History of Airbnb - FourWeekMBA

Airbnb is an online marketplace for short-term rental accommodation and various experiences. The company, which was started in 2008 by Joe Gebbia, Nathan Blecharczyk, and Brian Chesky, was one borne out of necessity rather than by design.

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Airbnb is founded

Broke and unable to pay their rent, co-founders and roommates Gebbia and Chesky decided to turn their apartment into a bed and breakfast.

The pair, who were designers themselves, observed that a design conference in San Francisco had caused a severe shortage of hotel accommodation.

To give their counterparts a place to stay, they set up a few air mattresses on their living room floor and offered breakfast in the morning.

The site airbedandbreakfast.com was subsequently launched because the co-founders believed Craigslist was too impersonal.

Early difficulties and funding

Chesky and Gebbia ended up hosting three designers for $80 a night and realized they may have stumbled onto an idea worth exploring.

They hired Blecharczyk to build a more robust platform and then expanded into Denver as 20,000 people descended on the city for the Democratic National Convention.

The launch in Colorado was successful but not profitable and early investors were not convinced that the business model was viable.

Gebbia and Chesky approached 15 angel investors with eight rejections and seven not bothering to respond.

Many were skeptical that Airbnb was just another tech company that wanted to repurpose an old idea, while others were worried for the safety of customers who were staying in the homes of strangers.

Refinement of the business model and funding

Around the time of the 2008 election, the co-founders raised $30,000 by selling limited edition cereal boxes featuring Barack Obama and John McCain.

In early 2009, one investor who did show interest was Y Combinator founder Paul Graham.

Graham tipped in $20,000 and the Airbnb team spent a few months at the start-up accelerator refining their product.

Graham reiterated the importance of understanding the company’s users and encouraged Gebbia and Chesky to visit New York City, listen to the needs of hosts, and promote the business in general.

When the pair returned to San Francisco, they had a better product to present to investors and by March 2009, there were 10,000 users and 2,500 places to stay on the platform.

The company then shortened its name to Airbnb and secured $600,000 in seed money from Sequoia Capital in April. Subsequent rounds of funding proved to come much easier.

Growth

Airbnb achieved 1 million nights stayed in 2011 and was present in 89 countries. The company also won the break-out mobile app award at SXSW and became a tech unicorn soon after.

Much of the company’s initial growth was driven by younger hosts who could rent out space in their apartments and create a side hustle in the process.

In 2012, the company started to experience some of the problems it continues to battle today.

Some cities made short-term stays illegal and hosts were evicted or fined for listing their properties on the platform.

Negative publicity also resulted from instances of guests damaging property and a controversial logo redesign in 2014.

Nevertheless, Airbnb reported that it had surpassed 150 million active users in 2018. This number has not been updated since, but revenue has remained strong in the face of the COVID-19 pandemic and macroeconomic headwinds.

The company had its most profitable quarter ever in Q3 2022 with net income up 46% from the same period in 2021 to $1.2 billion.

Key takeaways

Airbnb is an online marketplace for short-term accommodation and experiences. The company, which was started in 2008 by Joe Gebbia, Nathan Blecharczyk, and Brian Chesky, was one borne out of necessity rather than by design.
Broke and unable to pay their rent, co-founders and roommates Gebbia and Chesky decided to turn their apartment into a bed and breakfast. The pair believed the business model to viable, but early investors were unconvinced.
One investor who did show interest was Y Combinator founder Paul Graham. Graham invested $20,000 in 2009 and encouraged Gebbia and Chesky to visit New York City to better understand their hosts and refine the business model. Growth was rapid thereafter as the company secured additional funding.