Brian Chesky and Joe Gebbia were friends studying in Rhode Island School of Design.Gebbia were doing dual degree in graphic and industrial design,while Chesky was student of Arts,but later on he also selected industrial design seeing its good scope. After graduation, Chesky moved to Los Angeles where he joined a company, 3DID, to make career in industrial design. But he became disinterested in that work later on. On the other hand, Gebbia joined as a graphic designer at Chronicle Books located in San Francisco,and also started side business of making seat cushions. After leaving the job of industrial designer ,Chesky applied for a job in a San Francisco company called Method,which is a rapidly growing home products manufacturing company,but he was disqualified in the final interview. Gebbia also lived in San Francisco with roommates but because of the expensive rent, they left him. Hence, Gebbia requested Chesky to join him in San Francisco,but he was not able to join him up to November. Because of this, Gebbia decided to leave the room as its rent was $1150.Later on, Chesky accepted his request,and they started living together in the same apartment in San Francisco.
At that time, the annual meeting of two companies, Industrial Design Society of America and International Council Societies of Industrial Design, was going to be held. Chesky and Gebbia knew that hotels would be packed as well as expensive at that time. So they decided to rent out their extra space in their flat which consisted of a large bedroom, a living room and a kitchen, to those people who were unable to find hotel a room. They also managed breakfast along with the airbed of their room, and it was named as Airbed and Breakfast. It was an odd idea which they mailed to different blogs for promotion. Consequently, the room was booked by three people. This helped them earn $1000 in a week. They included their friend, Nathaniel Blecharczyk,a computer engineer with excellent coding skills. The website for the company was kept ‘roommates.com’, but another website with the same name already existed. Their website was targeted at booking home rooms at the time of conferences when hotel rooms would be sold out. Nathaniel Blecharczyk was the only engineer in the whole group who had to design the website. He worked top re launch the lite version of the site which was named as Airbedandbreakfast.com.At first Chesky had thought of making it free like couchsurfing.com but Gebbia and Nathaniel had convinced him for making it a paying website.
Their third roommate, Phil Reyneri, used to work in a startup company called Justin.TV.He had told about their idea to his CEO, Michael Siebel which he liked so much.So he promised to fix their meeting with Paul Graham, the CEO of Y-Combinator, which is a renowned investment company based on Silicon Valley. He also promised to get them in touch with angel investors. Gebbia, Chesky and Nathaniel refined their idea as they decided that their website would enable room booking not only at the time of conference, but at any time like booking a hotel room. Michael helped them to get in touch with seven investors but they refused to invest thinking that it would be difficult to convince people to sleep in other people’s flat. In the mean time only, Democratic National Convention was going to organize a summit in which Barrack Obama, the nominated candidate for the President of the USA, 2008, was going to give a speech. The venue of this program was shifted from Pepsi Center to Invesco Field, Denver. Total eighty thousand people were estimated to attend the summit the hotels there had only twenty seven thousand rooms available. Targeting the summit, it was re launched for the third time on August 11, 2008 in collaboration with a tech blog named Techcrunch.com. Also a reputed national daily like New York Daily News had published about it and as a result eight hundred people listed homes in their site out of which eighty rooms were booked. As soon as the convention was over, they face financial crisis once again as still no investors were found. Hence they launched a limited edition of cereal which they named as ‘Obama O’s’. They had sold five hundred boxes of it at $40 whose per box investment was just $2.This helped them pay the loan.
On November 2008, Michael fixed their meeting with Paul Graham, the CEO of Y –Combinator.Y Combinator is such a platform which does funding as well as helps in making business strategies, plans etc. required for runni8ng a business. Because of this it has become a renowned investment company. In that interview, Paul and his friends were going to ask were going to ask rapid fire questions. However, the interview didn’t go well. After the interview, Nathaniel gifted the “Obama O’s” cereal box to Paul Graham which he had brought secretly. When Paul knew the story behind “Obama O’s” cereal box, he was confident that if they could convince the people to buy the $2 cereal box at $40, they could also convince the people to sleep at others flat. Paul Graham told them to get ready for the demo day when they had to prove that their business was a profitable one. According to Y-Combinator,a business becomes profitable when it is able to sustain at least the monthly expenses of the founders. To prepare for the demo day, all three of them would wake up early and used to practice it the midnight the whole week. When Paul knew that most of their users were based on New York, he advised them to gather the views and problems of the people of that place. When Chesky and Gebbia went to New York, they knew that the people were mainly facing two kinds of problems. First, they had confusion about the renting price and second, the quality of the photo of their house taken by them was low. So to solve this professional photographer was sent. They also explained the people how the new business would help them earn money. They convinced seven hundred home owners to list their extra space out of which one hundred fifty were booked. When the demo day was near, the booking in their site increased by 20 people per day which was a ray of hope for them as they were earning $1000 weekly.
