The Story Behind Airbnb’s Massive Success
Analyzing the most inspirational start-up story behind the pioneer of vacation rentals.
A solo-trip to Europe, backpacking across Guatemala, a peaceful meditation retreat to India, or even a four-day staycation to attend the high-powered New York Fashion Week. When we think of travel, Airbnb is the first thing that pops into our heads. How did a simple survival idea by two unemployed roommates become the foundation of a multi-billion dollar industry?
Where it all began
The brains behind this crazy but revolutionary new idea were two mates- Joe Gebbia and Brian Chesky, who had met in Rhode School of Design. It all started back in 2007 in San Francisco, where the two roommates were in dire need of finding some means to pay their rent. A sudden brainwave made them convert their loft into a Bed’n’Breakfast by adding three air-mattresses, and the assurance of breakfast the next day for the guests. They created a website overnight, airbedandbreakfast.com, and decided to attract attention and market their new Air Bed and Breakfast by becoming tour guides for the people who had come to attend one of the biggest Design conferences in San Francisco. They knew that they could pull this off because it was evident that the people who came to attend the conference were going to find it difficult to find a place to stay for the night. Their first guests were an Indian man, Amol, a woman from Boston, and another man from Utah.
After the successful first night of serving their guests, Gebbia and Chesky thought they could really be onto something, and this could be a life-changing idea for them. They joined hands with their old roommate, Nathan Blecharczyk, to make it into a full-fledged business. They initially started with a service that matched people who were looking for roommates for close to four months, until they realized that there was already a roommates.com who were implementing that idea. They went back to their original Air Bed and Breakfast idea.
Rejections before the Breakthrough
When they went back on the market for the second time, they were not recognized by anyone. They tried their luck again at SXSW, but they had only two customers, and one of them was Chesky himself. They decided to then revamp the entire website and make the booking process easier for the users, with just three clicks. Once the website got a whole new look, they met up with a total of fifteen different angel investors, who completely rejected them.
In a Medium article written by Brian Chesky himself, he explains the 7 different times Airbnb got rejected, before succeeding.
He proceeds to attach five emails from different investors, where they rejected the Airbnb idea completely. He also mentions that two of the companies didn’t revert back to them.
He concludes by saying-
“Next time you have an idea and it gets rejected, I want you to think of these emails.”
Completely broke and knee-deep in debt led them to launch the Air Bed and Breakfast idea again during the 2008 Democratic National Convention in Denver. The previous experience gave them the notion that big conferences meant a lot of people finding hotels and rooms to stay overnight. Their website wasn’t making any money, hence they turned to design cereal boxes into political designs for the elections by making Cap’n McCains and Obama O’s Cereals. They sold this for approximately $40 a box, where each one came with a limited-edition number and a description of their company. This idea got them to a total of $30,000.
One Venture Capitalist, Paul Graham finally invited the guys to join Y Combinator, which was a well-known startup accelerator, which gave out money for equity or partnership in the company. Kind of like SharkTank. They worked for a total of three months in trying to perfect their product. But still, they were rejected multiple times by famous investors like Fred Wilson, who regrets it to this date. The company decided to continue with its website making plans and also personally went from house to house to stay with the hosts, write reviews on their website, and take professional pictures of the rooms and houses.
In March of 2009, they decided to change the company’s name from Air Bed and Breakfast to Airbnb, something short and simple, which allowed them to not be associated with just air mattresses anymore. Within a month, they got a seed investment by Sequoia Capital of $600,000. This was the ultimate breakthrough moment for the three. It was a period of exponential growth, where they learned a lot about their website, and modified it, again and again, to make it as user-friendly and attractive as possible.
Four years after the first air-mattress idea, in 2011, Airbnb was a massive hit, present in over 89 countries, with 1 million nights booked. The most ironic moment was when Airbnb won an award for the best break-out mobile app in SXSW, where they had initially tried to launch, three years earlier. In the same year, many Venture Capitalists put $112 million into the startup, making it a Unicorn startup in Silicon Valley, with a valuation of $1 billion.
Though they were riding the wave of success, they had many obstacles along the way. Many hosts complained of guests being unruly and leaving the house and rooms behind in an absolutely trashy manner. The company soon implemented a coverage policy and increasing it to a $1 million “Host Guarantee” by 2012. Cities around the states started having problems with the existence of Airbnb rentals. With the growing problems, the company decided to do a redesign of the Company Logo, which was also heavily criticized by the public. Cities like New York and their own hometown, San Francisco started banning Airbnb rentals. They implemented restrictions like fining the host and also made it illegal to rent out a unit for more than 30 days.
Despite the many obstacles that came their way, Airbnb continued to steadily rise. Research also revealed that users did not opt to go back to booking hotel rooms after living in an Airbnb once.
Sales and Progress Over the Years
As of 2018, Airbnb’s yearly revenue was $3.6 billion, with over 34 offices worldwide. In preparation for an IPO in 2020, the company recorded having $3.5 billion in cash, out of which, $25.9 million was raised in the most recent funding round (Aug 2019). The total funding as of March 2020 $4.8 billion, raised across 10 funding rounds.
Based on a report in 2018, the top 10 countries that saw a direct impact on their economy due to Airbnb were the United States, France, Spain, Italy, United Kingdom, Australia, Japan, Canada, Portugal, and Mexico. The report also revealed that guests were most likely to spend a lot more in neighboring cafes and restaurants if they stayed in an Airbnb.
As of 2020, Airbnb has over 400 agreements with local and national governments to automate the collection of tourism taxes, collecting over $2 billion in tourism-related taxes through these agreements.
Due to the global pandemic outbreak, COVID-19, Airbnb has faced a massive loss of $637 million, with a 67% drop in its quarterly revenue. They also had to lay off 1,900 of its 7500 employees due to the pandemic. Chief Executing Officer Brian Chesky reports a comeback with their early June bookings in the States, since the massive downfall in February. With states opening up for travel, people have started seeing refuge in rural estates, making it a great comeback period for the company.
Conclusion
The Airbnb startup story is one of the most inspiring ones ever, which truly teaches us to not stop if we ever get rejected. If you have an idea that is truly worth pursuing, and if you believe in it, don’t ever give it up despite facing many non-believers.
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