First Time Founders with Ed Elson – How Airbnb Scaled from 3 Guests to 2 Billion

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Welcome to First Time Founders.

I'm Ed Elson.

It started in 2007 with an air mattress in a cramped San Francisco apartment.

The rent was due, hotels were booked up for a local design conference, and two roommates had an idea.

What if they charged guests to sleep on the floor?

That weekend, three strangers stayed in their living room and an industry was quietly born.

My next guest helps turn that idea into a platform that has redefined travel.

Today, it has grown into a global network of over 8 million active listings and 5 million hosts, spanning more than 150,000 cities in 220 countries.

It has welcomed over 2 billion guests and in the process, it's upended the traditional hospitality industry and reshaped how people experience new places.

This is my conversation with Nathan Blachosik, co-founder and chief strategy officer of Airbnb.

Nathan, thank you so much for joining me on the program.

Thanks, Ed.

Really excited to be here on First Time Founders.

So

everyone knows what Airbnb is.

And, you know, usually on this program, I feel like I need to give context for what it is you do and what it is you've built.

I'm not going to do that because everyone knows what it is.

And it's a testament to what what you've built.

So I just want to start with the beginning.

We talked a little bit in the intro about how this all started, but I'd like to hear it in your words.

How did this all start?

I'll rewind just even a few months before October 2007, what you just kind of referenced, which was that I had moved to San Francisco to become an entrepreneur.

And I'm a software engineer by background, and I needed a place to live.

And I went on Craigslist

and Joe became my roommate.

Joe had a vacancy in his apartment and he put it on Craigslist and I we just got connected through serendipity there.

And so Joe would later become one of my co-founders in Airbnb, but we were roommates and friends before we ever started the company.

And a few months go by and then suddenly the rent on our apartment is raised 25%.

And I said, well, that's too expensive.

I'm moving out.

And so did the other roommate.

But Joe wanted to to stay in that apartment and he convinced Brian to move up from Los Angeles and live in the apartment with him.

But they still had a problem, which was that the rent had been increased 25%.

And they had recently quit their jobs to become entrepreneurs, also known as unemployed.

So they didn't have the money to pay the rent still, even with the two of them.

And that's when they had the idea to rent out that extra room.

They are both designers by background.

They noticed that an international design conference was coming to San Francisco in October, and they noticed that all the hotels were sold out for this conference.

And so they got the idea to rent out that vacant bedroom, my vacant bedroom, to designers who might need a place to stay that one weekend.

This room uh had nothing in it.

You know, I had taken all my positions.

I had taken the bed, but Joe set up an airbed.

And so instead of calling it a bed and breakfast for that weekend, they called it an airbed and breakfast.

So Airbnb is short for airbed and breakfast.

That's where the name comes from they were expecting to host uh some guys like themselves that weekend you know at that time we're about you know 25 years old and uh instead they got a uh a father of four um from from utah a 35 year old woman from boston and a man from india so a very eclectic group uh stayed there for you know 80 per person per night four nights.

I think that gets up to about 800 or 1,000 bucks, which meaningfully helped Joe and Brian pay the rent.

Meanwhile, these guests had an affordable place to stay when hotels were otherwise sold out.

But most interestingly, they all went to the conference together and had a great time.

And Joe and Brian took, showed them around the town, gave them recommendations, introduced them to friends, went out to dinner.

It was a whole social experience.

And, you know, it really was going to stop there.

I mean, it was meant to just pay the rent that one month, a one-weekend kind of thing.

There was no further thought that went into it.

You know, it wasn't until a couple months later that one of the guests pinged Joe and asked, you know, like, what's come of airbed and breakfast?

You know, how's that concept going?

And the truth was, nothing was going because it was just the one-off.

Meanwhile, I had quit my job

as well.

And the three of us were brainstorming ideas.

We spent two months brainstorming ideas of what we could do together without ever even talking about the story that I just shared now.

But after getting pinged by one of the former guests, Joe and Brian shared what they had done back in October.

And we reflected on that.

We thought to ourselves, why don't we make it possible, you know, for people to stay with each other in association with events?

And that's what we set out to do in early 2008.

And your relationship with Joe, so Joe Gebia is the...

the other co-founder and Brian Chesky is the other co-founder as well.

He's now the CEO.

Talk about your relationship with those two.

It sounds from your description that it was three friends who decided to collaborate together and start a company, which I think is actually rarer than

one would probably think in entrepreneurship.

I don't think usually, I mean, starting...

It sounds like a fun idea, starting a big company with all your best buds, but oftentimes it doesn't work out.

So talk a bit more about your relationship, the fact that you were roommates with Joe.

How were you friends with Joe?

What was Joe's relationship with Brian and so on?

