Article 002: Airbnb
Case Study: Airbnb
Airbnb is one of the most famous startup success stories of the past decade. What began as a simple idea to make extra money by renting out air mattresses has grown into a massive, complex corporation.
The Idea
In 2007, roommates Brian Chesky and Joe Gebbia were struggling to make rent in San Francisco. When a major design conference came to the city, they got the idea to turn their loft into a makeshift "Air Bed and Breakfast" by inflating a few air mattresses and renting them out. Their first three guests paid $80 each for the unique lodging experience.
Chesky and Gebbia realized there was a demand for affordable short-term rentals beyond just the convention, so they created a basic website called "Air Bed and Breakfast" with listings for their space. Later, they were joined by Nathan Blecharczyk who helped build out the business and technical capabilities.
The Early Days
In the beginning, growth was slow and money was tight. The founders maxed out credit cards to keep things running and even sold cereals called "Obama O's" (a play on Obama's 2008 presidential campaign) to raise funds.
To attract more hosts, they went door-to-door throughout New York passing out flyers and website info. On the demand side, they got creative by targeting specific events like conventions and concerts where hotels would be overbooked.
Things started picking up in 2009 when they were accepted into elite startup accelerator Y Combinator. The mentorship and $20,000 seed funding helped them repackage and scale their idea into a proper tech startup.
The Tipping Point
A few key developments in 2011 propelled Airbnb into becoming a successful startup:
They raised a $112 million funding round from leading venture capital firms, validating their business model
They rebranded to just "Airbnb" with a new professional logo and website
They created a seamless online booking experience with reviews, calendars, payments and messaging to build trust
As the mainstream idea of "sharing economy" services like Uber and Airbnb caught on, listing and usage growth skyrocketed. Airbnb's efficient model and network effects made it difficult for competitors to catch up.
Success and Controversies
In 2020, just before the COVID-19 pandemic halted travel, Airbnb completed one of the biggest IPOs of the year at a $100 billion valuation.
Even though they experienced rapid success, Airbnb still encountered many legal challenges regarding regulations, taxes, safety, and taking rental housing off the market. In Texas, Airbnbs are banned because of those reasons, specifically because it makes the rental house market much less important. However, it quickly adapted.
Today, Airbnb has over 6 million active listings across over 100,000 cities worldwide.
To conclude, use the story of Airbnb to better understand what you want to create and how to do so. Airbnb successfully turned a brilliant idea into reality through the clever manipulation of home ownership and renting. The next case study will be on a Nigerian company based in Lagos; they take recycled materials and turn them into concrete-like slabs. Till then.
