How I Built This with Guy Raz - Airbnb: Joe Gebbia

Episode Date: October 17, 2016

A chance encounter with a stranger gave Joe Gebbia an idea to help pay his rent. That idea turned into Airbnb — a company that now has more rooms than the biggest hotel chain in the world. See Privacy Policy at https://art19.com/privacy and California Privacy Notice at https://art19.com/privacy#do-not-sell-my-info.

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through Squarespace capital. Go to Squarespace.com slash built for a free trial. And when you're ready to launch, use offer code built to save 10% off your first purchase of a website or domain. Loans issued by Celtic Bank and serviced by Stripe, all loans subject to credit approval. This show is in partnership with Airbnb. This past summer, I took my family to Vienna, and it was incredible. We spent our days wandering the old streets, stopping for coffee and pastries, visiting museums, and just soaking up the history of one of the most beautiful cities in the world. And one of the things that made the trip so special was the home we booked on Airbnb. It had tall windows, beautiful old details, and plenty of space for all of us. And being in that home on Airbnb, right in the middle of Vienna, walking distance from so much of the city,

made it feel less like a visit and more like we were actually living there. Plus, taking a trip is the perfect time to host your space on Airbnb. your place with all of its personal touches and its amazing location could make someone else's vacation even better. Your home might be worth more than you think. Find out how much at Airbnb.ca.ca. slash host. We ended up going from zero to 800 homes in a matter of four weeks. And I have to tell you, I thought that this was it. Like this was our rocket ship to the moon. You thought we made it. We're here. We got it. Right. If you build it, they will come and look what's happening.

And so we get introduced to 20 investors in Silicon Valley. Ten of them replied our email. Five of them eat us for coffee. Zero invested in us. From NPR, it's how I built this, a show about innovators, entrepreneurs, idealists, and the stories behind the movements they built. On today's show, the story of how a side hustle to pay rent led Joe Gebia to build a company, that now has more rooms than the biggest hotel chain in the world.

Ten years ago, even five years ago, most of us would have thought the idea of renting out a room in our home to a complete stranger. A little creepy, even spending the night in someone else's home you never met would probably seem weird, especially on vacation or a business trip. But now it's not just normal. It's actually the preferred way to overnight for millions of people around. the world, even celebrities do it. And the company that made all of this normal, of course, is Airbnb. And the guys who started it had no background in travel or hospitality or even technology. Joe Gabia graduated from art school at the Rhode Island School of Design. Brian

Chesky, his co-founder, was Joe's college buddy. They played pickup basketball together. And after they graduated in 2005, both Joe and Brian moved out west. Brian went to L.A., Joe went to San Francisco. And in that first year, Joe, who was designing book covers at a publishing house, worked really hard to convince Brian to move up to San Francisco to start a business. And as Joe tells the story, after some prodding, Brian agreed. Both of us simultaneously quit our jobs. He left his, I was at Chronicle Books full time at that point,

and I left to dream up something with him. And you guys were like in your mid-20s or, So you didn't need a whole lot of money, presumably. At this point, no. We're just a couple of college grads, you know, eating ramen. Yeah. Why does everybody eat ramen? Everybody eats ramen.

It's so cheap. There's like ramen, ramen, ramen. I mean, you can get rice. It's rice, cereal too. Anyway, so you guys are there. You're eating ramen. And what? You're just like spitballing ideas?

We're spitballing ideas. And that first week was so exciting. You mean, the first week he comes, you're like... Oh, my God, yes. I mean, that first week felt like RISD again. This place was full of ideas. And then something ominous happened. A letter came in the mail.

I opened it up. It's dressed to me. I pull it out. And it's from our landlord. Yeah. Who politely states that our rent is now 25% higher than it was the month before. Wait, just one month he raised it by 25%. 25%.

And that's legal? It was not under rent control. Okay. Believe me, I looked into it. Yeah. And so were you like freaking out? Of course. I ran to my online banking and was like, oh my God, oh my God, can I make rent next month? And Brian, the same thing. And we realized that we almost couldn't. We weren't getting paychecks at this point. Yeah. So this is a moment where our backs are against the wall. And I feel like all the creative training that we had received started to pay off because we started to think about, okay, well, how can we design our way out of this? And that was when I reflected on a previous experience that I had. back in Providence.