Yeah, I think the part about being friends, what's important there is, you know, we got to know each other well, you know, before making the decision to start a company together.

You know, obviously, we all have lots of friends, but we chose each other explicitly.

And we did that because while I was living with Joe, I noticed two things.

Like one was that after work and on the weekends, you know, instead of killing out or socializing or whatnot, you know, we were working on our passion projects.

And so, you know, I saw in Joe and he saw in me an incredible work ethic and passion.

And then we also started helping each other on our respective projects.

You know, I, by background, am an engineer.

So I started doing coding of his websites.

He's the designer.

He started providing the designs for the things I was building.

And we saw how our complementary skill sets allowed us to build products really fast.

Because, you know, you really do need both.

Meanwhile, Joe and Brian had gone to Rhode Island School of Design together.

So they were friends from college and that, you know, had really gotten to know each other well then and had worked on a number of projects there together as well.

So I think we knew that there was a strong compatibility and that our skill sets were good complements.

And I think that's why we were brainstorming ideas together.

We didn't know what we wanted to work on, but we knew the team was a strong team.

And that was really the basis of

starting the company was first and foremost the team.

And then we stumbled into the idea.

Yeah, I think one thing that people find quite inspirational about Airbnb and the story is that it came from

a design forward perspective, which is quite rare.

And when I think about what they saw in you, I'd be interested to hear what Joe and Brian saw in you, but I'm sure a lot of it was also your technical expertise.

You're working as an engineer.

You knew how to get this off the ground.

I'd be interested to hear more about what you saw in them.

How did you identify that these designers

would have what it took to build this great company?

In a way, it makes more sense to me what they're seeing in you, but less sense to me what you see in them.

Well, in parallel around this time in 2007, I was working on a number of other things on this side.

And one of them was a, for example, an ad network for Facebook or that plugged into Facebook, creating social ads.

And I did all this technical work to make an ad server, et cetera.

And I launched it.

I was so excited.

And then I realized that

the tech was just a

small part.

of building a business.

I needed to go out and attract publishers and advertisers.

And there's like all this other stuff that needs to happen.

And I realized that's not my passion doing those other things

and that it really does require a team.

So I had come fresh off that kind of learning or reflection of like,

wow, I'm a great builder,

but to build a real business requires a lot of different skill sets.

So that was one.

I think also two, just the camaraderie of it all.

It's hard going it alone.

It's a lot more fun to go with a team.

So, you know, the idea of team and a team that kind of complements your, your skill sets.

And, you know, three, I think in them was just an incredible degree of

passion, creativity, boldness.

You know, they were not shy about kind of going out and really, you know, talking about new things and getting attention in a way that maybe wasn't natural to me, especially at the time.

And then there's the fact that we had lived together.

And so

we were quite comfortable with one another.

It wasn't like we were meeting for the first time.

Yeah, I feel like the passion element is almost the most important thing.

You could study anything, but so if you don't have the passion and the energy and the drive, then you're going to go nowhere.

I would also just say that this requires a great deal of evangelism, right?

I mean, we were kind of pioneering a new human behavior in some ways that was counterintuitive.

Right.

And that story from October 2007, where they rented out the apartment, you know, that took initiative, evangelism.

They did it.

And, you know, that story story continues in the early days where you know brian was one of the first guests using the product um and they were going out into the field and meeting all the hosts and taking the photographs themselves um and i would later become a host but you know i think you know all that is is really important and with their design background i think they were intensely interested in kind of interviewing all those early adopters and understanding their feedback, gathering feedback as part of the design process.

So I think all that was really beneficial.

I feel like all of this was almost perfectly encapsulated in this very famous cereal stunt, which I'd love for you to explain the story of just to set it up.

Airbnb, you guys are starting to get going, but you are running out of money and you're trying to think of ways to

make money to keep the business alive.

And you come up with this idea that has to do with cereal.

Could you explain what happened there and the story of the cereal stunt?

So just in terms of the timeline here,

you know, October 2007 is when we rent out, Joe and Brian rent out the extra room.

A couple months later, in basically February of 2008, the three of us, you know, start building, you know, airbed and breakfast as you kind of start to know it today.

We launched that in August of that year, so several months later.

And now we have have launched it and that was exciting, but no one's really using it after launch.

And it's coming up on a year now and we haven't made any money and we've had the expense of the apartment and all this.

So we're getting kind of desperate.

And I guess I should add that when we launched in August of 2008, it was during the time of the Democratic National Convention and the Republican National Convention.

And specifically, this is where Barack Obama received the nomination of his party to be the first African-American presidential candidate.

And it was a historic event, and it was going to be held in a stadium in Denver that held 80,000 people.

And we looked up that Denver only has 17,000 hotel rooms.

So we knew there was going to be a need for extra accommodation.

