Jessica Livingston Interviews Airbnb Founders Brian Chesky & Joe Gebbia

Hey, how are you?

Yeah. Well, the backdrop that you're looking at is the result of a brainstorm that we had company-wide last week. We brought everybody together and we just started to brainstorm some really fun ideas for a certain section of Airbnb that we're looking to improve. So we've got it, it goes way beyond what you see here. So there's a lot of ideas, a lot of creativity.

Yep, it did. Yeah. So it literally all happened in this apartment that we're sitting in. So the people watching this, we're not seeing an office. This is our office, but it's actually a three-bedroom apartment. This is the reason we actually started this business. And the way it all worked out was that Joe was living here in San Francisco in this apartment. I was living in Los Angeles. Joe's other roommate here in San Francisco in this apartment, who they met on Craigslist, was Nate Blecharczyk. So Nate was a third co-founder. And of course, the concept hadn't started yet. I literally moved up here from Los Angeles and here we were. We had maybe a month of runway left. In other words, we had very little money in the bank. We had to figure out how we were going to make the next rent check. So our story is a little different than some of the other Y Combinator companies. We weren't aspiring to start a company and get funded by Y Combinator for a really long time. We were completely independent of that. There was a design conference coming to San Francisco, and here we were thinking we need to make money, we need to meet people because if you don't have a job, you better start networking. So we put the two together and decided why not create a little designer bed and breakfast for these people coming to this international design conference in San Francisco. It happened to be that first weekend coming up when Joe and I first moved in together, and we noticed on the conference website that all the hotels were sold out. They had listed like three or four hotels, and they all said they were sold out.

Big red letters. Sold out. Sold out.

And that was the light bulb for us. It was like, well, why don't we create a little designer bed and breakfast? We pulled out a couple air beds. And we had the original idea: air bed and breakfast. And what we always tell people is we weren't trying to start a business. We were trying to solve our own problem. And we did.

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 the industry can tell you that the users you thought you were starting this business for may not be the users you end up with because you have certain assumptions. 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 a passionate user and we had just come up with a concept like a day ago, 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. There's obviously a bigger market here.

Right. If you asked us a month before if we could predict that a guy would pay $80 a night to sleep on our kitchen floor, I would have told you you were crazy.

Yeah. So we literally weren't trying to start a business. Created this tiny website, Joe and I, in a couple days, launched it. Here we were. We made close to $1,000. We had an amazing time, these three people that we went around the whole city with. Basically created some new friendships. At this point, we started re-evaluating. In other words, maybe air bed and breakfast wasn't a way to make rent one weekend. Maybe there were other people that would be interested in doing it. We met people at the conference. First of all, a couple little design blogs had picked it up. Other people started saying that's such a cool concept. And the way you know something's good is, we would go home for Christmas a couple months later, and this is how you know something's good: when you go to a party or you're with your relatives or you're with an average person and they ask you what you're up to, and of course it's not just one thing because when you're not really doing just one big thing, you're doing like three things. So we'd each tell them, "Oh, we're doing this and we're doing a little consulting. We're doing this." And then we get this other thing, air bed and breakfast. They say, "What? What's that?" It would completely monopolize the conversation. So here you were just trying to tell them a few things we're doing, and suddenly the whole dinner table, they want to talk about that. You go to a party, that's what they want to talk about. You start to realize maybe that is what we should be spending our time on. If everyone else seems to think it's interesting, they start saying, "I would do that." On top of that, Jessica, I remember specifically getting emails from South America. I got an email from London. I got an email from Vancouver, an email from Japan. And these are people who read about us on the internet and they wanted to participate in this idea of airbedandbreakfast.com.

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.

What happened next is we realized we wanted to build a site where you could book a room anywhere around the world. But to start off with, we had this kind of fear, a bit of uncertainty. We didn't know if people would be comfortable booking rooms with strangers all over the world. And since we launched at a conference previously, we said why don't we instead create a site where you can book housing for conferences all over the country. And so that was the original concept. So we basically at this point we needed to get another person to help us build a site. Nate happened to be Joe's old roommate. I remember looking at Joe and saying, "Who's the most talented engineer that you know?" Nate was the person. He happened to be the person that was brought together through this proximity of this apartment. We brought Nate on and we basically created the next version of the site to provide housing for South by Southwest. This was in March of 2008. And at that time we thought, I remember meeting the guys at Justin.tv. And we saw all the success they were having. We figured, oh, we're just going to build this site and like a couple months from now, we're going to have the traction that Justin.tv has. We're going to have millions of users. Everyone's going to love it because it's such a good idea. And all I can say is that that was the beginning of a very, very long road before we actually started getting a lot of traction.

