Each startup has its own journey, from an initial spark of an idea to its growing success and eventual exit. There are new ways to gain traction, especially in the early stages of a startup’s life cycle. One such notable story is that of Airbnb, which IPOed (see 50 Terms) despite being in the midst of the COVID-19 pandemic in November of 2020.
There’s an old saying that says something along the lines of, “Disparity breeds innovation and creativity,” the message being that great things can arise from trials such as the 2008 Great Recession. Startups such as Airbnb, Pinterest, Venmo, Slack, and rideshare apps such as Uber and Lyft were founded shortly after the financial crisis. Having now become successful companies today, several of them have IPOed or have plans to in the near future.
Airbnb began with the inspiration to find a way to provide service of a night’s sleep in exchange for some extra cash. The founders were faced with an opportunity several of their future consumers would also pursue, making money in renting out spaces. With hotel rooms providing a very specific experience that did not cater to all of its users’ desires, the founders Brian Chesky and Joe Gebbia thought of an innovative way to put extra air mattresses to good use.
Perseverance and creativity were key traits in the founders, attributable to Airbnb’s success today. An Industrial Design Conference was coming to San Francisco, and Joe Gebbia was inspired by seeing “Hotels Sold Out” for the conference to make use of his extra empty space. With three extra airbeds in the closet, they created an air bed and breakfast, and each of the guests could feel like “they belonged [in San Francisco],” not as strangers visiting a distant city (How I Built This).
The third launch was perfectly timed with the press, as the Democratic National Convention hosted in Denver, Colorado, which was facing a shortage in housing with the expected number of guests coming to hear Obama speak. Their rocket ship to the moon was “0 to 800 homes in a matter of 4 weeks,” but still, they faced difficulty after the high of the convention passed. No investor in San Francisco would fund Airbnb in these early stages, so Joe and his business partner named their own round of funding as Visa Round. In this round, they gained funding from maxing out Visa after Visa, Mastercard, and the AmEx, a product in the market available, called the “trough of sorrow,” which is simply missing the “fit” aspect with no proof of growth. No matter how long it takes, it is during this period of time that entrepreneurs lose hope.
In seeing the opportunity during the height of the Presidential elections in 2008, they created Obama O’s (the breakfast of change) and Cap’n McCains to help fund the struggling startup. Their latest venture included designing their own boxes, purchasing existing cereals from the grocery stores, and putting those bags of cereal in their political-themed boxes, and making them limited edition items. In creating only 500 of each box, at $40 each box, they created a wave of demand and limited supply as a collector’s item. Their credit cards were paid off, and when they believed in their product, despite a lack of investors who believed in them.
Following their participation in Y-Combinator (See 50 terms), more people began to understand Airbnb’s product, and they gained traction both in investor interest and consumer demand.
Part of Airbnb’s success today can be credited to its ability to adapt to the changing times and pivot its strategies when necessary. If it remained an Air Bed and Breakfast hosted by the two founders in their residence, complete with air mattresses and a total of 2 bookings, it never would have been able to reach the point today as a prominent player in its industry. They adapted to online payment processes rather than exchanging money in person, which they found to be very awkward. In all, it took tenacity and a willingness to do whatever it took to keep going and a strong belief in the product through roadblocks that it may eventually succeed.
Sources
Airbnb Founder Story: From Selling Cereals To A $25B Company (getpaidforyourpad.com)
The Secrets Of Airbnb’s Successful Referral Program: 11 Takeaways