Airbnb: Nathan Blecharczyk & Their First Advisor

17:13Sam Angus:A brand new show from Semaphore. And now back to the interview. Before getting to YC, I also just wanna set the stage for like what the world was like. You know, I mean, this wasn't obviously a common behavior. People weren't going, I mean, we take it for granted now to go, you know, I just stayed in an Airbnb last weekend, you know, but that wasn't what people were doing back then. You know, a lot of people were saying it'd just be crazy to go stay at a stranger's house, right? Like, like, tell us a little bit about what things felt like coming up with this idea and trying to convince people in the world that it was a good idea.

17:48Nathan Blecharczyk:Yeah. Well, first of all, you know, it was all inspired by our own experience that, you know, happened very naturally, not because we wanted to build a big business, but just because we were solving our own problem one weekend. So we knew that this could happen, you know, meeting somebody new and having a place to stay and having an experience that I think was our North star amidst everybody else in our lives saying, this is crazy. Like staying with a stranger, like someone's going to get killed, right? Like that was the kind of common wisdom. And it's the reason why I think so many investors, you know, had zero interest.

18:27Nathan Blecharczyk:Like they couldn't see themselves using this product. They probably didn't think it was a big market too as a result, right? But yeah, it was common sense that this was a bad idea. And not just a bad idea, like people had a visceral reaction, like this is terrible.

18:41Sam Angus:So yeah, so tell us about the Y Combinator interview, right? This feels really like make or break, life or death.

18:47Nathan Blecharczyk:Well, there's like a lot of things that lead up to setting the kind of table for this moment, right? We eventually aligned on this idea to make it just as easy to book someone's home as a hotel. This idea is meant to be not just about events or conferences anymore, but we still think conferences and events are a good catalyst for a good way to launch and get publicity. So we start thinking, what's the biggest thing that's going on in the world in the summer of 2008 that's an event that we could basically launch at? And it's the Democratic National Convention. And it's going to be held at this stadium that holds 80 ,000 people in Denver.

19:22Nathan Blecharczyk:We look it up and Denver has 17 ,000 hotel rooms. So we're like, perfect. Like hotels will definitely be sold out for this thing. And so we figured this all out like three or four months beforehand. So we build it in three months. We launch like a week before the event. And sure enough, like all the locals are looking to get out of town, make a buck. They're posting their stuff on Craigslist. And, you know, we message them and just say, look, you know, there's a site dedicated for this purpose where you can also advertise your homes. Within a week or two, we have like 800 homes on our website and Denver.

19:53Nathan Blecharczyk:And, you know, meanwhile, the newspapers and whatever are doing stories about how it's a historic event, but people have no place to stay. There can't be out in parks. So we write to the newspaper and just say, look, we have a website with 800 confirmed available homes. And they say, well, that's interesting. Like, we'll do a story. And so they do a story. And very quickly, it snowballs into us being on CNN International talking about Air Bed and Breakfast and the conference and, like, what we're trying to do. And so it's huge publicity. Hundreds of people, you know, book on Air Bed and Breakfast.

20:20Nathan Blecharczyk:And actually, it's through Sam Angus that we got connected with one of his contacts who was working on the campaign and kind of helped clue us into how big of a deal this was going to be.

20:30Sam Angus:I'm Sam Angus. I'm a partner at Fenwick & West, and I incorporated Airbnb in 2006, 2007. I helped them, through a contact, get invited to the Democratic National Convention where Obama was nominated. This was going way back. And they launched and they had a huge positive engagement with people who were staying over there because it was such an exciting time. And so at that point, I realized this thing is getting traction. Because if you think about the business, you already had Craigslist that had millions of people renting out rooms on a short-term basis. It was just in a very disaggregated, not a user or owner-friendly way.

21:19Sam Angus:So it was ripe for optimization. And so that was the brilliance is they saw that and they leveraged that in a way that created this platform that made it much easier and supercharged this activity.

21:33Nathan Blecharczyk:So that all goes super well. But like the week after the conference, the crickets are chirping. Like there is no business. Nobody books at all on our website. Like we're no longer relevant to anybody. And this is where we get really creative. Or frankly, Joe and Brian get really creative. At our time, our name was Airbender Breakfast. Somehow, don't ask me how. They start thinking about the breakfast part of our name. And they're thinking to themselves, like how can we reach back out to all the political reporters that we met during the DNC? And so they come up with this idea to create a presidentially themed breakfast cereal.

