“Goodbye. Take care,” he said as they both walked down the walkway of the apartment towards the street. They reluctantly stepped into the taxi, and as it drove down Rausch Street, the look of uncertainty and desperation set in on Joe Gebbia’s youthful face. Apartments were expensive in the bustling city of San Francisco, and with Joe losing his last two roommates, he was between a rock and a hard place to find a viable solution. With him being self-employed and his most recent venture, “CritBuns,”—a line of seat cushions designed in the shape of rear ends—running out of traction, his eviction would be inevitable if he did not find a roommate by the end of the month. Gebbia decided to call upon a friend from college, Brain Chesky. In the early 2000s, Gebbia and Chesky attended the Rhode Island School of Design and quickly became friends when they worked together on a research project at Conair Corporation. Their creativity and outside-of-the-box thinking made them compatible during that time, so Gebbia thought Chesky would make a great roommate. For weeks, Joe begged Chesky to move in, but since Chesky lived in Los Angeles, he couldn’t live there full time and, thus, pay full-time rent. Brian was still trying to appease Gebbia, coming up with plans to “rent his sofa three days a week so he could commute” to San Francisco to work on the project with him.¹ Thinking that his plan was ludicrous, Gebbia conceded and gave up the apartment. On the morning that rent was due, he was left speechless when he received a call from Chesky saying that he was in. Breaking all his ties with LA, Chesky drove to San Francisco in his Honda Civic. Arriving in front of the Rausch Street apartment, the weight of his decision started to fall upon him. With only $1,000 in his bank account, paying off a monthly rent of $1,500 seemed onerous. In addition, the two men would have to find a way to split the share of the empty room in their apartment.²

At the time of the men’s strife, there happened to be an international design conference that was being held in San Francisco later that October in 2007, and with the number of people set to attend this event, hotels in the city would be at full capacity. While Chesky was brainstorming how he could capitalize off this situation, he struck intellectual pay dirt. He instantly sent Gebbia an email that read, “I thought of a way to make a few bucks- turning our place into ‘designer bed and breakfast.’”³ Desperate to solve their rent problem, Gebbia agreed to do Chesky’s plan. They decided to create a bed and breakfast with their extra room. Using three air mattresses that Gebbia had stored in his closet, they furnished their spare room and made it into a hotel room that rooms at Caesar’s Palace in Las Vegas would aspire to be. They also decided to give their customers breakfast, feeding them Poptarts and orange juice. While perfecting the plan, the men paid a freelancer to make them a bare-bones website that would take orders for their room rental. The men started adding their touch to the website, adding what amenities would be provided and that it would only cost $80 per night. In the end, when their idea was ready to be set into motion, they named the website “Airbed and Breakfast.”⁴

Once the website went public, the two men contacted the design convention organizers and asked them if they could help promote their service. The organizers believed their idea was unique and bizarre, but just crazy enough for them to help the men, so they politely obliged. With the extra publicity, the men could only sit back and wait, fingers crossed, for tourists from the design conference to book their services. To their disbelief, three guests ended up booking the room while the conference went on. Their first guest to arrive was Amol Surve, a native of Mumbai who had just graduated from ASU’s master’s program in industrial design; he described how surprised Gebbia and Chesky were that he would book with them.⁵ When he called to reserve a room, Surve said, “They had no idea that someone would stay with them.”⁶ According to Surve, the men’s first experience with hosting for their new business went very well. They first welcomed him with a care package, city maps, spare change for the homeless, and a tour of the apartment. After letting him settle in, they invited him to a PechaKucha-style presentation, where both men explained their business to Surve and asked him how they could improve on what they already had and what else they could need. In response, Surve said, “No, this is already too much.”⁷ Soon after Gebbia and Chesky settled in with Surve, the two other guests arrived. Kat, a designer from Boston, stayed in the spare room with Amol, and Michael, a father of five from Utah, slept in the kitchen.⁸

Once the design conference started, the men took advantage of this opportunity to promote their little hustle. They managed to attend the conference free by claiming they were bloggers looking to write an article about the event. Using Surve to give personal testimonies on how excellent their service is, they approached people and introduced Airbed and Breakfast to them. After forcing poor Amol on every person that the founders talked to, they concluded that no one liked their product. The people at the design conference thought it was interesting but strange, a service that no one in their right mind would want actually to use. After spending the weekend at the conference with no luck whatsoever and saying goodbye to their temporary tenants, Gebbia and Chesky needed to take time to assess whether this business would be lucrative or whether they should scrap it to start another.⁹

