Airbnb is an American company that operates an online marketplace for vacation rentals, and tourism activities. The platform is accessible via website and mobile app. Airbnb does not own any of the listed properties; instead, it profits by receiving commission from each booking just like Uber.

From a simple idea of two people trying to get some extra cash to a multi-billion startup that generates billions in revenue every year, Airbnb has one of the best success stories. In today’s blog, we will be discussing the successful story This startup.

The Idea Of The Startup

It started in 2007 with 2 people Brian Chesky and his friend Joe Gebbia, both were from New York and were living in San Francisco.

While they were looking for some ways to make extra cash they noticed that in San Fransisco all the hotel rooms seem booked up every time there is a conference so they thought ” what if we set up a quick website called AirBedAndBreakfest and we sell people the opportunity to sleep in our flat in exchange for some money”. So that’s it. They came up with the idea of putting an air mattress in their living room and turning it into a bed and breakfast.

In 2008, Nathan Blecharczyk joined the startup, and the trio that will make the history was ready, they launched AirBedAndBreakfest.com on August 11, 2008. They got only 3 customers in the beginning. but they didn’t want to stop and headed to Washington DC for the inauguration because a lot of people were going there to see Obama sworn in as a president.

They secured 150 bookings, but just like any other startup, the starting was so difficult and it was on the brink to shut down until they got a chance meeting with Paul Graham.

Y Combinator

Computer programmer Paul Graham invited the Trio founders to the January 2009 winter training session of Y Combinator, which provided them with training and funding in exchange for a small interest in the company. They received $20,000 in venture funding from Y Combinator and used it to fly to New York City to talk to hosts and promote their site.

After that, They returned to San Francisco with a profitable business model to present to West Coast investors. The name of the company was shortened to Airbnb.com, and the site’s content had expanded from air beds and shared spaces to a variety of properties including entire homes and apartments, private rooms, and other properties. the site had 10,000 users and 2,500 listings.

The Funding

A VC from Sequoia Capital gave them $600,000 as seed money and with the participation of Youniversity Ventures partners Jawed Karim, Keith Rabois, and Kevin Hartz(Y Ventures is an early-stage venture investment group founded by Jawed Karim, co-founder of YouTube). In November 2010, Airbnb raised $7.2 million in financing from Greylock Partners and Sequoia Capital in a Series A round and announced that out of 700,000 nights booked, 80% had occurred in the previous six months.

Just one year later they grew exponentially to hit $1 million in bookings and raised $112 million in Serie B round from Andreessen Horowitz to join the unicorn club with a $1 Billion valuation. In the same year, the company established an office in London, its first international office.

The good thing about here, is that they were a business model from the beginning, they were making revenue and were making profits and due to the growth of international end-users, offices were opned in Paris, Milan, Barcelona, Copenhagen, Moscow, and São Paulo. These openings were in addition to existing offices in San Francisco, London, Hamburg, and Berlin. It’s 2012 and the startup sold more nights than Hilton, Yes!! a 3-year-old company sold more nights than Hilton.

October 2013, they had served 9,000,000 guests since its founding in August 2008. Nearly 250,000 properties were added in that year and the Serie C round was valued at $200 million with Peter Theil on the deal, Airbnb was heading to 10 million bookings.

A year later, the valuation of Airbnb reached $10 billion with a $500 million in Serie D round. In 2015, Airbnb expanded to Cuba making it one of the first U.S. companies to do so, in the same year a Serie E funding was valued at $1.5 Billion led by General Atlantic.

From 2016 to 2018, Airbnb raised another $500 million from Google Capital and Technology Crossover Ventures and another $1 billion in funding, to reach a total of $3 billion in funding and a $31 billion in valuation. They also, led a $13 million investment in a restaurant reservation-booking app, with serial entrepreneurs Gary Vaynerchuk, Ben Leventhal, and Mike Montero.

The Company announced Airbnb Plus, which is a collection of homes that have been vetted for quality of services, comfort, and design, as well as Beyond by Airbnb, which offers luxury vacation rentals. Their revenue grew more than 80% to reach $200 million in profit by the end of 2018.

By October 2019, two million people were staying with Airbnb each night. The COVID-19 pandemic hit and, bookings dropped as much as 96% in some cities, and the company ended up posting a loss of $322 million in 2019. the pandemic was difficult on a lot of businesses and especially businesses like Airbnb, they had to raise $1 billion in equity from private equity firms Silver Lake and Sixth Street Partners at an $18 billion valuation and $1 billion in debt, and announce a layoff of approximately 1,900 employees, about 25% of its workforce in the Americas, Europe, and Asia.

On December 10, 2020, the company went public via an initial public offering(IPO), raising $3.5 billion.

Government Restrictions

Europe:

Cities in Europe that have imposed restrictions on short-term housing rental include Barcelona, Amsterdam, Paris, and Venice. for example In Paris, , hosts can rent their homes for no more than 120 days a year and must register their listing with the town hall.

In Ireland, landlords are restricted to renting a short-term let for a maximum of 90 days per year for primary residences and requiring registration by landlords with local authorities.

United States:

Cities in the United States that have imposed restrictions on short-term housing rental include Washington, D.C, Los Angeles, San Francisco,  South Carolina, and New York City.

The Federal Trade Commission began an investigation about how Airbnb affected housing costs. In October 2016, New York Governor Andrew Cuomo signed a bill charging Airbnb fines for violations of local housing laws.

Despite efforts to regulate short-term rentals in the U.S., a general difficulty with enforcing restrictions is that Airbnb resists sharing its listings data with regulators, often citing privacy protection as the reason for such noncooperation.

Japan:

In 2018, Japan enacted regulations requiring hosts to register their Airbnb with the government and limiting the number of days a home can be rented to 180 per year.

Singapore:

Short-term home rentals of less than 3 months are illegal in Singapore, effectively making the use of Airbnb illegal.

Acquisitions

On May 31, 2011, Airbnb acquired a German competitor called Accoleo. They also acquired London-based rival CrashPadder, adding 6,000 international listings to its existing inventory. This acquisition made Airbnb the largest lodging website in the United Kingdom.

In November 2012, Airbnb acquired NabeWise, an online city guide that aggregates curated information for specified locations. In December 2012, Airbnb announced the acquisition of Localmind, a location-based question and answer platform.

In February 2017, the company acquired Luxury Retreats International, a Canadian-based villa rental company, and acquired Tilt.com, a social payment startup.

On November 16, 2017, the company acquired Accomable, a startup focused on travel accessibility.

In March 2019, the company acquired HotelTonight, a website for booking last-minute hotel rooms, for over $400 million.

In August 2019, Airbnb acquired Urbandoor, a global online marketplace that offers extended stays to corporate clients.

Lessons

Pitch your idea to an incubator: As we saw in the beginning the startup was going to fail if the founders didn’t have a chance meeting with Paul Graham

Get connected to your customers early: Airbnb was a business model from the beginning, they were making profits, and that attracted investors.

Get connected to your mentorship early: When it comes to funding it’s not about the money, you can get money everywhere. It’s about the people who invest with you, and what they could help you with.