The day before that I drove cross-country, I sold off all my stuff. And when I was having that yard sale, this guy pulls up in the red maza meata, and he starts looking at my stuff, and I'm getting pretty annoyed because I'm ready to go home. But he ends up buying a piece of art that I was selling, so we get to talking. And he tells me all about how he's about to go into the Peace Corps, and he's driving cross-country, and he doesn't know a soul in Providence. So I invite him out for a drink that night. and I make the mistake of asking him,

so where are you staying tonight? And he makes it worse by saying, actually, I don't have a place. And I'm thinking, oh, man, I mean, what do you do? Yeah, you have to give him a place. Like, we've all been there, right? Like, do I host this guy? So before I know what I'm saying, I'm like,

hey, you can stay on an airbed in my living room. So that night, I set him up in the living room, and I go to bed, and I try to fall asleep. I'm staring at the ceiling and thinking, Oh my God What have I done? There's a complete stranger in my living room What if he's psychotic?

So I get up, I tiptoed my door And I lock my bedroom door The next morning we wake up We get breakfast together Turns out he was not psychotic And the piece of art that he bought hangs in his classroom. He's a teacher now

And he's still, presumably you're still in touch with him Yeah, his name's Joseph We're still in touch. So this is the dude that inspired what would eventually become Airbnb So how did you, so you're in your apartment, your rent's going up 25%. And what? You say, let's just rent out a room in our apartment?

Well, I'm looking at my laptop, and there's a design conference that's coming to San Francisco, the industrial designers conference, right? And on the conference website, in big red letters, it said hotels sold out. And I'm thinking, oh, man, what a bummer. Designers want to come last minute. They're not going to have a place to stay. And in that instant, I look up, and I'm looking at it. around the living room. And I go, wait, we have so much extra space here. And I have airbeds in the closet. And the idea of hosting people on airbeds had gradually become natural to me. And the thinking

is there'll be more than just the place to sleep. We can cook breakfast in the morning. We'll pick them up from the airport. We'll give them a neighborhood guide and a map to San Francisco. So how did you get the word out? How did the designers know that this was available? Well, we didn't want to use any of the classified websites because there's going to be people in our home. So we made our own. What do you mean you made your own? Well, we designed your own website. But how did, so you designed your own website that said what? Well, it said who we were. It said about this concept of stay with us and we'll provide these things for you. So this website was just for the design conference. That's it. You made it. This is meant to be for one weekend.

And what did you call it the website? It was literally called airbed and breakfast.com. And we start to get emails from around the world. designers who needed a place to stay. Emails from London, from Brazil, from Japan. People actually started sending us their resumes, their LinkedIn profiles, to vie for one of these limited three airbeds. And for how much was it? For $80 a night.

You could stay in San Francisco with Brian and I. That's a great deal. It was an amazing deal. Do you remember who your first guests were? Yeah. So it was Mole, Catherine, and Michael were the first three guests. you know, what happened next, I don't think we could have predicted. They stayed with us and we got to show them San Francisco.

They got to feel like they belong there in the sense that they didn't feel like outsiders. You know what I mean? Like, yeah. And, you know, I'll never forget saying goodbye and watching the door click closed. And thinking with Brian, wait, what if we made it possible for other people to also share their experience and to host guests in their home and show off their city. Yeah. Wait, at what point did you and Brian look at each other and go,

okay, man, I think this is our business. Was it like right after that door closed and clicked? I wish it was, but I can't say that it thought it was the case. So that December, we both went home for holiday. And at a respective New Year's parties, everyone would ask, so what are you doing in San Francisco? Say, well, we're entrepreneurs. Well, what are you entrepreneurial?