And so we focused on this moment as the right launch opportunity.

And it was very successful.

We got hundreds of people staying on Airbnb in the span of a couple of weeks.

And we were on TV on CNN talking about

what Airbnb was in connection to

the DNC event and Obama.

So it was tremendously exciting.

But a few weeks later, it was gone.

It was a flash and nobody cared anymore.

And yet we had all these political reporters that we had met.

And we're thinking to ourselves, how do we generate some more attention for the company?

We have all these reporters that we met.

How do we make ourselves relevant to them again?

And somehow, Brian and Joe have this crazy idea one night that we should create a presidentially themed breakfast cereal.

Again, our name at the time was Airbed and Breakfast.

So they're thinking, breakfast, let's do something fun with the breakfast concept and do something that would be relevant to all these reporters we met and somehow basically do a stunt.

Okay, so

they come up with this concept of creating Obama O's

and Captain McCain's.

These are breakfast cereals.

And they come up with a tagline for each.

Obama O's is hope in every Bull, Captain McCain's Maverick and Every Bite, as he was a kind of a, I think, a Navy captain or something in his past.

And they come up with artwork for these physical cereal boxes that they're going to create and a lot of witty humor on it.

And they use their contacts from Rhode Island's World Design to get the boxes printed officially at a printing press, free of charge, actually.

And they do this whole thing to create it.

And I remember, first of all, when they told me about this idea, you know, my response was, if you want to do this, promise me you're not going to spend any money.

Because we didn't have any money.

And this sounded like, you know, a whole, whole effort to create cereal and it was going to potentially cost money.

So I said, do whatever you want to do.

Just don't spend any money.

Meanwhile, I'm going to stay focused on, you know, building the website for Airbed and Breakfast.

So they go off and they actually, you know, create these really compelling, funny cereal boxes without spending any money because they're very scrappy.

And we send the first 100 boxes of each to those political reporters that we had met.

And the idea was we could email them, but you know, they get emails all day long to probably delete them.

If they receive this physical box in the mail, they're going to have to call us back and want to know more about it.

And so that was the idea.

And we did it and it worked.

We sent out these boxes and soon enough, as soon as they were received, we ended up being on Good Morning America.

We were back on CNN.

talking about the serial, talking about its connection to the company.

And

we also, we had extra boxes printed off.

So we had 500 boxes of each.

So the first 100 we sent to the reporters.

The other 400 we numbered and called them like limited edition collector's items.

And we created a little website for them where we sold boxes of cereal that you could buy and we priced them at $40 a box.

Anyways, when we were on CNN International, that became the number one political video of the day, us talking about the cereal.

Wow.

And we sold a $40 box of cereal.

uh every three minutes until we sold out and so we made about thirty thousand dollars selling uh these cereal boxes in the span of that week.

And we like to say that that's more money than we made all year on our core business.

And, you know, materially helped us to pay the rent and a few bills.

And so that was kind of funny and kind of cool.

And we thought to ourselves, maybe we should become a cereal company, except if only there was a, you know, presidential election every month to generate that kind of interest.

So we knew that wasn't the answer.

But the truth is also, it didn't really help our core business, right?

It wasn't helping us to rent more rooms in that moment.

It was a funny story.

It sold boxes of cereals.

It allowed us to earn $30,000, but it wasn't selling more rooms on airbedandbreakfast.com.

Where this story becomes transformative in terms of what it did for us is a few months later.

A few months later, it's now the end of...

end of 2008.

It's been one year.

We're about to give up.

And we say, before we give up we have to give it one last chance we had gotten some advice that we should apply to y combinator that that would be a great way to re-energize ourselves and recommit and give it like one last chance uh with some good mentorship uh but before you can do y combinator you have to get into y combinator and y combinator is you know incredibly selective incredibly popular and has a very low acceptance rate yes this is the exclusive startup accelerator very

very much exclusive at the time, too.

Absolutely.

Right.

And so we managed to get an interview, which is incredible.

So we go into the interview, and the interview typically lasts about five minutes.

It's very quick.

And you're in there,

at least at that time, with maybe four other people.

One of them was Paul Graham, you know, the founder of the program.

And I remember we go in there for the interview.

Well, I'll back up.

Before leaving the apartment to go to the interview, I see Joe putting a box of Obama's into his backpack to bring it to the interview.

And I said, Joe, what are you doing?

Why are you bringing the Obama's to the interview?

I said, don't do that.

That, to me, was an embarrassment that we had spent so much time on Obama's.

I mean, it's a funny story, but it had nothing to do with our business being a likely success, in my mind, at least, because to me, it represented distraction.

As an engineer, I saw it as having been a distraction.

because it's a cool story, but it honestly took about two months of time to pull all that off.

So just says, okay, I won't bring it.