22:07Nathan Blecharczyk:Obama owes and Captain McCain's. And we fill the boxes with cereal that we'd bought at the store and hot glue the boxes together. And we mail the first 100 of each of these boxes to the political reporters. And it worked. You know, sure enough, we get huge coverage again. But, you know, that moment passed. And like, once again, we're back at square one. And the question is like, when do you know it's time to quit? right and uh this is where a mentor of ours encourages us to apply to y combinator and so we get the interview it's a five minute interview two minutes into the interview it goes off the rails paul graham was like what you know strangers staying in other people's houses like that's crazy that's doesn't sound safe like i wouldn't do that and then he starts like trying to tell us about some other idea that he's excited about so that clearly didn't go well we're walking out of the room.

23:01Nathan Blecharczyk:And as we're walking out, Joe takes out of his bag, a box of the Obama's and gives it to Paul Graham. And Paul Graham says like, what, what's this? Did you buy me a gift? And Joe says, no, we made this. And he's like, I don't understand. He's like, sit, sit back down and tell me how you made this. And he's like looking at it. So we spent five more minutes telling him the story about the cereal and why we did it and how we did it. And, uh, you know, later that day, we get a call back saying we've, we've been accepted into Y Combinator. And later on, Paul Graham told us he accepted us, not because he liked our idea, he hated our idea, but he knows ideas can change, but he knows founding teams don't really change.

23:36Nathan Blecharczyk:And he said, the serial story demonstrated to me that you as founders were incredibly scrappy and creative and what he called cockroaches, meaning like you just couldn't kill us because we would just never give up. We would just come up with like some wild idea to keep surviving. So he's like, that's what I wanted to fund in this kind of environment where it was a financial recession.

23:59Sam Angus:That's awesome. You know, before kind of continuing that story, you mentioned Sam Angus, you know, I'd like to kind of jump into that relationship as well. So, you know, tell me a little bit more about kind of the first impact that Sam had on the company. It sounds like he really took a bet on you guys, incorporated you, you know, even before YC or anyone else did. Yeah, totally.

24:19Nathan Blecharczyk:I mean, we met Sam, I think it was probably around the time of like April or so. of 2008. But, you know, super early on, like we're just three or four months in, this is like eight months or so before Y Combinator, you know, because he seemed to like our idea and, you know, was willing to spend the time with us at a time when, you know, nobody else at that point had recognized that this was going to be anything other than a bad idea.

24:42Sam Angus:I remember before they joined YC, we were trying to get them funded. And I reached out to a lot of different investors in the Silicon Valley and saying, Hey, listen, these guys are starting to get real traction. Look at the numbers here. The TAM is massive. I could not, for the life of me, get these investors interested because it was just a disconnect from their personal experience, right? I mean, an investor living in the Silicon Valley is not going to rent a room. They're thinking like, wait a minute, this just doesn't feel like a big business. And to this day, I mean, I have more than a few of them who come up to me and say, God, I should have listened to you and invested in that company.

25:21Sam Angus:And this was like pre-YC.

25:23Nathan Blecharczyk:You know, he was all in and there for us. And then, you know, as the company progressed, he was really the only professional person we had to talk to, right? Like we didn't know any other professionals in this industry. Very quickly, we became, I'll say friends, you know, like we would host these parties at the apartment and he would always show up. And I think like we weren't normal startup founders. Like the three of us are all very different. And obviously, Joe and Brian were bringing a lot of creativity and a lot of zany ideas to the table. I think he liked that energy. And so, you know, he spent the time with us.

26:01Nathan Blecharczyk:And, you know, by spending time together, we became very much friends. And he became a trusted advisor to us.

26:07Sam Angus:You know, we were talking with the company on almost a daily basis during those years. And then throughout that time and even through today, I've had a personal relationship with them. You know, we go grab dinner, we hang out together, we go work out. So I've had, I consider him a friend, really, more than a client. It's a very special relationship. Yeah. And so, like, I kind of want to connect the dots there because, you know, one of the things that Sam talked to us about also is the famous kind of EJ incident where, like, kind of the first big incident where there's an apartment, you know, something went wrong.

26:42Sam Angus:You know, there's an apartment that was trash and there was an owner that was maybe, let's say, being a little bit less than collaborative about the whole situation. And, you know, to hear Sam describe it, you really swooped in and you were calm and level headed and you kind of ran into that burning building. Like, how did you guys decide during that moment? Like, did you pick straws? How did you decide kind of who was going to go in and help work that situation?