So we sometimes refer to this period where you're not getting a lot of traction as the trough of sorrow.

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: Airbed 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.

Yeah. So this is the first time we really used it, right? We remember we started the site as hosts to make money. So for South by Southwest in March of 2008, we decided to use it now as a traveler. And remember at the time, on Airbnb now you can just put your credit card in and book a room anywhere around the world just like you're booking a room on Orbitz. It's not too much difference. It's a little bit different, but back then it was a bit closer to Craigslist. In other words, we just connect you with people, then you would message them. We didn't even have a robust messaging system. So you'd eventually email them and you'd have to work out the payment. Basically, you'd have to show up with money. So I booked a room with this guy named Tiandong, a PhD candidate from University of Texas at Austin. He was this Vietnamese student. He was really cool. He picks me up at the airport. He and his girlfriend had prepared a traditional Vietnamese dinner for me. They had this nice air bed laid out in the living room, and it was awesome. But then an inevitable awkward scenario happened. He asked me, "Okay, where's my money?" He didn't ask it exactly like that, but it did feel a bit awkward. And I remember telling Joe after, "We have to really address this." And of course, looking back now, it's a great business model, right? Handle payments through the site, take 10%. You have a business model from day one. But that wasn't how we were thinking about it back then. How we were thinking about it back then was, man, this is going to be really weird if we end up becoming really big and we have all these users just exchanging cash in person. What value are we really adding? So we took that experience, Jessica, and there were two things that surfaced to the top. The first was that it's super awkward to exchange money in person, so let's bring it online with a credit card. And the second thing was more email started to flood in. I remember we got written up on Mashable and some of these other tech blogs based on our South by Southwest site, and we started to get a flood of emails again from people all around the world. People were saying, "I want to list my room or travel through your website, but there's no event that's taking place. How can I do this?" And so we started to broaden our perspective of what the site could actually be. And we said two things are going to change for the next relaunch. We're going to make it really easy to pay online with a credit card, and we're going to open it up to be a travel website. Events can participate if they want to, but you don't have to have an event in order to travel or host on air bed and breakfast. I also want to make one random comment, and that is that you can't tell because we're not going to move the camera, but where we're sitting right now, we're sitting in an actual bedroom. Part of the company works in this bedroom. This is soundproof. Anyone working on the phone is in this bedroom. Behind us, behind this wall, is a living room, and this is where the rest of the company works. The reason I bring this up is that this bedroom was a bedroom of our old roommate Phil Rieger. And Phil worked for Justin.tv. So you ask us what was our connection to Justin.tv? Well, it was because we one day randomly met a guy on Craigslist that needed a bedroom. And so this was separate from air bed and breakfast. This is actually before air bed and breakfast. Joe, he had this guy Phil, he's working for Justin.tv. He ends up becoming a roommate. And so here independently we start this website. We find out that Phil is working for this company that is getting a ton of traction. We didn't really know what Y Combinator was at the time, and that was pretty much our introduction to the startup world. We did not come from a background in startups. So that was really our background. And I remember at that point we then met up with Justin, Michael, Emmett, and the guys, and it was over the course of that summer that we really got an inside view of what it would be like to have a real startup. I remember we go to their offices and they had like 10 or 12 employees at the time. That seemed like a ton of people when you're just two or three guys working on a project, really struggling in your living room.

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." Three clicks to a 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, 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, 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, really challenging. We just believed so much in this idea that things like that were 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. At that time, all the candidates are speaking in front of like 5,000 people. So this is the first big speech he had, right? And it was so many people. Everyone started saying this is a phenomenon. It was 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.

Yeah, it was pivotal that we timed the launch specifically with the DNC in Denver. It was a big problem as Brian just said, and we ended up getting close to about 800 or 900 people in Denver to list their properties on the website. And this is the first time where we actually had serious inventory, serious selection. So people were coming to the website and they could actually find what they were looking for, whether their family was coming to the DNC or an individual traveler. So we got our first taste of what the website would be like if we had 800 listings in every city around the world. And that was enough to inspire us to keep going forward.

