First Time Founders with Ed Elson – How Airbnb Scaled from 3 Guests to 2 Billion

Ed speaks with Nathan Blecharczyk, Chief Strategy Officer and co-founder of Airbnb. They discuss the pros and cons of starting a business with your friends, the moment he realized the business would be a success, and how he learned to turn a crisis into an opportunity. Learn more about your ad choices. Visit podcastchoices.com/adchoices

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Speaker 00

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• 0:36Ed Elson?

  Welcome to First Time Founders. I'm Ed Elson. It started in 2007 with an air mattress in a cramped San Francisco apartment. The rent was due, hotels were booked up for a local design conference, and two roommates had an idea. What if they charged guests to sleep on the floor? That weekend, three strangers stayed in their living room and an industry was quietly born. My next guest helps turn that idea into a platform that has redefined travel. Today, it has grown into a global network of over 8 million active listings and 5 million hosts, spanning more than 150,000 cities in 220 countries. It has welcomed over 2 billion guests, and in the process, it's upended the traditional hospitality industry

• 1:20Ed Elson?

  and reshaped how people experience new places. This is my conversation with Nathan Blacharsky, co-founder and chief strategy officer of Airbnb. Nathan, thank you so much for joining me on the program.

• 1:34Speaker 02

  Thanks, Ed. Really excited to be here on First Time Founders.

• 1:37Ed Elson?

  So, everyone knows what Airbnb is, and usually on this program, I feel like I need to give context for what it is you do and what it is you've built.

• 1:48Ed Elson?

  I'm not going to do that because everyone knows what it is, and it's a testament to what you've built. So I just want to start with the beginning. We talked a little bit in the intro about how this all started, but I'd like to hear it in your words. How did this all start?

• 2:05Speaker 02

  I'll rewind just even a few months before October 2007, which you just kind of referenced, which was that I had moved to San Francisco to become an entrepreneur. And I'm a software engineer by background, and I needed a place to live, and I went on Craigslist. And Joe became my roommate. Joe had a...

• 2:28Speaker 02

  A vacancy in his apartment and he put it on Craigslist and I, we just got connected uh through serendipity there. And so uh Joe would later become, you know, one of my co-founders in Airbnb, but we were roommates uh and friends before we ever started the company. And a few months go by and then suddenly the rent on our apartment is raised 25%. And I said, well, that's too expensive. I'm moving out. And so did the other roommate, but Joe wanted to stay in that apartment and he convinced Brian uh to move out from Los Angeles and live in the apartment with him. Um but they still had a problem uh which was that the rent had been increased 25% and they had recently quit their jobs to become entrepreneurs, also known as unemployed. Uh so they didn't have the money to to pay

• 3:12Speaker 02

  the rent uh still, even with the two of them. Uh and that's when they had the idea to rent out that extra room. They are both designers by background. They noticed that an international design conference was coming to San Francisco in October and they noticed that all the hotels were sold out uh for this conference. And so they got the idea to rent out that vacant bedroom, my my vacant bedroom, to designers who might need a place to stay uh that one weekend. This room uh had nothing in it. You know, I'd taken all my possessions. I'd taken the bed uh but Joe set up an air bed. And so instead of calling it a bed and breakfast for that weekend, they called it an air bed and breakfast. So Airbnb is short for air bed and breakfast. That's where the name comes from. They were expecting to host uh

• 3:55Speaker 02

  some guys like themselves that weekend. You know, at that time, we're about, you know, 25 uh years old. And uh instead, they got a uh a father of four um from from Utah, a 35-year-old woman from Boston and a man from India. So a very eclectic group uh stayed there for, you know, $80 per person per night, four nights. I think that gets up to about 800 or a thousand bucks, which meaningfully helped Joe and Brian pay the rent. Meanwhile, these guests had an affordable place to stay when hotels were otherwise sold out. But most interestingly, they all went to the conference together, had a great time. And Joe and Brian took, showed them around the town, gave them recommendations, introduced them to friends, went out to dinner. It was a whole social experience. And, you know,

• 4:40Speaker 02

  it really was going to stop there. I mean, it was meant to just pay the the rent that one month, a one weekend kind of thing. There was no further thought that went into it. You know, it wasn't until a couple months later that one of the guests pinged. Uh, Joe and asked, you know, like what's come of airbed and breakfast, you know? How's that concept going? And the truth was nothing was going because it was, it was just a one off. Meanwhile, I'd put my job um as well, and the three of us were brainstorming ideas. We spent two months brainstorming ideas of what we could do together without ever even talking about this story that I just shared now. But after getting pinged by one of the former guests, Joe and Brian shared what they had done back in October.

• 5:25Speaker 02

  And we reflected on that. We thought to ourselves, why don't we make it possible, you know, for people to stay with each other uh in association with events? And that's what we set out to do uh in early two thousand and eight.

• 5:39Ed Elson?

  And your relationship with Joe, so Joe Gebbia is the, the other co-founder and Brian Chesky is, is the other co-founder as well, is now the CEO. Talk about your relationship with those two. Um, it sounds from, from your description that it was three friends who decided to collaborate together and start a company, which I think is actually rarer than one would probably think in entrepreneurship. I don't think usually, I mean, starting, it sounds like a fun idea, starting a big company with all your, your best buds. But oftentimes it doesn't work out. So talk a bit more about your relationship, the fact that you were roommates with Joe. How did, how were you friends with Joe? What was Joe's relationship with Brian and so on?