So anyways, we're now at the interview.

We go into the room.

We have five minutes.

Within two minutes, Paul Graham says, what?

Strangers staying with other strangers in people's homes?

I would never do that.

That's strange.

That's weird.

You know, I don't like that idea.

Like, he had a really negative reaction.

And then he kind of pivoted the conversation towards like, well, you know, you guys are handling money and payments.

Like, maybe you should start a payments company.

And he basically went on to describe Stripe.

So the last few minutes of the interview were basically spent with him pitching us on what we should be doing.

And then the interview was over.

And we knew that, you know, that was not a good outcome, right?

Like that interview had gone off the rails.

And so we're walking out the door.

And suddenly Joe pulls out of his backpack a box of the Obama's.

And he says, oh, Paul, before we leave, we wanted to give you this.

And Paul looks at it and says, what?

You guys bought me a gift?

He's just looking at it mystified.

And we said, joe said no we we we made this as uh and he's still looking at it he says well sit back down and tell me how you made this and so we get five more minutes with him and we tell him the story of obama o's and captain mccains uh and you know the whole kind of stunt we pulled off and selling thirty thousand dollars worth of cereal

and um and then we leave the room and later in the day we get a call And the call was that we were accepted into Y Combinator.

And he later told us that we were accepted into Y Combinator, not because he liked liked air bed and breakfast the idea that we pitched him on he actually really did not like that idea at all which was clear he accepted us into y cometer because of the serial story and what was powerful about the serial story to him was it represented how scrappy we were and how we would never give up right with our backs up against the wall needing money we come up with a very creative idea to generate publicity and earn some extra dollars you know really quick.

And he said, you know, he needs to hire or not hire, but, you know, lend into iPalmator, those who can actually build and execute.

And so we demonstrated that we could build, that we could execute, that we were scrappy, and that,

you know, we were not ones to give up, even when things were tough.

And he said, you know, especially at that time, this was now 2000, end of 2008, the financial recession had begun.

You know, he was looking for founders who were really tough,

who would have the perseverance and never quit.

And so that's what he saw in us when he heard the serial story.

And so that's the real power of the story of Obama's and Captain McCain's.

It demonstrated our scrappiness and our perseverance.

It's so interesting because to your point, when you were going off to the interview at Y Combinator, it's true that what you did was

maybe a waste of time.

Maybe it was a distraction.

Maybe, you know, you should have been spending more time figuring out the idea.

But at the same time, it had this incredible payoff because it demonstrated the grit, the determination, also the creativity, the excitement, the energy.

There was clearly just this spark that you decided in that moment, or perhaps maybe Joe decided in that moment, that he was going to follow.

And

it's interesting to me because both of you were right.

You were right in the fact that it's a distraction, but he's also right in the fact that sometimes these things are important.

It's important to follow whatever the passion is and whatever the spark is.

And so I'd be interested to hear how you view that as you sort of scale a company.

Like, how do you balance those two competing narratives where on the one hand, maybe we should be focusing on what really matters logically, but on the other hand, maybe we should just be spending frivolously on things that excite people and capture their imagination?

Well, I think from the beginning, we, you know, the whole team was formed on a respect, you know, for one another's strengths and the value of different perspectives.

And, you know, this was reinforced, you know, by us getting into why Combrade are based on the serial box experience.

And so, you know, we're becoming to really realize that you know, although we see things differently, that, you know, the different perspectives are super valuable.

We have real, real value that we're each bringing, and we want to preserve that going forward.

And we've

always felt that Airbnb is kind of like a three-legged stool.

And, you know, if any one of us were not a part of it, you know, the stool would have tipped over.

And that Airbnb is also kind of the marriage of art and science.

And both those things are equally important.

And so, you know, I think what that allowed us to do as we went forward was just make sure,

you know, each of our voices were heard as we made important decisions and respect.

And I would say that honestly, it led to a lot of conflict because when you see things differently, you disagree.

But because we respected the value

of each other based on the experiences we have had thus far and the friendship,

we had the patience to listen and find compromise.

And compromise was always

the best outcome because compromise meant we were taking into account different perspectives and meeting in the middle.

And I think that was just a really powerful thing.

And it's really become a neat part of the company's culture.

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We're back with first-time founders.

Just going back to what Paul Graham thought about the idea itself,

you know, he thought that having strangers live in other people's homes was not going to work.

He didn't want to do it himself.

Bad idea.

But he was betting on the creativity and the determination of the founding team.

Maybe he was right, but I kind of think he was wrong.

I think in hindsight, I mean, hindsight's 2020,

I think your idea was correct and you'd proven it.

So tell me more about what Paul might have gotten wrong.

And I'd be interested to know if you, if you feel, as I do, that you guys actually were correct from the very beginning, that this was something that the market always needed and that you provided.