27:05Nathan Blecharczyk:You know, I think as a company, the most important thing we did was realize that this was a true crisis and not just try to manage it away, but actually use it as an opportunity to make us into a better company.

27:16Sam Angus:There was a situation, without disclosing too much, where there was some claims being made against the company by some people who had rented an Airbnb. And the person who owned the Airbnb wasn't representing what the accommodation was really all about. And they threatened to go to the press. And that was at a very vulnerable point for the company because this was early on when they were starting to scale up.

27:45Nathan Blecharczyk:And so what we famously did was basically stop everything and tell everybody, stop what you're doing and start thinking about ways to make the site more trustworthy, more safe. And we do this epic brainstorm, come up with all these projects. And over the course of two weeks, we implement about 40 of them. And that's powerful because while this PR crisis was playing out, two weeks later, we were able to come back and say, hey, look, we acknowledge this thing happened. And like we made some mistakes and like we're incredibly sorry for what happened here. But we also are excited to share that there's 40 new trust and safety features that we're launching.

28:23Nathan Blecharczyk:And that was probably more than what anyone would have expected us to be able to do or do in the situation. And so, you know, I think at the end of the day, like we were scrappy once again and creative and seized the moment. And we're all in.

28:40Sam Angus:Do you remember, like, I'm sure you must have gone back and forth, back and forth around like, hey, is this really our liability or, you know, how are we going to deal with this? Right. And like, you know, famously, you decided to create this program and you decided to do the right thing and, you know, stand behind the guests and stand behind the hosts. I think that's kind of a recurring theme for the company is that you've done that over and over again. But like, were there any differing opinions of like, this is going to cost too much money or we don't want to take on this liability? Like, how did you finally decide, like, we're going to set up this program?

29:10Nathan Blecharczyk:Oh, for sure. Yeah. I think in a crisis, you get so many opinions and a lot of people are acting out of fear and telling you, oh, be careful. Don't do that. It could create a new problem. Right. And so there's a lot of people telling you what you shouldn't do and can't do. Not a lot of people saying what you actually can do to make the situation better. I think one example of this that's noteworthy, we came up with this idea of a host guarantee. you know, if anything went wrong, Airbnb would cover the damages up to a certain amount. And we were thinking that we would make it$5 ,000. That seemed like a lot of money at the time or, you know, enough money to replace a piece of furniture or whatever.

29:51Nathan Blecharczyk:Like we were scared though, right? Because we, you know, this would be coming out of our pocket and we weren't sure how many people might file complaints and maybe they were legitimate complaints. Maybe they weren't, right? And then Mark Andreessen came over to our office and he had just funded the company and he was the lead investor in our a hundred million dollar round. And he said, you should add a zero to that. So the 5 ,000 instantly overnight became$50 ,000. And we just said, well, you know, like if our lead investor is comfortable with us making this offer, well, frankly, it's, it's kind of his money.

30:22Nathan Blecharczyk:He just gave it to us. That's where the money's going to come from. So let's go with it. You know, he kind of gave us permission to think boldly. And, you know, fast forward later on, that eventually became a million dollar guarantee. And I think it might even be three million now these days. But like that was the catalytic moment. And, you know, ultimately, I can't say it's right in every situation, but, you know, like the human thing to do is usually the best thing to do from a PR perspective. And like the other stuff will work itself out. And if you do right by the people, then I think some of the other risks kind of evaporate.

30:53Sam Angus:He was the one who sort of parachuted in and helped try and manage that situation. That was something I was very impressed with because he had to deal with a lot of different constituents in that situation. Angry people who were, you know, who were gypped out of stain, the owner of the property who was trying to leverage the company. And he was the perfect person because if you had somebody come in who was really aggressive, that could have backfired. And there's also, he understands really well, and I think all of them do, forests from the trees. There's no ego here. This isn't like they're going to do something because they want to get back at somebody or because almost always they looked at the bigger picture.

31:40Sam Angus:And it's easy to forget that when you're in the middle of a very intense adversarial situation. I think it comes down to emotional maturity, really. It's a very mature decision to say, it's not worth fighting this. You know, the money's not existential to the company. What's more important is reputation. And now, a short break. Keeping up with this economy matters. And in a world full of hot takes and noise, Marketplace does things differently. I'm Kai Rizdahl, the host of Marketplace, a daily podcast that delivers independent, award-winning journalism dedicated to making you smarter about this economy.

