100 Million Strangers Sleeping In Other People’s Homes
A conversation with Nathan Blecharczyk, co-founder and CTO, Airbnb
If Nathan Blecharczyk hadn’t moved out of the apartment he shared with co-founders Brian Chesky and Joe Gebbia, Airbnb might have never existed. But when rent was increased on the friends’ San Francisco flat, Blecharczyk decided it was time to find cheaper digs. To cover the gap, Chesky and Gebbia rented out his vacant bedroom to several visitors, and a multi-billion dollar brand — which has served 100 million travelers and counting — was born. In this episode of Shift Dialogs, Blecharczyk shares his views on Airbnb’s rise, its frequent tangles with local, state, and national governments, and its mission of helping “anyone feel like they belong anywhere.” Below is a full transcript, edited for clarity, and the video interview, edited for length.
John Battelle: I like to start with founding mythologies. How did Airbnb come about?
Nathan Blecharczyk: Before there ever was a company, Joe (Gebbia), Brian (Chesky), and I were roommates living together in San Francisco, and one month the rent on our apartment was raised 25 percent. I said, “That’s too expensive. I’m outta here.”
You were going to leave?
Yeah, I decided I’m moving out. The other two guys wanted to stay, but they had just quit their jobs to become entrepreneurs — also known as unemployed. They actually didn’t have the money to stay either. Both of them are designers by background. They saw that an international design conference was coming to San Francisco. They also saw that all the hotels in town were sold out, so they got this idea. Why not rent out that extra bedroom to designers who need a place to stay for the conference?
Now this room, it had no bed because I’d moved out. Joe set up this airbed and instead of calling it a bed and breakfast, he called it an airbed and breakfast. That’s where the name Airbnb comes from.
They ended up hosting three designers, making $1,000, all going to the conference together, and having a really great time and experience. Out of that one weekend experiment to help pay the rent, the idea of Airbnb was born. The story happened in October 2007, and we started the company in January 2008.
You were the guy who moved out?
That’s right.
You almost missed out. You ever thought about that?
We stayed in touch afterwards. We knew we wanted to start a company together because while we were living together, we developed a deep respect for each other’s work ethic and also complementary skills. They’re designers, I’m an engineer. We were already helping each other out on projects.
When did you know that this company was going to take off? When did you get the feedback that made you think, “We might be onto something.”
Probably it wasn’t until March of 2009. In fact, the entire first year was extremely difficult. By the end of the first year, we had not raised money, we were not growing, we had been without jobs. We had a conversation — “Is it time to quit? It’s been a whole year.” We made a commitment to each other that we’d give it three more months, that we’d join Y Combinator, be completely focused on Airbnb.
At the end of three months, if it wasn’t in a better place, we could quit, but it was during those three months, during Y Combinator, that things turned around. I got some really important advice from Paul Graham, who said, “It’s OK to do things that don’t scale.”
For us, that meant going to New York and meeting every single user. We started by offering them free, professional photography. We actually called them and said, “Would you like a professional to take some pictures?” They were surprised, but said, “OK.” They would get a knock on the door. It would end up being Joe and Brian.
They took the pictures, did a tutorial on how to use the website, invited them out for beers, told them the founding story, built a relationship with our early customers, and turned them into evangelists. We believe that it’s better to have a hundred users that love you, than a thousand users that like you. We really focused on a set of evangelists in New York, and from there things really started to take off.
We believe that it’s better to have a hundred users that love you, than a thousand users that like you.
In the first year, how many hosts did you have?
We launched at the Democratic National Convention in the summer of 2008, this historic event where Barack Obama received the nomination, and we got a lot of publicity around this. A lot of people signed up.
I saw your cereals.
That’s right, yes. We did a number of things to get press, that, including the cereal. There was some awareness, but we didn’t have critical mass anywhere, which is critical for a marketplace to work. You need supply and demand that has to come together. It wasn’t clicking.
It wasn’t until in New York. New York is a place that people from around the world want to come, but it’s too expensive for many. They’re looking for alternatives. That’s when it started to work. All of 2008, we couldn’t make more than $200 a week, despite all our efforts. Months and months would go by and we couldn’t move that number.
We had a goal during Y Combinator to get to $1,000 a week. We ended the three months at $4,500 a week, so we really surpassed the goal, and started to see movement after many months of stagnation.