Well, clearly we were ultimately correct.

I think the biggest kind of

entrepreneurial ideas tend to be ones that are non-consensus, where it's not obvious, right?

And so this was obviously not an obvious idea.

And that doesn't mean that all non-obvious ideas are good ideas.

But why was this one a good one?

And how did we know?

Well, I think it's because we we experienced it firsthand, right?

We, Joe and Brian were the first hosts and they viscerally felt the power of the experience, right?

It wasn't just an economic transaction.

Like they met people and it was really transformative and like friendships arose out of that.

The guy from India who stayed with them, you know, two years later invited them to his wedding.

Like it's hard to capture the power of that when you relay it as part of a pitch or whatnot.

So there was that.

I think as we started building the product and using the product, again, we were

very close to the experience and the customers.

Brian was amongst the first guests using the product and many learnings came out of that.

We were interviewing all those first users and

understanding why they were doing this, what their questions were, what was powerful about the experience.

And all that really,

I think, gave us conviction that we were onto something special.

Maybe most people didn't see it, but those who were brave enough to try it and were actually using it were coming away transformed.

And so the only question was how can you get people over that initial hump, that trust hurdle?

How can I trust a stranger?

Once they trusted the stranger, once they trusted Air Bed and Breakfast or Airbnb,

then they were transformed and it was hugely successful and they were huge advocates.

So it was just about that initial hurdle and how to get over it.

And,

you know, this is where design comes into play again, right?

It's kind of a design problem.

How do you create trust?

And,

you know, I remember one of the things an early host said, and he said, you know, all my friends think I'm crazy allowing strangers in my home.

And he said, I see it as a stranger is just a friend I haven't met yet.

You know, that's a really beautiful thing.

And we also noticed that when you talked to people about this idea and you framed it as strangers, of course, they hated the idea.

But if you framed it as, you know, would you like to

host a guest

who is from your alma mater, you know, who is from your university or, you know, in your professional field?

Or, you know, like if

you added some context to it and demystified who this person was, you know, people would actually get really intellectually interested and be like, yeah, you know, I would like to consider that.

I would be interested.

And so as we started to design the website, you know,

the three kind of core pillars to creating trust were just three things.

One was rich user profiles.

So we're going to show you a picture of the guest and of the host and who they were and like where they went to school, what did they do professionally.

We try to build out an image

and relative to something like Craigslist, where you had no idea who was posting the advertisement.

Our whole thing was let's demystify who the person is and humanize it.

Second, when it comes to handling the money, the transaction happens through the platform.

So you're protected.

You can't really have financial scams on Airbnb because the money is paid to the host only after

the stay, you know, successfully kicks off.

And so, you know, that addressed that potential problem.

And then third was the review system.

The fact that at the end of the stay, the guest reviews the host, the host also reviews the guest.

This creates a powerful incentive for both actors to

follow through on kind of what they've committed and be good guests and hosts.

And then also, you know, both parties accumulate reputation over time as a result.

And so just these three things, I think, were kind of the initial building blocks to creating trust on the platform.

Of course, the whole design of the website, too, was very friendly and

inspired trust.

And again, I think that the design background of Joe and Bryant specifically, you know, helped us to achieve that.

It's such an interesting problem that you solve.

I mean, you think about the kinds of solutions that people are trying to create when they're building companies.

I love the way you put that.

You're basically

the problem you were trying to solve is how do we turn a stranger into a guest?

What is the difference between those two things?

And how do we as a company make that shift?

And

it's just a fascinating problem to be solving.

And I'm sure a lot of people would find that very inspirational, what you just said.

What was the point at which you realized that you had something really great?

I think a lot of people, a lot of founders, they have their inflection point.

They suddenly something happens and they go, oh my gosh, I'm actually onto something.

What was that moment for you?

Well, everything changed over the course of Y Combinator.

We'd go into Y Combinator and we'd been making basically $200 a week for the last five months and nothing we did seemed to change that.

And our goal over the course of Y Combinator was to achieve $1,000 a week

in revenue.

And actually at the end of Y Combinator, and it's a 13-week program at that time.

So 13 weeks later, we go from $200 a week to actually over $4,000 a week.

So, you know, vastly outpacing what we thought was an ambitious goal.

And

coming out of Y Commitor with that kind of growth trajectory, we were able to raise our seed round from Sequoia Capital.

And so we went from a place at the end of 2008, at the start of Y Committer, really thinking that we were ready to quit.

And Y Committer was our last effort to give it, give it all we got.

But we had a verbal agreement that if by the end of Y Commoner things weren't in a better place, we would quit and we would support each other in that decision because nobody wanted to abandon the other two.

