Weekend Herald

Air beds a way to make ‘ a few bucks’

In his new book, How I Built This, Guy Raz ex­plains how a group of friends started Airbnb, a multi­bil­lion­dol­lar com­pany which has more than seven mil­lion list­ings in more than 100,000 cities


Typ­i­cally, when we talk about boot­strap­ping, it’s a fi­nan­cial con­ver­sa­tion, and to an ex­tent that will al­ways be true. With­out other peo­ple’s money to stand up your busi­ness — whether it’s from friends and fam­ily, ven­ture cap­i­tal, or some­thing like an SBA [ US, Small Busi­ness Ad­min­is­tra­tion] loan — you have to find other ways to pay for things: credit cards, per­sonal sav­ings, cy­cling prof­its back into the busi­ness.

But hav­ing spo­ken to hun­dreds of bril­liant en­trepreneur­s, I know that boot­strap­ping is more than sim­ply us­ing al­ter­na­tive sources of per­sonal fi­nanc­ing as a last re­sort. It’s also about keep­ing con­trol of your busi­ness as long as you can. It’s about us­ing other non- mon­e­tary as­sets to solve prob­lems that you would oth­er­wise hire some­one else to solve or throw money at — as­sets like your time, your ef­fort, your net­work, and your own tal­ent and in­ge­nu­ity.

Joe Geb­bia, Brian Ch­esky, and Nathan Blechar­czyk lever­aged ev­ery one of those re­sources in 2007 and 2008 to boot­strap their way into the peer- to- peer on­line hos­pi­tal­ity plat­form that we know to­day as Airbnb.

Airbnb be­gan as a web­site called Airbe­dand­break­fast.com that was de­signed to of­fer a place to stay for at­ten­dees of large con­fer­ences once all the ho­tel rooms in the host city were sold out. The idea came to Joe one day in Septem­ber 2007 as he sat at home surf­ing the in­ter­net, won­der­ing how he was go­ing to make rent and not lose a friend.

See, Joe’s land­lord had just raised his rent by 25 per cent mere weeks af­ter Joe had con­vinced his new room­mate, Brian Ch­esky, to quit his job down in Los Angeles and move up to San Fran­cisco to start a com­pany to­gether. What com­pany? Well, that part they hadn’t fig­ured out yet.

As luck would have it, there was an in­dus­trial de­sign con­fer­ence com­ing to San Fran­cisco a cou­ple weeks later that they were think­ing about at­tend­ing — he and Brian were both grad­u­ates of the Rhode Is­land School of De­sign ( RISD) — and when Joe nav­i­gated to the con­fer­ence web­site to check if passes were still avail­able, he saw right there on the front page, in big red letters, the words ho­tels sold out.

The idea be­came clear to Joe right away: “I’m think­ing, ‘ What a bum­mer. De­sign­ers are go­ing to come last minute, and they’re not go­ing to have a place to stay.’ In that in­stant, I’m look­ing around the liv­ing room, and I go, ‘ Wait, we have so much ex­tra space here, and I have air beds in the closet.’ And so the idea of host­ing peo­ple on air beds grad­u­ally be­came nat­u­ral to me.”

He brought the idea to Brian, his room­mate. Brian had $ 1000 to his name when he moved up to San Fran­cisco that month. His por­tion of the rent was $ 1050 per month. Even I can do that math. As odd an idea as this may have seemed in the mo­ment, it was a no- brainer to some­one who had no money.

“It’ll be more than just a place to sleep,” Joe thought at the time.

“We can cook break­fast in the morn­ing, we’ll pick them up from the air­port and give them a neigh­bour­hood guide and maps of San Fran­cisco.”

This is how he pitched it to Brian, in an email made fa­mous when it was pre­sented on the TED stage in 2016.

Brian I thought of a way to make a few bucks — turn­ing our place into de­sign­ers’ bed and break­fast — of­fer­ing young de­sign­ers who come into a town a place to crash dur­ing the 4 day event, com­plete with wire­less in­ter­net, a small desk space, a sleep­ing mat, and break­fast each morn­ing. Ha!

BRIAN WAS in. To­gether, they used their de­sign chops to quickly build a sim­ple web­site. It de­scribed who they were, what the idea was — sleep on our liv­ing room floor on an air mat­tress for $ 80 per night, ba­si­cally — and all the other stuff they would pro­vide as part of the deal.