If the men were serious about starting Airbed and Breakfast, let alone any business, they needed to bring in an engineer to create whatever they designed. Nathan Blecharcyzk, a Harvard grad whose coding skills were nothing short of genius, just happened to be Joe Gebbia’s old roommate. So Joe called him up and was happy to hear that he would love to work on a project with the men, mainly because he was planning on leaving the failing start-up company he was currently working for. With Nathan now on board with starting a company for themselves, they got straight to brainstorming. Before pigeonholing themselves to the Airbed and Breakfast idea, the men wanted to explore other options. For a brief stint, they decided to make a website to help people find like-minded roommates. They worked on the project for nearly a month before discovering that a website like that already existed. With no other ideas coming to mind, the three of them agreed on refining Airbed and Breakfast and growing that company.¹⁰

During the process of crafting their business model, Gebbia and Chesky would cook up extravagant ideas for their company and expected Blecharcyzk, the only engineer out of the group, to build it all. Of course, Blecharcyzk thought this was ridiculous and would frequently send them back to the drawing board to simplify the model. Once the plan was, as Gebbia called it, the “same great product, half the code” and was set up to be monetized, the men were ready to launch the website the “first” time at the Austin music festival, South by Southwest.¹¹ This “initial launching” was a tactic that Chesky devised. He once said, “If you launch and no one notices, you can keep launching.”¹²

Once they made their website public and introduced it to the South by Southwest crowd, they were once again ready and set to deal with anyone who booked their rooms. To promote Airbed and Breakfast at the event, Chesky stayed with a listing on their website. His host was a UT Austin student named Tiendung Le. When Chesky arrived at his apartment, he was delightfully shocked to find out how well thought-out Le designed his place in order to provide for his tenants. Le made the regular air mattress on his living room floor pleasant and classy, all by putting a little mint on the pillow. Chesky was deeply impressed by this listing. During a time of uncertainty in the company, Le’s apartment gave him a taste of hope for his future. He had to hold on to this hope; however, he found that there was only one other person who booked a room that weekend. This was profoundly concerning and upsetting to the trio, but Chesky used this as a learning experience despite the lack of success. He analyzed his experience of staying at Le’s apartment and took away a lot of things they needed to fix. He saw that there were problems in the payment system, which led the men to work on a more accessible and more reliable payment method. They refined their website and looked for a new place to “launch.”¹³

During their time at South by Southwest, Chesky made an extremely valuable connection through his other roommate at the Rausch Street apartment, Phil Reyneri. In November, Phil joined Gebbia and Chesky as a roommate and was working with a start-up called Justin.tv. He accompanied his current boss and CEO of Justin.tv, Michael Seibel, to South by Southwest in Austin, to promote their company the same way Chesky was advertising Airbed and Breakfast. When Brian Chesky concluded his experimental stay with Le during the festival, he decided to stay another night, which resulted in him asking Reyneri to let him stay in his hotel room. During the brief time Chesky stayed in his roommate’s hotel room, he started talking to Michael Seidel about Airbed and Breakfast. Michael, an entrepreneur himself, understood the struggle and the amount of courage it took to start a business. So when Chesky introduced his modest company to him, rather than saying it wouldn’t ever work, Seibel genuinely believed that it was a feasible plan that was capable of solving a real-world problem. Chesky was delighted to hear that someone believed in them, while Seibel was stunned that someone would ever ask him for advice on their company. Michael then offered his counseling to the Airbed and Breakfast trio and said he would use his business connections to help set up the men with an investor or an “angel,” as he called them.¹⁴

Over the next couple of months, Seibel connected them to seven different investors with whom he had connections. When contacted about Airbed and Breakfast, most of the investors didn’t even bother to write back, and most of the ones who did were not interested in the slightest. The men only landed a few in-person meetings, and even those went poorly. They were simply not what investors were looking for, lacking the “technical DNA” that was wanted at the time.¹⁵ Gebbia and Chesky even recall being in a meeting at a cafe in Palo Alto when the investor they were speaking with “simply got up with no warning and walked out halfway through the meeting, leaving his half-full smoothie on the table.”¹⁶ With this high rejection rate, the men decided that they needed to focus on finding success in their business and then search for investors.¹⁷