32:23Sam Angus:You can listen to Marketplace on Spotify.

32:32Sam Angus:And we're back. One of the things that Sam talked to us about also is how you're able to both have really good, strong technical talent, but also swoop in sometimes to chaos or to problems and just have this like kind of, you know, calm demeanor. Like, do you have any sense for where that comes from?

32:50Nathan Blecharczyk:Uh, in my teenage years, when I had the business and I was also like top of my class and I was also running track, like I, I had a lot going on and I had to be very disciplined about time management, but also just like balancing all this stuff. And so, you know, I think I got just very good at staying calm and taking one thing at a time and working through like what needed to be done, whether it was solving a problem or just load balancing across a lot of chaos. That's one thing. I think second, like in running my business back in high school, I was dealing with a lot of people. I had probably a thousand clients and, you know, I was doing customer service and everything, right?

33:30Nathan Blecharczyk:Like if they were upset, they would call me up on the phone and I would talk to them. And so here I am like as a 15 year old, you know, talking to someone who's probably like three times my age, four times my age, who's like super unhappy and, you know, trying to calm them down and, you know, commit to them that I was going to make the situation right or whatever. And so I think I, I got a lot of practice, you know, working it out with people and, you know, like my demeanor at that time was, you know, in my first business was like the customer is always right. So, you know, I was always trying to lean into whatever their emotional state was and figure out how to work with them to get them to a better place.

34:13Sam Angus:I want to talk about another moment where you basically, bigger stakes, same kind of decision, right? And that's the pandemic. So before getting to the pandemic, can you kind of set the stage for us? What did the company look like, let's call it 2019? How many guests or how many employees, just kind of how you want to describe where you'd gotten to at that point?

34:34Nathan Blecharczyk:Yeah, well, 2019, I think we'd probably raise like roughly$3 billion up at that point, like a lot of money. Things were going pretty well. Yeah, like we had had basically a decade of growth, right? Because like the growth took off in 2009 and 10 years later, like, and we were now ubiquitous in every country of the world. And things seemed pretty good for the most part. I think there were some challenges underneath the surface. I think the fact that we had had access to easy money and had$3 billion in the bank account meant that we hadn't needed to be very rigorous with our P &L and our investment choices and managing people.

35:16Nathan Blecharczyk:We were also in the midst of writing our S1 for the IPO. So we were planning to go public in March. And so at the end of 2019, we clearly had a draft of that ready to go. and very real plans to go public. And then the pandemic starts to happen, right? And by the beginning of March, it's a worldwide pandemic and our business drops 80 % in the span of just a few weeks. All these people are canceling their reservations. So to navigate all this, we came up with a bunch of principles. One of them was, for example, this is a public health emergency. So we should do like what's right by public health.

35:54Nathan Blecharczyk:Forget about the business or whatever. Let's acknowledge the reality, which is this is a public health crisis for the world. Two, we're going to be bold. We weren't going to take half steps. There are a lot of companies that were playing this a couple weeks at a time and doing small layoffs over and over again and things like that. Three, we were still going to, when we made tradeoffs, think of a long-term mindset about what's most important in the long term and try to preserve that. So these principles were helpful because there was a lot of decisions we were going to have to make really quickly.

36:26Nathan Blecharczyk:Also, these decisions were going to be controversial, so we needed to communicate them effectively to our employees. And so it was easier to start with the principles and educate them about the principles and the why behind the principles, and then use that to segue into the hard decisions versus just dropping a hard decision on them. And so we ended up refunding the guests because we didn't want them to be financially incentivized to have to travel when it wasn't in the best interest of public health. We had to cut a lot of expenses, lay off 1 ,800 people, which was one of the hardest things we've ever had to do.

36:57Nathan Blecharczyk:But by a few months later, you know, in the summer, it turned out like people were eager to get out of their houses and they still wanted to travel, even though they couldn't get on airplanes. And they were traveling to rural areas and creating their own like bubbles. And it turns out like staying in a home was great for that. So our business ended up bouncing back sooner than we would have thought. and sooner than the rest of travel. And later that year, we were actually able to resume our IPO and go public in December. So kind of remarkable in retrospect how quickly we worked through that period.