And many people use the platform now? How many hosts do you have?
We have more than 2.5 million properties in a 192 countries, 34,000 different cities. On our busiest nights, we have more than a million guests using the service on a single night.
On a single night a million people sleeping…
That’s right, in other people’s homes.
In other people’s homes.
Which is a concept eight years ago people thought was just totally foreign and would never take off at scale.
That kind of scale is daunting for anybody, but for three founders eight years later, who are still very active in the business, how have you managed that transition from a startup where you almost quit, to now a multi-billion dollar company?
I’ve got two answers. On the one hand, time has gone by really fast. It’s amazing what we’ve accomplished, and in some ways, a lot of things haven’t changed. We’ve been very heads down, focused in the details. That’s still true today.
On the other hand, at our scale, we’re just a much bigger team. You hire executives and you are able to delegate. When you do that, it’s really important that you communicate a clear vision for where you’re going as a team, as a company, and that you set up people with the context they need to make decisions.
I’d say what’s changed the most is the responsibility to clearly communicate the vision, clearly communicate the context, so that everyone has the benefit of that. Everyone can make decisions. At the same time, that’s not a replacement for us getting into the details on select projects, especially projects about the future of the company.
There was a time when companies got to a certain scale, the venture capitalist would bring in adult supervision. Did that ever cross your minds, that maybe you guys needed a Eric Schmidt or a Meg Whitman to come in?
Our involvement has never really been a question for us or from our investors. We’ve always had a really big vision. We’ve always had a clear idea of what more we want to do and the path we’re on to do that. On the other hand, though, with scale you do need expertise, and we’ve benefited greatly by hiring experienced executives to help run different aspects of the business.
That’s been super important to scaling, however, hasn’t been a replacement for Joe, Brian, and I, leading the vision of the company.
Can you state as if you’re telling a first-time hire, what is the vision, the mission, or the purpose of the company?
We want to make it possible for anyone to be able to belong anywhere. We believe that when you travel, you should be able to connect with your surroundings and that has a potential to transform you, transform the way you think about the world.
The way we deliver that today, is through people’s homes and connecting them also with hosts, who can share their neighborhood, share their favorite café, restaurants, activities, and put them in a new environment, instead of putting them in a cookie cutter environment that’s been sanitized of the local culture.
That kind of a shift is not without its societal push back, particularly when it comes to regulatory frameworks. Airbnb has become a touch point for a lot of conversation around regulation — here in San Francisco, as well as around the world. What’s the approach you take to working with local government and even smaller groups, like condo boards?
Anything we undertake, we do so with a long-term perspective. We are building a long-term sustainable company. It’s important for us to have strong relationships with all aspects of the community, city, neighbors, or otherwise. That’s the mindset we go in with, “How can we build a positive relationship?”
In the early days, the challenge was that when we didn’t have the scale, when we were less well known, nobody had the time to talk to us. It wasn’t possible to have these conversations for a while. Now, we’re of such scale and such notoriety, that you can’t avoid talking about us, which has been helpful. We’re now able to have these conversations and we try to do so as proactively as possible.
One of the main points that opponents to Airbnb make is, in a city like San Francisco where housing is at a premium, affordable housing is a big, big issue, even before Airbnb came on the scene. Many make the argument that precious housing stock is being used for out-of-towners to stay in and it’s not available for people to live in. What’s your response to that?
I think on the contrary, our point of view is that we actually make it more affordable to own a house. Which is that, to the extent that you are away traveling or you have an extra bedroom, you can now derive a source of income and help pay your mortgage, property taxes etc. We see so many of our users benefiting from that.
The vast majority of our users are below the median income and they tell us that they rely on this income to pay for their housing or other critical expenses.
The vast majority of our users are below the median income, and they tell us that they rely on this income to pay for their housing or other critical expenses. It’s hard to get a straight story around this topic in general because there are so many competing factors. There are a lot of stories being seeded by opponents — the hotel industry, for example, trying to put forth a different point of view.
It’s hard to get really good data because this is still new. The rules that exist today go back oftentimes 30 or 50 years, and indisputably new business and technology models exist now. I think it’s fair to ask what the policies are that makes sense today, not what are the policies from 50 years ago.
