524: In Retrospect - From Air Mattress to $31 Billion | The UNLIKELY Rise of Airbnb

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0:39Just head to omnisend.com forward slash founder without the E to get started. All right, now let's jump back into the show. Hey, founder fam, today I'm jumping back into the archives with an all-time favorite to bring you our episode with Joe Jebbia. He's the co-founder of Airbnb. This is a crazy story where he talks about from struggling to pay rent to building a$100 billion empire. This is one of my all-time favorite interviews. All right, let's jump in. Hear the stories, learn the proven methods, and accelerate your growth and future through entrepreneurship. Welcome to the Founder Podcast with Nathan Chan.

1:25the first question we ask everyone that comes on is uh how did you get your job aka how did you find yourself doing the work you're doing today that's such a funny question to ask i think any entrepreneur will probably give you the same answer many of your guests have probably said the same thing we made our own jobs you know there was no job description there's no application process there was nobody to work for because the company didn't exist and that is absolutely the case with Airbnb. Since I was in high school during the first.com, I would come home every day and I'd read these stories about these companies launching in this mythical place called Silicon Valley.

2:06And I grew up in Georgia in the Southern part of the United States. And every day there was a new story about a new company and this place of San Francisco, Silicon Valley, left this imprint on me. And I remember saying to myself, I know I want to start a company one day. It sure seems like Silicon Valley is the place to do it. And so I knew in high school at some point I was going to make my way to the West Coast. And when I finally did get out there in 2006, the timing couldn't have been better. It was sort of the second coming of the internet. You know, the first dot-com crash happened. There was a bit of a lull.

2:47And around 2006, things started to pick back up again. There was a lot of excitement, a lot of activity with startups in San Francisco and Silver Valley. YouTube had just been acquired by Google. I think that was really like kind of the gun went off that there was a resurgence in the internet of a new way of thinking about how to build and grow companies online. Yeah, interesting. So when did you get to, well, yeah, actually I know the answer, but I'd love to hear, even if winding back before Y Combinator, how did you meet Brian? How did that all come about? How did you guys decide that you're going to start working on a business together?

3:27Brian and I, we were class-based together at Rhode Island School of Design. We were both studying industrial design or product design. And, you know, in high school, I had this notion that I want to start a company one day. So when I got to college, my radar was always on. I was always scanning, kind of looking for people, friends, say who would be somebody that would be really fun to start a company with one day. And I had no idea, of course, what the company would be, but just who do I get along with? Who do I pair well with? And so throughout the course of my time at RISD, it was a pretty short list by the end.

4:06And Brian was at the top. we had worked on a project together one summer. And out of all the students that worked on the project, him and I got paired up. And we had by far the most interesting outcome. The design work we did was just so far afield from everybody else. And I remember thinking to myself, Brian and I are the same room. We can really think of big ideas together. And so we were also entrepreneurs on campus. I started the basketball team and Brian was running the hockey team on campus. So we actually got to know each other originally through sports. And we were kind of known as like the two entrepreneurs running around campus.

4:46We had these little mini organizations where we had to fundraise. We had to market. We had to get people to come to the games. We had to recruit a team. We had to run an operation. In essence, it was like my first startup. But very small scale. But a lot of the lessons from there are extrapolated to any company. It's about being a leader, about leading people into the unknown. The basketball team hadn't existed at RISD in over 60 years. And it was a total adventure. But it's through those experiences where Brian and I got to know each other. And there was an infamous slice of pizza that we had.

5:29the night before graduation, where over dinner, we're about to graduate the next day. He's going to go to Los Angeles. I was going to stay in Providence. I told him, I said, Brian, I have a premonition. I think that one day you and I are going to start a company together and they're going to write a book about it. We both had a good laugh and little did we know that that would actually become true. In fact, having been just one book, there's actually been two books about the company. So I moved to San Francisco in 2006. I saw that it was truly the epicenter of entrepreneurship. So I started calling Brian immediately.