And when Joe said “they”, he meant they: Joe and Brian. Which is ex­actly how it all worked out for the three guests they had space for.

“They stayed with us, and we got to show them San Fran­cisco. They got to feel like they be­longed there in the sense that they didn’t feel like out­siders,” Joe said.

Ev­ery­thing their guests did out­side the con­fer­ence was ar­ranged for or guided by Joe and Brian. If this had been a cruise, they were the ship­builders, the cap­tains, the so­cial di­rec­tors, the nav­i­ga­tors and engi­neers, the cooks, and the house­keep­ing staff, all rolled into two guys.

“I’ll never for­get say­ing good­bye,” Joe re­called, “and watch­ing the door click closed and think­ing, ‘ What if we made it pos­si­ble for other peo­ple to also share their ex­pe­ri­ence and to host guests in their home and show off their city?”’

To do that, they would need a much more ro­bust web­site that re­quired a level of tech­ni­cal ex­per­tise nei­ther Joe nor Brian pos­sessed. With no money to hire pro­gram­mers, they would need to lever­age their net­work to find one. For­tu­nately, Joe knew a guy. An en­gi­neer with a com­puter sci­ence de­gree from Har­vard named Nate Blechar­czyk, who just hap­pened to be the room­mate that Brian re­placed when he moved in with Joe.

Af­ter the hol­i­days, Joe gave Nate a call and they met for a drink. “So here we are in Jan­uary 2008, with an idea and no en­gi­neer,” Joe said, “and I tell him about this week­end ex­per­i­ment with these three guests, and he loved the idea.”

Even­tu­ally, the three of them de­cided the per­fect time to re- launch Airbe­dand­break­fast.com would be at the next big tech con­fer­ence, which hap­pened to be South by South­west ( SXSW) in Austin, Texas, in March. By the time they came to this strate­gic de­ci­sion, the con­fer­ence was less than a month away. The turn­around was tight, but the op­por­tu­nity was ideal.

“It’s the place where some of the tech greats had launched be­fore us. Twit­ter had

launched there, Foursquare, and oth­ers. We were just go­ing to fol­low the rocket ship that all of them did,” Joe ex­plained. Plus, “ev­ery year the same thing hap­pens. The ho­tels sell out months in ad­vance, [ and] peo­ple scram­ble for hous­ing.”

What bet­ter sce­nario for an on­line hos­pi­tal­ity plat­form born from a to­tal lack of ho­tel room ca­pac­ity? For the next three weeks, they worked out of Joe and Brian’s apart­ment, day in and day out, re­build­ing the web­site — Joe do­ing the de­sign, Nate do­ing the cod­ing, and Brian do­ing ev­ery­thing else re­quired to turn an idea into a busi­ness. With no money. On “half a shoe­string”, as Joe said.

THEY LAUNCHED the site with six list­ings, just in time for the con­fer­ence. Un­for­tu­nately, only two peo­ple booked. And one of them was Brian. “It was com­pletely de­mor­al­is­ing,” Joe said. “Here was this idea that we were so ex­cited about, and no­body took us up on the idea.”

But they re­alised a cou­ple of key things in the process. One was that ex­chang­ing money in per­son, es­pe­cially in a home, is re­ally weird, so they should prob­a­bly have the fi­nan­cial trans­ac­tion piece on­line. The sec­ond was that there may be peo­ple who like to travel for rea­sons other than con­fer­ences, who are also in­ter­ested in the idea of stay­ing in some­one’s home — with or with­out the air mat­tress, os­ten­si­bly — so maybe this idea shouldn’t just be tied to con­fer­ence sites.

“We said, ‘ Well, let’s add pay­ments, and let’s make this a travel site,’” Joe said.

“And that’s when we had an idea, which was to re­launch this new ver­sion of our ser­vice at the crest of a tidal wave of press.”

In 2008, there was a tsunami of at­ten­tion spread­ing across the coun­try.

It was fol­low­ing the his­tor­i­cally seis­mic can­di­dacy of Barack Obama for the pres­i­dency of the United States, and that sum­mer it was set to crash into Den­ver, Colorado, at the Demo­cratic Na­tional Con­ven­tion, where Obama was go­ing to speak and ac­cept the Demo­cratic nom­i­na­tion for pres­i­dent. This pre­sented a unique op­por­tu­nity.