That being said, no one is saying there shouldn’t be rules. There absolutely should be and we’ve committed to working on a city-by-city basis to figure out what these new rules should be and to help cities effectively introduced these new policies that they may want.
This kind of change is always hard, particularly when you’re dealing with something as fluid but as entrenched as societal norms. I’ve stayed in a lot of Airbnbs. Often the owner will say, “Hey — don’t talk about Airbnb when you’re walking through the lobby.” It’s sort of living in the gray that seems to happen.
I think this is the challenge of new things. New things aren’t accepted by everyone at the same speed. Hosts are not often comfortable talking about what they do with their neighbors or the landlord over the city, because they don’t know how it’s going to be received. It’s not necessarily a safe space to talk about those things. It’s too new and this is the challenge.
On the other hand having this activity happen around a platform like Airbnb I think is a huge step forward and bring this kind of activity out from what would otherwise be a completely unregulated space.
It makes possible things like tax collection — we’ve now partnered with 200 different municipalities to collect and remit taxes on behalf of our hosts to cities in a streamlined. This was something that wasn’t possible before and we’re hoping to extend to many other places too. We’ve collected more than $100 million in tax to-date that we remitted to cities.
Sometimes the tax can’t be collected by you — it has to be collected by the owner. Then there’s a thicket of micro-regulations in every single municipality. How large is the group that you must have to manage that around the world? I don’t think this has ever been attempted — literally, weaving together in one platform, the regulatory frameworks of tens of thousands of municipalities.
It’s extremely complicated. We’re in 34,000 different municipalities and oftentimes even in the single municipality there is different layers of regulation. You have city, county and state oftentimes, at least in the United States.
Then you probably have the condo association as well?
That too. In a place like New York, for example, where we have had a lot of conflict. For a while hotels were saying it’s not a level playing field because these guys don’t pay tax.
We approached New York about actually changing the law such that we’re legally allowed to pay tax, because as law is written right now, we are legally not allowed to pay tax because it’s the host’s responsibility, and we cannot do it on their behalf. Even though we want to, we can’t.
When we approached New York lawmakers about changing this, the hotels have come back and said, “Well, don’t let them pay a tax. That’ll legitimize their business.” It’s a bit of a Catch-22.
It is, but you keep growing. Would it be fair to say that you’re welcomed by more municipalities than you’re challenged?
That’s absolutely the case. There’s been a few dozen different cities, even countries that have embraced home sharing. Here in the US, states like Arizona, Connecticut, Pennsylvania have all passed policies. Cities like Philadelphia, San Jose, and Portland and even San Francisco have passed favorable policies.
Then in Europe you have countries like France, Portugal, UK have all passed national laws that are quite favorable. The vast majority are very supportive of home sharing. There’s just few places where because of, particularly the local politics it hasn’t been as easy as you might hope.
Airbnb, Uber, Facebook are all of almost a graduating class of startups — game changers that started in the 2005–2010 timeframe. A big shift has happened in the world because of that group. For a long time, the motto of many of these companies was “Move fast and break things” and “Ask not for permission but for forgiveness.” You seems to have a different sensibility.
We’re a hospitality company. That has a big impact on how we conduct ourselves and I think also part of our design ethos, where we really try to understand different perspectives. It means that we want to hear what other people think. We want to engage. As entrepreneurs, we see that as a challenge and opportunity, not something to be avoided.
If I’m CEO of Marriott or Hyatt, I probably ignored Airbnb for the first five years or so. There are very much paying attention to it now. Do you have any advice for the people running the hospitality industry? Should they get in the in game like many of the automobile manufacturers are with car-sharing and automation?
We believe that for us to win, it doesn’t mean anyone else has to lose. I think what we’re offering is not a substitute for a hotel. We each have different strengths and we should play to those strengths. Our strength is the fact that we can provide you a one-of-a-kind, unique home and the comforts of home and also connect you to the surrounding neighborhood and to the host.
Hotels’ advantage is the investment infrastructure. It’s the front desk, it’s the amenities, etc. They’re distinct strengths. Each party should play to them.
Rather than having conflict, there could even be innovative ways to work together.
Rather than having conflict, there could even be innovative ways to work together. I think we, meaning Airbnb, but also the traditional industry need to be thinking forward. Consumers have spoken. Consumers have said, “This is something we value.” Rather than trying to take that away, let’s figure out how to take that thing that they value and make it a part of everyone’s business.