• 6:24Speaker 02

  Yeah, I, I think the part about being friends, what's important there is, you know, we got to know each other well, you know, before making the decision to start a company together. You know, obviously we all have lots of friends, uh, but we chose each other explicitly. And we did that because while I was living with Joe, I noticed two things, like one was that after work and on the weekends, you know, instead of. Chilling out or socializing or whatnot, you know, we were working on our passion projects. And so, you know, I saw in Joe and he saw in me an incredible work ethic and passion. And then we also started helping each other on our, our respective projects. You know, I by background, I'm an engineer, so I started doing coding of his websites.

• 7:07Speaker 02

  He's a designer. He started providing the designs for the things I was building. And we saw how our complementary skill sets allowed us to build products really fast. Because you know, you really do need both. Meanwhile, Joe and Brian had gone to Rhode Island School of Design together. So they were friends from, from college and, you know, had really gotten to know each other well then. And had worked on a number of, of, of projects there together as well. So, you know, I think we knew that there was a strong compatibility and that our skill sets were good complements. And I think that's why we were brainstorming ideas together. We didn't know what we wanted to work on, but we knew the team was a strong team. And that was really the basis of, of, of, you know, starting the company was, was first and foremost, the team.

• 7:52Speaker 02

  And then we stumbled into the idea.

• 7:54Ed Elson?

  Yeah, I think one thing that people find quite inspirational about Airbnb and the story is that it came from a design forward perspective, which is quite rare. And, you know, when I think about what they saw in you, I'd be interested to hear what Joe and Brian saw in you. But I'm sure a lot of it was also your technical expertise, you're working as an engineer. You know, you, you knew how to, how to get this off the ground. I'd be interested to hear more about what you saw in them. How did you identify that these designers would have what it took to build this great company?

• 8:38Ed Elson?

  To, in a way, it makes more sense to me what they're seeing in you, but less sense to me what you see in them.

• 8:45Speaker 02

  Well, in parallel around this time in 2007, I was, I was working on a number of other things on the side. And one of them was a, for example, an ad network for Facebook. Or that plugged into Facebook, creating social ads. And, you know, I did all this technical work to, you know, make an ad server, et cetera. And I launched it and I was so excited. And then I realized that. You know, the tech was was just a small, small part of building a business. I needed to go out and attract publishers and advertisers. And there's like all this other stuff that needs to happen. And I realized that's not my my passion doing those other things. And that, you know, really does require a team.

• 9:29Speaker 02

  So I had come fresh off that kind of a learning or reflection of like, you know, wow, I'm a great builder. But to build a real business is requires a lot of different skill sets. So that was one. You know, I think also to just, you know, the camaraderie of it all. It's hard going it alone. It's a lot more fun to go with a team. So, you know, the idea of team and a team that kind of complements your your skill sets. And, you know, three, I think in them was just an incredible degree of of of passion, creativity, boldness. You know, they were not shy about kind of going out and really, you know, talking about new things and getting attention in a way that maybe wasn't natural to me, especially at the time.

• 10:13Speaker 02

  And then there's the fact that we had lifted together. And so we we were we were quite comfortable with one another. It wasn't like we were meeting for the first time.

• 10:22Ed Elson?

  Yeah, I feel like the passion element is almost the most important thing. If you could study anything, but so if you don't have the passion and the energy and the drive, then you're going to go nowhere.

• 10:34Speaker 02

  I would also just say that this requires a great deal of evangelism. Right? I mean, we were kind of pioneering a new human behavior in some ways that was counterintuitive.

• 10:43Ed Elson?

  Right.

• 10:44Speaker 02

  And that story from October 2007 where they rented out the apartment, you know, that took initiative. Evangelism, they did it. And, you know, that story continues in the early days where, you know, Brian was one of the first guests using the product. And they were going out into the field and meeting all the hosts and taking the photographs themselves. And I would later become a host. But, you know, I think, you know, all that is is really important. And with their design background, I think they were intensely interested in kind of interviewing all those early adopters and understanding their feedback, gathering feedback as part of the design process. So I think all that was really beneficial.

• 11:25Ed Elson?

  I feel like all of this was almost perfectly encapsulated in this very famous cereal stunt, which I'd love for you to explain the story of. Just to set it up, Airbnb, you guys are starting to get going, but you are running out of money and you're trying to think of ways to make money, to keep the business alive. And you come up with this idea that has to do with cereal. Could you explain what happened there and the story of the cereal stunt?

