Can you believe the home-rental site that lists properties in 30,000 cities across 192 countries once had trouble raising $20,000? Now it is valued at $2.5 billion.
In many ways, Airbnb is the classic story of Silicon Valley: A clever product, a massive market, and--as one investor would later say--founders who just "won't die." In 2008, the three founders--Brian Chesky, Joe Gebbia, and Nathan Blecharczyk--approached about 20 investors to fund their company, then dubbed "Air Bed and Breakfast." Ten investors returned their e-mail. Three met them for coffee. None invested. After all, two of the three founders were designers--not coders, nor MBAs--so the trio didn't exactly fit the Silicon Valley start-up archetype. But they persisted. Without funding for their start-up--and quickly running out of savings to pay the rent--the founders found other ways to scrape together cash. Using their background in design, they created collectible cereal boxes and sold them online. One of the cereals, Obama O's, "A Breakfast for Change," ended up being a hit. They netted $30,000, which bought the founders a few more months, and continued to pitch the Airbnb concept to investors. Then, at a dinner with the founders of Justin.tv in November of 2008, they were convinced to apply to Y Combinator, the accelerator founded by Silicon Valley legend Paul Graham. Graham, who would eventually accept the founders into Y Combinator, recalls that he thought the idea for an online bed-and-breakfast search-and-reservation service was "terrible," but he liked that the founders were relentless in their desire to start a business--really any business. They, in his words, just "won't die." With the acceptance into Y Combinator, the founders raised $20,000, and they kept iterating on the concept. They changed the name to Airbnb and developed a sleeker design. It began to catch on. In 2009, the company raised a seed round of $600,000. A year later, it raised another $7.2 million (and its founders were named to the Inc. 30 Under 30 list). Finally, by February 2012, the company had registered an impressive five million nights booked, a figure that continues to grow. Though the company does not release revenue figures, some back-of-the-envelope calculations reveal it's feasible the company may make nine figures this year.
Here's how we we figure: Airbnb takes a 6% to 12% commission on each room booked. In 2011, about four million nights were booked. Assuming an average price of $100, and a 10% commission--the company made at least $40 million in net revenue in 2011. Numbers from 2012 are already far more impressive: from January to June 2012, the company booked five million nights. Assuming the company's growth stays (at least) constant for the rest of 2012, the year will close out with 10 million nights booked. Using the same averages--10% commission on an average of $100 rooms--Airbnb could be making $100 million in 2012. In total, Airbnb has raised about $120 million in venture financing from a coterie of high-profile investors (including Andreessen Horowitz, Sequoia Capital, and Jeff Bezos) who have valued the company at $1.3 billion. Last month, it was reported that Peter Thiel considered staking the company with $150 million of his own money, which would have valued it at $2.5 billion. It's an international endeavor, too--the site has locations in 30,000 cities across 192 countries and is boosting new revenue streams into those communities. According to a study Airbnb commissioned, Airbnb travelers spent $56 million in San Francisco from June 2011 to May 2012. But what's talked about less--both in Silicon Valley circles and outside them--is the cultural effects the company is having on our collective idea of travel. Namely, the idea that Airbnb might subtly be redefining people's attitudes towards adventure and exploration. Because, well, let's face it: letting a total stranger into your home--or entering a stranger's home for a week-long stay--could potentially be the beginning of a horror movie. But for the vast, vast majority of users, that's not the case. In fact--it's quite the opposite. Airbnb has become the go-to facilitator of adventure-esque travel experiences. For many people, now and into the future, the idea of a vacation may no longer be about 'Hey, let's visit City X,' and more about 'Hey, this guy's eco villa in Hua Hin, Thailand, looks amazing, we should go there.'" To that end, the company created its own "Wish List" of outlandish rentals. Spend a few days in a house boat in Spain, a cave in Greece, or a Frank Lloyd Wright home in Wisconsin--it's up to you. "When we created Airbnb, we never dreamed that one day we would be offering everything from treehouses to entire private islands," Brian Chesky, the CEO and co-founder said recently. "Wish Lists allow our community to discover some of the planet's most inspiring destinations." So in many ways, Airbnb is creating a new class of tourism: the anti-tourist, if you will. The early adopters of Airbnb understand that visiting a new city is much more than visiting the typical cultural touch points--it's about meeting new people, understanding how a community lives, and, whenever possible, finding a unique perch to spend the night.
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