I think one of the things that made the folks in the hospitality industry sit up is the recent news you struck a deal with three of the largest corporate travel agencies. Airbnb is now targeting the business traveler. Do you see the business travel as a big new segment that you might be going after?
Business travel is already 10 percent of our business by number of trips. If you look at the broader industry, that number would be about 35 percent. We certainly think we can get well beyond 10 percent. We think we can double that to 20 percent. Will it ever be 35 percent? I’m not sure. We’ll see.
There are certain kind of trips, again, that hotels really excel at where you need a one-night stay on short notice with perfect consistency. A hotel’s going to be able to provide you that very well.
If you are staying for a longer period of time, you want extra space, you want to have a local experience while you’re on business or perhaps you’re doing a team off-site, these are great use cases for Airbnb while on business.
I read a recent post on Airbnb’s site showing overwhelming support by millennials for the Airbnb model. What does the average Airbnb user look like?
The average age is about 35 on the guest side. About half of our guests are millennials. If you look at hosts, though, hosts actually do skew older, partially because the older you are, the more likely you are to own property. The average age for a host is about 42. Actually, one-third of our hosts are over the age of 50.
But your guests are, on average, millennials.
We’re not the first to recognize that millennials have grown up in a different time with access to technology and an understanding appreciation for technology, and they have very different preferences as a result of that. That’s definitely demonstrated with Airbnb. Millennials have embraced Airbnb.
I do think it’s a point worth stressing more generally that there is a younger generation that is growing up that is very different than the generation that came before it. That’s something that everybody should keep in mind as they plan for the future.
The idea that the boomers, my parents, would stay in a stranger’s home would just be the strangest concept in the world to them. The core issue is trust. You and the other founders have had a lot to say about this issue of designing for trust. Can you unpack that a little bit?
This is what makes the whole thing work, because the first question people ask is, if I’m going to open up my home, is, “How can I trust the other person?” It’s easy to realize that we don’t directly control either the guests or the host. What we do is provide the process, the incentives, to make people behave the desirable way.
We’ve done a lot of work to facilitate payments, collect reviews, give people the tools they need to feel comfortable. This is really the original innovation and something that we continue to fine-tune.
On top of which, there is some deeper big-data type stuff that we’ll do on the back end to make sure that when you have 100 million guests use your service over the last eight years, what can we learn from that? What can we learn about what are factors that indicate trustworthiness or risk factors?
Then, what are the things we can do to mitigate and incentivize the right behavior? This is something we have to be world class at, so we spent a lot of time thinking about it.
That’s a very different model from hotels. One of the things about hotels is the idea that you’re anonymous. They work very hard at making it seem like there’s never been anyone else in the room except you. Folded corners on the tissue, all the soaps are new, and all the towels are folded. When you go to an Airbnb, there’s the owners’ shampoo in the shower rack. It’s a very different approach. Do you feel like there’s a positive, broadly, to the idea of a deeper, almost tangible connection between people?
We believe that people are, by and large, fundamentally good, that the vast majority of people are fantastic, and that there’s just a few people out there that might create that concern that so many people have.
The question is can we design a system such that the majority of people don’t have to worry and we can control around the edges for anything that’s concerning? Hotels actually deal with all the same challenges.
Lots of people die in hotels.
They operate at tremendous scale, and everything that you can imagine happens as a result because of that scale. The way they work around that is by developing a brand, and the brand stands, usually, for quality of some sort. You trust that they take care of these matters. Just like in the real world, they don’t happen often.
Our version of that is to make sure that the Airbnb brand stands for having the right processes in place, the right incentives in place, to likewise make sure the vast majority of our experiences are positive.
You’ve been very involved in opening international markets. Tell me about the most interesting market that you’ve most recently spent time in.
Cuba’s probably the most interesting. I made my second trip to Cuba back March, when the president made his visit. That was in commemoration of our one year of operation in Cuba. Today, we have approximately 8,000 properties available in Cuba.
I think it’s exciting for a number of reasons. First of all, the Cubans have been doing this longer than anyone else on the planet. In the mid-’90s, the government allowed for, for the first time, a few kinds of private business to exist here, one of which was renting a spare bedroom to travelers. People started doing this in the mid-’90s, completely offline, completely without the Web. This has been a thriving thing ever since then.