“A hun­dred thou­sand peo­ple were an­tic­i­pated to see Obama speak, and there were less than 30,000 ho­tel rooms, most of which were picked up by del­e­gates,” Joe re­mem­bered.

It was a le­git­i­mate hous­ing cri­sis. At one point, Den­ver’s mayor even con­sid­ered open­ing the city’s parks to campers. Sud­denly, there was a real need for the ser­vice that Joe, Brian, and Nate were try­ing to bring into be­ing.

They just had to get the word out. “We thought what if we timed the re­launch of our ser­vice dur­ing the DNC? We can ride the coat- tails of all the Obama press to bring a lot of aware­ness to this mar­ket­place,” Joe said.

So that’s ex­actly what they did. While Nate worked on shift­ing the web­site from its con­fer­ence ori­en­ta­tion to a travel fo­cus and then adding an on­line pay­ment func­tion, Joe and Brian flew to Den­ver.

They talked to any­one who would give them 10 minutes un­til they fi­nally started to get some trac­tion.

“We got lo­cal press, which turned into the re­gional press, which turned into na­tional press,” Joe said.

Joe and Brian even did a live in­ter­view with CNN from their liv­ing room. Within a mat­ter of four weeks af­ter the con­ven­tion, they man­aged to add

800 homes to their web­site and process 100 book­ings.

“I thought that this was it,” Joe said.

“This was our rocket ship to the moon.”

And they’d boot­strapped the en­tire thing. More than that, they’d shown proof of con­cept; they’d evinced their own wor­thi­ness as smart, agile en­trepreneur­s; and best of all, they con­trolled 100 per cent of the busi­ness.

What bet­ter time to pur­sue in­vest­ment ( like the Method guys did) than when it feels like your new ven­ture is headed into the strato­sphere and you’re in con­trol at the helm? Through their con­nec­tions in San Fran­cisco, Joe and Brian were in­tro­duced to 20 dif­fer­ent in­vestors from Sand Hill Road. They emailed each one of them their pitch deck.

But it didn’t go great.

“Ten of them re­ply to our email. Five of them meet us for cof­fee. Zero in­vested in us.”

Joe rat­tled off the de­creas­ing cas­cade of in­creas­ingly hor­ri­ble num­bers like they’d been stitched into his en­tre­pre­neur­ial DNA.

“I didn’t have any­thing else go­ing on in my life ex­cept this. And to put it in front of very cred­i­ble in­vestors — the guys who have picked the Googles and PayPals and YouTubes of the world — and have them look you square in the eye and go, ‘ Well, this is weird,’” Joe said, his voice trail­ing off.

“Two thou­sand eight was the worst year of my life.”

In the­ory, this should have been the end of Airbe­dand­break­fast.com. And in a way, it was.

Or at least it was the be­gin­ning of the end. That’s be­cause within eight months, the name would be short­ened to Airbnb; the trio of co­founders would be ac­cepted to, and then grad­u­ate from, the Y Com­bi­na­tor startup in­cu­ba­tor; and their fledg­ling web­site would have 10,000 users and 2500 list­ings.

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 ?? Photo / Getty Images ?? Nathan Blechar­czyk, Brian Ch­esky and Joe Geb­bia launched the peer- to- peer on­line hos­pi­tal­ity plat­form we know to­day as Airbnb on “half a shoe­string”.
Photo / Getty Images Nathan Blechar­czyk, Brian Ch­esky and Joe Geb­bia launched the peer- to- peer on­line hos­pi­tal­ity plat­form we know to­day as Airbnb on “half a shoe­string”.
 ?? Photo / 123rf ?? Airbnb is of­ten the go- to web­site for Ki­wis book­ing ac­com­mo­da­tion here and abroad.
Photo / 123rf Airbnb is of­ten the go- to web­site for Ki­wis book­ing ac­com­mo­da­tion here and abroad.
 ??  ?? How I Built This by Guy Raz ( Macmillan Pub­lish­ers, RRP $ 39.99)
How I Built This by Guy Raz ( Macmillan Pub­lish­ers, RRP $ 39.99)

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