• 11:57Speaker 02

  So just in terms of the timeline here, you know, October 2007 is when we rent, Joe and Brian rent out the extra room. Couple of months later, in basically February of 2008, three of us, you know, start building, you know, Air Bed and Breakfast, as you kind of start to know it today. We launched that in August of that year, so several months later. And now we have launched it and that was exciting, but no one's really using it after launch. And it's coming up on a year now and we haven't made any money and we've had the expense of the apartment and all this. So we're getting kind of desperate. And I guess

• 12:38Speaker 02

  I should add that when we launched in August of 2008, it was during the time of the Democratic National Convention and the Republican National Convention. And specifically, this is where Barack Obama received the nomination of his party to be the first African American, you know, presidential candidate. And it's an historic event and it was going to be held in a stadium in Denver that held 80,000 people. And we looked up that Denver only has 17,000 hotel rooms. So we knew there was going to be a need for extra accommodation. And so we focused on this moment as the right launch opportunity. And it was very successful. We got, you know, hundreds of people staying on Airbnb in the span of a couple of weeks. And we were on TV,

• 13:17Speaker 02

  on CNN, talking about, you know, what Airbnb was in connection to the DNC event and Obama. So it was tremendously exciting, but a few weeks later, it was gone. It was, you know, it was a flash and nobody cared anymore. And yet we had.

• 13:36Speaker 02

  All these political reporters that we had met. And we're thinking to ourselves, how do we generate some more attention for the company? We have all these reporters that we met. How do we make ourselves relevant to them again? And somehow, Ryan and Joe have this crazy idea one night that we should create a presidentially themed breakfast cereal. Again, our name at the time was Airbed and Breakfast. So they're thinking breakfast, let's do something fun with the breakfast concept and do something that would be relevant to all these reporters we met and somehow basically do a stunt. Okay, so they come up with this concept of creating Obama O's and Captain McCain's. These are breakfast cereals.

• 14:18Speaker 02

  And they come up with a tagline for each Obama O's is, "Hop in every bowl." Captain McCain's the maverick in every bite, as he was a kind of a, I think, a Navy captain or something in his past. And they come up with artwork for these physical cereal boxes that they're going to create and a lot of witty humor on it. Yeah. And they use their contacts from Rhode Island School of Design to get the boxes printed officially at a printing press, free of charge, actually. And they do this whole thing to create it. And I remember, first of all, when they told me about this idea, you know, my response was, if you want to do this, promise me you're not going to spend any money. Because we didn't have any money and it sounded like, you know, a whole, whole effort to create cereal and it was going to potentially cost money.

• 15:03Speaker 02

  So I said, do whatever you want to do, just don't spend any money. Meanwhile, I'm going to stay focused on, you know, building the website for Airbed and Breakfast. So they go off and they actually, you know, create these really compelling, funny cereal boxes without spending any money because they're very scrappy. And we send the first 100 boxes of each to those political reporters that we had met. And the idea was we could email them, but, you know, they get emails all day long and probably delete them. If they received this physical box in the mail, they're going to have to call us back and want to know more about it. And so that was the idea and we did it and it worked. We sent out these boxes and soon enough, as soon as they were received, we ended up being on Good Morning America.

• 15:44Speaker 02

  We were back on CNN, talking about the cereal, talking about its connection to the company. And We also, we had extra boxes printed off. So we had 500 boxes a week. So the first 100 we we sent to the reporters, the other 400 we numbered and called them like limited edition collector's items. And we created a little website for them where we sold boxes of cereal that you could buy. And we priced them at $40 a box. Anyways, when we were on CNN International, that became the number one political video of the day, us talking about the cereal.

• 16:14Ed Elson?

  Wow.

• 16:15Speaker 02

  And we sold a $40 box of cereal every three minutes until we sold out. And so we made about $30,000 selling these cereal boxes in the span of that week. And we like to say that that's more money than we made all year on our core business. And you know, materially helped us to pay the rent and a few bills. And so that was kind of funny and kind of cool. And we thought to ourselves, maybe we should become a cereal company, except if only there was a, you know, presidential election every month to generate that kind of interest. So we knew that wasn't the answer. But the truth is also, it didn't really help our core business, right? It wasn't helping us to rent more rooms in that moment. It

• 16:56Speaker 02

  was a funny story. It sold suit boxes of cereals. It allowed us to earn $30,000. But it wasn't selling more rooms on airbedandbreakfast.com. Where this story becomes transformative in terms of what it did for us is a few months later. A few months later, it's now the end of, end of 2008. It's been one year. We're about to give up. And we say, before we give up, we have to give it one last chance. We had gotten some advice that we should apply to Y Combinator, that that would be a great way to re-energize ourselves and recommit and give it like one last chance with some good mentorship. But before you can do Y

• 17:40Speaker 02

  Combinator, you have to get into Y Combinator. And Y Combinator is, you know, incredibly selective, incredibly popular, and has a very low acceptance rate.

• 17:48Ed Elson?

  Yes, this is the exclusive startup accelerator, very, very much exclusive at the time, too.

• 17:54Speaker 02

  Absolutely. Right. And so we managed to get an interview, which is incredible. So we go into the interview, and the interview typically lasts about five minutes, very quick. And you're in there, at least at that time, with maybe four other people. One of them was Paul Graham, you know, the founder of the program. And I remember we go in there for the interview. Well, I'll back up. Before leaving the apartment to go to the interview, I see Joe putting a box of Obamas into his backpack to bring to the interview. And I said, Joe, what are you doing? Why are you bringing the Obamas to interview? Um, I said, don't do that. That, that to me was an embarrassment that we had spent so much time on Obamas. I mean, it's a funny story, but it had nothing to do with our business

• 18:38Speaker 02

  being a likely success, in my mind at least. Uh, because to me it represented a distraction. As an engineer, I saw it as having been a distraction, uh, because it's a cool story, but it honestly took about two months of time to pull all that off. So, so Joe says, okay, I won't bring it. So anyways, we're now at the interview. We go into the room. We have five minutes. Within two minutes, Paul Graham says, what? Strangers staying with other strangers in people's homes? I would never do that. That's, that's, that's strange. That's weird. You know, I don't like that idea. Like he had a, like a really negative reaction. And then he, he, uh, kind of pivoted the conversation towards like, well, you know, you guys are handling money and payments. Like maybe you should start a payments company.