And we didn't really have very much other than to say, well, let me tell about this time where we hosted these three guests on airbeds in our apartment. And one of two things happened. People either said, oh my God, that's the coolest thing in the world. Where can I do that? Or they said, that is the most bizarre, creepiest thing I've ever heard. And they left the conversation. And I think one of the things that I've learned is that great ideas, I think they usually start out as polarizing. They're not kind of like, that's kind of okay.

they either really tug on somebody's emotions or a latent desire that they have that's never been answered before or they really perturbed them in some way. But as long as there's people who really gravitate towards the idea, to me that's a signal that you might be on to something. So what did you do? How would you guys do next? Well, we knew that we needed great technical expertise. And funny thing, the roommate who moved out so that Brian can move in was a guy named Nate Bouchard. Rzik. Nate was an engineer who found me on Craigslist. And as we lived together, there were some similarities in how Nate and I worked, which is that we come home from our day jobs. And in the

evening, we would both work maniacally on our own projects. And I'd look over my shoulder. I remember thinking to myself, this guy has a work ethic just like I do. If I ever need an engineer, I think I'm to call Nate. So here we are, January of 2008. So I meet Nate for a drink. I tell him about this, this weekend experiment with these three guests. And Nate loved the idea. He's like, we can use the internet to actually get people off the internet. How cool is that? And he had this coding experience that neither you nor Brian had. He was a computer science degree from Harvard. Yeah, he sure did. So I guess at this point you have your team assembled, you've got your idea, you have your website. So when do you really decide to launch it? We all agreed that we would launch the next

version of our site, our bed and breakfast, at the next big tech conference, because actually we thought the original opportunity was housing for conferences. Right. So the next big one that was coming up was South by Southwest. And every year the same thing happens. Hotel sell out months in advance. It's people scramble for housing. And it's also the place where some of the tech greats had launched before us. Twitter had launched their Four Square and others. And we thought, well, this is perfect. We're just going to follow the rocket ship that all of them did.

Yeah. So at this point, we have about three weeks to build before South by Southwest. I'm doing design, need to do the coding. We're just pulling the pieces together. And no money at this point. Oh, no money at all. Just doing this just like on shoestring. Half a shoe string.

Yeah. So we get it out just in time. We ship it. When you say you ship it, what do you mean? We release the next version of the site. Okay. And we think this is the next greatest thing. And at this point, there's not a single listing on it, right?

Not yet. Okay. We actually had six people put up listings in Austin, and we had two people book those listings. Oh. One of them was Brian. Wow. So it was not a smashing success at all. Did you get, were you guys, like, sad, or were you laughing about it?

No, this is completely demoralizing. Here was this idea that we were so excited about, and nobody took us up on the idea. So we learned two things from Austin. The first was that exchanging money in person is really awkward, especially inside of a home. So we thought, well, why do people have to exchange cash in person? What if we just bring the transaction online?

What if we allowed people to seamlessly pay with their credit card, Same you would for traditional accommodations on the internet, but instead you get somebody's home. Right. And suddenly we realized we had a business model. We said, well, maybe we'll just take a transaction fee as we flow the funds from guests to host. The second thing we learned is that there were people who did want to travel where there weren't conferences taking place. They're emailing us, including our first three guests, Catamol and Michael, Ramos. Hey, I'm going to Vancouver next week.

How do I stay in somebody's home? I had such a good experience to you guys. And we're like, well, is there a conference going on? And we said, well, why does there need to be a conference? Maybe this is just a travel site. So we went back to Nate and we said, well, Nate, what's ad payments and what's make this a travel site? And Nate started to warm up to the idea, but had some real questions about how to get a

marketplace like that started. So he started to build something even more ambitious? Well, actually, he moved back to Boston to be with his girlfriend. And so kind of, you know, the band's falling apart a little bit. And that's when we had an idea, which was, what if we rewashed this new version of our service and we do it at the crest of a tidal wave of press, which in summer of 2008 was Barack Obama. And specifically, Obama speaking at the Democratic National Convention in Denver, Colorado. Yeah. Where there was a housing crisis because a hundred,

thousand people were anticipated to see Obama speak, and there were less than 30,000 hotel rooms, most of which were picked up by, you know, delegates. So this is a real problem. In fact, the mayor of Denver at one point thought about opening up the city's parks so people could camp out. And we thought, well, what if we timed the relaunch of our service? It would be the third launch. During the DNC, we can ride the coattails of all the Obama press to bring a lot of awareness to this marketplace. So that's exactly what we did. We hustled. We flew to Denver. We met people on the ground. We got local press, which turned into regional press, which turned into the national press and eventually international press. Wow. And so this is still weeks before the convention, right?