In August 2008, the Democratic National Convention was held in Denver, Colorado. Local articles at that time were pouring in, claiming that there would be an influx of attendants at this convention, close to around eighty-thousand people. However, Denver only had twenty-seven thousand hotel rooms.¹⁸ This event was looking to be a massive problem or, to the Airbed and Breakfast team, an enormous opportunity. The men were putting everything they had into their DNC campaign. They expanded the website to make transitions go as smoothly as possible, and they made a clever slogan, “Stay with a local when traveling” and even managed to get featured on a popular blog, TechCrunch.¹⁹ This boosted their image as a company and allowed them to gain popularity. So much even that during a meeting with an investor, their website crashed while they were trying to show it off because of the large amount of traffic they received on their website. This did bring a problem to the men’s attention, which needed to be resolved posthaste. The issue that was arising was the lack of listings they had on their website. At this point, they only had a few listings in Denver, so regardless of how many people looked on their website, they wouldn’t make any money if they did not have the houses to stay at. Gebbia and Chesky sought to fix this problem by drumming up new coverage.²⁰

Getting mentioned from a source with many viewers would be an enormous task, so the men decided to start small and hope that it could start a domino effect. For the first time in Airbed and Breakfast’s history, their plan actually went right, with their business being promoted from a small, no-name blog to the New York Times. This coverage generated a tremendous amount of attention for Airbed and Breakfast, causing over 800 people to list their rooms and 80 people to book.²¹ During this time, the men were using PayPal as the primary way of payment for their site; however, since they had never had this many people use their services at once, PayPal saw the transactions as fraud and froze the account. Nathan Blecharczyk had to plead to a service caller from India for them to unfreeze their account, which took a couple of days. Regardless that the payment system was upsetting to the hosts, this venture was seen as a massive success to the founders compared to the rest of their past efforts.²²

After their success at the DNC, the men were rapidly approaching a lull in their business, partially because Blecharczyk moved back to Boston, but mainly because of how they only do well whenever conventions or large activities happen in a city, causing the hotels to run out of space. Chesky and Gebbia were running out of money rapidly, so as usual, they got to brainstorming to come up with a solution. Once again, their resilient spirits came up with the idea to sell election-themed cereal for the presidential election to raise money. Asking Nathan for permission, like a reluctant parent, he said yes, but wanted no part in their operation. Immediately, the two men contacted their friend who owned a printing shop and agreed to give him a “piece of the pie” if he printed out 500 boxes for each of their lines of cereal (1000 boxes total). Their Democratic line of cereal was called Obama O’s, while their Republican line was called Cap’n McCain’s. After going to the dollar store and buying all the one-dollar cereal they could find, the men strapped up their hot glue guns and pasted together one thousand boxes. After realizing how surreal their attempt to raise money was, Chesky said, “I don’t remember Mark Zuckerberg Assembling Cereal Boxes.”²³ After every box was assembled and filled with cereal, the two founders, in a last-ditch effort, mailed samples to various news stations. With such catchy names and no negative side for these news outlets to display their product, they promoted the cereal as a political gag gift. Instantly, the boxes became iconic, causing the Obama O’s to completely sell out in only three days. Once they ran out of stock on Obama O’s, the buyers took to eBay and Craigslist to resell them for up to $350. Although Cap’n McCain’s did well, they never sold out. All in all, Gebbia and Chesky made between $20,000 to $30,000, which is massive compared to the $5,000 of profit they had made from their “actual business.”²⁴

After a few hard months with next to no success in the business and living off dry Cap’t McCain’s, Gebbia and Chesky were at their end. Their business was on the verge of ceasing to exist, but before they shut the place down, the men wanted to have an advisory meeting with Seibel to discuss their “what now?” business plan. Seibel suggested that they apply to Y Combinator, an incubator company for start-ups that needed a push, financially and strategically, for them to succeed. At first, the men were hesitant and resistant to apply for an investment, but after Seibel pushed back and told them that they were “dying,” they were willing to give it another shot.²⁵ After Seibel pulled a few strings to allow them to apply, since the deadline had passed, they applied and managed to get an interview. The interviews from Y Combinator were infamously rigorous and professional, so when Gebbia opted to bring a box of cereal to present to their interviewers, he was quickly told no by the other two founders since it was deemed unprofessional. Once the men arrived at the interview, they were ready to show them why Airbed and Breakfast deserved to be a part of their team; however, once the meeting commenced, all of that went out of the window.²⁶