The wiggles of hope.

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, you're making all these mistakes. 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.

So this leads into the start of Y Combinator. In between the DNC and the start of Y Combinator, a lot of companies fail because even though you have this amazing idea, you're working for so long with no money. But what keeps you hopeful is that you're going to launch on TechCrunch, you're going to get this huge spike, everyone's going to know about you, and you're going to be living happily ever after. That's what keeps you going: the hope. Very few people never even get to the launch; they quit. But a lot of people get to the launch, they get a ton of press, and then you have this famous graph where you're struggling, you get this TechCrunch spike, and then you crash. And then you find out where your real traffic is, and then you've got this really long trough of sorrow. The one before you launch is just getting your product out there. After that, here we were, we were so excited about the DNC. We had all these people using it in Denver. I remember it was so exciting. We were at the Democratic National Convention. We come back to San Francisco and we had no users. That entire user base was gone. It was back to almost nothing. So we had to figure out, okay, we made a little money for the DNC. We have more rent checks coming up. We hadn't taken any investment at this point. It was absolutely no business going on. I remember at the time we were talking about for fun, what would we do if we could give hosts a little breakfast kit or something that they could give to the travelers coming to the Democratic National Convention? We did the same thing for the Republican National Convention as well. And we decided it would be a non-perishable breakfast. Well, what is a non-perishable breakfast? It's probably cereal. There's not many other things you could do. And the great thing about cereal is if we designed these cereal boxes, it'd be very easy to brand it. And so we started, and this was mostly for fun. We weren't thinking this as a huge business opportunity. It was just for fun. So late at night one night, we were thinking, well, what would a Barack Obama cereal look like? What would a John McCain cereal look like? For Barack Obama, it was just so obvious. What would a Barack Obama cereal be? It would be Obama O's, right? The breakfast of change. And Captain John McCain, he was a captain in the Navy. So that's when we said it would be Captain McCain's, just like Cap'n Crunch. And so we start designing this box, and before we knew it, because we're both design grads, we had this really cool design box. One thing led to another, and we ended up collaborating with an illustrator, a photographer, a printer, and we put together the now famous Obama O's and Cap'n McCain's cereal box collector's items. And we proceeded to not only sell these on the internet, but we sent these to every major press outlet across the United States. Jay Leno has a box of these. Oprah has a pair of these boxes. NBC, name a press outlet, they got a pair of these boxes. We thought it would be great exposure for the website. That's why we made the box. And there are 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. 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. It 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 ended 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.

So it's actually pretty funny. And I remember at one point my mom asked me because the business was making very little money. The cereal made us all this money. At some point, my mom asked, "Are you guys still a website? Are you a cereal company now?" And at some point we had to think about it.

People were very confused at this point. What kind of company are you? We're peddling cereal on the internet and we're trying to get a web startup going. But I think this speaks to the nature of our company, the way it's run. We're extremely frugal because we started with nothing. We literally had our credit cards to run our company off of from the early days. So we've always had to get creative to figure out ways to make money.

Well, I hope that 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 sometimes design 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. Some really important people have even said it. 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.

What's really unique, Jessica, is that both Brian and I studied product design or industrial design. When you focus on industrial design, like designing the product, you're really designing an experience, and it just takes the shape in the form of fill in the blank: a computer mouse, a laptop, a shoe. And I think a lot of those same principles that you are going through your mind as you're designing an experience for somebody as they open a package and pull a product out and turn it on for the first time, the same thing is running through your mind as you're thinking, okay, somebody comes to our website to search for accommodations. How, what happens next? And you're just in this mindset of how can I make this experience so easy for them, so simple that they don't have to think about it.

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?" So not to say that we're not analytics driven or metrics driven, but we also do a lot of things that designers do. 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. 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. What did he tell us to do? Paul Graham told us to 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 was medical equipment. So if we were designing medical equipment, this is actual hardware, right? You would go to the hospital, watch the patients. You would observe and you'd try to 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 during Y Combinator, and this is kind of leading into where Y Combinator started taking off. I remember we're sitting in Mountain View, California, meeting with Paul Graham, and he asked us, "Where are all your users?" 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. 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 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 if you're talking about 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.

So I think I remember you guys coming to dinner with a rolly bag. I just have that memory in my head. Tell me a story about when something went hilariously bad.

Oh god. Oh god.

Which one?