• 19:22Speaker 02

  And he basically went on to the stripe, stripe. Uh, so the last, last few minutes of the interview, we're basically spent with him pitching us on what we should be doing. And then the interview was over and we knew that, you know, that was not a good outcome. Right? Like that interview had gone off the rails. And so we're walking out the door and suddenly Joe pulls out of his backpack, a box of the Obamas. And he says, oh, Paul, uh, before we leave, we wanted to give you this. And Paul looks at him and says, what? You guys bought me a gift? He's just looking at it mystified. And we said, Joe said, no, we, we, we made this as, uh, and he's still looking at it. He says, well, sit back down and tell me how you made this. And so we get five more minutes with him and we tell him the story of Obamas and Captain McCain's,

• 20:05Speaker 02

  uh, and you know, the whole kind of stunt we pulled off and selling $30,000 worth of cereal. And then we leave the room and later that day we get a call and the call was that we were accepted into Y Combinator and he later told us that we were accepted into Y Combinator, not because he liked Airbed and Breakfast, the idea that we pitched him on. He actually really did not like that idea at all, which was clear. He accepted us into Y Combinator because of the cereal story. And what was powerful about the cereal story to him was it represented how scrappy we were and how we would never give up, right? With our backs up against the wall, needing money, we come up with a very creative idea

• 20:49Speaker 02

  to generate publicity and earn some extra dollars, you know, really quick. And he said, you know, he needs to hire, or not hire, but, you know, let into Y Combinator, those who can actually build and execute. And so we demonstrated that we could build, that we could execute, that we were scrappy, and that, you know, we were not ones to give up, even when things were tough. And he said, you know, especially at that time, this was now 2000, end of 2008, the financial recession had begun, you know, he was looking for founders who were really tough, who had the perseverance and never, never quit. And so that's what he saw in us when he heard the cereal story. And so that's the real power of the story of Obamas and Captain McCain. It demonstrated our scrappiness and our perseverance.

• 21:34Ed Elson?

  It's so interesting because to your point, when you were going off to the interview at Y Combinator, it's true that what you did was maybe a waste of time, maybe it was a distraction, maybe, you know, you should have been spending more time figuring out the idea. But at the same time, it had this incredible payoff because it demonstrated the grit, the determination, also the creativity, the excitement, the energy. There was clearly just this spark that you decided in that moment, or perhaps maybe Joe decided in that moment, that he was going to follow. And It's interesting to me because both of you were right.

• 22:18Ed Elson?

  You were right in the fact that it's a distraction. But he's also right in the fact that sometimes these things are important. It's important to follow whatever the passion is and whatever the spark is. And so I'd be interested to hear how you view that as you sort of scale a company. Like, how do you balance those two competing narratives where on the one hand, maybe we should be focusing on what really matters logically. But on the other hand, maybe we should just be spending frivolously on things that excite people and capture their imagination.

• 22:53Speaker 02

  Well, I think from the beginning, we, you know, the whole team was formed on a respect, you know, for one another's strengths and the value of different perspectives. And, you know, this was reinforced, you know, by us getting into Y Combinator based on the serial Fox experience. And so, you know, we're becoming to really realize that, you know, although we see things differently, that, you know, the different perspectives are super valuable. We have real, real value that we're each bringing and we want to preserve that going forward. And we've, we've always felt that Airbnb is kind of like a three-legged stool. And, uh, you know, if any one of us were not a part of it, you know, the stool would have tipped over.

• 23:36Speaker 02

  Um, and that Airbnb is also kind of the marriage of art and science. Uh, and both those things are equally important. And so, you know, I think what that allowed us to do as we went forward was just make sure, uh, you know, each of our voices were heard as we made important decisions and respected. And I would say that honestly, it led to a lot of conflict because when you see things differently, you disagree. But because we respected the value of each other, you know, based on the experiences we have had thus far, the friendship, you know, we, we had the patience to listen and find compromise.

• 24:17Speaker 02

  And, you know, compromise was always, always the best outcome because compromise meant we were taking into account different perspectives and meeting in the middle. Um, and I think that was just a really powerful thing. And, uh, you know, it's really become any part of the company's culture.

• 24:35Ed Elson?

  We'll be right back.

• 24:46Scott Galloway?

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• 25:31Scott Galloway?

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• 25:54Ed Elson?

  We're back with first-time founders. Just going back to what Paul Graham thought about the idea itself. He thought that having strangers live in other people's homes was not going to work. He didn't want to do it himself. Bad idea. But he was betting on the creativity and the determination of the founding team. Maybe he was right, but I kind of think he was wrong. I think in hindsight, I mean hindsight's 2020, I think your idea was correct and you'd proven it. So tell me more about what Paul might have gotten wrong.