Immediately, the CEO, Paul Graham, disliked the idea and even said, “People are actually doing this? Why? What’s wrong with them?”²⁷ Graham and the rest of the interviewers pointed out flaws in the company and proceeded to tear down the idea. Once the interview was over and the men were getting ready to leave, Joe Gebbia reached into his briefcase and, to the founders’ surprise, pulled out a box of Cap’t McCain’s, rushed towards Graham, and gave it to him. Thinking it was a strange, off-color gift, he awkwardly thanked Gebbia, but the founders explained that they sold cereal to fund the company. Gebbia pleaded that they have been giving it their every effort to keep this business alive and that they are a resilient company that he believes deserves a chance. Graham’s response to all this was, “You guys are like cockroaches. You just won’t die.”²⁸ Before the men left his office, they were informed that they should expect a call shortly if Y combinator wanted to bring them on.²⁹

On the way home from the interview, the men saw Paul Graham’s number show up on their phones. Chesky immediately picked up while the other two men closely listened in. Graham was about to offer the men a position on the team, but right before the guys could say yes, their connection cut out on the long stretch of desert they were driving on. They all screamed in horror. They had thought they had just fumbled the biggest opportunity this company had ever had. Chesky said, “I’m like, Oh my God, I just ruined it.”³⁰ They whisked through traffic and managed to make it back home, where they called again. Paul Graham picked up and offered the men a spot at Y Combinator and $20,000 for a 6% stake in the company. Paul believed in the men and saw that they had what it took to be the leaders of something much more significant than what the company was already. He later commented about bringing the trio to Y combinator, saying, “If you can convince people to pay forty dollars for a four-dollar box of cereal, you can probably convince people to sleep in other people’s airbeds.”³¹

In January 2009, Chesky, Gebbia, and Blecharczyk were brought on to Y Combinator, where Graham acted as their mentor. Graham explained to the men that at Y Combinator, they had a biannual event called “Demo Day,” where start-ups would have to present their business plans to investors. This was considered the most important day at this company, so Graham suggested that the men make Airbed and Breakfast “Ramen Profitable” to remotely attract investors. This term meant that your profit would be enough for you to feed yourself, even if it were simply on ramen. This shark-tank-esque activity had the men shift into gear with their company. Asking Graham for advice on how to make the company profitable, he suggested “Go to your users,” which the majority of users were in New York.³² So, while Blecharcyzk remained in San Francisco for the next three months to do coding, Gebbia and Chesky would fly in and out of New York, staying with their Airbed and Breakfast hosts. This tactic allowed them to see what kept them from success and develop solutions. By visiting hosts and temporarily living with them, they noticed one fatal issue: their hosts took horrible pictures of their listings. Most of them had poor-quality cameras or did not correctly spruce up their listing. So to fix that, Chesky borrowed a high-end camera from his friend and took his own pictures. He would disguise himself as a professional photographer to look more legitimate and put nice pictures of their houses on the website.³³

After spending their time focusing on New York, they switched their focus later that month to doing another one of their cheeky “re-launches” in Washington, D.C., for the inauguration of Barack Obama. Using the marketing tactics they used at the DNC and all of their prior knowledge, they managed to get 700 people to list their spaces and 150 people to book them.³⁴ During this momentum for the founders, they came across a new idea. One of their users, David Rosenblatt, drummer for Barry Manilow, asked if he could use his spare bed instead of an air mattress, and even if he could rent out his apartment. Chesky told him no, but later came to the realization that this could be the company’s new direction. By widening the requirements that they imposed on the users and maximizing their options, it would entice more people to not only list their homes, but also for people to book them. The men “eliminated the breakfast requirement and added the option to rent an entire residence.”³⁵ In addition to that, since they weren’t exclusive to air mattresses and breakfast now, they shortened the name to Airbnb, which was less of a mouthful and more memorable.³⁶