Yeah. This is like July 2008. And what happened? Well, we did a live interview with CNN from our living room, and we had about a hundred people actually book and pay with a credit card through our service. which this was like the first sign of a working viable marketplace, even to the point where we were getting customer service calls for the first time. Yeah. And that just like was your cell phone? Yeah.

How did it go? It went great. We ended up going from zero to 800 homes in a matter of four weeks. So 800 homes are on this site called Air Bed and Breakfast. That's right. And I have to tell you, I thought that this was it. Like, this was our rocket ship to the moon. You thought, we made it.

We're here. We got it. Right. If you build it, they will come and look what's happening. And they came, yeah. And then the convention ended. And all of those numbers came crashing right back down. So here we had a dilemma because at this point, we had also starting talking to investors.

We thought, well, this is a great time to talk to investors. Our numbers are up. Yeah. Look, it's actually working. We have stories that we can share. We've got press. We get introduced to 20 investors in Silicon Valley. Ten of them replied our email.

Five of them eat us for coffee. Zero invested in us. Wow. It was completely demoralizing. Yeah. Like 2008 was the worst year of my life. Really? Oh, my gosh, yes.

Because you've put so much into this thing, right? Like, I didn't have, there was nothing else going on in my life except this. And to put it in front of very credible investors, the guys that had picked the Googles and PayPal's YouTube's of the world. And for them to look you square in the eyes and go, well, this is weird. I'm not investing in this. What did they say? Why? Why? Well, they didn't say this, but here's the underlying reason. It's because we've all been taught since we were kids that strangers equal danger. Right. No one in the right mind would invest in a service that was based upon this pitch that we want to build a website where people publicly post images of their most intimate

spaces, their bedrooms, their bathrooms, the kinds of rooms that you usually close when people come over. And then over the internet, they're going to invite complete strangers to sleep in their homes. It's going to be huge. So this is like after the conventions, you're thinking, we got it. We're going to get all this, make all this money and raise all this money. And all of a sudden you get back to San Francisco and nobody wants to give you any money. Exactly. Nobody. So how are you keeping the business going if you didn't have any Any cash. We did raise a round to financing.

We call it the visa round. Which means you maxed out your credit cards? You know those binders where you keep baseball cards? Yeah. I had one of those, except there weren't baseball cards in it. There were credit cards. We would go through visa after visa to MasterCard and then final to Amex, just maxing out credit cards.

And that's how we funded ourselves. And I can tell you, like, there's no worse feeling than getting a credit card statement that's only going up with no hope of ever paying it down. Yeah. There's a name for this, by the way, in the startup world. There's a name for this phase of a company where you have a product in the market, but they don't fit yet.

It's almost like two gears that don't touch. There's this mysterious gap between these metal gears that you can't figure out how to close the gap. And they call this the trough of sorrow. It's this long period of time where you don't have product market fit. And in the data or the analytics, it looks like the Midwest of analytics because it's perfectly flat. There's zero growth.

And this is when people tend to quit. This is when people tend to quit. In a moment, when we come back, how Joe Gabia and his partners eventually climb their way out of that trough of sorrow. I'm Guy Raz, and you're listening to How I Built This from NPR. Just one more thing before we get back to the show. We've been incredibly inspired by the hundreds of stories. you've sent us about the companies you are building. Let me just read a few examples here.