Yeah, we had so many stories. So this is a story that we haven't told in a public forum before. This is the first time. We told it once at a Y Combinator dinner. So let's go back to exactly a year ago. It was January 2009 and I was going to go to New York City for a meetup. We do meetups all over the country, and we go from city to city doing a meetup. This was going to be our first one in New York City. We had just done one in Washington DC. So I figured our New York City meetup was going to be huge. When you're just starting up, you tend to think things are going to be way bigger than they are. So we thought we were going to have this huge meetup in New York City. So I remember calling Joe up. What happened? I get a call from Brian on the morning of December 31st. He said, 'Joe, I'm going to have the meetup tonight in New York City.' We put an email out the night before to all of our hosts, and we're thinking there's a couple hundred hosts in New York City. We'd be lucky to get half of them. So like 200 people could come to this meetup, 100 to 200 people. And Brian says, 'Joe, I want you to get me some press. I want you to see about getting your news to show up.' I'm thinking, 'All right, Brian, I'm back here in San Francisco. It's like 9 in the morning, just waking up.' I get on the internet, and I Google all the local news stations in New York City. I find the numbers for all the producers and all the hotlines at these local news stations in New York, and I call every single one of them and I tell them that there's this amazing website called Airbedandbreakfast.com and there's hundreds of people in New York City hosting New Year's Eve travelers tonight, and they're going to get together for a meetup. There could be 100 to 200 people there. So I go down the list, and the producer is saying I'm going to call you back, maybe can you do a story? And then one person says this sounds really cool, I'm going to call you back. And I think what Joe's leaving out is that one of the tricks we do is we'll go to a city and the way you get press in a city is you use the scarcity principle. We're going to be here just tonight. This is your one shot. They didn't know they were going back to New York every single weekend. So we told them we're here just tonight. If you want to do this interview, you have to do it tonight. So they can't mull it over. You have to make a yes or no decision. So Joe starts at the top of the list, and I'm sure the first time he told them, 'The meetup's going to have like a hundred people. It's going to be really interesting.' They probably said no. So the next person he calls up, another local television station. He probably tells them now he's getting a little more excited. 'It's going to be 150 people. It's going to be really crazy. We have people from all over.' They still say no.

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 remember, 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?

It was one of the channels in New York. They said we're going to send a crew out. We're going to do the story. We'll meet him at the bar.

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. All right. So you can imagine, New Year's Eve, and I 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 and 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, I think, like 25 years old. And so they end up hosting a brother and sister at the time from Paris. And so they decided to cut a little B-roll basically to kill time. They said, 'Okay, cool. We're going to film basically this experience, this Parisian brother and sister staying at this apartment in the East Village.' And then they're like, 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. This place is going to be packed, right? We're about to walk into a bar. There's going to be people everywhere. They're going to be cheering. I walk in the bar and I see two older obese guys with hats on slumped over a bar, just drinking like a beer in each hand, and I'm thinking, 'Holy shit.' Excuse my language, but I was pretty nervous at this point. I'm like, 'Oh my god.' First thing I'm wondering is, 'Do we give them the wrong bar? Did we give them the wrong time? Where are all of our users?' And so the press reporter, this woman, she's probably like in her early 30s and she's really, really anxious because they had that big van outside the bar, you know, with the human antennas. They had a camera guy, a sound guy, a lighting guy, plus her. And 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. And it also turns out that the Rad Brothers, I told them ahead of time, make 50 gift bags so I can give out on camera. And they didn't tell me what was in the gift bags. So the Rad Brothers make these 50 gift bags. So I have these 50 gift bags sitting next to me. And it turns out that in the gift bags are just energy drinks and condoms. And they didn't know press was going to be there. So they thought they were just trying to do something really funny. They thought that'd be 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. So anyways, we're thinking, 'All right, well, 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. And I'm like sweating. I'm like, 'Oh my god, this is so embarrassing.' Everyone's pissed off at me. The bartender's pissed because the camera crew's in there. The press people are so angry at me. They're like, 'All right, let's just get this over with.' And 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's like yelling at me, this is so unprofessional. They're just really angry because they're waiting for hours to do a story. So I end up going in the street, and 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, 'Well, let's just film you walking down the street.' We decide because we have no users showing up to the party, we end up just corralling people on the street and asking them to pretend like they're our users and walk down the street with us. And 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, and the news made it look like they were our users, but they were just random people. They needed a story. And yeah, so that was a pretty interesting thing. You know, 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 end up showing is they go back to the B-roll of the Parisian couple, the brother and sister staying in an apartment in the East Village. And 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.

