It's often the go-to site for Kiwis booking accommodation here and abroad. But Airbnb's humble beginning was air mattresses on the floor of the founders' apartment because accommodation ahead of a conference in San Francisco had sold out.
In his new book, How I Built This, based on his popular podcast, Guy Raz explains how a group of friends started a multi-billion dollar company which has more than seven million listings in more than 100,000 cities.
Typically, when we talk about bootstrapping, it's a financial conversation, and to an extent that will always be true. Without other people's money to stand up your business — whether it's from friends and family, venture capital, or something like an SBA loan — you have to find other ways to pay for things: credit cards, personal savings, cycling profits back into the business.
But having spoken to hundreds of brilliant entrepreneurs, I know that bootstrapping is more than simply using alternative sources of personal financing as a last resort. It's also about keeping control of your business as long as you can. It's about using other non-monetary assets to solve problems that you would otherwise hire someone else to solve or throw money at — assets like your time, your effort, your network, and your own talent and ingenuity.
Joe Gebbia, Brian Chesky, and Nathan Blecharczyk leveraged every one of those resources in 2007 and 2008 to bootstrap their way into the peer-to-peer online hospitality platform that we know today as Airbnb.
Airbnb began as a website called Airbedandbreakfast.com that was designed to offer a place to stay for attendees of large conferences once all the hotel rooms in the host city were sold-out. The idea came to Joe one day in September 2007 as he sat at home surfing the internet, wondering how he was going to make rent and not lose a friend.
See, Joe's landlord had just raised his rent by 25 per cent mere weeks after Joe had convinced his new roommate, Brian Chesky, to quit his job down in Los Angeles and move up to San Francisco to start a company together. What company? Well, that part they hadn't figured out yet.
As luck would have it, there was an industrial design conference coming to San Francisco a couple weeks later that they were thinking about attending — he and Brian were both graduates of the Rhode Island School of Design (RISD) — and when Joe navigated to the conference website to check if passes were still available, he saw right there on the front page, in big red letters, the words hotels sold out.
The idea became clear to Joe right away: "I'm thinking, 'What a bummer. Designers are going to come last minute, and they're not going to have a place to stay.' In that instant, I'm looking around the living room, and I go, 'Wait, we have so much extra space here, and I have air beds in the closet.' And so the idea of hosting people on air beds gradually became natural to me."
He brought the idea to Brian, his roommate. Brian had $1000 to his name when he moved up to San Francisco that month. His portion of the rent was $1050 per month. Even I can do that math. As odd an idea as this may have seemed in the moment, it was a no-brainer to someone who had no money.
"It'll be more than just a place to sleep," Joe thought at the time.
"We can cook breakfast in the morning, we'll pick them up from the airport and give them a neighbourhood guide and maps of San Francisco."
This is how he pitched it to Brian, in an email made famous when it was presented on the TED stage in 2016.
Brian I thought of a way to make a few bucks — turning our place into designers bed and breakfast — offering young designers who come into a town a place to crash during the 4 day event, complete with wireless internet, a small desk space, a sleeping mat, and breakfast each morning. Ha! Joe
Brian was in. Together, they used their design chops to quickly build a simple website. It described who they were, what the idea was — sleep on our living room floor on an air mattress for $80 per night, basically — and all the other stuff they would provide as part of the deal.
And when Joe said "they," he meant they: Joe and Brian. Which is exactly how it all worked out for the three guests they had space for.
"They stayed with us, and we got to show them San Francisco. They got to feel like they belonged there in the sense that they didn't feel like outsiders," Joe said.
Everything their guests did outside of the conference was arranged for or guided by Joe and Brian. If this had been a cruise, they were the shipbuilders, the captains, the social directors, the navigators and engineers, the cooks, and the housekeeping staff, all rolled into two guys.
"I'll never forget saying goodbye," Joe recalled, "and watching the door click closed and thinking, 'What if we made it possible for other people to also share their experience and to host guests in their home and show off their city?'"
To do that, they would need a much more robust website that required a level of technical expertise that neither Joe nor Brian possessed. With no money to hire programmers, they would need to leverage their network to find one. Fortunately, Joe knew a guy. An engineer with a computer science degree from Harvard named Nate Blecharczyk, who just happened to be the roommate that Brian replaced when he moved in with Joe.
After the holidays, Joe gave Nate a call and they met for a drink. "So here we are in January 2008, with an idea and no engineer," Joe said, "and I tell him about this weekend experiment with these three guests, and he loved the idea."
