Airbnb

#1In 2008, Brian Chesky and Joe Gebbia were assembling cereal boxes by hand. One was Obama O's, a play on Barack Obama. The other was Cap'n McCain's, named after John McCain.

#2They designed the packaging themselves, filled the boxes with cereal, and sold Obama O's for $40 each.

#3None of that would have been particularly strange if they were starting a food company.

#4They weren't.

#5Brian and Joe were trying to build Airbnb, a service that let travelers pay to stay in other people's homes. The problem was that their lodging startup was barely making money.

#6So the founders of a lodging company were selling cereal to keep it alive.

#7To see why, you have to go back a year.

#8In 2007, Joe was living in San Francisco when the rent on his apartment went up sharply. Brian, his friend from design school, had just left his design job in Los Angeles and moved to the city. Neither of them had much money to spare.

#9A large design conference was coming to San Francisco, and hotel rooms were becoming difficult to find. Looking around the apartment, they had an idea.

#10If visitors couldn't get hotel rooms, maybe they could stay here.

#11They inflated three air mattresses, made a simple website, and called the idea AirBed & Breakfast.

#12Three people actually booked.

#13Brian and Joe gave strangers a place to sleep, made them breakfast, and got paid. It had started as a way to cover rent, but the weekend left them with a more interesting discovery.

#14People really would pay to stay in the home of someone they had never met.

#15Maybe there was a company in that.

#16Joe's former roommate, programmer Nathan Blecharczyk, joined them, and the three started turning the experiment into a real service.

#17Then they discovered how hard it was to make the first weekend happen again.

#18They promoted the service around SXSW in 2008 and got roughly two bookings. Later that year, the Democratic National Convention brought a flood of visitors to Denver, and AirBed & Breakfast managed around 80 bookings.

#19For a moment, things looked more promising.

#20Then the convention ended, and the momentum went with it.

#21They had shown that the service could be useful when a major event overwhelmed a city's lodging supply. They still hadn't shown that people would use it regularly.

#22Nathan went back to Boston and resumed other work. Brian and Joe started looking for investors.

#23They tried to raise $150,000 for 10 percent of the company. They approached seven investors. Five rejected them, and two never replied.

#24One meeting took place in a café. While Brian and Joe were explaining the company, the investor got up from the table.

#25They waited for him to come back.

#26He didn't.

#27His half-finished smoothie was still sitting there.

#28The investors could walk away. The bills couldn't.

#29Brian and Joe kept the company going with credit cards. When one card reached its limit, they looked for another way to buy themselves more time.

#30Then came the 2008 U.S. presidential election.

#31The two founders were designers. If Airbnb couldn't make enough money yet, perhaps they could make something else that people would pay for.

#32That became Obama O's and Cap'n McCain's.

#33Obama O's sold surprisingly well. In total, they sold roughly $30,000 worth of cereal.

#34For a while, the thing keeping their lodging startup alive wasn't lodging at all.

#35It was cereal.

#36Cap'n McCain's didn't sell nearly as well, leaving boxes behind. With money still tight, the founders ate some of the unsold cereal themselves.

#37This didn't mean Airbnb had found its business model. The cereal had done something more modest and more urgent: it had given the company a little more time.

#38Around then, adviser Michael Seibel urged them to apply to Y Combinator, the startup program that invested in very early companies and worked closely with their founders.

#39Brian wasn't convinced at first. They had already launched. They had customers. They weren't three people sitting around with nothing but an idea.

#40Seibel saw a different problem.

#41Their company was dying.

#42The application deadline had already passed, but Seibel contacted Paul Graham, and Airbnb was given a last-minute chance to apply. Brian and Joe called Nathan in Boston late at night and asked to put his name on the application.

#43The team that had begun to scatter was back on the same application.

#44Getting a Y Combinator interview did not mean anyone there suddenly believed Airbnb was a great idea.

#45Paul Graham and Jessica Livingston had the same basic question many others had asked. Would large numbers of people really want to sleep in strangers' homes?

#46There was even discussion of whether the founders should pursue a different idea.

#47The three pushed back. They had hosted people themselves. The numbers were small, but real customers had paid them and enjoyed the experience.

