Lost Brian Chesky & Joe Gebbia on Airbnb’s Early Days (2010)

Big red letters. Sold out. Sold out.

What happened next, Jess? It was pretty amazing. We learned some lessons early on on how to get press. And we took that little rinky-dink website airbedandbreakfast.com, an 18-character URL, and we sent it out to every design blog that we knew on the internet. And when we woke up the next morning, we were posted on Core77, Swissmiss.com, some of these prolific design blogs around the internet. In fact, the conference themselves, the IDSA, even endorsed us and emailed all the conference attendees about what we were doing because the problem was that big. There was actually no place to stay in San Francisco. So the solution that we came up with simply to pay our rent was actually solving the problem for all these other conference attendees coming to town. And we hosted three people, and the three people that we hosted changed all assumptions about our website. And that's something that's kind of interesting because when you're starting a company, anyone who's in a company can tell you that the users they thought they were starting this business for may not be the users they end up with because they have certain assumptions. This is our assumption. Our assumption was that this was a business that other people like us, other guys in their early 20s, were willing to do. Kind of like backpackers, but really people with no money, people that are really young willing to use this. The idea that somebody over the age of 30, the idea that a woman would stay with a couple guys, I don't know. A lot of our friends didn't think that was going to happen. And the three people that stayed with us, the first person was a 35-year-old woman from Boston. Immediately broke our assumptions. A woman over 30. Okay, there's maybe a bigger market here. The second guy was a designer from India. He would scope out our site. He was a huge fan. He was already like a passionate user and we had just come up with a concept like a day ago. So which is amazing that that could happen. And the third guy was a 45-year-old father of five from Utah. And as soon as that happened, we said there's absolutely no way this is a fluke. Three totally different demographics. It can't be a one-time thing. There's obviously a bigger market here.

And I think it was those emails along with what Brian just said that kept us going with the idea. Like there actually is something bigger here. People want this. They keep writing us about it.

The trough of sorrow was a very generous term for this time of Air Bed and Breakfast because as Brian mentioned, we thought the market opportunity was housing for conferences and that's how we labeled the website: Air Bed and Breakfast, housing for conferences. And we thought that we would target conferences around the country, around the world, and people could post rooms to those conferences and then travelers could book those rooms and we could make a great connection and people could sleep on an air bed and save money. What happens though is that conferences have an end date and at that end date they're over until the next year. And so what we found ourselves doing was kind of marketing in a hamster wheel from conference to conference. We put all this effort into marketing to a specific event. And when the event's over, all those rooms that had been posted to our website were lost. So we found ourselves just kind of overworking ourselves, really just trying to get the website to stick. We totally believed in the idea. We knew that one day people would use this. We just needed to find the right sort of application for it. And that brings up a great story that Brian has about his trip to South by Southwest, which fundamentally changed the website forever.

And so they were really important to us. Over the course of that summer, we basically said okay, now we're going to build a site where you can book a room anywhere around the world with three clicks. A three-click book button. And that was the vision. And I think everyone thought that was awesome. And the next thing people said when we said guys we're going to build this amazing site, three clicks of booking, but it's going to be so easy to use, everyone says makes sense. But how are you going to get people to use it? In other words, it's a marketplace. Anyone who knows anything about marketplaces knows the hard part is the chicken and egg problem. Buyers only want to go where sellers are. Sellers only want to go where buyers are. It was a really challenging problem. And for a few months, we didn't know how to crack it. We were really chopping away at this point. I think my bank account was in the negative zone. We were probably living on credit card debt for months at a time. It was really challenging. We just believed so much in this idea that those were like distractions. We weren't letting that stop us because we knew this big opportunity was so big. And so I remember one day we're sitting at home and we see this blog post and it's a photo of Barack Obama in Portland, Oregon. This was during the Democratic primaries and he's speaking in front of 70,000 people. And at that time all the candidates are speaking in front of like 5,000 people. And so this is the first big speech he had, right? And it was so many people. Everyone started saying this is like a phenomenon. It's really in the beginning stages of that. And then it became clear he was going to win the nomination. And so when it became clear he was going to win the nomination, it also became clear to us: opportunity right here. We started noticing there were news articles, housing crisis in Denver. There are 27,000 hotel rooms. Barack Obama's getting such big crowds that they're moving him from the Pepsi Arena, which is 20,000 people, to this huge 80,000-seat Invesco Field. So the New York Times, CNN, they're all doing these headlines: Housing crisis in Denver. At that point, we said, "That's our chance. What we're going to do is we're going to get a ton of press by having an answer, a high-profile answer to a high-profile problem." And it was within a matter of a couple weeks that here we are sitting in a living room with no money, a tiny little website that no one ever heard of, to a few weeks later sitting in a living room with no money, but we were being interviewed by CNN and the New York Times. So it really changed our trajectory.

