In this blog series we dive into a business book. We give you a summary with the most valuable insights, lessons and tips for you as an entrepreneurs. By reading our blogs you’ll gain valuable knowledge without having to read the book yourself. This way you save time you, so you can do what you love and build your business. This week we give you a summary with the 12 most valuable lessons from ‘The Airbnb Story’.
The Airbnb Story is a book about Brian Chesky, Joe Gebbia and Nathan Blecharczyk. Who founded Airbnb in 2008. In roughly ten years they build a company that is worth 35 billion dollars, created a lot of controversy and disrupted an entire industry. This is their story.
Lesson 1: Start small
Brian Chesky and Joe Gebbia met each other when they were students at Rhode Island School of Design (RISD). During this time they became friends and discovered that they were a great team. But at the end of their time at the university they each went their own way.
While he was working for an industrial design company in Los Angeles Brian missed the idealistic, entrepreneurial spirit from his time at RISD. He visited Joe – who was working in San Fransisco as a graphic designer – a couple of times and fell in love with the energy, creativity and entrepreneurial spirit of the city. They eventually moved in together in a three room appartement in San Fransisco, with the idea to build a business together.
Before they could think about building their dream business, they had another problem to solve first. They were sharing an apartment they couldn’t afford, so they had to come up with a solution to pay the rent. They knew that there was a big design conference coming up. The event would attract thousands of designers to the city and the hotels would be full with prizes going through the roof. They got the idea to make by making a bed and breakfast from their apartment (renting air beds to people visiting the conference).They got Nathan Blecharczyk, one of Joe’s former roommates and a brilliant developer, to join them and build a website to promote it. Airbed & Breakfast was born.
In the beginning AirBed & Breakfast was just an experiment. They thought the idea, to rent a room in your own house to a complete stranger, was just too crazy. But after a while they started wondering if AirBed & Breakfast would be it after all. They decided to go for it.
Lesson 2: Starting up a business is super hard
After launching the platform Joe, Brian and Nathan found out that going from a successful experiment to building a business was very hard. They struggled to get traction and didn’t have a clear plan on how to change this in the future. This almost caused Nathan to leave the company.
During this time they took the opportunity to experiment and meet new people who would help them during their startup adventure. One of those people was Michael Seibel, a 25 year old CEO who had experience with startups. He helped them refine their idea, product and business model and started introducing them to potential investors. During this time Brian, Joe and Nathan went on refining their plans, building the platform and generating publicity. With an excellent instinct for playing the media they succeeded in generating a lot of publicity. But in the end they were not able to generate real traction and a sustainable revenue stream. They also didn’t have succes in finding an investor. Cash was becoming a serious problem.
Lesson 3: Think creative
Money was becoming a serious problem, so Brian and Joe started brainstorming about different ideas to generate the money they needed to survive. This happend during the 2008 democratic elections, in which Barack Obama and John McCain were the two main candidates. Having ‘breakfast’ as part of their name they came up with the idea to design special boxes of cereals (Obama O’s and Cap’n McCain), get publicity around them and sell them for a premium price. Doing this turned out to be a huge succes and helped them to pay off their debts. In the end this creative solution to solve a problem would be a valuable experience in finding investors as well.
Lesson 4: The value of customer feedback
Paying off their debts was a good step, but they were still not able to turn AirBed & Breakfast into a successful business. That was when Michael Seibel convinced them to sign up for Y Combinator, a startup incubator in Silicon Valley. Attending Y Combinator turned Joe, Brian and Nathan into real entrepreneurs. Paul Graham – one of the founders of Y Combinator – taught them the importance of knowing your customers and using their feedback.
Most of Airbnb’s early adopters were located in New York City. During their three months in Y Combinator Joe and Brian flew to New York every weekend. They got in contact with their first users. By doing this they were able to tackle important hiccups in their business model and provide Nathan with important feedback from their users. They found out that some people wanted to offer a room with a normal bed (instead of an airbed) and others wanted to rent their entire home to people without being present themselves.