6:12I said, hey, I don't know what's going on in Los Angeles, but you got to come to San Francisco because this is where the action is. And he saw a couple of startups that I was working on out of my apartment. And I think he got the bug. He saw that like, wow, there's a lot of energy up there. It'd be exciting to be paired back together with Joe and actually think of something together. And so he eventually decided after about a year of recruiting him, he moved to San Francisco and became my roommate. And it was that infamous weekend where he moves in, a letter shows up for the landlord. It says, Dear Joey, your rent is now 25 % higher.

6:52I run to my online banking account only to find that I have a math problem. Rent went like this and my income has gone like this. So we have to figure out how to make ends meet very quickly. And later that week, I'm in the living room of our apartment. And I glance over the edge of my laptop. I was looking at the website of a design conference coming to San Francisco that was so big, the hotel sold out. It says, sold out on the website. And I'm reading this, and I look over the screen of the laptop. It is the vastness of the living room. I thought, huh, I got an airbed from college that I used to host people on.

7:33What if we inflated that in the living room? And we hosted people who wanted a place to stay at this conference. Email Brian. He loved the idea. We made the website. We called it Airbed and Breakfast, a place to sleep, plus breakfast in the morning. and the idea was Boris. Crazy. Such a humble beginning story. One thing I'm really curious around, if we just, before we go further on and go back, you said that you and Brian, you know, were running sports teams like hockey and basketball. And you said basketball was the first ever in 60 years of your college that you're at. How did you guys, how did you fare?

8:13Did you guys like did you guys do wow oh man we crushed it uh i you know we were everybody goes to originally to study art and design you don't go to play sports but there are athletes that can be artists too and so i found enough people i had to recruit the team and uh we had a great time you know i'll never forget our first game on december 4th 2001 after months of calling schools around New England, trying to convince them to come to Providence to play us in basketball. Everybody said no. They're like, what's this RISD basketball? Come on, this must be a joke. So I got dozens of rejections from basketball coaches.

8:52And finally, there was one school that said yes, it was Clark University up in Massachusetts. And I couldn't believe it on the final. I said, wait, oh, you want to come play us? Oh, great. Okay. So I mean, everything happened. I think they realized what they got themselves into when they showed up. They came in a big bus. They had multiple coaches. Their shortest player was taller than our tallest player. And I think very quickly they saw how kind of rough and tumble and scrappy we were. And they said, uh-oh, what did we get ourselves into here? We ended up losing that game 94-49. But in my books, it was a big win because it put us on the map.

9:30And it was actually the spark that started the flywheel that got the team going. And to this day, all these years, 20 years later, the team is now, it's a part of the school. It's a part of the campus. It's a place where students, alumni, faculty, staff, administration all come together. It's the only place outside of graduation that brings the RISD community together under the same roof at the same time. So I'm really proud of the team and what it's doing for the school. Yeah, interesting. So you and Brian like to compete. I really do. It's a hard part of entrepreneurship, right? You're competing against the status quo.

10:09You're trying to make something new. You're trying to break a norm, enter something new into the world. So I think sports is a great metaphor for us. Interesting. And I'm curious, like one more question around before we move on to the next part of the story is like, it sounds like you kind of always knew deep down that you were destined for more than what you were doing at that point in time. Where did that come from, do you think? That's a really good question. My parents planted a seed and he probably was really young. They worked independently. They're both independent sales reps and they really charted their own path.

10:47Their success was dependent on how hard they worked. Their paycheck wasn't guaranteed every month. It was based on their capacity and ingenuity to grow their business, their sales business. so i remember watching them thinking wow like how how cool to be in charge and in control of your own destiny to be able to forge your own path and um no i saw them on good months when they did well i saw them on other months when they didn't do so well and so i saw you know a bit of a range of you know it's it's not easy the lows are low but the highs are also really high and so i think ever since as a kid i just always wanted to start my own thing i just always wanted to be in control my own path yeah no it is it is truly exceptional what you know you yourselves the team at airbnb have been able to create um so if we wind keep going back in time you had the air mattress you got your first first guest what did that look like from a platform perspective like who coded up the site what did that look like how did you like how did you spread the word yeah wow we did that first website in less than a week or two i was doing the front-end coding and brian was doing a little bit of illustration then i i pulled it together he published the design it's a five-page website we were so proud of it airbed and breakfast.com and 18 character through URL.