The wiggles of hope. And that was a little wiggle for sure.

We have to give them a lot of credit. Yeah, they exposed us to the Y Combinator philosophy, I guess you could say. In the sense that they were so giving. Here we were, two design guys, didn't know too much about starting a web startup, and they really took us under the wing and said, "Guys, these are all the mistakes you're making. If you want to correct them, you have the option to do these different things." And they really were very giving of their knowledge and very open to meeting with us. And it's very reflective of Y Combinator.

Yeah. And there's some really cool stories about the box itself. First of all, here's a secret to getting press. If you want to get press for something, imagine if we just emailed somebody a screenshot of that cereal as compared to somebody in the mail getting this, right? And then you suddenly open this. This is on your desk. Not everyone that we mailed these to did we get stories from. But of course TechCrunch picked this up. But this was on CNN. It was on Good Morning America, the Today Show. It was in Fortune magazine. It was in publications and broadcast. It was on like 30 or 40 different local news stations all around the country. And the coolest part about this is that these cereal boxes, we sold them because they're collector's edition, right? They're all individually numbered. We sold them because they're not just regular cereal boxes. They're really premium boxes and there were very few of them. So we sold them for $40 a box and we weren't sure if we'd be able to sell very many. But because we couldn't do a big run, we couldn't just sell them for $4 cereal boxes. We're like, "These are not going to be opened. You're going to save these because we've spent so much time on them." Sure enough, because we got all this press, we end up selling 800 boxes. That's over $30,000. We sold $30,000 of cereal. The cereal actually gave us more funding than Y Combinator when you think about it.

Well, I think one of the greatest contributions that we make, I think there's maybe two contributions that this company can make. One is the general travel industry, if we can hopefully kind of turn it on its head and make people think about space differently. I think another big contribution that we can make though is that we change the perceptions of what the importance of design is to a startup. I feel like I get this impression from other companies that they think that maybe a designer is thought of as a headcount, right? Like you hire a designer and they do design. And what they mean by design is making it look pretty or making it look nice. And we don't think of design as something that just makes it look nice. Design isn't how it looks. Design is how it works. I think some really important people have even said it. I mean Steve Jobs himself said design is how it works and technology enables that to happen. So when we're coming up with things, I think that's the most important distinction because two of the three founders are designers. We're really thinking about problems from a design perspective.