What we’ve been able to do is now take that existing industry, and put it online, and make it accessible to the rest of the world. With the lifting of restrictions, it’s now possible for others to book and actually stay with a real Cuban family and have a fantastic cultural exchange.
I’ve been to Cuba, and the thing that’s remarkable is how part of its culture has been frozen in amber, in a way. For example, there have not been any developments of new tourist hotels in Cuba for decades. Do you think it’s possible that it might be a market where, as it opens, your model becomes the central model for hospitality, as opposed to the old industrial model of putting a big Hyatt in the center of Havana?
I think it’s a real possibility. If you look anywhere else, hotels have been scaling and growing their businesses for about a hundred years, so they have quite a head start. In Cuba, not much has been happening over the last many decades. Now, suddenly, things are beginning to happen, but we are starting at the same point.
I think (we) fulfill a real need, not just to accommodate all the visitors who want to come but also for the local people who haven’t been able to invest in fixing up their homes. If you go there, the first thing you’ll notice is a lot of the homes, a lot of the infrastructure is crumbling. There’s been no investment.
Suddenly, people are able to rent out that room, make meaningful income, and reinvest that money into their homes. They’re using that to upgrade their plumbing, to fix the steps that are crumbling.
This is a big quality of life issue, and I think it helps to preserve that character that you mentioned is so distinct down there, the fact that most of these homes date from the 1920s, and there haven’t really been much built since.
Now people have the money to reinvest in their homes rather than having large-scale development that replaces entire blocks of homes.
Now people have the money to reinvest in their homes rather than having large-scale development that replaces entire blocks of homes.
My son just came back from a month in Shanghai, where he stayed in an Airbnb the whole time. He said it was probably the best way to experience China. But China is a very tough market to crack. I’m curious your point of view on the news that Uber, after investing billions, cried uncle and said, “OK. We’ll take 20 percent of the market through Didi and move on.” How are things going in China for Airbnb?
Really well. Over the last 12 months, the business has grown 5.6x year-over-year, specifically, the number of Chinese travelers using Airbnb to go abroad has increased 5.6x year-over-year.
That’s the segment we’ve been focused on — Chinese going abroad — for a very strategic reason, which is it plays to our strength. Despite the existence of local competitors, none of them are able to offer over two million homes in 191 other countries.
Those travelers, once they have a good experience outside of China, come back and…
That’s exactly right.
..instill the Airbnb ethos into their market?
Right. We’re offering something in China that only we’re in a position to offer because leveraging our network effects outside the country. That’s our introduction to the consumer. That’s where our reputation is spreading, but then people have a great experience and they come back. They’ll use us for their next trip, regardless of where that might be.
That’s really the playbook we’ve used in other countries, too. Take advantage of the fact that travel is inherently cross border. This is very different than most other businesses, including Uber, which is a marketplace but on a city level. It’s not cross-border network effects.
This is very different than most other businesses, including Uber, which is a marketplace but on a city level. It’s not cross-border network effects.
This has been a big part of our success. It’s also been a focus of ours, though. For the last two-and-a-half years, we’ve had a concerted effort, making our product work better in China.
Many companies have tried to go into the Chinese market and been repulsed — the most famous is Google. I’ve been told that it is not a level playing field, that the government picks favorites and generally, those favorites are native companies in China. Are you concerned that that might happen to you?
I think because we’ve chosen a specific segment of the market to focus on that doesn’t come into direct competition with local companies, we’re spared that question. That’s also another benefit of playing to our strength there and focusing on outbound travel.
Let’s talk about adjacent markets. Your original vision — allowing anyone to belong anywhere — isn’t specific to hospitality. Can you see in 10 or 20 years Airbnb being involved in other very large-scale businesses that have nothing to do with hospitality?
I think travel itself is such a big space.
A multi-trillion-dollar market.
That’s right, yes, a multi-trillion-dollar market. There’s plenty left for us to do in travel. I’d say for the foreseeable future, that will be the confines of where we innovate. That being said, we’ve spoken at a high level many times now about our desire to go beyond just accommodation and to provide other aspects of the trip.
I think it’s still relatively early days in terms of what Airbnb offers as a service and as a value proposition. I think that will continue to evolve but it will still be within the confines of travel.