We heard from Seth Hill. He's got a company that's taking pre-orders for a product that grew out of a camping trip. And on that trip, he says, we grabbed our nylon hammock, strung them up on a little island in the middle of a lake, and froze our butts off. So he's now got a prototype for a product he calls sway. It's an insulated hammock that he says solves cold butt syndrome, which is a real thing. look it up. We also heard from Leah Farazini. She started Semolina Artisanal pasta two years ago in Los Angeles. She's never had a business before, and she's had some real hurdles. Like she says, she engaged in some hand-to-hand combat with her pasta extruder, and she lost. But Leah is

doing okay. Her organic pasta is all ready for sale online and in Whole Food Stores in Southern California. We also heard from Larry Moss of Rochester, New York. He writes, I built my business out of thin air, on a product that typically lasts a week. And Larry is talking about balloons, like the kind you make balloon animals out of, except his balloon sculptures are gigantic. They can literally fill a whole building. You can check out his story and the amazing pictures on our Facebook page.

And while you're there, we'd love it if you'd like us. And if you want to send us your story about what you're building, go to build.npr.org. That's build with a d.npr.npr. It's How I Built This from NPR. I'm Guy Raz. So it's 2008. Joan and his partners have no investors and a lot of credit card debt.

And they're trying to figure out how to raise cash. It was at this point that Brian and I are in the kitchen late one night. It's like two in the morning. And we're just trying to keep each other's spirits up. And it's during the peak of Obama versus McCain. This is like September of 08. and we're riffing on this idea of being airbed and breakfast and providing maybe we gave our host some breakfast cereal to give to their guests. Wouldn't it be funny if it was politically themed?

Oh yeah, we could call it like Obama owes, the breakfast of change. Or maybe Cap McCain's, a maverick in every bite. And we actually ended up making breakfast cereal. Wait, you made breakfast cereal? Like actual cereal to eat? Well, it's a good question, which is how do you make breakfast cereal? Yeah. And how do you do it with not a zero budget, but a negative, you're in a deficit, by the way?

Yeah. So, you know, I picked up the phone. I called Kellogg or General Mills and I started going through the pitch, and then I go, hello? Hello? They had hung up on me. And then it dawned on me, well, maybe we don't have to make cereal. Maybe we can just go to the grocery store, buy some cereal off the shelf. We could design our own box and, and,

put the bag of cereal in her own box, seal it up and sell it that way. Just sell it on the street? Well, maybe you would make a website. We know how to do that. So this would be instead of Airbnb or in addition to it? No, at this point, we weren't really sure. Then the question was, well, how do you make the boxes? So I found an illustrator.

I did the art direction, pulled all the pieces together. And I found a RISD alumni in the East Bay here in San Francisco that I went in and, you know, I poured it all out to this guy. Here's the idea of the concept we're really excited about. Here's the mockups and sketches. And it goes, all right, here's what I'll do. I'll make 500 of each box. You guys don't have to pay me up front, but pay me a commission based on every sale. And it dawned on us that with 500 of each box, well, that was a limited edition.

That was a collector's item. We could number them on the top of the box out of 500. And suddenly, we decided we could sell a box of Obama owes and Kat McCain for $40 a box. What? This is just a crazy story. I don't even, I don't even, I've forgotten about Airbnb. Where are we going? What's going on with this interview?

So we make, look, it's an entrepreneurial bender going on here. So we makeobamos.com. We get the boxes, a cereal, we put a hundred boxes together and we mail them out to all of the press that we, that we could mail to. Like, every morning show had a box of these. So we ended up to get featured on all of these different shows. CNN did a live interview with us about breakfast cereal. And we were the number one politically themed video on CNN.com for an entire day.

And after that CNN in an interview, we ended up selling out of Obama owes, which is incredible. But like where did you think you were going to go from there? Well, it almost didn't matter because at $40 a box times 500 boxes, we need $20,000 in breakfast cereal. Yeah, that's a lot of breakfast cereal. Barely just enough to pay off our credit cards. All right. So you pay off your credit card bills, and then what, you go back to airbed and breakfast? Well, we got to this sort of fateful dinner one night with one of our mentors.

It was Michael Seibel and Justin Kahn. And so we're out to dinner with them, and they had been helping us the last couple of months, and we're kind of like at the end of the rope, and they can tell, and they're like, you guys need some help. You should participate in this incubator program called Y Combinator. So we're at dinner and we look it up on our phones and the deadline was the night before. So we're like, oh, come on. But they end up emailing the guy who runs it, a guy named Paul Graham, who they knew. And they say, you know, hey, Paul, there's these guys.