• 26:36Ed Elson?

  And I'd be interested to know if you feel, as I do, that you guys actually were correct from the very beginning, that this was something that the market always needed and that you provided.

• 26:50Speaker 02

  Well, clearly, we were ultimately correct. I think the biggest entrepreneurial ideas tend to be ones that are non-consensus, where it's not obvious, right? And so this was obviously not an obvious idea. And that doesn't mean that all non-obvious ideas are good ideas. But why was this one a good one? And how did we know? Well, I think it's because we we experienced it firsthand, right? We Joe and Brian were the first hosts and they viscerally felt the power of the experience. Right? It wasn't just an economic transaction like they met people and it was really transformative. And like friendships arose out of that. The guy from India who stayed with them, you know, two years later invited them to his wedding.

• 27:32Speaker 02

  Like, it's hard to capture the power of that when you relay it as part of a pitch or whatnot. So, so there was that. I think as we started building the product and using the product, again, we were, we were, you know, very close to, to the experience and the customers. Brian was amongst the first guests using the product and many learnings came out of that. We were, you know, interviewing all those first users and, you know, understanding, you know, why they were doing this, what their questions were, what was powerful about the experience? And all that really, I think, gave us conviction that we were on to something special.

• 28:13Speaker 02

  Maybe most people didn't see it, but those who were brave enough to try it and were actually using it, were coming away transformed. And so the only question was how can you get people over that initial hump, that trust hurdle? How can I trust a stranger? Once they trusted the stranger, once they trusted Airbnb Breakfast or Airbnb, then they were transformed and it was hugely successful and they were huge advocates. So it was just about that initial hurdle and how to get over it. And, you know, this is where design comes into play again, right? It's kind of a design problem. How do you, how do you create trust? And, you know, I remember one of the things an early host said, and he said, you know,

• 28:56Speaker 02

  all my friends think I'm crazy allowing strangers in my home. And he said, I, I see it as a stranger is just a friend I haven't met yet. You know, that's a really beautiful thing. And we also noticed that when you talk to people about this idea and you framed it as strangers, of course, they hated the idea. But if you framed it as, you know, would you like to host a guest?

• 29:18Speaker 02

  Who is from your alma mater, you know, who is from your university or, you know, in your professional field or, you know, like if you, if you added some context to it and demystified who this person was, you know, people would actually get really intellectually interested in it. But yeah, you know, I would like to consider that. I would be interested. And so as we started to design the website, you know, the, the, the three kind of core pillars to creating trust were just three things. One was rich user profiles. So we're going to show you a picture of the guest and of the host and, you know, who they were and like where they went to school, what did they do professionally? Like we try to, you know, build out an image, you know, and relative to something like Craigslist where,

• 30:01Speaker 02

  you know, you had no idea who was posting the advertisement. Uh, you know, our whole thing was let's demystify who the person is and humanize it. Second, when it comes to handling the money, uh, the transaction happens through the platform. So you're protected. You know, you can't really have financial scams on Airbnb, uh, because the money is paid to the host only after, uh, this day, you know, successfully kicks off. And so, you know, that addressed that potential problem. And then third was the review system. The fact that at the end of this day, the guest reviews the host, the host also reviews the guest. This creates a powerful incentive for both actors to, um, follow through on kind of what they've committed and be good guests and hosts. And then also, you know,

• 30:44Speaker 02

  both parties accumulate reputation over time as a result. And so just these three things, I think were kind of the, the initial building blocks to creating trust on the platform. Um, of course, the whole design of the website too was very friendly and, um, uh, inspired trust. And, and again, I think that the design background of Joe and Brian specifically, you know, helped us to achieve that.

• 31:07Ed Elson?

  It's such an interesting problem that you solve. I mean, you think about the kinds of, uh, solutions that people are trying to create when they're building companies. I love the way you put that. You're basically, you're, the problem you were trying to solve is how do we turn a stranger into a guest? What is the difference between those two things? And how do we as a company make that shift? And?

• 31:32Ed Elson?

  It's just a fascinating problem to be solving. And I'm sure a lot of people would find that very inspirational, what you just said. What was the point at which you realized that you had something really great? I think a lot of people, a lot of founders, they have their inflection point. They suddenly, something happens and they go, oh, my gosh, I'm actually on to something. What was that moment for you?

• 31:55Speaker 02

  Well, everything changed over the course of Y Combinator.

• 31:58Ed Elson?

  Okay.

• 31:58Speaker 02

  We go into Y Combinator and we'd been making basically $200 a week for the last five months. And nothing we did seemed to change that. And our goal over the course of Y Combinator was to achieve $1,000 a week in revenue. And actually, at the end of Y Combinator, and it's a 13-week program at that time. So 13 weeks later, we go from $200 a week to actually over $4,000 a week. So vastly upcasing our, what we thought was an ambitious goal. And coming out of Y Combinator with that kind of growth trajectory, we were able to raise our seed round from Sequoia Capital. And so we went from a place at the end of 2008, at the start of Y Combinator,