On April 2009,Greg McAdoo ,the partner at Sequoia Venture Capital, had come to visit Y-Combinator.Sequoia Venture is that investment firm which had invested in renowned companies like Google, Apple and Oracle. Greg had liked Airbnb’s idea of community based home sharing concept. In addition to this, Greg was also talking with Youniversity Ventures. The Youniversity Ventures comprises of Javed Karim, Youtube’s founder; Kevin Hartz, co-founder of Xoom and Eventbrite and Keith Robois, the ex-top executive of PayPal, LinkedIn and Square. After a few weeks, Airbnb received an additional fund of $585000 from Sequoia and $30000 from Youniversity which valued the company to $2.4 million. In August, the booking increased to seventy people per day and they paid themselves an annual salary of $60000 each.
According to Silicon Valley, their business was a market fit product as it had probable customers and it was able to fulfill the demand of the people. On August 2009, Airbnb’s weekly income reached $10000.To manage the growing company, two engineers, Nick Grandy and Zoe Zadech were appointed. Gebbia and Chesky often met with people and explained about their business idea to expand it. Airbnb’s working system is similar to that of eBay which works on commission basis. For example-a person books a room at $100 per night in which Airbnb charges $12 extra as service charge. Also it takes $3 extra from the host which means the host gets only $97 and Airbnb’s commission becomes $15.To ensure its website function properly, Nathaniel has kept a phone alert system. If the site cracks down, he gets a message alert “Airbnb deflates” and when it’s restored he gets the message “Airbnb fluffed.”
Looking at its popularity, Greylock partners and Andresen Horowitz invested $7.2 million and $112 million respectively which valued the company to $1.2 billion. While Airbnb was in the phase of development, three brothers from Germany named Mare, Alexander and Oliver Samware had started a copy cat company of Airbnb called Wimdu. Their business was starting a copycat website of the original companies and sells it to the same original company after they came to the European market. They had already earned millions of dollars selling the copy cat websites similar to eBay, Zappos and Amazon. When they had proposed to sell Wimdu, Airbnb’s copy cat website, Paul Graham suggested them to reject the proposal as Wimdu had more than four hundred employees which would cost a lot to Airbnb.Airbnb was already in thirty four thousand cities of one hundred ninety one countries and it spread its network in Europe as well with the help of another company called Accoleo.
While people doubted about Airbnb’s security system, an incident occurred at a house that belonged to a woman named EJ.Her home was rented through Airbnb and her possessions like camera, iPod, computer etc. were stolen. Also the house was vandalized badly. This news went viral when she posted about it through her blog ion June 29, 2011.As a response to it, Brian Chesky organized a press conference informing that the culprit was arrested but again EJ posted another blog defending Chesky’s saying that nothing was done. To control the situation, Chesky posted another blog post apologizing for the delay in action and announce $50000 compensation for such events which was increased to $1 million later on. The main reason for delay in EJ’s case was the lack of proper communication. Hence, a communication officer, Kim Rubey was appointed in case of such unexpected incidents.
Because of Airbnb’s growing popularity, the famous Hollywood actress, Gwyneth Paltrow, also booked the room for vacation of 2013 through Airbnb.Airbnb has a listing of three millions which include the unique listings like castles, windmills, houseboats, tree house, shipping container houses etc. The most popular listing is the Mushroom Dome located in Aptos, California. To encourage more people for listing their homes in Airbnb, Chip Conley was appointed as the Hospitality Manager in 2013 who is the owner of world’s famous hotel chain, Joie de Vivre boutique hotel chain. He trained the Airbnb’s host by providing them tips and ideas about hosting .Airbnb also started organic search I which the good hosts were shown on the top search lists while the bad one were permanently deleted from the site.
Besides these, it had to face the incident of racial discrimination as well. It was found in a research that the black Americans earned much less than the white Americans although the location and quality of house was same. The whites earned 12% more than the blacks. Also the black Americans were 16% more likely to be rejected than the white Americans when they booked any room. Hence, Airbnb warned its members not to practice racial discriminations and prohibited any such practice. Every host has to sign the “Community Commitment” ensuring that no discrimination is done and this step was welcomed by the African-Americans.