Design allows you, I think, to empathize with your users. You're constantly putting yourself in their shoes, thinking, "If I were them, what would I be feeling right now? What would I be doing right now?" And so, not to say that we're not analytics driven or metrics driven, but we also do a lot of things that designers do. Well, what are some of the things designers do? They do a lot of field work. That's what they call field work, going into the field. So what was our version of that? We told this a little bit on our Mixergy interview and part of it was inspired by Paul Graham. I mean, we generally believe this anyways. We just thought because no one else that we knew in startup culture were meeting their users. They weren't getting their hands dirty. Paul Graham really gave us permission. But what did he tell us to do? Paul Graham told us do things that don't scale. It's kind of a designer's philosophy anyways, right? In other words, our background in industrial design, so I remember one of the things I used to design, I used to design medical equipment. So if we were designing medical equipment, this is actual hardware, right? You would go to the hospital, watch the patients, right? You would observe and you'd try to even empathize. Maybe you'd be laying down on the table. You wouldn't just be giving them five samples and doing A/B testing on the different samples. You would actually have to put yourself in their shoes. We decided we have to do that with this company as well. Our version of that was we went to New York City and during Y Combinator, this is kind of leading into where Y Combinator started taking off. I remember we're sitting in Mountain View, California at where probably you are now. And we're meeting with Paul Graham and he asked us where are all your users. And at this point after the DNC we didn't have a lot, but the few that we had were in New York City. We said, "Well, our users are in New York City." And we're talking about how our users are meeting in person. And he says, "So all your users are in New York City. That's where you're making all your money, but you're here in Mountain View. Why are you still here?" And it kind of almost went over our heads like, "What do you mean why are we still here?" It's like, "Why are you still here? Go to New York." And of course, this is in the context of we told him that we went to Washington DC for the inauguration. We told him how we did a party, like a meetup, a Yelp-style meetup. We met our users. He said, "Do the same thing in New York." We went to New York and we decided to do one other thing. And the other thing we decided to do is we wouldn't just have a party. We wouldn't just meet our users. Because we're both designers, we'd take photographs of their place. We knew how to take really great photographs. And the excuse of photography was basically to let you into their homes, right? And so over that process, you'd be sitting there, they'd tell you about the space, how they were having rent problems. They'd tell you their story. They'd pull up the website. They'd show you them using it and all the problems they're having. They were never going to email you this, right? You can have a big feedback button on your website. You're not going to observe things because they didn't know they were doing those things. You had to observe them. And so that was the kind of fieldwork that we did was really important. I came from a design background. And this was again Paul Graham's advice. I remember specifically going into office hours with PG and having 12 really well thought-out strategies to present to him of how we were going to spend our Y Combinator weeks together. And he basically looked at all 12 of them and said, "These are crap." And we looked at each other and we're like, "Oh crap, what are we going to do?" And he said, "Go to where your market is. Go to New York." So I remember that weekend we booked tickets to New York City. Brian and I, we had this camera equipment. We're trudging around the snow in Manhattan and Brooklyn going door to door to our users' homes. And sometimes you'd end up spending hours with them, right? They'd have just so much information and so many good insights on what we were doing wrong with the website. And so we were just soaking it up like a sponge. We come back to San Francisco literally just in time for the Y Combinator dinners. I remember we'd be the first ones there at Mountain View. We'd run in with our luggage. We'd get dinner and then head back to San Francisco. And we take all that knowledge that we got from New York and we'd start to apply it here in the office and we'd make changes very quickly to the website. We were a three-person team at that point. So we could. And I remember emailing some of our users that we met in New York and they were so thankful. They couldn't believe that the co-founders of a company flew across the country to meet them, to take photos, to listen to their problems, and then they fixed the problems within like a week. So right away we were starting to get a really passionate, very loyal user base in New York City and we learned from that. We continue to grow it out. That's another thing. A lot of people when they have a website, very few people anywhere in the country have met a founder of a website that they use on a daily basis. And so I think we take it for granted living here in Silicon Valley, right? Everyone seems like they run into people that start websites. But even in New York City and especially in other cities outside of New York and San Francisco, very few people have ever met somebody that started a website that they used on a daily basis. And so that's actually really meaningful. You can't take little things like that for granted. And also, your users will do work for you.

Another thing that's really, really important. And they will tell you what you need. But they're not just going to be giving you feedback through email. You're getting 10% if you're waiting for feedback to decide what users want. And if you're looking at the data, you may or may not be looking at the right thing. So you've got to really balance the feedback emails you get and the data you review with the observations, because the observations will tell you a story that's very, very difficult.

Which one?