They've got this concept and they'd really benefit from being in your program. You know, would you take a look at their application if they send it to you? And Paul writes back and says, yeah, if they get it to me by midnight tonight. Wow. So Brian and I race home. It's like 10 o'clock at this point. We start to fill out the application. It's pretty intense.

Yeah. So the next day, we get this callback that our application got accepted. So we got to the next round, which was an interview. So we prepared in advance. We would grill each other with all these really tough questions. What's your growth rate? How do you plan to expand internationally? You know, what's the next big feature you're going to build, etc., etc.?

And so we go into the interview. It's in a small, tiny room at the White Combinator office, and there's four partners around the table. We sit down, and the very first thing at a Paul Graham's mouth is, you mean people actually use this? And we go, yeah? And he goes, well, that's weird. Well, he's not a great way to start an interview of any kind.

It kind of went downhill from there. We're walking out of the room and kind of thinking like, this is our last chance effort and it didn't go so well. And that's when I remembered that I had brought a box of Obama owes to give to him as a gift. So I go Ronnie back into the room. I whip out the box. I hand it to him.

I go, hey, Paul, we got this for you. He goes, oh, where'd you buy this? I go, well, we made it. He goes, what do you mean he made it? And I told him the story in 60 seconds. And he goes, wait, so you guys funded your company based on selling breakfast cereal? And he immediately turned around and put the box of cereal on the shelf behind his desk. On the ride home, we get a phone call from Paul Graham to inform us that he'd like to offer us a spot in the Ycombinator program.

and we later found out that the reason we got in wasn't because of our idea. It was because through the breakfast cereal, we had proven to him that we had hustle, we had grit. If we could figure out how to sell breakfast cereal for $40 a box, we could figure out how to make our website work. All right, so you get into Y Combinator, and what does it do for you guys? What happened there? Why Combinator was a game changer for us. And I'll never forget the first office hours that we had with Paul Graham. He sits down with us and he goes, where's your market?

And we all get each other and we're like, we don't really have a market. No one's really using the website. But we go, you know, New York is showing some promise. We have 30 hosts in New York who are renting their extra rooms out. in their homes. And he goes, so let me understand. Your customers are in New York City, but you're here in Mountain View. And we're like, yeah, we're here for your program. And then he goes, what are you still doing here? Go to New York City. And he points his finger at you. He's got this thing where he looks at you and points his finger. And it was in this moment, sitting in this

room, this tiny room, where something profound change for us. Because up until this point, we had subscribed to the mythology of Silicon Valley. Yeah. Which is that you have to solve things in a scalable way. Right. Because what happens when one day the rocket ship takes off? You don't want to get left behind because your code held you back. And so we had tried to solve our problems by coding our way through it.

And if you remember, that didn't get us anywhere because we were in the Midwest of analytics. Right. And so here comes Paul Graham, who gave us permission to do things. things that don't scale, such as fly across the country and meet the early adopters of your service. Yeah. And it was in that moment that we felt so much more free to think even more creatively about how we could get our service off the ground.

If you could do things that don't have to scale, what else could we do? And as we start going through the search results and looking at the hosts, we identified a pattern. And the pattern was this. People just generally didn't know how to take a good photo of their house. home. So the photos were really bad. So the photos that you had on the site at that time were just like crappy photos? Well, you know, people were using their camera phones. At the time, it was like flip camera phones, which is even worse. They were taking pictures at night. It just wasn't, they

weren't merchandising their home in a way that you would want to stay there. So therefore, no one was booking them. And we thought, you know, I went to art school. I took some photography classes. I've done photography my whole life, in fact, as a hobby. I'm willing to bet if we just flew out there for a weekend, we could probably take some nicer photos. And we wouldn't charge him for it. We'll do it for free. So that weekend, we bought plane tickets. Brian and I flew to New York. We emailed our hosts, all 30 of them. We rented a really nice camera and went door to door throughout Manhattan, Brooklyn, and other parts of New York. And it's funny because I'd knock on the door and then they'd open the door and I'd introduce myself as, you know, hey, I'm Joe. I emailed the

from Airbnb and they're kind of like looking over my shoulders. So yeah, where's the professional photographer you promise? I go, well, that's me too. I'm also going to take the photos for you. Yeah. So you're the guy taking the photos. So, yeah, I'm taking photos. And what's cool is that the photos are looking pretty good.