We have a good update for you, Jessica. So our first New York meetup had zero to one person show. That was our New York meetup.

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

And there's a lesson there. And that is that when we first started, we grew so much slower than I thought we would. We were looking at the guys at Justin TV and everyone else. We heard these stories about how Facebook was building in two weeks and within that period of time a certain percentage of the hard population was using it. You hear all these romantic stories. You think you're going to build something and everyone's going to love it. We came up with the idea in October of 2007. It was like 16 months from the time we had the idea to the time we had any momentum. I mean 16 months. It may even been longer than 16 months. So in general, when you first start, you think you're just going to have the idea. First of all, your idea is going to change. Our idea changed. Our original idea was airbeds for conferences, and our idea maybe changed less than a lot of startups, but we are not Airbnb for conferences. It's very different than what it was when we started. And I think that we were pretty close to being pretty focused. The other thing is that you're going to just struggle and you're going to have this trough. No matter how good your idea is, even if you are going to be that home run, that one company is going to become hugely successful, there's a very good chance that you're going to be struggling for months and months. It could be years before something really takes off, especially something that is a network play, a platform play like ours. So now I can say that I think maybe things are happening faster than we expected, but things are always happening way slower than you expected until one point you reach this kind of tipping point and then they start just accelerating. And then at that point, those are the stories you always hear. You always hear the stories about how it's growing so fast. I think people sometimes gloss over the trough of sorrow, but I don't think it's that unique. I think it happens all the time. I just think it's not super interesting. It's not the most exciting part of the story. So it's usually condensed. It's like, 'Oh, they struggled for a little period of time.' You don't get the sense of how long it was.

We'd love to. And I think a lot of these things stem from the fact that our home is our office. And for me personally at least, 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 kind of like 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. And so along with that, we come up with some extremely fun ideas to keep the workplace loose and creative.

Yeah.

So, 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 will do different activities together as a team. Usually it's kickball, sometimes it's ultimate frisbee, but it's very much something that's along the lines of elementary school. And it's just something that breaks up the day. We get outside, get some fresh air, get some sunshine, and everybody comes back really energetic and really enthused.

Every, it just so happens today is a Monday, and every Monday is actually we call Mustache Monday. And so I actually have my mustache right here. At least if I can put it on. There we go.

So we'll actually be in the open office like this.

Mustache Monday.

Yeah, even the girls have a mustache, but you know, you don't have to wear it all day. It's actually hard to talk on the phone with a mustache.

Yeah, a fake mustache. Yeah, I think you could talk with a real one. But yeah, I think the key is just having fun. You know, a lot of people are motivated by a couple things. Number one, they want to do something they feel like is important. So we want to be able to tell people that what we're doing if we're recruiting is we're doing something really important that's affecting people's lives. And number two, we're going to have fun doing it. And what do we mean by that? The mustache thing is just an example of saying that we don't take ourselves maybe too seriously. That we also have fun doing it. That we don't want it to feel like you're in high school again, sitting in a room, you have to be accountable. You can do things of significance and have fun doing it. So we also take trips together. We hit milestones. We travel. I know that Google, they have their 20% time and Google's 20% time, you can work on a project of your interest. Now, our 20% time, it's not to qualify. It's not 20% time. It's probably more like 5% time or 10% time, but our equivalent of that is traveling. So we have everyone in our company travel and you spend a portion of the year just traveling using the product. And in fact, everyone in the company had to book a room this month and travel and stay somewhere. A lot of the trips were local, but we really try to make sure that we get to travel and really have a lot of fun.