• 32:42Speaker 02

  really thinking that we were ready to quit. And Y Combinator was our last effort to give it all we got. But we had a verbal agreement that if by the end of Y Combinator, things weren't in a better place, we would quit. And we would support each other in that decision because nobody wanted to abandon the other two. And so we kind of agreed upfront what the parameters were for kind of the go, no-go at the end of Y Combinator. Well, anyways, at the end of Y Combinator, things are on a vastly different trajectory. And that's because over Y Combinator, we're focused on New York City and photographing the listings in New York and meeting the users. And a whole bunch of things happened, which I can talk about if you'd like. But

• 33:26Speaker 02

  Coming out of that, we get introduced to Sequoia Capital, you know, one of the top firms in the world for venture funding, someone we never thought would be interested based on where we were just 13 weeks earlier. And they end up funding our seed round. And so that was an incredible validation and gave us a whole injection of confidence. You know, over the course of the remainder of that year, by August, we're making, I think, $12,000 a week. So it continued to ramp aggressively over those months. At that point in 2008 is primarily a business that was taking place in New York City. And this is 2009. Over the course of 2010, it continued to grow and branch out to maybe, you know, five or

• 34:09Speaker 02

  eight more cities. Most of the business was happening, including places like Paris. But these were like top destinations in the world. And then it was really 2011 where just things went bananas. And we started the year 2011 with 40 employees. We ended with 400.

• 34:26Ed Elson?

  Wow.

• 34:27Speaker 02

  We became an international company, opening 12 offices around the world. And, you know, really racing to build a global network. And so I think we were ecstatic in 2009 with that change in trajectory and we had a lot of confidence. But there was always this question of, you know, is this a business that only makes sense in New York City, where hotels are incredibly expensive and where everyone in the world wants to go there though? Or does this generalize and become kind of a global phenomenon? And, you know, starting in 2011, we were able to demonstrate this is a truly a global business. You know, and by 2013, it was, it was literally everywhere all around the globe.

• 35:07Ed Elson?

  What do you think happened in 2011? What took you from 40 employees to 400? Why did it explode in the way that it did?

• 35:14Speaker 02

  Competition. Competition as a, as a way of accelerating things. Yeah. So, you know, up until that point, we had been very quiet about our success. But by 2011, you know, word of our Series A fundraising had gotten out. This Series A had happened in April of 2010. It was a $7 million raise at roughly 70 million valuation. You know, based on that news, there was a number of European serial entrepreneurs who kind of took up the idea and wanted to be the Airbnb of Europe. So by 2011, these two new companies kind of emerged. And we said, well, you know, hey, this is inherently a global idea.

• 35:59Speaker 02

  Travel is inherently global. You know, we need to be the Airbnb of Europe. We can't have, you know, others taking that when we're a travel company. So it kind of set off a race. And these companies were based in Europe. And we said, well, we have to be just as local as they are. So that motivated us to open local offices in each of, you know, the most important countries from a travel perspective. You know, places like France and Spain and Italy and Germany, et cetera, and hire local teams who knew the market and, you know, vigorously recruit kind of new hosts to the platform

• 36:42Speaker 02

  and really take a more active role in, you know, building the marketplace and scaling it quickly. So we kind of went from what I call like kind of a peacetime mentality to a wartime mentality where we were, you know, leaning in and not letting it just grow organically. We also raised a lot of money that year. We raised $100 million in May of 2011. So that gave us the capital to, you know, also really lean in on the investments and grow the business.

• 37:12Ed Elson?

  The moment that competition comes in is so interesting because as you say, from 2007 to 2011, you're trying to prove to people that you're right. And as you say, you're the evangelist. You're walking into boardrooms and meetings saying, we know you don't think that this makes sense, but trust us, it makes sense. We really want to prove to you. And suddenly, and once the competition gets involved, it's like, oh, my God, okay, we're right. This is legit. And it's so interesting, that sort of shift in mindset that every entrepreneur who succeeds has to go through, where you have to shift from, I'm going to try to prove to everyone that I'm right. And now. I know I'm right. What do I do with that?

• 37:57Ed Elson?

  So I'd be interested to hear, it sounds like, you know, the wartime mentality, beefing up on fundraising. But are there any ways that sort of your management principles changed during that time? Maybe the way that you conduct meetings, maybe the way that you hire, maybe the way that you speak to employees. What was some of the changes that you felt happening from a management perspective around that time?

• 38:23Speaker 02

  Well, I mean, I think first, I think you're exactly right that this was when was an inflection point from, you know, this is still kind of non-obvious to this is obvious. Because in April of 2010, we raised money at roughly $70 million valuation. And when we raised again, one year later in May 2011, it was a $1.3 billion valuation. But I'll tell you, leading up to that, there was a lot of skepticism. You know, there were a lot of investors who loved, were excited about how different this was and how it was growing. But they weren't ready to step up and bring the valuation up that high. And then suddenly, the round was oversubscribed and the valuation was pushed up even higher than we thought.

• 39:08Speaker 02

  You know, it would be, we were targeting a billion and it ended up being 1.3. But leading up to that for months, you know, nobody wanted to go maybe above 500 million. So anyways, the perception really shifted over those months. And, you know, it was also because we were buckling down and going from like the peacetime to wartime kind of way of operating the company. And what did that mean in practice? I mean, first, we had to recruit and, you know, hire these country managers. And so there was a dozen countries we were hiring for. And how do you do that in the span of just a couple of months? We had to move really fast. And these competitors that we were up against, these were serial entrepreneurs.