12:20I do not recommend a URL that long. And we got the side up, but then we had our next challenge. It says, how on earth do people find out about this? There's nobody who's coming to our new website. And so we had an awareness challenge. It turns out the design conference endorsed our website and emailed it out to a few thousand of the attendees. And we also reached out to all the local design firms in San Francisco, IDEO and Frog and Smart Design, Fuse Project. And we asked their designers to list their places for the conference as well. And then we did something. I'll remember one night before bed, we emailed a bunch of design blogs about airbatterbreakfast.com.

13:05And we had never gotten impressed before. We had no idea how you would get on a blog. The next morning, it felt like Christmas. We were covered on the top design blogs back in 2007. Swissmiss, Core77, JoshSpeer.com, CoolHunting. There we were in the headlines at the top of these blogs. It was unbelievable. And with that awareness, we had people from around the world start to email us and say, hey, I'm coming to the conference, but I have a place to stay. How do I get one of these three airbeds at the airbed to breakfast? And lo and behold, people started sending us their resumes, design portfolios, their LinkedIn profiles, trying to convince us why they should be one of the first three guests on the Air Med and Breakfast.

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14:50So don't miss out. This deal closes soon. Start building your business today at founder.com forward slash plus. That's P-L-U-S, or click the link in the show notes. All right, now let's jump back in the show. So how much faith did you guys have in the eye or actually i'd love to ask you like not like how much faith did you have um in the start of of airbnb like with this you know air bed and breakfast idea like did you were you confident that it was going to be the thing that you and brian were going to do or we were confident enough and when i think back to like through the early years and all the rejection and the hardships and all the reasons why this should not have worked.

15:39I mean, this is an idea that was not supposed to work because if you put it on a spreadsheet and you calculated it up, there were too many forces working against this. If anything, just the bias that we're all taught as kids, that's strangers equal danger. Like we had that to go up against, which is like, how do you even overcome that? And so, you know, the building an online marketplace, is probably one of the hardest, I'd say, verticals to do on the internet. There's a reason that there's only a couple of marketplaces. They usually consolidate. There's usually one big winner at the end because they're really hard to get the flywheel going and to get the scale of supply and demand that you need for a marketplace to be, to basically, the metaphor we use, to walk into the store and have products on the shelf that people want to buy.

16:32You have to have scale for that. They've done a lot of products. So in the early days, it was incredibly difficult to convince people to even try this. But there was something unexpected that was in our favor, which is the timing. Because in 2008, 2009, what was happening globally, economically, that impacted a lot of people and changed people's behaviors was the economic downturn. or the Great Recession. I think because of that, looking back, I could see how people's behavior shifted where prior to that, they'd say, no, no, no, no, no. I'm not interested in having a stranger at my home. I have an extra bedroom, but only for people I know.

17:19Now, suddenly there's some economic hardship and people looked at it a little bit different, a little bit more open-minded. Well, if that could help pay off the mortgage every month, I'll give it a shot. I saw good coverage in the New York Times or maybe a piece of press that we got that year. And people started to open up and warm up to this idea. And when they got to our service, when they got to airbb.com, they saw that we built tools to make it safe, to make it reliable, to make it more trustworthy than before. and uh it's remarkable it's um i remember so many emails coming in from early hosts in 2009 telling us that our site saved them that they were gonna foreclose in their home and they came across airbnb they started hosting people and they were able to keep their head above water economically and save their homes from foreclosure we had dozens of those emails and And somebody said that we actually printed them out and put them up on the wall in our living room, which was our office.

18:28It's where we started to see, okay, there's something more to the site than just travel. This can mean more to people than just a travel site. Because those were also telling us, wow, I'm meeting some of the most interesting people. Our guests from Italy have invited us to go back to Rome the next time we're in Europe. I feel like my world's expanding. The world's coming to my living room. so there was this you know the economics but it's also this social component uh that that hosts uh in the early days uh love that's still very true today it's so crazy you reminded me of a story of me like i reckon probably around nine ten years ago when yeah i was like much younger graduate working my first job i was living in this like rented uh house very run down but there was a spare bedroom and like a bit of a side hustle was like we used to rent it out and it would it sometimes paid our rent like it's it's crazy to even think like there's an economic there's not just the experiences side but there's like yeah that's that's one of the key pillars of why people use the product right it can be as even from as from side hustle you know of like you've got this room why wouldn't you use it you know exactly why not make the use of the things that we already have.

