HOW AIRBNB STARTED?

Information articles

  • Frank
  • 20.12.2019

How could Airbnb – from a long-term startup with only $ 200 a week in a row, eat cereals through the day – could turn the tide to become a $ 10 billion business?

Marc Andreessen and his venture sidekick Ben Horowitz are two of the most outspoken investors against the notion that there’s a Web bubble brewing. Their latest $60 million beton a three-year-old online home-sharing start-up is sure to renew those talks, right or wrong.

Around the stroke of midnight, Airbnb announced it raised $112 million in funding from Andreessen Horowitz, DST Global and General Catalyst Partners, more than 14 times the $7.8 million the company raised previously since it was seeded by the Y Combinator accelerator program in January 2009.Just three summers ago, Chief Executive Brian Chesky and his fellow 20-something co-founders Joe Gebbia and Nathan Blecharczyk enrolled in the Y Combinator program after many venture capitalists passed on his idea to allow people to rent out their beds to others. They originally put the site together to raise rent money by renting out their own San Francisco apartment in October 2007 for local conference-goers.

(*) Y Combinator: a small-scale fund, only disbursing about $ 120,000 for many startups.

Here’s how Chesky describes Airbnb’s early history (on the question-and-answer website Quora):

Airbnb approaches many investors in 2008. Most say “the market is too small.” Some are concerned 2 of the 3 founders are designers, thus creating a founding team DNA different from the success patterns they are looking for.

Running out of money, Airbnb starts selling collectible cereal, and makes $30,000 in the process. (See the Startup School talk for more about this here: http://www.justin.tv/startupscho…)

With their website low in traffic, their kitchen is without food. Airbnb starts living off their collectible cereal. This is a low point.

At a dinner with the founders of Justin.tv in November, 2008, Airbnb is convinced to apply for Y-Combinator. Paul Graham thinks “the idea is terrible,” but likes the founders because they “won’t die,” and are “very imaginative.” He decides to accept them. Airbnb finally raises $20,000.

By Demo Day in April, 2009, Airbnb becomes “ramen profitable,” and finally stops eating the leftover collectible cereal in their kitchen. Sequoia Capital takes notice. Sequoia leads a Seed Round of $600,000, led by Greg McAdoo. Keith Rabois, Kevin Hartz, and Jawed Karim of Youniversity Ventures participate.

700,000 nights booked later, Airbnb announces a Series A Round of $7,200,000 led by Sequoia Capital and Greylock Partners to expand from 8,000 cities to every city known to humankind. Reid Hoffman leads the round for Greylock Partners. New angels include Ron Conway, Jeremy Stoppelman, and Elad Gil.

Fred Wilson, a partner at New York venture firm Union Square Ventures, described in March how his firm made the mistake in early 2009 to pass on investing in Airbnb. You can hardly fault Wilson, or other VCs at the time, since Airbnb was nothing but an unproven marketplace for air mattresses on the floors of people’s apartments. “We made the classic mistake that all investors make,” Wilson wrote. “We focused too much on what they were doing at the time and not enough on what they could do, would do, and did do.” Wilson, whose firm displays a box of collectible cereal “Obama O’s” in the office as a reminder, added: “Airbnb is well on its way to building the ‘eBay of spaces.’ I’m pretty sure it will be a billion dollar business in time.”

who is notably sitting pretty is celebrity punker Ashton Kutcher, who in March joined the company as an investor and “strategic advisor.”

Airbnb doesn’t disclose its revenue, but its growth is explosive by all accounts. Airbnb says it now has booked more than 2 million nights, a number that has doubled in the past four months, and it receives over 30 million page views per month. Airbnb charges hosts 3% of the listing price and travelers a 6-12% on top of the host’s price.

The site now features rentals in 186 countries and more than 16,000 cities around the world. In the U.S., the company faces competition from vacation rental site HomeAway Inc., which recently held an initial public offering, and from the hotel market since Airbnb bills itself as an alternative. Last month, a similar site to Airbnb launched in London with a $90 million funding round.



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