• 39:53Speaker 02

  They were moving very fast. They had existing operations and people whom they could repurpose to this project. So I remember, you know, one of the companies was founded by the Samwar brothers, also known as Rocket Internet. They've cloned many kind of Silicon Valley companies successfully. And I remember them reaching out to us and saying, hey, look, you know, you can acquire us now and we can work together. Or otherwise, we're going to be the Airbnb of Europe. It was pretty much the pitch. And so as you know, part of that, we had to take it seriously and we had to go meet them. And so we'd fly out to Berlin and we'd go to their office and, you know, meet their team. And they had 200 people in that office. You know, and back home, we had, you know, maybe 60 people.

• 40:38Speaker 02

  And so it was clear that the competition had an ability to scale that we just weren't used to. And part of that reason was they had existing people and assets that they could just repurpose and segue into this new company. But we realized we had to move really fast. And so, um, you know, we found a few regional partners, investors who were well-connected with entrepreneurs across Europe. And, you know, in the span of just weeks, you know, Brian and I and Joe, we flew around and, you know, interviewed these guys and, you know, made decisions quickly. And, uh, you know, just did things that we wouldn't otherwise be doing. I think we would otherwise have been back in San Francisco looking at mockups of product.

• 41:19Speaker 02

  And instead, you know, we were meeting in airports across Europe, uh, interviewing country managers and, you know, making decisions within a week or two about, you know, who we wanted to hire and giving them permission to set up an office and, uh, you know, a budget to build a team. So, you know, it just was a whole different kind of mentality and definitely outside of our comfort zone. But frankly, we, we were very worried. We were worried that we weren't going to exist in Europe because this competition had such a track record of, you know, successfully cloning Silicon Valley companies.

• 41:52Ed Elson?

  We'll be right back.

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• 43:16Ed Elson?

  We're back with first-time founders. How many moments, when you look through the history of the company, from when it's three of you, basically with just an idea in a dorm room, essentially, to this giant, global, iconic, public company that it is today? How many moments are there in that journey where things could have gone to zero? I mean, the first that comes to mind is you're walking out of that Y Combinator pitch meeting, and Joe decides to pull out the cereal box. That was a moment where it was zero versus today? Yeah.

• 43:58Ed Elson?

  Perhaps this interaction with the competitor in Europe, that might have been another moment? Yeah. How many of those moments can you identify? And... Is that something that every founder has to deal with if you're scaling from zero to what you are today?

• 44:19Speaker 02

  I think there's two others. There was the summer of 2011 where we had our first major trust and safety incident. And trust was really violated and it became a very public incident. And we had to basically regain the trust of our community.

• 44:37Speaker 02

  And what I'll say about each of these, the importance is to treat them like a crisis. And I talked about peacetime versus wartime, but maybe another way to say it is like to recognize that you're in a crisis and not just try to manage the crisis away, but recognize that a crisis is a transformative opportunity that can make a good company great. And so you're not just trying to survive a crisis, you're trying to transform yourself over the course of the crisis. And so with the international competition, it was a threat that could have sent the company to zero, I suppose, over time. But actually, it made us so much stronger because it motivated us to grow and become more local in all these countries around the world.

• 45:20Speaker 02

  And likewise with the trust incident, when that happened, instead of just trying to treat it like a PR incident and minimize it. We leaned in and we said, everybody, stop what you're doing. We want everybody in the company to work on building trust and safety features for at least the next few weeks. And we want in a few weeks to make an announcement about all the innovation that we've done in the space of trust and safety. And so literally about two weeks later, we were able to announce 40 new features that were designed to make Airbnb that much more trustworthy. And I think the idea was like, we wanted to go above and beyond what customers expected. And so a lot of those features are still with us today.

• 46:05Speaker 02

  Like, for example, the idea that with every booking, there is protection against damage included free of charge.

• 46:15Speaker 02

  And there's dedicated customer service, there's a dedicated trust and safety team. You know, a lot of this stuff was pioneered in that moment. And you know, at the beginning, like, there was a lot of doubt about, you know, can we do these things well? Like, is this actually a good idea? Like, what if something goes wrong? Are we liable, et cetera, et cetera? But, you know, we, we took the moment, seized the moment and innovated and led with boldness. And, and a lot of that lives with us today and made us, you know, a stronger company. So you, you identified two moments. That's the trust and safety one is the third moment. There's a fourth moment, which is the pandemic. In the span of eight weeks, our business dropped 80%. And, you know, what was worse was we didn't know how long this was going to last for. And of course, at that point, we have like roughly 8,000 employees.

• 47:00Speaker 02

  So we have a tremendous burn rate. And yet suddenly there's no revenue coming in and we don't know how long that's going to last for. And of course, the whole market is in crisis. And so it's not a good time to raise more capital either. And so, you know, that was a moment where we wondered like, what's going to happen? Can we, can we adjust fast enough to course correct? And ultimately, we went through the pandemic and came out way stronger, way successful. And actually went public that same year quite successfully by the end of 2020. And so that, that was probably the fourth, fourth time where I think, you know, it could have gone to zero.

• 47:38Speaker 02

  But because of decisions we made and kind of leaning into the crisis and coming out stronger, you know, made it not only not go to zero, but become a much more valuable company.