While the founders worked to become “ramen profitable,” Paul Graham was attempting to schedule a meeting between the men and venture capitalist and co-founder of Union Square Ventures, Fred Wilson. Paul felt that Airbnb was what he was looking for and would be a good investment for Fred. For a while, the two were chatting back and forth, with Graham taking a self-assertive, almost pushy approach to persuade Wilson to consider investing. When Wilson would tell him that he was taking time to debate with his team and that he needed time, Graham made it imperative to let him know that it would be wise to meet the founders before they disregarded their business. Graham stressed to Wilson, “We had big doubts about this idea, but they vanished on meeting the guys,” which led to Wilson putting his trust in Paul, saying, “We are still very suspect of this idea but will take a meeting as you suggest.”³⁷ So, having an impending meeting with Fred Wilson, the men prepared themselves and got ready for the largest opportunity that this company has had. This investment could transform their company from less than “ramen profitable” to “Lamborghini profitable.”³⁸

On February 13, 2009, Gebbia, Chesky, and Blecharczyk waited anxiously in the Union Square lobby in New York. They were inspecting their suits for lint and checking to see if they had any food from breakfast stuck in their teeth. This was their big moment, and nothing could mess it up. They had to keep their composure and do what they did in the Y Combinator interview. After all, Paul Graham saw something special in them, so why wouldn’t Fred Wilson? Chesky, making sure they had all they needed, briefly checked to see if they had everything ready. “Business plan,” Chesky said. “Check!” Gebbia responded. “Cereal boxes,” said Chesky, to which Gebbia responded enthusiastically, “check!” They were ready. Wilson’s office door opened, unveiling the man who they were all there for. Fred Wilson greeted each man with a sense of familiarity and welcomed them into his office, encouraging them to sit. Wilson had waited a long time to meet the founders and was ready to be shown why they deserved this opportunity. At the time, he was on the fence between investing or letting this opportunity slide, and this interview determined the way he would fall. The men started by showing them the plan for their business and what they had already accomplished. They displayed their marketing techniques and new direction of allowing people to rent out their apartments or homes rather than making them strictly a shared space. Lastly, Gebbia brought out the cereal boxes and told Wilson how they stayed alive, both from a business standpoint and a literal standpoint, by selling cereal. He conveyed to him that the story of selling cereal embodied the spirit of their company and underlined the values that the founders incorporated in Airbnb. After the men gave their all in presenting their company, they sat back and waited for Wilson to share his thoughts and hopefully want to invest. Wilson started by thanking the men, then went into how he still did not see how this company could be a success. He thought they would do well on a small scale but nothing significant. He said, “I’m just not sure how big it’s going to be.”³⁹ Fred later commented shortly after the interview, “I think it can scale all the way to the bed and breakfast market, but I am not sure they can take on the hotel market.”⁴⁰

Wilson did not believe this company would be big enough to invest in. It was something that did not make sense, and at that moment, the men were bringing in next to nothing in sales, so why would he even want to invest? Regardless of the men’s persistence and grit, he did not believe that they were the right decision. “Sorry guys, but I’m out,” Wilson decisively said. The weight of this decision crushed the men’s hopes. They were used to rejection at that point in their company, but losing this massive opportunity truly disappointed the founders. They grabbed their belongings, thanked Wilson, and were on their way out the door when Wilson stopped Gebbia. With hope in his heart, Joe Gebbia turned to Wilson to see if he had changed his mind; however, when his gaze met Wilson’s, he noticed that Wilson was pointing towards the cereal box in his hand. He boldly asked if he could keep a box for himself. As if he didn’t just turn down the men, he grabbed the box out of Gebbia’s hand and wished them a good day. The men left defeated and disheartened.⁴¹

Back in San Francisco, the men were still working to further stimulate Airbnb’s growth, regardless of their heartbreaking defeat. They managed to become “ramen profitable” by getting twenty bookings a day, which gave them a weekly revenue of $1000. This was great for the men, but they were still praying for an investor but weren’t hopeful because of their interaction with Wilson.⁴²