And so we kind of agreed up front what the parameters were for kind of the go, no go at the end of Y Combinator.

Well, anyways, at the end of Y Combinator, things are on a vastly different trajectory.

And that's because over Y Commoner, we're focused on

New York City and photographing the listings in New York and meeting the users and a whole bunch of things happen, which I can talk about if you'd like.

But

coming out of that, we get introduced to Sequoia Capital, you know, one of the top firms in the world for venture funding, someone we never thought would be interested based on where we were just 13 weeks earlier.

And they end up funding our seed round.

And so that was an incredible validation and gave us a whole injection of confidence.

You know, over the course of the remainder of that year, by August, we're making, I think, $12,000 a week.

So it continued to ramp aggressively over those months.

At that point in 2008 is primarily a business that was taking place in New York City.

And this is 2009.

Over the course of 2010, it continued to grow and branch out to maybe five or eight more cities.

Most of the business was happening, including places like Paris.

But these were like top destinations in the world.

And then it was really 2011 where just things went bananas.

And we started the year 2011 with 40 employees.

We ended with 400.

We became an international company opening 12 offices around the world

and, you know, really racing to build a global network.

And so I think.

We were ecstatic in 2009 with that changed in trajectory and we had a lot of confidence.

But there was always this question of, you know, is this a business that only makes makes sense in New York City, where hotels are incredibly expensive and where everyone in the world wants to go there though?

Or does this generalize and become kind of a global phenomenon?

And starting in 2011, we were able to demonstrate this is truly a global business.

And by 2013, it was literally everywhere all around the globe.

What do you think happened in 2011?

What took you from 40 employees to 400?

Why did it explode in the way that it did?

Competition.

Competition has a way of accelerating uh things yeah um so you know up until that point we had been very quiet about our success um but by 2011 you know word of our series a fundraising uh had gotten out this series a had happened in in april of 2010.

um it was a you know seven million dollar raise at you know roughly 70 million valuation you know Based on that news, there was a number of European serial entrepreneurs who kind of took up the idea and wanted to be the Airbnb of Europe.

So by 2011,

these two new companies kind of emerged.

And we said, well, you know, hey, this is inherently a global idea.

Travel is inherently global.

You know, we need to be the Airbnb of Europe.

We can't have,

you know, others taking that when we're a travel company.

So it kind of set off a race.

And these companies were based in Europe.

And we said, well, we have to be just as as local as they are.

So that motivated us to open local offices in each of

the most important countries from a travel perspective,

places like France and Spain and Italy and Germany, et cetera, and hire local teams who knew the market and

vigorously recruit.

kind of new hosts to the platform

and really take a more active role in

building the marketplace and scaling it quickly.

So we kind of went from what I call like kind of a peacetime mentality to a more wartime mentality where we were

leaning in and not letting it just grow organically.

We also raised a lot of money that year.

We raised $100 million

in May of 2011.

So that gave us the capital to also really lean in on the investments and grow the business.

The moment that competition comes in is so interesting because as you say, from 2007 to 2011,

you're trying to prove to people that you're right.

And as you say, you're the evangelist.

You're walking into boardrooms and meetings saying,

we know you don't think that this makes sense, but trust us, it makes sense.

We really want to prove to you.

And suddenly, once the competition gets involved, it's like, oh my God, okay, we're right.

This is legit.

And it's so interesting that sort of shift in mindset that every entrepreneur who succeeds has to go through, where you have to shift from, I'm going to try to prove to everyone that I'm right.

And now I know I'm right.

What do I do with that?

So I'd be interested to hear, it sounds like, you know, the wartime mentality beefing up on fundraising, but are there any ways that sort of your management principles changed during that time?

Maybe the way that you conduct meetings, maybe the way that you hire, maybe the way that you speak to employees.

what were some of the changes that you felt happening uh from a management perspective around that time well i mean i think first i think you're exactly right that this was when it was an inflection point from you know this is still kind of non-obvious to this is obvious um because in april of 2010 we raised money at roughly 70 million dollar valuation uh and when we raised again one year later in May 2011, it was a $1.3 billion valuation.

But I'll tell you, leading up to that, there was a lot of skepticism.

You know, there were a lot of investors who loved,

were excited about how different this was and how it was growing, but they weren't ready to step up and

bring the valuation up that high.

And then suddenly the round

was oversubscribed and the valuation was pushed up even higher than we thought.

you know it would be uh we were targeting a billion and ended up being 1.3 but leading up to that for months you know nobody wanted to go maybe above 500 million So anyways, the perception really shifted over those months.

And, you know, it was also because we were buckling down and going from like the peacetime to wartime kind of way of operating the company.

And what did that mean in practice?

I mean, first we had to had to recruit and, you know, hire these country managers.

And so there was a dozen countries we were hiring for.

