to be held in August 2008 and it's where Barack Obama was going to receive the Democratic party's nomination for Kent presidency and big historic event they had upgraded the venue to the stadium that holds 80,000 people and while we looked up in Denver there's only 17,000 hotel rooms so we knew right away there is going to be a problem that there's going to be a need for alternatives and so we rushed to build this website in three months and again we launched it two weeks before the event and we were lucky there are a lot of locals who were looking to get out of town and make some money and so within the first week we got 800 people to put up their properties on our website because people wanted to be sure that they found a booking and meanwhile the news was doing stories about how so many people want to come to this historic event and participate but that there aren't any places to stay and so we said we wrote to the local newspaper and we said actually we have 800 places that are confirmed available right now on our website and they said that's interesting let's do a story about that and so we very quickly got in the newspaper and by the end of the week it had gotten picked up by CNN International and we were doing a video interview and suddenly everyone across the nation maybe even further was hearing about this new concept air bed-and-breakfast and for this event we've probably had a hundred people stay on our service it felt great everything that you would want when launching your company unfortunately it's just the beginning and this is the typical life cycle emotionally of a startup it starts with a lot of excitement climaxing when you launch your company and hopefully you get some some press coverage and you just feel on top of the world but that quickly wears off and for us one week later the crickets were chirping nobody cared about us we weren't relevant anymore and that began a very long period known as the trough of Sorrows where no matter what you do it doesn't get any better and it only actually gets worse and eventually if you're lucky things do get better but during this period we had to find some solutions to finance the company and generate press so after the convention we had the contact information for many reporters who we had gotten in contact with and been featured with for the DNC and we were thinking how can we leverage those political reporters contact details to get more press and so the election was coming up very shortly in November two months away and we thought to ourselves our name at the time was air bed-and-breakfast we've done a lot with the air beds maybe we should do more with the breakfast and we came up with the idea to create a presidentially themed cereal Obama owes and captain McCain's and so the idea was we created this concept all original artwork designed we got boxes printed we even went to the supermarket and bought cereal and rhe stuff that cereal into our boxes and we mailed a hundred of each box to the reporters and we thought if we email them they'll just delete the email but if we send them a box like this they're gonna have to ask us questions they're gonna want to know where did this come from they're gonna want to hear our story and sure enough it worked within a week of having done that we were on CNN again talking about the breakfast cereal and actually this became the number-one political video of the day and was featured on the home page and what we had actually traded 400 additional boxes of each and we had made on our website a place where we were selling these boxes for $40 each and that day when we were featured on the home page we sold at $40 box of cereal every three minutes within a week we had sold $30,000 worth of cereal and that's how we finance the company in the early days not ideal and this is where the term be a serial entrepreneur comes from this story right here to be scrappy to think creatively and be entrepreneurial of course we had tried to raise money the traditional way as well so over this summer we had been reaching out to different angel investors different venture capitalists and not with much luck investors ran from us like we were the plague and one particularly memorable story we met with a angel investor at a well-known cafe in Palo Alto and we were pitching him and halfway through the pitch he just got up and walked out and he left his drink half half drunk the smoothie and we had thought he got out had gotten up to maybe just put some money in the parking meter and he was going to come back but we waited and waited and he never came back and this was a picture of taken of Brian looking perplexed on another occasion we were going down the sand hill road to pitch a venture capitalist and we were looking at the slide deck the night before and this was one of the slides in the deck and it basically says that we were gonna make 200 million dollars in revenue within our first three years and I'm a very analytical person my two partners are designers and I was trying to explain to them that doesn't really make sense there's no way well can ever make 200 million dollars in three years if you do the math and so we agreed that night that we would change it to 20 million but that was going to be more realistic and so the next day we're in the meeting and they come to the slide and they had changed him they had changed it to two billion it was like what and of course the the guy that we were pitching wasn't buying any of it but I asked him later why did you do that and Brian said one of our trusted advisors had told him that investors don't want m's they want b's baby I mean he is right but we didn't have this story to go along with it so times were just about to get worse actually so this was just the beginning of recession fall of 2009 we had been at this for nine or ten months without jobs without having been able to raise any money except for $30,000 from cereal which really was actually the cost of all this cereal to begin with and Sequoia Capital published this this presentation basically saying that the good times were over and that everyone was going to need to save up capital because you might not be able to fundraise again so if as if things weren't hard enough things got more bleak and we were basically at the point of asking ourselves when should we give up when should we quit it's almost been a year now and despite whatever we do we're only making $200 a week we can't seem to increase that and one of our advisors said you should apply to Y Combinator well I commad Combinator is an accelerator program very well known run by Paul Graham and our adviser had gone through this program and himself you see this would be really good for you oh really pull you together get you focused and we realized that up until now although we had worked very hard we still haven't given it a hundred percent meaning that I was moonlighting a little bit on the side the other guys had some other commitments I was in Boston they were in San Francisco we weren't a hundred percent focused yeah and we realized that before we could quit we had to say we gave it our best shot so we agreed to try out for Y Combinator you have to apply and you we were lucky enough to get an interview and when you interview it's a five-minute interview it goes really quick and within two minutes into the interview basically Paul Graham the guy who runs this program was trying to convince us to do something else so our interview wasn't going very well and then it was over five minutes later and as we were walking out Joe took out of his back a box of the Obamas and gave it to PG and he said what's this did you buy this for me and we said no we made this and he says I don't understand