We did. Well, when we went to YC, we were struggling. I mean, we were on life support. The company had almost died like four or five times before that, and we had to do something. And we knew that by the end of Y Combinator, our goal, Nate, Brian, and myself, we committed to being a ramen profitable company, which is the term that PG coined. Yeah. I remember actually PG said, I think we're meeting in the very beginning of Y Combinator, and I remember PG, this is when people were not that they're not nervous about the economy now, but exactly a year ago they were even more nervous. There was a lot of uncertainty about people's ability to get investment. And he basically said one or two things. Number one, you better not need investors right now because it's going to be very hard to get money. And number two, even if you do want them, you better be able to stand up there on demo day and be able to show a graph going up and be able to say this is traffic, this is money. In other words, you better be able to say by demo day you're profitable one way or another. And to us, that meant ramen profitable. We had to get ramen profitable by demo day. And so that was our goal. And that's when during Y Combinator, the three of us like transformed into soldiers. And I remember Nate was sleeping on an airbed in my room because he didn't even live in San Francisco. He lived in Boston at the time, but for 3 months, he slept on an air bed on the floor in my room. We all woke up together. We ate breakfast together. We worked throughout the day together. We got dinner together. We went to the gym together. We came back and we worked until we couldn't keep our eyes open anymore. And it was that day in and day out for the entire Y Combinator experience. And when we woke up in the morning and when we went to bed at night, there was something waiting for us on our bathroom mirrors. And it was a graph of our revenue. And each time we looked at it, it brought us back thinking it encouraged us to reach that ramen profitable mark by demo day. So we drew a red line of where we need to be ramen profitable on this graph. And we looked at it obsessively. So I'm going to show you this graph now.

It was on our bathroom mirrors. It was on my bedroom door. It was everywhere around the office that I could possibly be. And we looked at this graph incessantly. And so then you can see like right before demo day, we over here, sorry. We hit the red line and it was like an amazing experience. I just, you know, we went up to the roof to drink champagne and celebrate.

Because it was such a milestone for us then.

Well, I think it was a number of things, but one of the most important things was that well actually here's a great another story. This segues into one of my favorite stories, and that is that I think a big part of it was meeting our users, and there was one user in particular that I think changed the trajectory of our business forever. So here we were. Remember our vision was airbeds for conferences. When we opened it up, it wasn't just airbeds for conferences. It was airbeds and bedrooms because you didn't have to just put an airbed. It could be a real bed all over the world. And that was the vision. And that was the vision in the beginning of Y Combinator until one day we go to New York City. We meet up with this user. This guy decides to put his entire apartment up. He has this beautiful penthouse apartment across the street from Carnegie Hall. His name's David. He decides to put it up. I remember we had a debate. Should we allow people to put up entire apartments? In other words, should we allow people to put up space when they're not there? Do they have to be there with the person? And at first, we had the assumption they had to be there. That was airbed and breakfast. We're still calling it that at the time. And just because so many people wanted to do this, and we met up with this guy, David, who turns out he was a musician and he was touring around the country. And so he told us every day, 'Brian, Joe, every day I'm not home, I'm losing money because I'm paying that rent. Plus, I got to get places to stay on the road. I'm losing money every time my room's not empty.' We realized his hair is on fire. Like, we needed to solve that problem for him as well. And he was an amazing host. Well, it turns out that this guy, this drummer, he was a musician. He was a drummer. It was Barry Manilow's drummer. This wasn't just any drummer. This was Barry Manilow's drummer. And I can say with confidence that Barry Manilow's drummer changed the trajectory of our business because of him. You now not only can rent out an extra bedroom or a living room, but you can rent anything anywhere on the website, and he was the one that really changed that assumption for us. It was the idea of meeting. Well, suddenly what happened in the middle of Y Combinator, instead of having a whole bunch of bedrooms for $40 a night, we also let people put up their entire apartments for like a hundred bucks or 80 bucks a night. And suddenly started getting all these bookings. So these apartments we never thought would ever even be on our site. And that really increased the revenue. I think that's one really important story.

Yeah, I think when you meet your users, you get a lot of stories and they'll tell you they're doing fun and they'll tell you all different reasons. The really important thing about our site is that we started right around the time that the economy started really going down, and 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, and we hear these stories all the time. We're traveling around the country hearing these stories, and it starts to resonate. You know, Paul Graham says, 'Make something people want.' And 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. And I remember this is actually two months ago, right before Christmas, we get this email and it comes in our inbox. It went to all of us, and it's from this host in New York City named Kendra. And I'm just going to read this email. It's a very short email, but you'll see what I mean. So 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.'

Well, I mean, the first thing that just came to mind when he asked that question was Paul Graham's permission for us to do things that don't scale. I never would have expected somebody of his caliber to say something that seemed so obvious or unapplicable to what we were trying to do, but I remember that advice completely shocked me.

