People & Startups

How Airbnb Evolved: Key Takeaways for Doer stage of Entrepreneurs

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Pic Courtesy: www.click2houston.com

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With a whopping $555 million of funding in the recent past Airbnb has reached a massive valuation of 30 Billion US$. They have nailed it and this time much massively and broadly! Just Like Rome, Airbnb was also not built in a day! Let’s traverse through the stages of progression of this organisation to help us understand how this organisation has evolved with Time.

Stage 1 : Conceptualisation

In Oct 2007 in San Francisco, Brian Chesky and Joe Gebbia faced a real life situation to be unable to pay rent for a rented space which they took, and in turn they tried to turn the same into a lodging space with three airbeds on the floor along with the promise of home cooked breakfast in the morning.

They tried to solve this problem with the help of the website. They developed the website and were able to get three people to rent their space along with them. They were two guys and one girl and they decided to pay 80$ each for the same. Later when they were able to magnify in their own entrepreneurial minds, the potential of this idea, they asked their common friend Nathan Blecharczyk to join in the early days of inception. This was time when it was named as Air Bed and Breakfast (Rented Home with Air Beds |Home Cooked Breakfast).

Your Takeaways
A real idea is a problem to solve and nothing else, the early you are exposed the problems more chances for you to build better businesses. Problems first stage of your success, never ignore them!

Do Prototyping: Is your idea something that can be used by people and help them solve their problem in a hassle free manner. Don’t know the answer, best thing is to prototype it…

When You have to walk fast walk alone but when You have to walk far walk together: Brian and Joe brought Nathan as they knew that they needed him and when you share the pie amongst three, the overall pie increases by more than 300% and what you eventually achieve is greater than the value of your percentage you would have got, had you been alone.

Stage 2: Bootstrapping

They decided to launch the company in 2008 around the Democratic National Convention as they were eyeing on the increasing demand of the Hotel rooms during these times. Also they didn’t want to leave the opportunity of making some money out by selling cereal boxes in the names of the presidential candidates at that time (Obama & John McCain). They packed these cereal boxes and started to the crowd.  They were able to sell 500 cereal boxes with a price of 40$ each and raised 30K $ to put into Airbnb. With not so much sales as expected, these guys start living off on the leftover cereals.

Thereafter they met Paul Graham (The Founder of Y Combinator and a VC) over a dinner and they were convinced with the idea to join Y Combinator.  They joined Y Combinator and were able to pull $20,000 in funding. This was the time it was formally named as Airbnb. They continue to evolve the stages of  their product development and eventually they landed to a funding of $600K from Sequoia Capital and Y Ventures and they finally had some money to start with their customer acquisition.

Your Takeaways

You target is to get your idea to the next stage and whatever that you may have to do to survive, Do that! They sold cereals to fuel them for few months, do whatever it takes to get your idea to the next stage and do it fast!

Hold on to your idea you will see the dawn: Fred Wilson rejected their idea however Sequoia funded them not just as seed but also participated in the Series A round of their funding.

How Airbnb Evolved Key Takeaways for Doer stage of Entrepreneurs

How Airbnb Evolved Key Takeaways for Doer stage of Entrepreneurs

Stage 3: Customer Acquisition: Getting the Teachers customers On-board.

They were really seeking inroads to establish the first set of teachers consumers on board to help them gain insight and reach to a stage where they can start planning to “Unlock the Organic” and be viral with the idea.  They did whatever it takes to ensure that they gain users and this time they were really serious to give them a pleasurable experience.

Airbnb knew by doing market research as well as a known fact that Craiglist was the portal where people search for listings other than the usual experience of staying in a hotel. Craiglist used to function the URL way instead of a cookie, where it generated a unique URL for publishing the listed properties to the user. Airbnb put out a bot which could put the listing of Airbnb properties to the Craiglist searching users.

They started to experiment and test the responses of the marketing channels and to keep moving at pace. They meticulously worked over the data points and were able to pivot and improve out of their own experiences in least time possible. They picked up the offline channel where they physically visited the people, set up booths around town, throw parties, made contact in person with potential property holders. While they were practicing this they also tried to give Facebook ads to see what they able to achieve were. Since they were keeping their analytics eye on! They were able to clearly identify that the offline medium was giving them 5x better customer acquisition cost through activities on Facebook.  For them the offline channel was working.

While this was happening Brian and Joe realised that something was missing. Sooner they realize that the picture of the listed properties were not good at all. So they flew to New York and went door to door to take professional photographs of the listed properties, themselves! This was one of the growth levers that they identified and the bookings which had the professional shooting done were able to receive 2x – 3x bookings more than properties with normal photographs. Post this success they officially launched Photography Program for the listed property holders.

With all these efforts in progress Airbnb received their third round of funding  7.2million US$ as Series A  from Jeremy Stoppelman, Elad Gil, SV Angel, Y Ventures, Keith Rabois, Greylock Partners, and Sequoia Capital in the winter of 2010.

Your Takeaways

Get on board with your Teacher customer first: What are Teacher Customers? Teacher customers are the first set of users who bring a lot of consumer insights for you. They help you to learn from them. Never take them lightly, treat them as your Teacher and you would be able to gain hugely from them.

Incremental Growth is always advisable: Airbnb started to bring fewer areas under their radar and started comprehensively to work on certain areas like San Francisco. Even the founders were so keen on user acquisition from these areas as they themselves started performing photography of the listed properties professionally, to help the listed property owners increase their bookings.

Fail fast to be Successful! Airbnb failed miserably in the initial days of their execution but they were always of the opinion to continue experimenting with Data. The best part about the dotcom startups are that YOU CAN FAIL FAST TO BE SUCCESSFUL.  They kept the record of their data meticulously to ensure that they take the data driven decisions for the next campaign. And that’s what they did! They realised that offline medium was working better for them instead of the Facebook activities and ads.

Stage 4 : Revenue Generation

While Airbnb was evolving with the approach to unlock the organic it also introduced a booking fee which was to obtain a small percentage of money from the host and majority from the shareholder who has booked to stay. This was to bring in more viability to the business model.

Your Takeaways

Money brings viability in the Business Model: You are either pivoting on User Experience or Revenue Generation throughout as a business professional. Once you are able to bring good user experience your utmost priority will be to generate revenue.

Stage 5: And finally they unlocked the Organic

In the spring 2011, the company had seen 800% growth in nights booked from their website with listing in 89 different countries. This was a massive figure for Air Bed and Breakfast was now Airbnb and they have hit the 1million nights booked for the first time. They reached the acme of virality as the idea was really worthful for regular travellers and equally benefitting for people with properties to gain out of it. People started booking and listing and finally Airbnb was able to Unlock the Organic.

Thereafter they keep the On Site Engagement of the user live by introducing social connections and other features to ensure their site prevails with the growing need and dynamics of their large operations.

Your Takeaways

Rome was not built in a day! It took them 4 years (approx.) of continuous hustling to see this day where they booked 1 million nights. Don’t panic, if your Unlocking the organic is delayed, its not! Its just building up to become better and bigger!

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