Lessons from Airbnb's Startup Story: To Scale, Do Things That Don't Scale

Lessons from Airbnb's Startup Story: To Scale, Do Things That Don't Scale

Airbnb is a home-sharing service now known and popular worldwide, with over 800,000 listings in 192 countries and their cities. 

When the unicorn company went public in December 2020, it was valued at over $40 billion, despite temporarily suffering from the coronavirus pandemic. One can safely say that it is a leading example of a wildly successful Silicon Valley startup in the last few years.

However, Airbnb struggled with amassing users during their early days.

Note: Republished from BlueCircle with permission from the author.

Early-stage struggles and a fateful meeting

When Airbnb launched in 2008, it had around 50 page views on its site and 10 to 20 bookings a day. With no breakthrough in sight, the two founders, Brian Chesky and Joe Gebbia, were running out of cash. 

Chesky was $25,000 in credit card debt, and Gebbia was in a similar predicament. A distressing situation.

Desperate to make some money, the two came up with an idea: selling breakfast cereals themed on the two candidates in the US presidential campaign—Obama and McCain. Airbnb was originally called Air Bed and Breakfast, so they figured, "The air beds aren't going so well. Maybe breakfast will."

They called their Obama-themed breakfast cereal "Obama O's," like Cheerios.

For the cereal that was themed on McCain, who was a Vietnam veteran in the Navy and climbed to the rank of captain before he retired, they came up with "Cap'n McCain's," like Cap'n Crunch.

They packaged each box by hand, suffering many burns from handling hot glue guns and sold the cereal for $40 per box as collectibles only available during the elections and sold a combined total of a thousand boxes and made $40,000. 

 Image: Early-stage Airbnb breakfast cereal.
Image: Early-stage Airbnb breakfast cereal.

This helped them survive their first year, and in January 2009, the two were admitted to a Y Combinator winter program for startups led by Paul Graham. 

The turning point

The following is the famous conversation the two had with Graham when he heard about their struggling Airbnb business:

GRAHAM: Where's your traction (*users)?

AIRBNB: There's a few people in New York using it.

GRAHAM: So your users are in New York, and you're still in Mountain View. What are you still doing here? Go to your users. Get to know them.

AIRBNB: But that won't scale. If we're huge and we have millions of customers, we can't meet every customer.

GRAHAM: That's exactly why you should do it now because this is the only time you'll ever be small enough that you can meet all your customers, get to know them and make something directly for them.

So they used the seed money from Y Combinator to buy airline tickets and commuted to New York from Mountain View every week.

But they figured they needed an excuse to meet their users. Their visits had to be beneficial for the users. So they came up with an offer. In exchange for their time, Airbnb would send a professional photographer to photograph their home for free. (Of course, since they couldn't afford to employ a professional photographer, the two took the photos themselves.)

This strategy to meet their users later became an important element in onboarding (i.e., acquainting a new user with the service) new Airbnb hosts. It also helped distinguish them from other similar services like Craigslist and Couchsurfing.

By providing a professional photography service to new hosts, they accomplished the following:

  • The listings looked beautiful and provided attractive lodging options to travelers.

  • Hosts secured more bookings than on other platforms (with the same listing).

  • More users signed up and attracted more quality listings.

  • This, in turn, attracted more travelers.

  • More users meant more listings, and more listings meant more users, and so on.

This started Airbnb on an upward spiral to becoming the unrivaled leader in the house-sharing industry.

The founders said the insights they gained from spending intimate time and talking with a dozen early users helped improve the Airbnb service drastically. 

In Chesky's words, "It's really hard to figure out what ten people really love. But it's not hard if you spend a ton of time with them. If I want to make something amazing, I just spend time with you. And I'm like, 'Well, what if I did this, what if I did this, what if I did this?' 

“The (product) roadmap already exists in the minds of the users you're designing things for."

These visits and stays and listening to their early users gave birth to this service development mindset.

Key takeaways

Their story is not uncommon for entrepreneurs who have taken an entirely new product or service global. But what makes them extraordinary is that they didn't just make a business principle out of it. They also integrated what they learned into a systematic approach to improving their service daily.

Airbnb applies the following framework: "Don't start by wanting to scale. Don't aim for five stars out of five. Ask yourself what you can do to get six, seven, or eleven stars." By going through this exercise and regularly brainstorming new services and features, Airbnb continues to create small innovations.

Airbnb's story teaches seed-stage startups pre-PMF that doing things that are not smart, even inefficient at times, is crucial in designing a service that puts customers first. Take this opportunity to ask yourself the following questions:

  • As a startup, are you basing your activity only on what you think is reproducible or expandable (i.e., automatable or can be supported by a system or product)?

  • Are you taking steps to truly understand the opinions and raw needs of your early users?

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