These all events were just the trailers. The real problem began when the American law considered it the short term rentals to be illegal. In 2010, New York addressed the multiple dwelling laws, in which it was announced that renting home for less than a month in the absence of the owner, was illegal. Although it was not targeted at Airbnb, it was going to affect it badly as majority of its market was based on New York only. This bill was passed by the Governor Andrew Cuomo. To stop these activities, Airbnb decided to mobilize its hosts with the message that Airbnb was helping the middle-class New Yorkers. This was made through the TV advertisement entitled “Meet Carol” in which an African-American woman was featured. According to a report of 2015, the Airbnb hosts earned up to $3.2 billion in which the hosts of New York alone had earned $1.5 billion. When Aston Kutcher, the investor and TV actor wrote a letter to Linda Rosenthal, the woman representative of New York State assembly defending about Airbnb, she told that it was useless to do so. In order stop such an affecting step of New York, Airbnb appointed Josh Meltzer as the head of policy of New York. He had worked for Attorney General Schneiderman previously. Similarly, for assisting the labor union, the former chief of Service Employees International Union, Andy Stern was appointed. The short term rental law announced that a person would be fined up to $7500 if they were found to be renting the room for less than thirty days. This law was passed on Friday, October 2016 by Governor Cuomo.
A few days later Airbnb protested against it with the display cards that said “Each cent pays my rent” and “Freelancers for Airbnb.” Later on this matter was solved with the agreement to punish only the possible wrong doers in Airbnb. Coming through all these difficulties and obstacles, Airbnb’s net worth in 2016 was $25 billion. In Silicon Valley’s history, there are many start ups that have either gone bankrupt or have been fully shut down after reaching a certain height of success due to the dispute over money and position. However, Airbnb has remained an exception in this case as it is growing continuously. The main reason for this is that the founders are always interested on learning something new. Brian Chesky, the CEO of the company had no any previous experience as he had taken over that position at a very early age. He was neither an MBA nor a business man. The credit for his success goes to his never ending desire for learning something new. To keep himself updated with new things and learn about the management, he has spent countless hours with people like Michael Seibel, Paul Graham, Greg McAdoo, Reid Hoffman, Mark Andreessen and Ben Horowitz. He has learnt to build up and manage Tech Company from them. In the same way, he has learnt about design from Johnny Ive of Apple, management lessons from Jeff Weiner and Bob Iger, product expansion lessons from Mark Zuckerberg of Facebook. Similarly, he also learnt not to run after the rumor from Warren Buffet. Besides he also spends several hours reading management books which has enhanced and polished his management skills. He also makes notes of anything he finds interesting, discusses about it with people and becomes ever ready for any kind of challenges.
Every year Airbnb organizes three day festival for top five thousand hosts to make them feel intimated towards the company. Chesky had studied about world’s giant companies like Google, Apple and Amazon. From that study, he had found out two things. First one was that if any tech company wants to survive for a long term, it has to start a new project and the second one was that the new project has to be started in the personal effort of the CEO .For example-Amazon used to sell only books in the beginning,but later on it became everything store due to which it is the richest company in the world today. Airbnb is also determined to launch such unique projects which have been named as “The Magical Trips.”Under this project, people can enjoy the tour of different perfume houses, 1920s themed dinner parties, midnight mysterious bike rides and so on. Such kind of out of track packages are supposed to make the bond between the customer and the company much deeper that ultimately helps in generating extra income for the company.
Airbnb’s current value is $31 billion(2017) which was achieved just in a period of nine years. Renting extra space of home is not a new idea as it was already started in the decade of 1950s.But it was given a new and commercial concept by Chesky,Gebbia and Nathaniel. This new concept got a hungry audience which made it a grand success. Neither of them was a businessman,and they faced several difficulties in the initial phase, made thousands of mistakes, but they kept on learning from those things which sharpened their business skills. In today’s era when hotels have been commercialized,lacking intimacy, people have started desiring for a family like place with a family like environment. This has been turned into reality which is the key to Airbnb’s success. If you are worried thinking that it’s difficult to start a company, just remember the fact that Airbnb was started by a group of three unemployed students, who had once hard times paying the rent,and even buying a liter of milk for breakfast.