In the beginning not being present (and therefore not being able to serve breakfast) wasn’t allowed, because ‘Airbed’ and ‘Breakfast’ was part of their mission and name. But having found out that they were missing a huge opportunity, they skipped the breakfast requirement and added the possibility to rent an entire house. They changed their name from AirBed & Breakfast into Airbnb. Within three months they got traction and were able to build a profitable business.
Lesson 5: Never give up
The attempts of Joe and Brian to get an angel investor onboard turned out to be lessons in rejection. Most of the investors Michael Seibel introduced them too, turned them down without a meeting. The meetings they did have turned out to be a disaster. Investors thought the idea of renting a room to a complete stranger was crazy and very risky. They also had serious doubts regarding the art school background of Brian and Joe.
But the founders didn’t give and there were a lot of investors visiting Y combinator regularly. One of these investors was Greg McAdoo from Sequioa. A famous venture capitalist who had funded companies like Google, Apple and Orcale. He was impressed by Brian, Joe and Nathan’s philosophy about building a community and the way they used social mechanisms and technology to tackle trust issues. They had a couple of meeting and after a couple of weeks the Airbnb founders got a term sheet from Sequioa with an investment of $ 585.000,-
Lesson 6: Build a team around your core values
Brian Chesky, Joe Gebbia and Nathan Blecharczyk achieved product market fit with Airbnb in april 2009. They had been able to show that there was a good market for their concept. They’d developed a product people in this market where willing to buy. As a result they had a growing cash flow and their revenue went up from $ 1.000 to $ 10.000 a week. The three founders were up for their next challenge. They needed a long term vision, a plan, a roadmap and a strategy to build the business that was going to build and market their product.
They knew how important building the right team was to go from startup to scale-up, so they decided to begin by writing down their core values and use those to decide who would make a good fit for their team. The hiring process that followed was very intensive (even for Silicon Valley standards), but this way they made sure they were building a strong team that was going to help them achieve hyper growth in the future.
Lesson 7: Focus on your key drivers
Growing fast was crucial for Airbnb’s business model to work because it is build around the network effect. The more people offer their house or room on Airbnb the more interesting it is for people to use the platform to find a room or house to rent. Because the knew how important it was, Brian and Joe did everything they could to generate growth. They used different guerilla marketing techniques, but they also had a secret weapon; Nathan Blecharczyk, who used technology and new tools to implement smart growth systems into the platform.
In building a multi-sided platform like Airbnb you need to constantly create a balance. Between buyers (people who are looking to rent an accommodation) and sellers (people who offer an accommodation on Airbnb). It was a lot harder for Airbnb to grow the amount of people offering an accommodation that the amount of people who were looking for an accommodation. To solve this they subsidiated the seller side of their business model by offering free services and asking a fee that was only covering their costs.
Another key driver to Airbnb’s success is their focus on the design and the user experience of the Airbnb platform. This is where Airbnb differentiated itself from the beginning from existing websites like Couchsurfing.com, Homeaway.com and Craigslist.com. In designing the platform they turned Steve Jobs Three-Click-Rule into brilliance.
From the start, Brian Chesky and Joe Gebbia were emphatic about the design of the website and the experience. The listings had to look beautiful. Based on the famous three-click rule from Steve Jobs, the founders also wanted their users to never be more than three clicks away from a booking.
Lesson 8: Use technology to solve challenges
One of the biggest challenges for Airbnb was to match two sides off the platform (who don’t know each other) and create trust between them.
To make sure users use Airbnb again and to have them refer Airbnb to their family and friends Joe, Brian, and Nathan had to create an awesome experience on both sides of their platform. But every accommodation, its owner and every guest are unique, so they developed a complicated matching system to do this. They started with a simple search system and developed this into a sophisticated AI matchmaking system that uses data and machine learning to make the best possible match between a buyer and a seller.