Eventually, the three of them decided that the perfect time to re-launch Airbedandbreakfast.com would be at the next big tech conference, which happened to be South by Southwest (SXSW) in Austin, Texas, in March. By the time they came to this strategic decision, the conference was less than a month away. The turnaround was tight, but the opportunity was ideal.
"It's the place where some of the tech greats had launched before us. Twitter had launched there, Foursquare, and others. We were just going to follow the rocket ship that all of them did," Joe explained. Plus, "every year the same thing happens. The hotels sell out months in advance, [and] people scramble for housing."
What better scenario for an online hospitality platform born from a total lack of hotel room capacity? For the next three weeks, they worked out of Joe and Brian's apartment, day in and day out, re-building the website — Joe doing the design, Nate doing the coding, and Brian doing everything else required to turn an idea into a business. With no money. On "half a shoestring," as Joe said.
They launched the site with six listings, just in time for the conference. Unfortunately, only two people booked. And one of them was Brian.
"It was completely demoralising," Joe said. "Here was this idea that we were so excited about, and nobody took us up on the idea."
But they realised a couple of key things in the process. One was that exchanging money in person, especially in a home, is really weird, so they should probably have the financial transaction piece online. The second was that there may be people who like to travel for reasons other than conferences, who are also interested in the idea of staying in someone's home — with or without the air mattress, ostensibly — so maybe this idea shouldn't just be tied to conference sites.
"We said, 'Well, let's add payments, and let's make this a travel site," Joe said.
"And that's when we had an idea, which was to re-launch this new version of our service at the crest of a tidal wave of press."
In 2008, there was a tsunami of attention spreading across the country. It was following the historically seismic candidacy of Barack Obama for the presidency of the United States, and that summer it was set to crash into Denver, Colorado, at the Democratic National Convention, where Obama was going to speak and accept the Democratic nomination for president. This presented a unique opportunity.
"A hundred thousand people were anticipated to see Obama speak, and there were less than 30,000 hotel rooms, most of which were picked up by delegates," Joe remembered.
It was a legitimate housing crisis. At one point, Denver's mayor even considered opening the city's parks to campers. Suddenly, there was a real need for the service that Joe, Brian, and Nate were trying to bring into being. They just had to get the word out.
"We thought what if we timed the relaunch of our service during the DNC? We can ride the coattails of all the Obama press to bring a lot of awareness to this marketplace," Joe said.
So that's exactly what they did. While Nate worked on shifting the website from its conference orientation to a travel focus and then adding an online payment function, Joe and Brian flew to Denver. They talked to anyone who would give them 10 minutes until they finally started to get some traction.
"We got local press, which turned into the regional press, which turned into national press," Joe said.
Joe and Brian even did a live interview with CNN from their living room. Within a matter of four weeks after the convention, they managed to add 800 homes to their website and process 100 bookings.
"I thought that this was it," Joe said.
"This was our rocket ship to the moon."
And they'd bootstrapped the entire thing. More than that, they'd shown proof of concept; they'd evinced their own worthiness as smart, agile entrepreneurs; and best of all, they controlled 100 per cent of the business.
What better time to pursue investment (like the Method guys did) than when it feels like your new venture is headed into the stratosphere and you're in control at the helm? Through their connections in San Francisco, Joe and Brian were introduced to 20 different investors from Sand Hill Road. They emailed each one of them their pitch deck.
But it didn't go great. "Ten of them reply to our email. Five of them meet us for coffee. Zero invested in us."
Joe rattled off the decreasing cascade of increasingly horrible numbers like they'd been stitched into his entrepreneurial DNA.
"I didn't have anything else going on in my life except this. And to put it in front of very credible investors — the guys who have picked the Googles and PayPals and YouTubes of the world — and have them look you square in the eye and go, 'Well, this is weird,'" Joe said, his voice trailing off.
"Two thousand eight was the worst year of my life."
In theory, this should have been the end of Airbedandbreakfast.com. And in a way, it was. Or at least it was the beginning of the end. That's because within eight months, the name would be shortened to Airbnb; the trio of co-founders would be accepted to, and then graduate from, the Y Combinator startup incubator; and their fledgling website would have 10,000 users and 2500 listings. This all happened, ironically, all because of two boxes of cereal and a binder full of credit cards.
How I Built This
By Guy Raz