The number did tend to grow a little bit. I'm sure by the last person he promised, I'm telling Joe we're going to have like 50 people, and he probably told the person we're going to have hundreds and hundreds of people from all over the world. Of course, I still thought we were going to have about 50 people. So here we are. I'm about to host our first meetup in New York City. We're going to supposedly have users from all over the world at this meetup, this brand new concept, and press has now committed. Joe got what channel?

So Joe calls me up and says, 'I got it, buddy. I did it. We got press. They're coming. They're going to cover the party.' So you're going to have this meetup in this bar. And this is New Year's Eve, by the way. You can imagine, New Year's Eve, and we think we're going to have a huge turnout. So I get to the bar before the press gets there, really early to the party, and it turns out that there are hosts right next to the bar. So we basically tell the press, 'Well, since you're waiting an hour, why don't you do a quick interview at this apartment? You can meet these two hosts. They're the Rad Brothers, and they're our most prolific hosts in New York City.' These two guys, Michael and David Rad. They're about 25 years old. They end up hosting a brother and sister from Paris at the time. So they decided to cut a little B-roll to kill time. 'Okay, cool. We're going to film this experience, this Parisian brother and sister staying at this apartment in the East Village.' Then I can see them looking at the clock. 'Okay, when's this big party? When's this big party?' So we go back to the meetup. It's supposed to start at 7:00. I'm expecting to walk in and this place is going to be packed. We're about to walk into a bar. There's going to be people everywhere, cheering. I walk in the bar and I see two older obese guys with hats on slumped over the bar, drinking like a beer in each hand. I'm thinking, 'Holy shit.' Excuse my language, but I was pretty nervous at this point. 'Oh my god.' First thing I'm wondering is, 'Did we give them the wrong bar? Did we give them the wrong time? Where are all of our users?' The press reporter, this woman probably in her early 30s, she's really anxious because they had that big van outside the bar with the human antennas. They had a camera guy, a sound guy, a lighting guy, plus her. This was their story. They were going to have the evening news on New Year's. This was a big story. They were going to have the story about us hosting, and there's no one in the bar. It also turns out that the Rad Brothers, I told them ahead of time, 'Make 50 gift bags so I can give them out on camera.' And they didn't tell me what was in the gift bags. So the Rad Brothers make these 50 gift bags. I have these 50 gift bags sitting next to me. It turns out that in the gift bags are just energy drinks and condoms. They didn't know press was going to be there. They thought they were just trying to do something really funny. I thought it wasn't quite as funny when I'm on camera and I look like a total creep on the local news, a guy with 50 bags of condoms at a bar by himself. It doesn't come out the same way. Anyway, we're thinking, 'All right, it won't look as bad if all these people come and I don't look like some random guy.' But no one ends up coming. So here we are sitting at a bar. I had ordered like 10 or 20 shots for all the people that come in. I'm just a guy with a bag of condoms and 20 shots of vodka. It's not going real well. I'm sweating. 'Oh my god, this is so embarrassing.' Everyone's pissed off at me. The bartender's pissed because the camera crew is in there. The press people are so angry at me. They're like, 'All right, let's just get this over with.' They basically said, 'We'll just do an interview at the bar.' So they try to put the light on the camera, and we're in the bar, and the bar says, 'No, you can't film in here.' They kick us out. The sound guy is yelling at me, 'This is so unprofessional.' They're really angry because they've been waiting for hours to do a story. So I end up going in the street. We're trying to stand in the entryway of the bar, and they're going to finally film me, and the bar is like, 'No, you can't film even the bar.' So then they decide, 'Let's just film you walking down the street.' Because we have no users showing up to the party, we end up corralling people on the street and asking them to pretend like they're our users and walk down the street with us. Actually, they end up doing a real piece, and the Rad Brothers end up showing up, and then there's a whole bunch of random people walking behind us. The news made it look like they were our users, but they were just random people. They needed a story. So that was a pretty interesting thing. It turns out at the end of the day it was a great story. Why? Because they couldn't do a story at the meetup. There was no meetup. What they ended up showing was going back to the B-roll of the Parisian couple, the brother and sister staying in the apartment in the East Village. To us, that was actually the perfect story because that was promoting the website, not some party. So it worked out for us, but in a very unexpected way.