19:46And, you know, my favorite part about, about the host stories I've heard over the last 14 years doing this is the hosts who tell me about the things they've gone on to do in their lives because of that income that they've been able to earn from the room that was just sitting there empty. And a lot of people have gone on and start companies that, because they funded based on their Airbnb listing. And that's, that's exciting. That's, that's incredible because if, you know, If we can help somebody bootstrap and do the initial funding to have them self-fund for their idea, that's magic to me. That's music to my ears to hear entrepreneurs self-funding that way.

20:27I'm curious, at what moment did you know that Airbnb was going to take off? Was there a particular turning point in time that you can maybe recall or draw from that you could share with us? Yeah, there's a couple moments. I'm going to read you an email that we got back in 2009. And this is one of the emails that we put on the wall. And this was a moment where I said, okay, we're on something here. It says, hi, Airbnb. I'm not exaggerating when I tell you that you literally saved us. My husband and I just married this past May after having lost both our jobs and our investments in stock market crash last year.

21:08We slowly watched our savings dwindle to a point where we didn't have enough to make our payments. That point, I had recently listed our New York City apartment on your site and was receiving so many requests that we decided to rent out our place and seek when we'll cost a vacation accommodation for ourselves elsewhere. You gave us the ability to keep our home, travel together, and have peace of mind knowing that we're going to make it through this challenging time in real life. Thank you so much. Wow. Wow. That was a powerful testimonial to get from an early customer, from an early adopter. And I think, again, it just showed us that there's a richness to our platform that can really help people, in this case, in the time of need.

21:53I'll tell you another example of what I thought, okay, we're early on to something here. Back in the day, this is probably 2010, at the end of every day at the office, aka our living room, I used to go through and look at every new listing that was added to the site. And when you don't have a lot of listings added to the site, you can do that. There's probably 20 or 30. I just clicked through and I just see what kind of places are people listing and where? And I'll never forget, there was late one night, I'm in the apartment, I'm about to go to bed and I'm like, I'm just going to check the listings.

22:29I click on one of the ones added that day. And it pops up a listing that says private island in Fiji. And I go, holy cow. First of all, how do people in Fiji even know about our tiny little startup? And second, a private island? And then third, I looked at the price. I go, 500 bucks a night? Oh my gosh, for you and a couple of your friends, you can have a private island for$500 a night. And I read The Galistine. It had a chef and some water sports. And I was like, beautiful pictures of these blue sparkling waters with crystal sand on the beach and beautiful green swayed palm trees. The kind of place people just die to be.

23:14And I thought to myself, oh man, if this is any indication of the kind of places this platform will attract in the future, there's no limits here. the kind of creativity that people could have about what to list on our platform. There's nothing stopping people from listing all kinds of things. And sure enough, of course, there's enough private islands now. We have a category for it. And then we had other things pop up like castles. And then we had tree houses like the one behind me here. Actually, this is a tree house in Bali that's on my wish list to go to on Airbnb. There'd be people listed teepees and yurts and all kinds of things that we'd never imagined in the early days.

23:57Yeah, yeah. Look, that's an incredible story. You talk about the early days. What did team and office and setup look like? Let's just go. So you got into Y Combinator. Incredible story there around how, you know, you met Paul and he, you know, told you to go to New York. But yeah, maybe a little bit post kind of when you got funded, perhaps, your first round. What did team office setup look like? Yeah, our first round of financing was in April of 2009. It was a seed round led by Sequoia Capital with Ron Conway as an angel investor, along with Kevin Horst, Keith Reboye, and Javik Kareem. And this is about$600 ,000.