I'm getting the lighting right, the composition. You know, I'm kind of staging the place a little bit, just fluffing the pillows and making sure that the place doesn't look cluttered. And I'd show the photos on the back of the camera. Say, hey, what do you think? You know, do you like these? and these house were like, oh my God, my apartment looks amazing. I can't believe it.

Do you want to stay for some tea or coffee? And so I'd end up spending a few hours sometimes in their homes just talking with them. And this is where instinctively we went into design research mode, which is going out and talking to the people you're designing for such that you can understand the world from their point of view to inform you. point of view. Yeah. And so I call this enlightened empathy, which is seeing the world so closely in the shoes of the person that you're creating for that you can see the world of the way they see it. And you bring those insights back and you combine it with your own design point of view to create something new. So here we are in the living room. They pull up their laptop. I say, could you show me how you check your calendar? Show me how you message with guests.

in those moments, we saw how our perfectly designed interface completely and utterly failed. What we thought took two or three clicks to get done. People were taking 10, 12 clicks. They were stumbling around getting lost within our own website. And you guys did not know that up until that point. We had no idea. And so it wasn't until we actually sat down next to our early adopters, some of our most passionate early customers.

and they revealed to us the mysterious gap between our product and our market was the inefficiencies of our user interface. Yeah, I mean, what's interesting about this is that you don't strike me as like an egomaniac or somebody who doesn't like feedback. You strike me as somebody who really wants it, and it's surprising that it took you guys so long to discover this. I know. Right? I know. But once we did, it was like a jackpot. Yeah.

So we came back with all of our discoveries. Something interesting happened. Our numbers, that second week, went from $200 a week in fees, which is what we were making for six months, right? Which is not sustainable. Three guys cannot live off that in San Francisco. Our numbers jumped to $400 in one week. One week.

Just from pictures and making a couple of simplified changes. Well, I looked at Nate. I said, Nate, is there a bug in the system? because that's just crazy. Yeah. How did we double in a week? And sure enough, we had done more reservations with the host that we had met. Huh.

And what's very interesting guy is that we didn't know this at the time, but because New York is such an international destination, we had guests coming from Berlin, we had guests coming from London, from Sydney, from Vancouver, who were coming as guests, experiencing this new service of staying in somebody's home. they go back to where they came from and they'd have this epiphany moment this aha they go wait I have an extra room

why don't I rent that on the site and they would sign up then they would sign up yeah so at what point did you were you able to actually attract money from investors was it around that time it's precisely around this time

so what I've learned is that when the gears start to click investors can hear that and they actually this time they came to us and we had offers coming in from a variety of different groups. And the one that shocked us the most was Sequoia Capital, which is a preeminent venture capital firm in Silicon Valley that we thought,

well, maybe one day, like a year from now, we'll go talk to them. But actually, they were knocking our door to talk to us. And we ended up closing to deal with them. We got our first round of financing, which was a huge relief. We could pay rent comfortably. And we could start to hire a team. I'm wondering at what point do you remember sort of sitting with Nate and Brian saying, I think this is going to be really big. Well, one night, this is in 2010. It was probably like 1130 at night. I was really tired.

At this point, we have an office. And I used to look at every listing that got added to Airbnb. I would go through it at night and just click through each of them. And I come across this one that says Fiji Island. And I'm like, hmm, what's that? I click on it. And sure enough, somebody out in the South Pacific listed a five-acre private island on our site. Wow.

Complete with personal chef. Complete with water sports. And I'm looking through the photos of this thing going, holy cow, this is incredible. And it was in that moment where I realized the power of this platform is that we put it out there. and the creativity of the people who have contributed back to it has gone beyond any of our expectations. So you guys have obviously grown much, much bigger since then, bigger than most or all hotel chains. And you have some similar challenges to companies like Uber with some cities saying, hey, you know, you guys should be regulated like hotels.

