Brain CheskyHow Airbnb Founders Grew From An Idea To A $31 Billion Company

It all started with two guys, and an air mattress. In 2007, Brain Chesky and Joe Gebbia were broke and looking desperately to make some extra money to pay their rent in San Francisco.

Instead of just finding odd jobs, they decided to do something very creative at the time: rent out air mattresses in their apartment to attendees of a conference because all the hotels were booked and expensive.

The two friends had yet to learn that their simple idea would turn into a multi-billion-dollar business. Today, Airbnb is the world’s largest online marketplace for booking rooms and other accommodations.

BEFORE AIRBNB, THEY WERE TWO COLLEGE STUDENTS.

The two founders met while attending the Rhode Island School of Design college. They were both studying Industrial Design.

Chesky and Gebbia had very different college experiences. Chesky was very outgoing and was always organizing social events. On the other hand, Gebbia was more introverted and spent most of his time on his design projects.

Despite their different personalities, the two friends bonded over their passion for design. They would often work on projects together and bounce ideas off each other.

During their college years, the idea for Airbnb came about. Chesky and Gebbia realized a huge demand for short-term rentals, especially during major events like conferences and festivals. They created a website named airbenandbreakfast.com. The idea revolved around renting air mattresses in their loft and promising customers they would be served breakfast after a good night’s rest.

After the website was up and running, it wouldn’t take long before they started receiving customers, an Indian man, a woman, and another man from Utah, to book their loft for rentals at $80, and like that the company was in business!

HERE COME THE CHALLENGES

After the company was born, it wasn’t smooth sailing from there on out. They faced numerous challenges. The service was up and running, but it wasn’t popular at all. The founders tried to gain funding for their business and avoid a potential crash if they couldn’t adapt.

After venturing onward to find potential investors, the founders could only get all rejections. According to the founders, out of the 7 investors, they pitched the idea to, 5 said no, and 2 didn’t even reply.

When things even got worse when Air Bed and Breakfast tried to replicate the business model they had in San Fransisco at the 2008 Democratic National Convention, but it flunked heavily. Hence, they resorted to selling cereal boxes with political designs to earn extra at the convention.

Things would later brighten up as many investors watched them at the convention after their cereal sale made them $30,000. Shortly after, Paul Graham invited them to the Y combinator, where they spent the next three months perfecting their products and refining their ideas.

After these challenges, their time at Y combinator changed many things. In 2009, they changed the company’s name to Airbnb and secured $600K in funding from investors.

AIRBNB’S GROWTH

After finally getting their foot in-door, establishing themselves as a proper company, and having some funding behind their backs, the company is already set for growth. Airbnb went global in 2011, serving over 89 countries and receiving amazing feedback about its services.

As the company grew, more investors were looking to get in on the action. Eventually, some investors put $ 112 million into Airbnb, rounding up Airbnb‘s total valuation to $1 billion and putting the company on the map finally.

Their growth did not stop here by 2016. The company went cash flow positive and generated more than $1 Billion in revenue, skyrocketing its growth by over 80% since its last valuation in 2015. Everything was primed and ripe to go public and start selling shares. This is when the company would face another challenge.

AIRBNB’S BID TO STAY PRIVATE

After Airbnb’s incredible growth over the past couple of years, there has been internal pressure on investors and the founders to go public. Chesky wanted to develop Airbnb with time and care, and he believed staying private would allow this process to take place.

Investors saw the situation otherwise, as they thought it would be more viable to go public as soon as Airbnb was ripe. These decisions raised tensions internally in the company, and many investors wanted out of the company.

Around 2017, Airbnb reached profitability, and the market estimated it could achieve a valuation of $49bn at IPO. Chesky resisted, pushing to continue to grow the company in his image. He insisted that the company should remain private and stated the reasons why the company should remain private.

It surprised many when Airbnb announced that it would not go public in 2020. After all, the company had been on a seemingly unstoppable growth trajectory for years, and going public would have provided a huge windfall for its investors. So why did Airbnb refuse to go public?

There are a few possible explanations. First, Airbnb may have been worried about the potential for regulatory scrutiny if it went public. The company has faced criticism for its impact on the housing market, and going public would have made it a target for even more intense scrutiny.

Second, Airbnb may have wanted to avoid the scrutiny of being a public company. Being a public company would have meant that Airbnb had to disclose much more information about its business, including its financials. And given the company’s checkered past concerning transparency, that could have been a difficult pill for investors to swallow.

Third, and perhaps most importantly, Airbnb may have simply decided it’s not ready to go public yet. The company is still in the early stages of its growth, and it may want to wait until it has a few more years of strong growth under its belt before it takes the plunge into the public markets.

Chesky’s decision not to go public in 2020 was sure to be a controversial one. Little did they know what was about to happen next.

THE COVID ATTACK

2020The Covid Attack
2020 was a very defining and challenging year for every company and individual. Despite several contemplations that same year to go public, COVID-19 decimated the global travel industry greatly.

Since people couldn’t travel and rent apartments from Airbnb, practically everyone was quarantined, they were a huge loss in revenue, and Chesky’s stubbornness was a great mistake.

Revenue dropped by a staggering %67, and they had to lay off hundreds of staff, halt all marketing projects and were on the brink of bankruptcy.

Chesky quickly raised an emergency $2bn in debt and equity and wanted to use that revenue to avoid the potential bankruptcy knocking at the door. Fortunately enough, many countries started promising a vaccine. Bookings came back online, and the business was getting back in shape.

Post-COVID, the way people use Airbnb changed. People no longer just needed it for weekends or during an event. Since people were working remotely, Airbnb was needed more frequently, with the company ready for another boom.

AIRBNB GOING PUBLIC

After the recent COVID challenge, the investors weren’t going to back down on the bid to go public anymore. Although Airbnb’s founders rose to the challenge and saved the company from bankruptcy, investors weren’t going to allow the founders’ stubbornness to cost the company one more time.

On December 2020, Airbnb went public, and its public valuation skyrocketed to $100bn, double that of Marriott, the world’s largest hotel operator, and has continued to rack up billions in revenue.

While Airbnb has been tight-lipped about the filing details, the company plans to list its shares on the Nasdaq stock exchange under the ticker “ABNB.”

This move is no surprise, as Airbnb has been rumored to be preparing for an IPO for several years. In 2017, the company hired an investment bank to advise it on a potential public offering, and earlier this year, it was reported that Airbnb was looking to raise as much as $3 billion in an IPO.

So, what does this mean for Airbnb’s existing investors? Well, they’re likely to see a nice return on their investment. Airbnb is currently valued at $31 billion, and if it goes public at that valuation, it would be one of the largest tech IPOs ever.

Airbnb’s IPO is also likely to be a boon for its employees. The company says that it will use some of the proceeds from the IPO to “create an employee stock ownership plan,” which will give employees an ownership stake in the company.

Airbnb going public could make it easier for other home-sharing platforms to raise money and go public themselves. On the other hand, it could make it tougher for them to compete with Airbnb, which will have a lot more money to spend on marketing and expansion.

Airbnb founders showed great resilience and have proved that the market is challenging and can change scope at any given time once they gain the funding they need. The sky was the limit.

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