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 you know, over the course of like three months you build a product, and over those three months it just takes off. The thing that surprised me was that we weren't the only ones. You know, we had an advantage in that we launched before Y Combinator, but a lot of the most successful companies, a lot of them had already launched or had already been working on their product. And I think the reason why is that there's this general notion that it's a very, very short process, but you know, 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. And so I think the fact that 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 just know that that was important. You know, remember with Justin TV, they entered I think at a much earlier stage, but for us it was a big difference.

Favorite dinner guest speaker. You had a couple of them that were really, really good. I really liked was it Yuri from Google? He was the director of Google search.

Oh, Udi Manber.

Thank you. Yeah, Udi was great. Greg McAdoo from Sequoia was really, really great because he had really simple advice. And we really liked a lot of the, I wasn't at the dinner but Javi Kurim from YouTube told some I guess some amazing stories about the early days of PayPal.

That's right. Javi had some really kind of detailed stories that you know about the early days of YouTube and how they hit this amazing like 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 like, and not in a bad way but in a really good way, it felt very competitive. In other words, we have these things like prototype day. Halfway through Y Combinator, it's prototype day and you have to basically simulate demo day. So or actually maybe prototype day is the one right before demo day. But what's the halfway point one? It's

Prototype day is the halfway point.

Okay. So prototype is the halfway point. Okay. And so what prototype day is is every single company has to get up there and basically do their demo day pitch. It's like only a five or 10 minute pitch and they have to pitch to all the other Y Combinator companies. And Paul Graham doesn't ask you who's your favorite startup. What website would you use? He said if you could own 10% of any company, which company would you buy 10% stock in? And that was a really, really good question because you had to basically think like an investor and like you know they basically then there were rankings and so he'd announced the winners because everyone got three votes. It was very, very competitive and then right before demo day he'd do the same exercise with the founders. And so I think you know we were all like there's like it was a combination of on one side 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 they really like their whole website changed like 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 like the big company but they're actually looking really, really good and it pushed you to work really, 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. I mean, what's really the difference when you're starting up? It's like 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. And so, you know, the trough was incredibly lonely point. I think the press things kind of kept us going, but

Then we had each other. We had each other.

Yeah.

You know, I think though that the camaraderie of Y Combinator, it's just so so important.

That's nice. One other thing, Jessica, that came to mind that that surprised me about Y Combinator is actually how much it models a semester at RISD because a semester at RISD is this incredibly kind of stressful creative time where you have this like 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 and 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 the final critique where you present to advisors and critics and your classmates and teachers and that's very much what demo day was like where you're presenting in front of you know the who's who of Silicon Valley and your peers. So I just felt like the same creativity that RISD pulled out of me, Y Combinator did the same exact thing.

Oh and the other really good thing about Y Combinator is the deadline, right? I think there are so many people that are working on a website, they could probably just launch in a month if they had to. And you know what? They're not going to launch in a month. They're going to launch in like six months. And why? No good reason. They think it's not ready yet. Having that deadline means that you need to like know you're at a certain level. It's like the right amount of pressure and it's hard to simulate that, right?

And I think it'd be really cool to ask yourself like what are other ways to simulate that kind of pressure? And we try to keep doing that ever since. But the people often tell you the hardest time they ever worked was during Y Combinator because you go from like nothing to this huge like Super Bowl type event for founder. I mean it just feels like a huge thing and you have a very short period of time and so you've got to work super super hard and you know that you can't just push. It's not like meetings that you can push back. 'Oh, I'm going to wait to meet with investors like 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 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. Launch early and launch often.

Yeah.

Specific to Y Combinator?

Just specific to starting a startup.

There's so much.

Just think of one thing.

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

There's so much trust that's involved. It's you know it's like in everything that Brian just said. I think a piece of advice that I'd give is to really solve a problem that you can empathize with. Like solve something personal to you so that you actually really care about it. I have people that come up to me and they have an idea for a company and it's an idea that their friend gave them because it was a friend's problem and immediately I'm a little hesitant about it because they haven't experienced it themselves. I think even going back to product design, some of the best products come from solving your own problem. And I just think that you know for somebody who's looking for an idea to start a company, just look around you. Where do you feel pain throughout the course of the day? Like where's there a point in time where you're just like super frustrated, like 'Why is this like this? It could be better.' I think that's the perfect jumping point for an idea to start a company.

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

All right. Thanks, Jessica.

All right. Talk to you later. Bye.