And our New York meetup this past year in December of '09 had over 150 people. So we made some progress.

We'd love to. I think a lot of these things stem from the fact that our home is our office. For me personally, I know that when I wake up in the morning and I walk down the hall to work, it better be a hell of a lot of fun because I'm doing it every day for 12 plus hours a day. I think that's one of the roots of this idea of creating a super fun workplace that everybody can have a great time working in. You don't even feel like you're coming to work. You feel like you're coming to a team that's working on an exciting project together. Along with that, we come up with some extremely fun ideas to keep the workplace loose and creative.

For example, every Wednesday we take a recess and we go to a park that's about a block and a half away and we do different activities together as a team. Usually it's kickball, sometimes it's ultimate frisbee. It's very much something along the lines of elementary school. It breaks up the day. We get outside, get some fresh air, get some sunshine, and everybody comes back really energetic and enthused.

Mustache Monday.

Because it was such a milestone for us then.

Yeah, when you meet your users, you get a lot of stories and they'll tell you they're having fun and all different reasons. The really important thing about our site is that we started right around the time the economy started going down. A lot of people, of course, the economy was very much driven by a housing crisis, and that was very much related to us because here you had people who couldn't afford their mortgages, they were stuck in these places, or they couldn't afford to make their rent. They were laid off from a job. We hear these stories all the time. We're traveling around the country hearing these stories, and it starts to resonate. Paul Graham says, 'Make something people want.' I think that for many people, Airbnb is something they want. We started realizing that for many other people, Airbnb was something they needed. It wasn't just something they wanted, it was something they needed. I remember two months ago, right before Christmas, we get this email in our inbox. It went to all of us, from this host in New York City named Kendra. I'm just going to read this email. It's very short, but you'll see what I mean. Kendra wrote to us and she said, 'Hi Airbnb. I'm not exaggerating when I tell you that you literally saved us. My husband and I just married this past May after having lost both our jobs and our investments in the stock market crash last year. We slowly watched our savings dwindle to a point where we didn't have enough money to pay our own rent. At that point, I recently listed our New York City apartment on your site and was receiving so many requests that we decided to rent out our place and seek low-cost vacation accommodations for ourselves elsewhere. We even saved enough money to rent another apartment across the hall that we've now listed on your site as well. You gave us the ability to keep our home, travel together, and have the peace of mind knowing that we are going to make it through this challenging time in our life. Thank you so much.'

I think another thing that surprised us, I had this perception before Y Combinator that Y Combinator was this thing that you do when you have an idea and you enter Y Combinator with an idea, and over the course of three months you build a product and it just takes off. The thing that surprised me was that we weren't the only ones. We had an advantage in that we launched before Y Combinator, but a lot of the most successful companies had already launched or had already been working on their product. I think the reason is that there's this general notion that it's a very short process, but it's such a long process. It really is like a year kind of game, not a month kind of game, before you even get any traction. Having a built product going into Y Combinator and even having users is a huge advantage. Just being a little more mature, that was a big difference for us to know that that was important. Remember with Justin.tv, they entered at a much earlier stage, but for us it was a big difference.

Oh, Udi Manber.

That's right. Jawed had some really kind of detailed stories about the early days of YouTube and how they hit this amazing unprecedented growth through YouTube, just things that you don't read about in a book. I think the other thing that surprised us about Y Combinator is it felt very competitive, not in a bad way but in a really good way. We have these things like prototype day. Halfway through Y Combinator, it's prototype day and you have to basically simulate demo day. Or actually maybe prototype day is the one right before demo day. What's the halfway point one?