And how do you do that in the span of just a couple of months?

We had to move really fast.

And these competitors that we were up against, these were serial entrepreneurs.

They were moving very fast.

They had existing operations and people whom they could repurpose to this project.

So I remember, you know, one of the companies was founded by the Sanborn brothers, also known as Rocket Internet.

They've cloned many kind of Silicon Valley companies successfully.

And I remember them reaching out to us and saying, hey, look, you can acquire us now and we can work together or otherwise we're going to be the Airbnb of Europe.

It was pretty much the pitch.

And so as, you know, part of that, we had to take it seriously and we had to go meet them.

And so we'd fly out to Berlin and we'd go to their office and, you know, meet their team.

And they had 200 people in that office.

And back home, we had, you know, maybe 60 people.

And so it was clear that the competition had an ability to scale that we just weren't used to.

And part of that reason was they had existing people and assets that they could just repurpose and segue into this new company.

But we realized we had to move really fast.

And so,

you know, we found a few regional partners, investors who were well connected with entrepreneurs across Europe.

And, you know, in the span of just weeks, you know, Brian and I and Joe, we flew around and

interviewed these guys and made decisions quickly and

just did things that we wouldn't otherwise be doing.

I think we would otherwise have been back in San Francisco looking at mock-ups of product.

And instead, you know, we were meeting in airports across Europe,

interviewing country managers and, you know, making decisions within a week or two about who we wanted to hire and giving them permission to set up an office and, you know, a budget to build a team.

So, you know, it just was a whole different kind of mentality and definitely outside of our comfort zone.

But frankly, we...

we were very worried.

We were worried that we weren't going to exist in Europe because this competition had such a track record of successfully cloning Silicon Valley companies.

We'll be right back.

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We're back with first-time founders.

How many moments when you look through the history of the company, from

it's three of you basically with just an idea in a dorm room, essentially, to this giant, global, iconic public company that it is today.

How many moments are there in that journey where things could have gone to zero?

I mean, the first that comes to mind is you're walking out of that Y Combinator pitch meeting and Joe decides to pull out the cereal box.

That was a moment where it was zero versus today.

Perhaps this interaction with the competitor in Europe, that might have been another moment.

How many of those moments can you identify?

And

is that something that every founder has to deal with if you're scaling from zero to what you are today?

I think there's two others.

There was the summer of 2011 where we had our first major trust and safety incident, and trust was really violated, and it became a very public incident.

And we had to basically regain the trust of our community.

And

what I'll say about each of these,

the importance is to treat them like a crisis.

I talked about peacetime versus wartime, but maybe another way to say it is

to

recognize that you're in a crisis and not just try to manage the crisis away, but recognize that a crisis is a transformative opportunity that can make a good company great.

And so you're not just trying to survive a crisis, you're trying to transform yourself over the course of the crisis.

And so, you know, with the international competition, you know, it was a threat that could have, you know, sent the company to zero, I suppose, over time.

But actually, it made us so much stronger because it motivated us to grow and become more local in all these countries around the world.

And likewise with the trust incident, when that happened, instead of just trying to treat it like a PR incident and minimize it,

we leaned in and we said, everybody, stop what you're doing.

We want everybody in the company to work on building trust and safety features for at least the next few weeks.

And we want in a few weeks to make an announcement about all the innovation that we've done in the space of trust and safety.

And so literally about two weeks later, we were able to announce 40 new features that

were designed to make Airbnb that much more trustworthy.

And I think the idea was like

we wanted to go above and beyond what customers expected.

And so a lot of those features are still with us today.

Like, for example, the idea that with every booking,

there is

protection against damage included free of charge.

And there's, you know, dedicated customer service.

There's a dedicated trust and safety team.

You know, a lot of this this stuff was pioneered in that moment.

And at the beginning, there was a lot of doubt about can we do these things well?

Like, is this actually a good idea?

Like, what if something goes wrong?

Are we liable, et cetera, et cetera?

But we took the moment, seized the moment, and it innovated and led with boldness.

And a lot of that.

uh lives with us today and made us you know a stronger company so you you you identified two moments that's the the trust and safety one is the third moment there's a fourth moment which is the pandemic in the span of eight weeks our business dropped 80 percent

And, you know, what was worse was we didn't know how long this was going to last for.

And of course, at that point, we have like roughly 8,000 employees.

So we have a tremendous burn rate.

And yet, suddenly, there's no revenue coming in, and we don't know how long that's going to last for.

And of course, the whole market is in crisis.

And so it's not a good time to raise more capital either.

And so, you know, that was a moment where we wondered, like, what's going to happen?

Can we adjust fast enough to course correct?

And ultimately, we went through the pandemic and came out way stronger, way successful, and actually went public that same year, quite successfully by the end of 2020.