• 47:51Ed Elson?

  I feel like inherent to all of those moments and the way that you dealt with it is this almost respect or fear for your own mortality. It's like a crisis arises and instead of.

• 48:05Ed Elson?

  Basically resting on your laurels and saying, you know, we're great. Look at our track record. We're great. You're saying, no, we need to really reckon with this. This gets at the heart of who we are. This could be the end of us. And I think that's clear to everyone when you're just starting out as a company, or even when you're raising your early rounds, your A or your B. I think that that sense of that feeling of mortality is very strong. I think there is a feeling among most people that as you get bigger and bigger and bigger, once you become Airbnb, once you become a massive company, you don't have to worry about that anymore. And I'd like to understand from your perspective,

• 48:47Ed Elson?

  does that fear ever go away? Do you ever think, is there ever a moment where you think we're we're fine now? We'll we'll definitely figure everything out? Or does it always live in inside you that, you know, there could be a moment where things go to zero?

• 49:06Speaker 02

  Look, I don't think things are going to go to zero realistically, right? At this scale, and given, you know, how ubiquitous Airbnb is around the globe. So I don't think that's realistic, even in a crisis. But I would say we definitely don't have any complacency. And for a couple of reasons. One, I think the opportunity is so much bigger than we've realized at this point. I mean, I think conceptually we realize it, but in terms of the size of the company today, I think it could be so much more. I think there's so much more to be done in travel. I think there's so much more that we can do leveraging our host community to create really special experiences. And so I think there's an opportunity ahead of us that's so much bigger. And, you know, it's it's hard to rest or get comfortable

• 49:49Speaker 02

  when you see such a big gap between where you are today and where you want to be. So the ambition is still so so much bigger than we've captured or grown into. So I think that keeps us keeps us very hungry. You know, I'd also say that, you know, having had those four experiences I mentioned, you know, we we understand that, you know, a crisis is a terrible thing to waste. And so whether it's a crisis or not, like these challenges are real opportunities. And I think when we see them, I mean, they are of course scary and not fun and no one would wish a crisis. Uh, but at the same time, you know, it immediately gets us thinking, how can we come out stronger?

• 50:31Speaker 02

  You know, what's the silver lining here? Um, how can we better ourselves? And so, yeah, I think we're just always looking for opportunities to innovate because we know that opportunity is so big. Uh, and we know that, you know, in difficult times, you know, there are, there are hidden opportunities.

• 50:48Ed Elson?

  We're gonna start to wrap up here, but just as you look back at what you've built and this pretty insane journey that is very unique in terms of lives, a life that you can live. You've had a pretty interesting one. Um, what has the whole journey taught you about humanity? What has it taught you about people? What have you learned about the human experience from being, from building this company?

• 51:19Speaker 02

  As I mentioned, you know, the, the real innovation here is around trust. Uh, and that was, you know, question number one from, from day one. Um, and, you know, we always had a point of view that people are fundamentally good. I think we've, we've, we've proven that, um, you know, the fact that two billion people, two billion guests have arrived into other people's homes over these, uh, you know, last 17 years. That's a huge number. And so we have like, you know, two billion data points. And, you know, not every trip is perfect, but you know, the vast majority are very, very positive experiences. You can read the reviews on the website. Most guests leave reviews.

• 52:00Speaker 02

  So we have, you know, numerical data and, you know, written prose describing these experiences. And again, the vast majority of, of people are, are, are good. And I think there's.

• 52:16Speaker 02

  A hunger for travel and for seeing the world and understanding different cultures. You know, if you look at the trends for international travel, going back to the sixties, it's just been exponential growth and continues to be the first thing people want to do when they have disposable income, including developing parts of the world, places like China, India, whatever, you know, you're just seeing tons of interest in people leaving their own kind of home country, their own experience and seeing the world, seeing what's out there, connecting with others. And so, you know, I think that's, that's really an inspiring thing because, you know, I think ultimately it makes the world a smaller place, it fosters

• 52:58Speaker 02

  understanding. We need that more than ever in these times of everything being politicized. We need to understand that behind, you know, the politics and the ideology, there are, you know, ordinary people who are much like ourselves, who, you know, want to meet people, want to have good times, you know, want to be financially successful and are willing to work hard. And, you know, that's true all around the world. And, you know, we, we create a marketplace, a platform where, where, where people can do that, where we can make these connections. So, yeah, I think very much there's a shared mentality out there around

• 53:42Speaker 02

  entrepreneurship and being a global citizen that we've kind of tapped into. And, you know, is popular in every country of the world, especially as people get to experience it themselves, you know, they get a lot of satisfaction out of that.

• 53:58Ed Elson?

  Nathan Blachosik is the co-founder and chief strategy officer of Airbnb. Nathan, this was really informative and also inspiring. We really appreciate your time.

• 54:09Speaker 02

  I enjoyed it very much. Thank you so much.

• 54:15Ed Elson?

  This episode was produced by Claire Miller and Alison Weiss and engineered by Benjamin Spencer. Our research associate is Dan Shalane. Thank you for listening to First Time Founders from the Vox Media Podcast Network. We'll see you next month with another founder story.

• 54:40Speaker 04

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