Because Airbnb puts people who don’t know each other together in an accommodation (or have someone rent their own house to a complete stranger) they had some big trust issues to solve. To do this they invested in a strong customer service system and a smart, two-sided review system. Before a booking is made the buyer and the seller check each others profiles and reviews. This helps to builds trust between the two parties.
Lesson 9: Use data to make smart decisions
Airbnb not only uses data to make the best possible match between a guest, an accommodation and its owner. They also use data to make important, strategic decisions. When they found out professionally photographed locations got two to three times more booking than the average accommodation they scaled up their photography program with a factor five.
By overcoming these challenges in designing their platform Airbnb was able to grow incredibly fast. In 2010 the number of booking through Airbnb grew by 800%. As a result they were able to make deals with new investors, resulting in a valuation of over $ 1 billion dollars. Making them a unicorn (a technology startup with a valuation of over $ 1 billion dollars).
Lesson 10: Learn from big blows
Joe Gebbia, Brian Chesky and Nathan Blecharczyk had build a successful businesses by overcoming some very big obstacles. A skill they needed again when suffering a couple of big blows in the years after 2010.
Although the majority of stays were without any problems, the founders couldn’t totally prevent incidents from happening. Over the years a variety of incidents have happend. From guests destroying a complete accommodation, to sexual harassment, drug abuse in an accommodation and illegal parties. Some of these incidents got a lot of public attention. In the beginning Airbnb struggled to deal with problems like these and the decisions they had to make to solve those issues. They hired some crucial people to help them deal with their public communication and legal issues. They improved their review system. they set up a ‘Trust and Safety team’ and started to use machine learning to predict where and when possible incidents could happen.
Airbnb promotes a world in which normal people open their homes for unknown people and offer them a unique experience and travel opportunity. In reality this is just part of what is happening. It is easily possible to make twice as much money by offering of a house on Airbnb compared to regular monthly renting of the house. Because of this professional real estate investors and property owners use Airbnb on a large scale to increase their profits. The commercial use of Airbnb creates fundamental problems – like unaffordable housing – for cities like New York, Amsterdam and Barcelona. This would become Airbnb’s biggest challenge for future growth, and a battle Airbnb is still having with authorities.
Lesson 11: Build a movement (not just a business)
Airbnb is as much a movement as it is a business. The Airbnb movement consists of the millions of people around the world who have booked an accommodation.
Making it possible for people to rent a cheap accommodation instead of an expensive hotel room is one of the biggest reasons Airbnb became such a hit. The other reasons are less obvious. A lot of travelers are unhappy with the standardization within the big hotel chains. They are looking for unique, authentic and personal experiences. Exactly what Airbnb is offering.
Another reason for Airbnb’s success in building a powerful community is their idealistic and purpose driven mission statement ‘belong anywhere’. This mission goes beyond the personal connection between a host and a guest. It’s about the opportunity to stay in someone else’s house and explore neighbourhoods and places you wouldn’t normally visit. Sleeping in a Airbnb is a personal experience, even if the host isn’t there. To make sure Airbnb hosts offer guests a remarkable experience, Airbnb gives their hosts tips, rules and suggestions. On top of that they provide an online community in which new hosts learn from experiences hosts.
Lesson 12: Learn by just f*cking doing it
In 2008 Joe Gebbia, Brian Chesky and Nathan Blecharczyk began Airbnb without any real experience. Now – more than 10 years later – they are still leading the company. Their incredible journey was full of obstacles. But together they have learned to overcome all of them and learned how to grow and lead a company.
For the founders of Airbnb there was no time to learn how to lead a company the conventional way. Together they had the talent, strong leadership skills and sharp, curious minds to do it. They had a passion for what they were doing and build strong relationships with people who would help them. They overcame obstacles. But above all. they were able to learn extremely quickly by just f*cking doing it.
Give us your feedback
We love how Brian, Joe and Nathan where able to turn a crazy idea into a successful business that is changing the world. We hope this book summary helps you as an entrepreneur to start or grow your businesses and make an impact. If you have any questions or feedback, please let us know! We’d be happy to answer them.
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