How Airbnb Got that Way
Today, Airbnb has 2 million listings in 34,000 cities, but less than a decade ago, it wasn’t much at all – just two broke art school friends renting their apartment in San Francisco.
In 2007, Brian Chesky and Joe Gebbia, two Rhode Island School of Design graduates, made their first foray into the room rental business when they discovered that hotels in their area had sold out during an industrial design conference. They were broke (they lived in San Francisco, after all) and decided to rent out an air mattress in their apartment. By the end of the conference they had made $1,000, and they knew they were on to something.
Chesky and Gebbia soon brought in Nathan Blecharczyk, who had worked at Microsoft, to help them build a website and find listings.
In 2008 when hotels in Denver sold out for the Democratic National Convention, Airbnb got a big boost when 1,000 hosts welcomed convention goers.
“Obama supporters can host other Obama supporters from all over the world,” Chesky told Vator News when discussing the convention. “All we did was become part of the story.”
Around convention time the founders also purchased bulk cereal and designed packaging for boxes of ‘Obama’s O’s’ and ‘Cap’n McCain‘ to sell on their site. What was initially designed to be a PR stunt ended up making them more than $30,000 when they sold 800 boxes.
Money from investors wasn’t as easy to come by, though. Although Airbnb is now valued at $30 billion, it took a while to raise cash.
“When we started this company, people thought we were crazy,” Chesky said during an employee orientation last year. “They said strangers will never stay with strangers, and horrible things are going to happen.” Investors were just as skeptical.
During Airbnb’s first year in business, every investor they pitched turned them down, according to Fast Company.
At the beginning of 2009, things started to change, including their website domain which they moved from Airbedandbreakfast.com to Airbnb.com. The company raised $20,000 in seed capital from Y Combinator and later that year $600,000 from Sequoia Capital. At the end of 2010 the big money came in–$7.2 million from Greylock Partners.
In 2011, Airbnb received $112 million in series B funding from Andreessen Horowitz. And this was also the year the company announced it’s 1 millionth night booked.
The year wasn’t all positive for the company. 2011 also marked the company’s first big scandal. A San Francisco host’s home was burglarized and vandalized by Airbnb guests.
At the time Airbnb offered no insurance to hosts. “We weren’t prepared for the crisis, and we dropped the ball,” wrote Chesky in an Airbnb blog post. “Our job’s not done yet; we’re still evolving.”
On August 15, the company implemented a $50,000 Airbnb Guarantee. It’s now been raised to $1 million.
This guarantee would presumably cover Chesky, who occasionally still rents out his couch in that original San Francisco apartment for around $40 a night.
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