Just over decade ago, in 2007, Brian Chesky and Joe Gebbia couldn’t afford to pay rent. Having moved from New York to San Francisco in search of success in the buzzing startup industry, the pair were without jobs and were growing desperate for cash injections to meet their monthly outgoings. During a local Industrial Design conference, the pair noticed that every hotel in the city was fully booked, an opportunity that came along almost every time a major event came to San Francisco. Generally wealthy visitors were visiting the city for a number of days and the demand for rooms temporarily outgrew what the local hotel industry could handle.
Working with what they had – a modest amount of floor space in a not particularly large apartment – Brian and Joe bought a few airbeds and set up a website selling rudimentary sleeping space for $80 a night. With breakfast thrown in as a sweetener, the original concept for AirBed & Breakfast was born. The initial run saw just a few guests take them up on the offer, but the following year the site was relaunched ahead of the Democratic National Convention in Denver. Though people were initially suspicious of the notion, over 600 people stayed in others’ houses during the conference, a short-lived success that gave Brian and Joe the impetus to throw themselves all into the project.
During this embryonic period of the company, essentially half of the brand’s product was the breakfast. For the Democratic National Convention, the pair sold two types of cereal to their guests – Obama O’s, and Cap’n McCains. They made $30,000 selling the cereal, and put it towards growing out the business. Interest slowed, though, and the pair started living off the leftover cereal, a ‘real low point.’
Shortly after the convention and the period of relative poverty, AirBed & Breakfast received its first funding of $20,000 from Y Combinator - it’s at this crucial point that the fledgling startup had to decide what it was. The original cereal had been a hit, and at this point breakfast was very much part of what the brand was offering its customers. It also took an unsustainable amount of time to produce, though, and as the business expanded the entrepreneurs realized it would be impossible to scale the breakfast aspect and maintain any uniformity across hosts. At this point, AirBed & Breakfast became Airbnb – breakfast was dropped from the company strategy and the brand was free to focus solely on its original MO, to offer an alternative to hotel rooms.
Once they had made this decision and streamlined what their business was about, Brian and Joe were able to work more consistently on honing it. Realizing that properties with professional photographs received 2x or 3x the number of bookings, they launched an official photography program, which allowed hosts to automatically schedule a professional photographer to take photos of the space, an idea that immediately takes off among its users.
In November 2010, after continually working on the focussed, limited product, Airbnb received funding of $7.2 million, and safe to say Brian and Joe haven’t had trouble paying rent since. What young brands should learn from this origin story is that the product is the all-important factor of any startup. Airbnb looked at its bed and breakfast business and saw one side that was ultimately not scalable. After spending hours packaging hundreds of boxes of cereal by hand, and despite making a tidy profit from the gimmick initially, the two entrepreneurs took stock of what it was that made their business different.
Making it easy for people to find cheap rooms as an alternative to hotels is as simple and as complex a business plan as Brian and Joe needed to chase all-important funding. They have since diversified with products like Airbnb For Work and their ‘events, experiences and tours’, but they have been able to do so thanks to a limitless core product. Airbnb had an internal mage crisis when it saw itself becoming more of a breakfast (specifically cereal) company than a room letting company, and it acted quickly to ensure it didn’t get that reputation, stripping away the cumbersome product detail and preparing themselves for speedy growth. Airbnb’s story demonstrates that, though brands needn’t have their identities set it stone from the very beginning of their venture, it pays to be decisive when one organically develops.