👋 Hi there,
In this week’s post, I thought it would be fitting to choose a company that represents the Failure to Success mantra. Airbnb (Air Bed n Breakfast) was the perfect fit. This company was initially thought to be nothing more than “weird”. As we know now, that is actually far from the truth.
For those who may not be familiar Airbnb is a service that lets you find places you can rent.
“Airbnb started off offering just a room—somebody who had a vacant room with an air mattress who would provide some hospitality, maybe a hot meal in the morning. That was it.”
It began by renting a room to strangers who wanted to attend a designer conference in which local hotels were all booked. The founders Joe Gebbia and Brian Chesky rented a room in their homes, accompanied by a travel guide for the city they loved, to keep the guests entertained. This experience was so much fun that they decided to try it again.
After hiring a programmer to code their website, they attempted to recreate the rental experience they enjoyed last time around by offering a similar experience for an upcoming conference “South by Southwest”. However, only 6 listings were created and only 2 bookings were confirmed. One of those bookings was Joe himself.
Unphased with this “failure” Joe and Brian were determined to make this work. They discussed that perhaps this was not a designer conference business but instead a travel business…
Joe and Brian settled on the DNC Speach given in Washington by President Barack Obama in 2008. The expected number of visitors was approximately 100,000 with only 30,000 rooms available to rent. This was such a strong signal that they were onto something. Joe and Brian relaunched their website and this time gained 800 bookings within 4 weeks.
After the speech was completed the surge of booking declined once more. Using the high sales data from the DNC they approached investors. The results again were not anything to brag about. Only 10 investors replied to their emails, 5 agreed to meet and 0 actually invested. At this point, Joe and Brian were in debt tens of thousands. However, they were certain this idea would take off. They needed a way to raise money to fund their operations.
They thought of something unique leveraging the 2008 election. Can you guess what they created…? Cereal. Yes, Cereal. Obama O’s and Cap'n McCain’s
They printed 1,000 boxes of cereal. 500 for each party. They proceeded to the grocery store-bought cereal and poured the contents into their boxes. Only having 1,000 boxes they included “limited edition” /500, a great marketing tactic. They charged $40 per box which sold out fast! Joe and Brian generated $30,000 in profits!
“You mean people actually use this? That’s weird”
Why did Paul G invest? Not because of the Airbnb business idea at all, instead, it was about their hustle. The Hustle to make cereal boxes that generated 30k in profits is what caught Paul’s eye!
Y-Combinator ended up investing $20,000 dollars. As you can imagine that sum of money helped open the door to others who invested. In total $600,000 was invested in Airbnb! Enough to hire a team, set up a legitimate business.
Slowly but surely Airbnb began to get momentum. The ‘Global Financial Crisis’ actually was a key driver of bookings for Airbnb. People were desperate to make money in any way they could. Rent out a room for x amount of dollars sounded great! Think about what occurred here. People were losing their jobs. Their house an investment that was becoming a liability become an area of concern for many.
Airbnb would take a cut out of the listing that was rented out. So naturally, the more listings, the more money was to be made. One problem that became evident over time was most people didn’t know how to market their own homes. This resulted in roughly $200 per week in revenue. After some thought Joe and Brian included a free photographer for anyone who listed their home on the site. These ensured quality photographs were posted online.
Brian actually went two months on exclusive living in Airbnb locations. This was pivotal to understanding the clienteles mindset, and understanding how to properly target future clients. When the site started to gain more actively, investors became more interested. VCs came to them this time around. That resulted in an additional 7.1 million dollar investment. This included key celebrity Ashton Kutcher who also invested in the startup.
By the end of 2011, Airbnb had over 5 million users. June 2012, 10 million users. 2019, 150 million users. The company is valued at 38 billion dollars. In 2020, there are rumors Airbnb will go public! I’d say this once failed business has turned that failure into a mighty successful company.
This companies journey started with an idea which was experienced through their own problem. Trying to attend a conference that had no hotel rooms available. That experience was enough to spark that idea and the courage to go after it. Even after rejection, being in debt, they believed in this idea so much they were motivated and confident to get this to work. It did eventually. There was no get rich scheme here. It was persistence, hard work, and sacrifice that got them there.
I hope you enjoyed this weeks post and if you did please share with a friend 👍