And so that was probably the fourth time

where I think,

you know, it could have gone to zero, but because of decisions we made and kind of leaning into the crisis and coming out stronger,

you know, made it not only not go to zero, but become a much more valuable company.

I feel like inherent to all of those moments and the way that you dealt with it is this almost respect or fear for your own mortality.

It's like a crisis arises and instead of basically resting on your laurels and saying, you know, we're great.

Look at our track record.

We're great.

You're saying, no, we need to really reckon with this.

This gets at the heart of who we are.

This could be the end of us.

And I think that's clear to everyone when you're just starting out as a company, or even when you're raising your early rounds, your A or your B.

I think that sense of that feeling of mortality is very strong.

I think there is a feeling among most people that as you get bigger and bigger and bigger, once you become Airbnb, once you become a massive company, you don't have to worry about that anymore.

And I'd like to understand from your perspective, does that fear ever go away?

Do you ever think, is there ever a moment where you think,

we're fine now.

We'll definitely figure everything out.

Or does it always live inside you that there could be a moment where things go to zero?

Look, I don't think things are going to go to zero realistically, right?

At this scale, and given how ubiquitous Airbnb is around the globe.

So I don't think that's realistic, even in a crisis.

But I would say we definitely don't have any complacency.

And for a couple of reasons.

One, I think the opportunity is so much bigger than we've realized at this point.

I mean, I think conceptually we realize it, but in terms of the size of the company today, I think it could be so much more.

I think there's so much more to be done in travel.

I think there's so much more that we can do leveraging our host community to create really special experiences.

And so I think there's an opportunity ahead of us that's so much bigger.

And you know, it's hard to rest or get comfortable when you see such a big gap between where you are today and where you want to be so the ambition is still so so much bigger than we've captured or grown into so i think that keeps us keeps us very hungry um you know i'd also say that you know having had those four experiences i mentioned you know we we understand that you know a crisis is a terrible thing to waste and so whether it's a crisis or not like these challenges are real opportunities.

And I think when we see them, I mean, they are, of course, scary and not fun, and no one would wish a crisis.

But at the same time, you know, it immediately gets us thinking, how can we come out stronger?

You know, what's the silver lining here?

How can we better ourselves?

And so, yeah, I think we're just always looking for opportunities to innovate because we know that opportunity is so big.

And we know that, you know, in difficult times, you know, there are hidden opportunities.

I'm going to start to wrap up here, but just as you look back at what you've built and this pretty insane journey that

is very unique in terms of lives, a life that you can live, you've had a pretty interesting one.

What has the whole journey taught you about humanity?

What has it taught you about people?

What have you learned?

about the human experience from being from building this company.

As I mentioned, the real innovation here is around trust uh and that was you know question number one from from day one um

and you know we always had a point of view that people are fundamentally good i think we've we've we've proven that um you know the fact that two billion people

two billion guests have arrived into other people's homes over these uh you know last 17 years That's a huge number.

And so we have like, you know, 2 billion data points.

And, you know, not every trip is perfect, but the vast majority are very, very positive experiences.

You can read the reviews on the website.

Most guests leave reviews.

So we have

numerical data and written prose describing these experiences.

And again, the vast majority of people are good.

And I think there's

a hunger for travel and for seeing the world and understanding different cultures.

You know, if you look at the trends for international travel going back to the 60s, it's just been exponential growth and continues to be the first thing people want to do when they have disposable income,

including developing parts of the world, places like China, India, whatever.

You know, you're just seeing tons of interest in people leaving their own kind of home country, their own experience, and seeing the world, seeing what's out there, connecting with others.

And so, you know, I think that's really

an inspiring thing because, you know, I think ultimately it makes the world a smaller place.

It fosters understanding.

We need that more than ever in these times of everything being politicized.

We need to understand that behind, you know, the politics and the ideology, there are, you know, ordinary people who are much like ourselves, who,

you know, want to meet people, want to have

good times, you know, want to be financially successful and are willing to work hard.

And that's true all around the world.

And we create a marketplace,

a platform

where people can do that, where we can make these connections.

So, yeah, I think very much there's a shared mentality out there

around entrepreneurship

and being a global citizen that we've kind of tapped into

and

is popular in every country of the world,

especially as people get to experience it themselves.

They get a lot of satisfaction out of it.

Nathan Blachosik is the co-founder and chief strategy officer of Airbnb.

Nathan, this was really informative and also inspiring.

We really appreciate your time.

I enjoyed it very much.

Thank you so much.

This episode was produced by Claire Miller and Alison Weiss and engineered by Benjamin Spencer.

Our research associate is Dan Shalon.

Thank you for listening to First Time Founders from the Vox Media Podcast Network.

We'll see you next month with another founder story.

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