We’ve spoken at a high level many times now about our desire to go beyond just accommodation and to provide other aspects of the trip.
You recently stood up Samara, which is a design lab essentially, is that correct? An innovation lab?
Yes, which Joe, my co-founder, leads.
Tell me about its mission.
Joe is really thinking about the future of the home and if you were to redesign the home from the ground up, how might you do things differently, with basically sharing economy in mind.
Most recently, he debuted a proof of concept of such a home in Japan that is designed to be shared. It’s both a permanent residence but also fluidly able to accept visitors. He has given a lot of thought to how that could be embedded in a larger community and provide benefits to that community.
Instead of a home designed for privacy and exclusion, it’s built with the ideas of a constant ebb and flow of people, strangers becoming connected.
Yes, exactly, and making sure that there’s space for both sets of people to have their belongings and to easily gain access to things and know what’s shared and what’s public and private. I think this is just a great example of some of the long-term future potential, things that might be outside of our immediate focus as a company and a driver of growth, but this is what Samara is focused on the really long term.
One of the most remarkable things about Airbnb is your offices. Can you give us just a verbal tour of the design ethos of the actual office space for Airbnb in San Francisco?
Sure. One of the most iconic things is the fact that every one of our conference rooms is themed after an actual Airbnb property. You’ll look in and it’ll be designed like a living room or like a kitchen or whatnot, all very interesting and different spaces, but right next to it, you’ll see a little placard of a picture taken from our website of an actual home. We’ve that in the conference room.
You’ll also see that it’s incredibly open environment and that no two parts of the building look alike. In a lot of ways, it’s quite cozy and comfortable with very different kinds of workstation. Some people have desks. Some people have standup desks. Some people don’t have dedicated desks. They are just constantly floating.
We’re trying to create collaboration. We’re trying to create fluidity in exchange of ideas, but we’re also trying to make people feel at home and comfortable.
The number one thing people say when they come in the office for the first time and I ask them, “What do you notice about this place?” is they’ll say, “The energy.” They’ll say, “People seem genuinely happy to be here. They seem invigorated by what they’re doing.” I think the environment plays an important role in helping to maintain that.
It probably also doesn’t hurt that most of those people in that office have Airbnb shares. The company has done nothing but increase in reported valuation round to round to round, to the point where it’s bigger than many public hospitality companies. So why the heck haven’t you gone public yet? Microsoft went public at $600 million valuation. Then public investors and therefore all those 401k savers and the pensioners and so on got to ride Microsoft all the way up to its current multi-hundred-billion-dollar valuation. Is there a reason to stay private, or is there a reason to not be public or is it just happenstance?
I think the common reaction is to look at the valuation and say, “This is a very mature company. Why isn’t it public yet?” but on the other hand, I feel like it’s still a very young company in terms of the vision and how far the amount of progress we’ve made. There’s still a lot more to do.
I think we want to, one, optimize for staying focused on implementing that vision, that mission and to not get overly fixated on managing the business quarter to quarter by public expectations. Also, IPO is really a means. It’s a means to raise money. The company is well capitalized as it is. We haven’t needed to go public in order to raise additional capital. That’s also a big part.
The fact that we’re sitting in the NASDAQ studios would prompt me to ask if that might be something that would be considered in the short term, a year, two years, three years?
I don’t have any time horizon for you.
I had to ask.
You had to ask.
If you could go back to when you were 20 or 21 years old and you were just starting out, what would you say to yourself then that might have saved you some pain? What lessons might you give a younger version of yourself?
I would say that your path in life is never a straight line. You have ups and you have downs, but in retrospect, when you look back at all the setbacks, whether it’s me personally or others have experienced, at least for myself, I found that those setbacks were always the learning opportunities that eventually helped me later on with Airbnb in making that successful.
For example, prior to Airbnb, I was a lead engineer at a company that didn’t do so well, but I like to say I learned everything not to do at that company, which actually was incredibly valuable and at the time, it was disappointing, but actually, all those learnings got effectively put into Airbnb and we’re stronger for it.
All these setbacks are really just short-term setbacks. As long as you’re always learning, then I think that’s progress forward and something to keep in mind.
At some point, I suppose, we’ll have a President of the United States staying in an Airbnb, or maybe a President who rents out the Lincoln Bedroom in a legit way, as opposed to the way it’s normally done.
One of these days…
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