#48Then Joe reached into his bag and pulled out the cereal.

#49Nathan had told him not to bring it. Presidential cereal did not seem especially relevant to an interview about a lodging startup.

#50Joe brought it anyway.

#51The founders explained why those boxes existed. Investors had rejected them, the company was running out of money, and instead of shutting it down, they had designed cereal boxes, assembled them by hand, and sold them.

#52What interested Graham wasn't the cereal market.

#53It was what the cereal said about the founders.

#54When they ran out of obvious options, they found another one.

#55Graham later wrote that the cereal story was the single most important factor in Y Combinator's decision to fund Airbnb. It wasn't the only reason, but it gave the partners a vivid example of how resourceful and determined the founders could be.

#56Airbnb got into Y Combinator.

#57The cereal had now helped the company twice. First it had brought in money and bought time. Then it had shown investors something the lodging idea itself had not yet proved.

#58Airbnb still had very few users.

#59Paul Graham asked the founders where the service was working best.

#60New York.

#61Then they should go to New York.

#62Brian and Joe left their computers behind and flew across the country. They knocked on hosts' doors, sat in their living rooms, and listened to what was going wrong. When listing photos were poor, they borrowed a better camera and took new ones themselves.

#63Two founders visiting homes one by one was obviously not a way to run a global internet company forever.

#64But it was a way to learn things they couldn't see from a screen.

#65They asked hosts why they were listing their homes on Airbnb.

#66Many needed the money.

#67They had rent to pay.

#68Brian and Joe knew that problem. Rent was the reason they had opened their own apartment to the first three guests.

#69At that point, the founders weren't trying to become one of the world's largest travel companies. They were trying to make about $4,000 a month.

#70Roughly $3,500 would cover rent, and another $500 would cover food. If Airbnb could earn that much, they could at least stop depending entirely on credit cards.

#71They put the number on the bathroom mirror.

#72Then, in February 2009, something started to change.

#73Airbnb collected $460 in fees one week. The next week it collected $897. The week after that, $1,428.

#74This time, the revenue didn't vanish as soon as a conference ended.

#75Brian emailed Paul Graham to say they were approaching the point where the company could cover their bare-minimum living costs. Graham reminded him that they would have to grow again the following week.

#76Brian replied:

#77“We are not going to slow down.”

#78For once, the money was coming from Airbnb itself.

#79The company that grew from there was not just the original apartment experiment repeated millions of times.

#80In 2009, AirBed & Breakfast became Airbnb. The service expanded beyond spare rooms and air mattresses to entire apartments, houses, and vacation homes.

#81As the platform grew, another part of the original idea became harder to ignore.

#82How much could strangers trust one another?

#83In 2011, a host's home was badly damaged by a guest, and Airbnb's initial response was inadequate. Brian publicly acknowledged that the company had mishandled the situation. Airbnb then strengthened protections for hosts and built more systems around trust and safety.

#84With three guests in one San Francisco apartment, Brian and Joe could meet everyone themselves.

#85At large scale, that was impossible.

#86Could you send this person money? Could you let them into your home? If something went wrong, who would take responsibility?

#87Trust could no longer depend on two people meeting face to face. The platform had to build it into the service.

#88Only a few years earlier, investors had wondered whether the market was too small to matter.

#89By 2011, competitors such as Wimdu were racing into Europe.

#90The old question had been:

#91Who would stay in a stranger's home?

#92Now there was another one:

#93Who would win this market?

#94Airbnb did not invent the practice of renting private homes to travelers, and it did not make hotels disappear.

#95But when lodging demand rose in a city, Airbnb did not have to build another hotel from the ground up.

#96The homes were already there.

#97Someone had to open the door.

#98In the summer of 2026, the FIFA World Cup brought travelers to 16 host cities across North America.

#99From the run-up to the tournament through its end, more than 150,000 new homes were listed on Airbnb across those cities. Millions of Airbnb guests checked in from 196 countries.

#100Nineteen years earlier, another big event had been coming to San Francisco. Hotel rooms were hard to find, and two designers who needed rent money looked around their apartment.

#101They didn't own a hotel. They didn't have millions of hosts. They didn't even have guest beds.

#102They had three air mattresses.