so we told him the story of the cereal and he loved that story so much because it's proved to him that we were scrappy and resourceful and he has this this this very well-known quote about the importance of being like a cockroach basically being unkillable and very scrappy and so because of that story he led us into the program and that's when things begin to change we got super focused and very disciplined I moved to San Francisco again and we all live together in that same apartment I showed you before and we got hyper focused we woke up at the same time at 8 a.m. I was sleeping on an air bed and Joe's bedroom we would work all day only taking breaks to go to the gym take a shower and maybe go grocery shopping make breakfast lunch dinner but otherwise we were working six days a week really focused and because it was the recession peih-gee told everybody he says revenue is going to be super important it's really important that by demo day which is the kind of the culmination of why comedy there after 13 weeks you go to demo day where you pitch investors he said it's really important that on demo day you can show that you are profitable and we came up with this concept of ramen profitability ramen like the soup noodles and basically ramen profitability was for us was $1,000 a week it meant enough money to buy ramen and pay the rent $1,000 a week and so we created this graph of our revenue and the red line was our goal and we would update it every week and we posted it all over the apartment it was over the fireplace and it was right in the middle of the mirror in the bathroom so you couldn't get away from this thing we kept this hyper focused on what we were trying to do it was during Y Combinator that we got some really valuable advice this is from the the creator of gmail actually and he told us that it's better to have a hundred users that love you than a thousand users that like you and so we thought about that and Paul Graham told us something else he said it's okay to do things that don't scale it's counterintuitive a little bit you're making an internet company the whole idea is that it's self-serve and it can scale to millions but he said when you're trying to find that product market fit it's okay to do things that don't scale and he asked us where are your users and we said well our users are everywhere he said well no where do you have the most users we said New York he said go to New York and meet all your users which again was counterintuitive because we had no money how are we gonna buy plane tickets and do all this he said figure it out so over the course of four different weekends we went to New York and we met all of our users at the time we only had 20 or 30 hosts in New York so it wasn't that hard actually and we noticed something about our hosts we noticed that they had really bad photos of their properties this was again in 2008-2009 and camera phones weren't as as good as they are today so a lot of the photos were a low resolution really dark and so we would call the hosts up and we'd say would you like a professional photographer to come to your home and photograph your apartment for free and people were a little confused but they said sure why not it's free and so they got the knock on the door and who was it but Joe and Brian right the cofounders of the company so they were a little surprised by that but they took the pictures with a camera that they had rented and while they're there they opened up the website and showed them how to use the website and got product feedback and then also invited the hosts out to beer later on that night and so we'd get together say 10 or so people out of time for beer and we would build a relationship build a rapport tell them our story try to make them into our evangelists and so much so that once we went back to San Francisco we were able to give them a call and ask them things like hey you're your profile description it's only a paragraph and you have a really nice apartment do you mind if we write two more paragraphs for you or you're trying to charge $400 a night that seems a bit unrealistic to start with maybe we can start with $50 a night and if you get too many enquiries you can always increase it so how do we not met these people and built a relationship we would have never been able to ask him that but because they were they had heard our story and they wanted us to be successful they were cooperative and as a result of taking high-quality photos lowering the prices improving the profile descriptions and just generally getting the host to cooperate with us and wanting us to succeed suddenly we had a really nice product and it was at this point that guests from around the world started booking these properties in New York and so the host started making money they would tell their friends their friends would come to the site see the really high bar that was established and they would emulate that they would put up their own property and and take the good photos etc and meanwhile people were coming from New York from around the world and then they would go home and oftentimes the guests would become hosts themselves and so very quickly this idea began to cross-pollinate and so properties were popping up in Berlin Barcelona and Hong Kong all over the world and suddenly you had a lot more places you could go to and today it's exploded there's 600 thousand properties in 192 countries 40,000 different cities literally everywhere and those properties are being booked so it took us four years to get our first four million guests but in 2013 alone we serviced 7 million additional guests for 11 million today so classic hockey stick growth and on any given night there's about a hundred 50,000 people staying in other people's homes and so what we have realized though is it goes way beyond just hospitality we've actually created a new generation of serial entrepreneurs we did a study in Spain specifically surveying our hosts and what we found is that 28% of our hosts in Spain are entrepreneurs and that those entrepreneurs have been responsible for about 40,000 jobs here and these are new companies so half of them are younger than five years 25% over the last year and the third of them are located here in Barcelona but it's not just about the money that is helping these entrepreneurs to succeed they're actually using the service to meet other people 55% use it to meet other people 36 percent use it to meet clients and 25 percent used it to get opinions on their work and so with that in mind we partnered with the event here today four years from now and we thought how cool would it be if we could connect the entrepreneurs in our host community with entrepreneurs who are visiting from far and wide so I'm not sure how many of you were able to take advantage of this but we had many entrepreneurs staying with other entrepreneurs hopefully making connections hopefully propelling their businesses forward I hope you enjoyed the story I hope you found it inspiring I hope you have a great rest of the week here thank you for having me you

Channel: The Business Channel

Views: 50,257

Rating: 4.9030614 out of 5

Keywords: startup, venture capital, funding, seed funding, investors, small business entities, business entites, latitude33, entrepreneur, how to start a business, legal issues, law, business legal structure, legal issues in business, startup tips, vc funding, how to start a company, initial public offering, growing a business, types of funding, investment, startup entrepreneur, help for new businesses, start-up, starting a business, small business, entrepreneurship, airbnb, nathan blecharczyk

Id: M6GBqqk2mY4

Length: 29min 25sec (1765 seconds)

Published: Fri Sep 16 2016