24:45And for us, this was it. Like, wow, we had been scrapping ourselves off our credit cards and we bootstrapped until there are no laces left to even pull on. And so$600 ,000 for us was like, oh my God. We can now actually afford to hire people, a couple of engineers, some people to just help us grow the team. Nate at this time was doing the work of probably three or four engineers. He was having to build a payment system, reputation system, search algorithm, profiles. And so we needed to hire like five or six people to keep up with this, the numbers that were growing very quickly. So we're still working at our elevator.

25:34That was our office for the first two years or so, a company. That's a great way to keep our costs down. and we ended up having, I think we maxed out on about 20 people working out of our three bedroom apartment in San Francisco. And at a certain point, Brian and I actually moved out. Our bedrooms became meeting room and more desk space. It got so crazy. I mean, I can't begin to tell you, people were doing sales calls in the kitchen. People were bringing sales calls in the bathroom. There was nowhere to interview anybody because there's no meeting space. People were doing interviews in the stairwell.

26:10of the apartment building, it was mayhem. We were all sitting on top of each other, elbow to elbow. But one of the upsides of that is when you have the whole company in the same room, practically, the time to communicate is essentially zero. I remember many days I'd be at my desk, which was one big table, and I'm a cross-range hearing team, which is three or four inch years, and I'm on a live call with a guest or host talking about a problem and they're overhearing the conversation and they're going, wait, we can fix that problem. And sometimes by the end of the call, they'll have fixed the bug that the customer's calling about.

26:54So it was like, the communication was just so incredible. And of course, as your company grows, you've got to implement systems and find new ways to keep that sort of collaboration and serendipity happening. Yeah, that's wild. And were those some of the funnest times back in the early days? Of course. I mean, there was so much uncertainty. We had no idea, no idea if it was going to work. Of course, we raised some money, but there were a lot of competitors who were about our size at the time. There was no clear winner in the space. and you know I will say this the people that joined at that time yeah they joined for something more for the paycheck because we didn't have a lot to pay you know we weren't competing with of course not with Facebook Google or any of those guys we were just a couple guys working out of a three-bedroom apartment in San Francisco and people really joined because they saw that there was something bigger that there was there was this potential that we had to use travel to connect people in a way that hadn't been done before.

28:08And I just think, you know, the excitement of working with people who were there for more than a paycheck, and you were really there to try to figure out how do we make this thing work? How do we cross the chasm from this sort of niche Silicon Valley, San Francisco, tech only kind of crowd to something that our parents would use. And that was actually another point where I realized, okay, we're onto something. It was the first time that my mom booked a place to stay on Airbnb all by herself without asking me for help. How long did that take? It took a couple of years actually, but it did create at the time what we called the mom test, what we called the parent test, which is how we made an interface that's designed And it's easy enough to use it to it enough that our parents can figure out how to use our service without having to call us for help.

29:00Yeah, I love it. Look, that's when you know you hit mass market, right? Like when your parents are talking about like, yeah, that's awesome. So look, just switching gears, just around bringing your idea to life. For someone that's been like holding onto their idea for a while, or they might feel stuck or not knowing when to start, what would you say to them? I get this question a lot. And I think the simplest thing that your listeners or anyone who has an idea can do is very simply take the next step, figure out what is just the tiniest next step that I need to take to move my idea forward. It doesn't have to be the end goal.

29:47It doesn't have to be the big final vision. I think a lot of people get stuck when they think, well, I got to do all these things. But if you reduce it down to just like, literally like, what's the one tiniest next thing that I can do to move this forward? People usually have an answer to that question. And it's usually not as complicated as they need to happen in their head. And so I'd really encourage people to take the next step, whatever that might be for them. It might be sharing your idea with a roommate or a colleague or a friend and say, hey, what do you think about this? It might be sending an email to somebody or reaching out over Twitter, posting something on Twitter.

30:23It might be just publishing the website. There is a myth. I think there's this myth that exists where I certainly experienced this as a budding entrepreneur looking up to companies that were established and founders that started those companies thinking, wow, they just woke up one day and had the idea and it just took off just like that. And that couldn't be further from the truth. I'm sure many of your guests have said this. It's like, no, like anybody who's gone through this and got something to a level of success has had the, there's a whole path of failures that preceded it. And I really encourage people to get something out into the world, even if it's not the big idea, because even the small things build on themselves.