37:30Nathan Blecharczyk:And it was just a financially much more fit company.

37:34Sam Angus:How did it feel to go public in December of 2020 after going through such a hard experience that year?

37:40Nathan Blecharczyk:I mean, it was unfathomable, frankly. I mean, it was really scary when like the floor drops out from underneath you and you are sitting on$3 billion of other people's money that you suddenly have to give out return and you don't know like how that's gonna go down and you have to let go 20 % of your employees. I'm like, these are like really scary, sad things. They're like emotional. So that part was like, you know, really terrifying. You're just kind of wondering like, will the world ever go back to the way it was? Will we make it out of this thing? or are we forever going to be, you know, like one 10th or one 100th our original size?

38:22Nathan Blecharczyk:But it was a very successful IPO, right? The stock price, I think we were supposed to open up at like between 60 and 80, something like that. But, you know, it ended up closing out at like 135, I believe, or something like that. So it basically doubled over the course of that day. And it was, that was a huge validation that like the market saw that Airbnb was going to be an exciting company in the future, despite, you know, all that had happened over the last 12 months.

38:49Sam Angus:You know, so much of this is trust building and responding to crises. You know, one of the last things I really want to cover is this program. You have Airbnb.org around natural disasters, right? I think, you know, if I have it right, the idea first came out of Hurricane Sandy and a host wanting to donate their home. But can you tell us a little bit, you know, I know most recently with the LA fires, you guys did a lot with helping people out with emergency housing there.

39:13Nathan Blecharczyk:Yeah, yeah. Yeah, right. So, I mean, again, like a lot of things, we sort of stumbled into the idea. It wasn't meant to be anything big. It was a one-off. We saw on Twitter, one of our users during Hurricane Sandy was offering her home for free. And we thought, like, that's so generous, so kind-hearted. You know what? Actually, I bet there's other hosts who are just like her, right? And so over 24 hours, we made this functionality where people could opt in and offer their home for free. And like 1 ,000 people pressed that button or more to offer their home for free. And we were just like blown away by people's how like a disaster could be a way to galvanize generosity.

39:52Nathan Blecharczyk:And so that was completely inspiring. And so when that was all over, we made sure we saved the functionality. and when things came up in the future, we rolled that functionality out again and we started to make it really easy to roll this stuff out on short notice, like 30 minutes notice, we could get it up and running, have a landing page and activate the host community. So we continued to refine this muscle and challenge ourselves, like, well, how big can it get? Because like the Airbnb community is pretty big. And then, you know, most recently for the fires down in LA, we were able to host 25 ,000 people who were displaced whose homes had burned down.

40:28Nathan Blecharczyk:And so I think it's a really unique capability. Like there's no other lodging provider that can rapidly scale up accommodations that quickly. I think it's something we can uniquely do. And we should strive to use technology to do good in the world.

40:47Sam Angus:Yeah, it's kind of remarkable to think about. You go from like, we shouldn't be connecting strangers because it's dangerous to we're connecting strangers in this natural disaster who can all help each other, kind of really proving out in a lot of ways how kind of the good in people and how they can be helping each other through this kind of platform is really kind of remarkable.

41:07Nathan Blecharczyk:Yeah, and once again, finding the opportunity within what is otherwise a terrible situation, right? Which is that these tragedies in some ways bring people together because of our humanity, because people want to help when they see others suffering. and with technology and creativity, like we can actually orchestrate that. So, you know, I think we can do more around connecting people and creating the trust necessary to connect people, which is really the mission of the company is to create connection and belonging, whether it be between people or people and discovering places.

41:44Sam Angus:Awesome. Nate, this was really great. Really appreciate you coming on. It's a lot of fun.

41:54Sam Angus:This podcast is brought to you by Leap Forward Ventures, an investor in early stage startups. If you like the show, the number one thing you'll want to do is sign up to get notified when we release new episodes. That includes transcripts and key takeaways from each story. Head to leapforward.fm to sign up. I'd also love to hear your feedback on the episode and who you want to hear from next. Just shoot us a text at 415-915-3050 to get in touch. This episode was produced by Theo Balcom and Kim Naderfein-Pietersa. Craig Ellie is our engineer. Rhys Lodano made our cover art. Music is by Jim Brunberg and Ben Landsverk of Wonderly.

42:34Sam Angus:I'm David Rusenko, and this is the Leap Forward podcast. See you next episode.