So how do you respond to that? I think about that question in the context. text of innovations over the last hundred years. And there are three examples that come to mind of new ideas that entered the world that had a pretty rough start but are now so commonplace in every day that you'd laugh if you thought like, oh wow, like people were against that at one point. So ATM machines at one point in I think it was in 1970s had a lot of criticism. And I think there were actually laws being written against them in certain states throughout

the U.S. because it was this new and different way of banking where you didn't have to go inside and talk with a, you know, a person behind a desk who could maybe upsell you on other services. You just went to, you know, a computer in a wall and retrieved your money. But of course, can you imagine today without ATM machines? No. The VCR, I think, is another great example.

It was first patented in the mid-20th century, but it didn't really become a product until the 80s, the early 80s, because it was met with such resistance from incumbent instruments. that didn't want people to watch movies at home. The car is another example where when the Model T came out in 1908, it represented a new way to travel, a new form of transportation. And there were certain cities that were against the car. And there were actually laws drafted to outlaw cars.

But, you know, after a year of trying a new, more efficient way of transportation, the people demanded that they didn't want to go back to horse and buggy. And so the policymakers, you know, had to modify the laws to what the people wanted. Yeah. So I think the world is ready for our invention, given that there's been over 100 million people that have stayed in homes all over the world. And the good news is that as cities come to learn about what we do and what we offer, they tend to want to work with us because they see that there is an economic impact that allows people in their cities. in different neighborhoods to benefit. When you, I think last year, Airbnb was valued at like $20 billion and probably more today.

I mean, is that crazy to you? Does that shock you when you think that you just started this thing and is an idea that really went nowhere for the first couple years in your apartment in San Francisco? And it's now worth like billions of dollars, like with a B. Does that mean anything to you or to you? just a number on a piece of paper. I don't think about it too much. I mean, those things can change.

If you look at the first.com, you know, when I was growing up in Georgia, I was so enthralled by every day there was a new story of a new company that started in Silicon Valley or San Francisco. And that planted a very deep seed with me that one day I wanted to be a part of that. And so I also remember it in the first.com of companies that were here today, gone tomorrow. Yeah, there's a list of 10 of the hottest companies from the 1990s, one of which you would still remember. It's because technology moves so quickly that if you're not thinking about what's next, the world around you can change faster than you do. Joe Gabia. By the way, the company that he first tried to build before Airbnb was called CritBuns, which are basically, and I am not making this up, but cushions for art students.

The company kind of went dormant after Airbnb's success, but there is a still. a website for it. And every now and then an order still comes in, and I still run down to the garage and pack them up and say... Wait, how many crit buns do you have in your garage? I think there's a few hundred. Wow, you have a few hundred crit buns still in your garage? Oh, my God. It's a funny thing because it reminds me of like where I started. Yeah. And it's very grounding. Wait, what's a website? Is it critbuns.com? Literally, critbuns.com. Okay. We're going to plug this. Go on to critbuns.com and order your crit bun. Only 600 left. Hey, thanks for listening to the show this week.

If you want to find out more or listen to previous episodes, you can go to how I Built This.npr.org. And if you have a chance, please subscribe to our show through iTunes and let other people know about it. You can also write us directly at hibt at npr.org or tweet us that's at How I Built This. Our show is produced this week by Rumtin Arablewe. You also compose the music. Thanks also to Neva Grant, Sonazmeshkampur, and Jeff Rogers. I'm Guy Raz and you've been listening to How I Built This from NPR. Hey, I want to invite you to come see how I built this live on stage at the Now Hear This podcast festival on Friday, October 28th in beautiful Anaheim, California.

Now Here This is a three-day festival of your favorite podcasts, October 28th through the 30th, with shows like NPR's Pop Culture Happy Hour, Dinner Party Download, and WTF with Mark Marin. We will be doing a live episode of how I built this on Friday, October 28th. So if you can only make it for one day, make sure it's Friday or you'll miss out on our show. To get tickets and information about the full lineup, go to NowhereThisfest.com. Hope to see you there.