In April of 2009, Greg McAdoo strolled into Y Combinator’s headquarters to ask Paul Graham if he had any up-and-coming companies with founders who embodied “intellectual toughness.”⁴³ Graham immediately thought of his Airbnb team and directed McAdoo over to them. When he founded the trio, he introduced himself as a partner of Sequoia, a venture capital firm that had invested in massive companies such as Google and Apple. He started up a conversation about the hotel and rental industry and bounced the idea off the men. Both parties enjoyed what the other had to say, and the founders were interested in Sequoia, which led to multiple meetings to discuss the industry and the ins and outs of the company. At the same time, the founders were talking to Jawed Karim, Kevin Hartz, and Keith Rabois, all representing a company called Youniversity Ventures. Jawed, the founder, took a serious interest in Airbnb and its owners since he thought that their company was a “reversion to a very standard practice” and that the men “seemed like this ideally balanced founding team.”⁴⁴ Through a couple of weeks of negotiation with both companies, the men managed to secure an absolutely massive investment. They received a whopping $585,000 from Sequoia and $30,000 from Youniversity ventures.⁴⁵

Gebbia, Chesky, and Blecharczyk finally made it. After years of being told their idea was ridiculous, they finally had people who believed in their product. Brian Chesky commented, “We were told for a long time that this was terrible. Then we were told we were excited.”⁴⁶ This was not only a massive confidence boost but also an astronomical boost to their company. With this investment, it metaphorically injected steroids straight into the heart of the company, causing rapid growth. As Chesky puts it, “There was no turning back.”⁴⁷ The bookings grew over the next few months until they hit the triple digits daily. They started to add more obscure listings to the website, such as igloos, treehouses, and teepees. They truly gained a following, and Airbnb was well on its way to solidifying itself as the next big thing.⁴⁸

After a few months since his meeting with Airbnb’s founders, Fred Wilson was having to deal with the weight of regret. Seeing the company he turned down grow into something massive within a few months haunted him. Taking the cereal box that he asked the founders to leave, Wilson placed it next to the wifi router in the conference room to serve as a reminder never to let something like Airbnb pass again. To this day, it sits in the conference room. Later on, in 2011, Wilson made a blog talking about his past failures. Saying that at the time, “We couldn’t wrap our heads around air mattresses on the living room floors as the next hotel room and did not chase the deal.” and that “We focused too much on what they were doing at the time and not enough on what they could do, would do, and did do.”⁴⁹ Fred said, “We missed Airbnb even though we loved the team. Big mistake.”⁵⁰ At the time of his writing this, Airbnb was still growing at a rapid rate. It was impressive not only for him but for the hotel and hospitality market as well. Wilson, predicting the company’s further growth, said, “Airbnb is well on its way to building the “eBay of spaces.” I’m pretty sure it will be a billion-dollar business in time.”⁵¹ That comment, unlike turning down Airbnb, was no mistake at all.⁵²

Throughout the next decade and a half, Airbnb continued to grow into the mammoth company it is today. In the first four years that the men had investments from Sequoia and Youniversity, they managed to host over four million guests. The year after that, they managed to host over seven million in one year. This is a huge difference from their first couple of years of only hosting a handful of people and pretty much pleading for people to use their product. At the company’s ten-year mark in 2017, it managed to hit 33.9 million users in the United States. This growth in ten years is unprecedented. At the time, the company’s profits were fluctuating heavily. In 2018, they earned a profit of $200 million but had a loss of $322 million in 2019. The company, although growing at a steady rate, dealt with instability in users, which caused its profits to fluctuate heavily. Regardless, it was still attracting millions of users worldwide, where even in 2019, when the company suffered heavy losses, it still averaged two million guests per night. ⁵³

In 2020, Airbnb went public with an initial public offering of $68 a share.⁵⁴ This monumental milestone for the company allowed Airbnb to have more connections with its users and gave it the funding needed to continue to improve the product. Now, according to the NASDAQ, Airbnb is worth over $79.38 billion, with its shares now selling for $122.64 each, at the moment. They have around seven million active listings worldwide, in over one hundred thousand cities in two hundred and twenty countries. The company has hosted over one and a half billion guests at their over four million listings. Airbnb has grown simply from an idea that two young and broke men had to pay rent for the month into a massive international company that is a household name. The creativity and sheer tenacity that Gebbia, Chesky, and Blecharczyk had to keep the business afloat is something out of a legend. The creation of Airbnb took an effort and mindset that most others do not have. The history of Airbnb will always be known as a story that embodies the idea of entrepreneurship and the unbeatable human spirit.⁵⁵