Okay. So prototype is the halfway point. What prototype day is, every single company has to get up there and basically do their demo day pitch. It's only like a five or ten minute pitch, and they have to pitch to all the other Y Combinator companies. Paul Graham doesn't ask you who's your favorite startup or what website would you use. He said, 'If you could own 10% of any company, which company would you buy 10% stock in?' That was a really good question because you had to think like an investor. They basically then had rankings, and he announced the winners because everyone got three votes. It was very competitive. Then right before demo day, he'd do the same exercise with the founders. I think we were all like, there was a combination of a ton of camaraderie because every single week we weren't really competing against each other. It was more like they were pushing us. We'd see all the work that some other startup would do and we're like, 'Man, their whole website changed two weeks ago. You didn't get what they were doing, suddenly it all came together, and now you're like, 'Wow, I thought we were the big company, but they're actually looking really good.' It pushed you to work really hard. I think that starting a company can be in the early days one of the most solitary things you could ever do because starting a company when you have no business, there's a fine line between being an entrepreneur and being unemployed. What's really the difference when you're starting up? It's a state of mind. If you have no customers, you have an idea, you're basically unemployed except you're telling yourself you're an entrepreneur at that point. The trough was incredibly lonely. I think the press things kind of kept us going.

Yeah.

One other thing, Jessica, that came to mind that surprised me about Y Combinator is actually how much it models a semester at RISD. A semester at RISD is this incredibly stressful creative time where you have this project that's due at the end of the semester, and every week there's a weekly critique where you come in and present what you're working on with the rest of the class to get feedback. You're all kind of in it together, but at the same time you also want to be the best in the class. It all culminates in the final critique where you present to advisors, critics, your classmates, and teachers. That's very much what demo day was like, presenting in front of the who's who of Silicon Valley and your peers. I just felt like the same creativity that RISD pulled out of me, Y Combinator did the same exact thing.

I think it'd be really cool to ask yourself what are other ways to simulate that kind of pressure. We try to keep doing that ever since. People often tell you the hardest time they ever worked was during Y Combinator because you go from nothing to this huge Super Bowl type event for founders. It feels like a huge thing, and you have a very short period of time, so you've got to work super hard. You know that you can't just push it back. It's not like meetings that you can push back. 'Oh, I'm going to wait to meet with investors another month, or I'm going to wait to launch.' You've got to launch. You've got to do it by that date. I think that pressure makes you do things you wouldn't have otherwise done. It puts you in an uncomfortable position. It makes you take chances.

Yeah.

There's so much.

You want to go? Okay. A few things come to mind. These aren't just one thing, but I would say number one, the most important thing you will ever pick is not your idea. The most important thing you will ever pick is your co-founder. Finding a founder is like being married. You're probably going to spend more time with your founder than you will your future wife. It's true. Pick a founder that you've known for a while. Joe and I have known each other for 10 years, and we worked together previously. I think the most important thing that we ever did, and Nate I want to include him as well, we also live together and we are all friends. The most important thing we ever did with Airbnb. I hope the cereal proves that there was an element of luck here and an element of us stumbling upon a really good idea, but I hope we've shown with the cereal that there was something special with the team. If we had to start a different business with this team, we probably would have been successful. I don't know about as successful, but we probably would have been successful. So I think that's the one thing that stands out to me: pick amazing co-founders. We met a number of people who don't have any co-founders, and you ask what do you do? That's a little more challenging advice, except that finding co-founders is like finding a wife. You've got to do a lot of dating. You have to spend a ton of time with a lot of different people. If you're sitting in your apartment by yourself, you're never going to find another co-founder. So you have to be out there, being around other people that are also doing things that interest you.

Yeah. And there are a few other things about that. You should probably not open an Excel spreadsheet before you have users. Why are you opening a spreadsheet if you don't have users? What that really means is not reading about really big market sizes and trying to back into a really interesting business based on what you think on a macro level a problem is and trying to model what your exit could be. As Joe says, we stumbled upon this business. We were solving our own problem. Solve your own problem. You probably have all different things on a daily basis that are annoying that if somebody would just come up with something, millions of people would probably want that as well.

All right. Talk to you later. Bye.