Zero invested in us

Transcription

We ended up going from 0 to 800 homes in the matter of 4 weeks.

We got introduced to 20 investors in the silicon valley.

10 of them replied to our email.

5 of them met with us for coffee.

0 invested in us.

This was the state of Airbnb in 2008.

Background

Airbnb team relaunched the service for the third time in the summer of 2008 coinciding with Barrack Obama's speech at Democratic National Convention at Denver, Colorado. 100,000 people were expected to attend the event, but there were less than 30,000 hotel rooms most of which were booked up by the delegates and so Airbnb capitalised this situation to enable home owners there to host guests.

This resulted in exponential growth in 4 weeks during the convention, but the numbers crashed down as soon as the convention ended. After the convention, Airbnb team approached Investors but they didn't come forward to invest, because they didn't believe in the idea of 'allowing strangers via Internet to stay in a room at your house'.

Airbnb team funded their startup at this point by maxing out on their credit cards, Joe calls this 'The VISA round'! According to him, they were at the state of Trough of Sorrow without product-market fit. They went on to create limited edition politically themed breakfast cereals by rebranding off the shelf cereals as Obama O's & Cap'n McCains which made them $20,000 to pay off their credit card debts.

The breakthrough came when Paul Graham of YCombinator asked them to be where their customers are, which was New York. Airbnb team went to meet their customers in person at New York. They noticed that the photographs posted by their hosts were not good, as they were from flip phone camera.

Airbnb team rented a professional camera and they themselves shot good quality photographs of 30 houses of hosts from New York and posted them in their website. Joe says, this is when they went into 'Design and Research' mode.

Design and Research mode is going out and talking to with the people whom you are designing for, such that you can understand the world from their point of view to inform your point of view.

-Joe Gebbia

Airbnb team found from their interactions with their customers directly that the user experience on their website was very inefficient. They removed the UX frictions between hosts and guests on their website soon after.

Within a week, they saw that their revenue numbers double in a week due to larger bookings with the hosts they had met earlier and implemented what they learnt from their feedback.

New York being an international destination, many of the guests who returned to their home country started listing their spare room on Airbnb. Soon enough, Sequoia Capital knocked on the doors of Airbnb themselves and provided them the seed money.