18 ms·
Subject: Airbnb
- zck 16y ago>(Fred Wilson): I am also talking to my friend Mark Pincus who had an idea like this a few years ago. Mark Pincus is better known as the founder of Zynga, unless this is another Mark Pincus.
- jedc 16y agoNope, same guy. Fred has written a fair bit about him before.
- fredwilson 16y agosame mark. he has hundreds of ideas for businesses to start and has pitched me on many of them over the years
- wensing 16y agoVery encouraging to see that AirBnB struggled to prove market size. I know the pain.
- jedc 16y agoWow, thanks PG (and Fred and AirBnB team). This is an awesome insight into angel/VC investment decisions. It's hugely valuable.
- siddhant 16y agoI think this is the post that best gives an idea of "Why should you do YC".
- andrewljohnson 16y agoAnd this is the post that tells you why you should read HN too.
- swampplanet 16y agoAbsolutely there is a lot of meat there. And hope for all of us!
- Hovertruck 16y agoI have to say, it's pretty inspiring to see that PG went to bat that hard for the Airbnb guys.
- joshbert 16y agoWas I the only one that kind of smiled when reading the emails from PG to Fred pitching these guys? I loved that!
- vaksel 16y agointeresting stuff I was under the impression that YC introductions were pretty much the equivalent of "hey, here are some guys...invest in them"...but here you can see that there is a lot more pressure....bordering on begging
- picasso81 16y agoWe earned PG's recommendation by working really, really hard.
- chr15 16y agoI've told this story before on HN, but it's worth telling again. I rented a room in L.A. using Airbnb. The owner of the room said he made $4000 in 3 months on two rooms that would have otherwise been vacant. If you're making this much money for people you've tapped into one helluva market.
- joelhaasnoot 16y agoWonder how elastic the market is. Don't know LA enough, but can assume that eventually too much demand will ruin the seemingly perfect situation. It's a luxury position. Huge profits were possible on ebay too at one point in time...
- yef 16y agoI can cover the rent of a 2-bedroom apartment in Manhattan by renting out one of the bedrooms on Airbnb. I don't expect the situation to last forever, but for now it's great.
- luckystrike 16y agoIf someone still has any doubts about the value of YC, they should read this email exchange. PG is pushing for the startup as if it was his own. He genuinely wanted them (and also the VC firm) to succeed. Great stuff.
- thesis 16y agoWhat? He was invested in them. Do you think he wants to see them crash and burn?
- luckystrike 16y agoYou still really think he did all of that only because of YC's ~6% stake in them?
- jfager 16y agoI'm not trying to take anything away from pg here, but "all of that" refers in this case to 7 emails with one VC. AirBnB has raised $7.8M (at, what, around a ~$40M valuation at the time? 6% of which would be over $2m). Is it really that incredible that someone would send a few emails for a shot at that kind of money?
- mentat 16y agoHe's risking his reputation if he's pushing a company that he's not confident in. The reputation is worth a lot too, probably mostly in reciprocal connections.
- jfager 16y agoThat's true, but he's also risking his reputation (and his paycheck) if he doesn't shop around for later stage investors for his companies. This kind of thing is his job, it's what Y Combinator exists to do. When one of his companies looks like it's going to be successful, he has to do this kind of stuff to actually get a return out of it. Which, again, isn't to denigrate him at all. He's obviously very good at what he does and deserves a lot of respect for it.
- pclark 16y agoIt's interesting that in the end Airbnb raised from Sequoia, I wonder if lots of other VCs passed. It possibly shows why Sequoia are the best.
- dr_ 16y agoTrue that is. +1 for the suburban golf loving VC's - at the end of the day, they are successful for a reason.
- joshu 16y agoHave you met the Sequoia guys?
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- chrismanfrank 16y agoi THINK that by the time sequoia invested, airbnb was obviously on a roll. i could be wrong though.
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- neebz 16y agothe most amazing thing is that it took them only 2 years to come to a stage that a VC had to write a blog regretting missing them out.
- danielha 16y agoWhat an incredible post. Thanks for sharing, pg. YC absolutely does hustle for you like this, and it's the best kind -- genuine.
- seiji 16y agoGreat examples of VCs never saying no directly and of a strange insider be-terse-and-get-out-of-my-way writing style.
- andrewparker 16y agoThat terseness is how Fred writes every email, it's not unique to this thread with Paul. When you try to reply to a couple hundred emails a day, this terseness is the result.
- fredwilson 16y agoi suspect you have a few of those in your gmail archives to andrew ;)
- andrewparker 16y agoOne or two long ones too :)
- NickPollard 16y agoIs it terse or is it just concise? So many 'business' people think that long waffling sentences seem clever and impressive. Nothing is further from the truth.
- jrockway 16y agoThis is neither terse nor concise. Terse and concise means you write what you mean. When the VC writes, "we are still in the data-gathering phase", he really means "I see what you are saying, but my gut says no right now. I may contact you in the future when I know more." This is longer, but it actually means something. Instead of saying that he needs more data in order to make a decision, he's said that he needs more time to make a decision. The data comes natrually. A "data-gathering-phase" is the phase that everyone is always in about everything. I am currently in a "data-gathering-phase" with respect to whether or not I should make another cup of coffee. My current cup is cold, but still contains liquid. So it's not a sure thing that I should make myself another cup of coffee. On the other hand, hot coffee is nice. I can't decide, so I will continue to gather temperature and flavor data until I make a decision or I spill my coffee. See how meaningless that is?
- evanjacobs 16y agoVCs often say they invest in team first and idea second but USV decided not to invest in AirBnb despite having no (obvious) reservations about the team or their ability to execute. Does this mean that ideas are more important than investors really let on?
- alain94040 16y agoMarkets are the most important. Great team in a small market: no hope. Bad team anywhere: no hope. Great team in a great market, bad idea: there is hope (changing the idea is easy, just pour more money - changing the team is close to impossible)
- d0m 16y agoI wish PG could back up my idea like that. What if.. I simply signed Paul Graham? : )
- alienreborn 16y agoIt seems PG has utmost belief in AirBnB guys from the beginning by the way he repeatedly tries to convince Fred to invest it. Thanks for sharing the inside story. :)
- olivercameron 16y agoNot that I doubted it, but this shows that YC are really prepared to fight and defend your corner to help you advance. Great to read.
- alienreborn 16y agoIt seems PG has utmost belief in AirBnB guys from the beginning by the way he repeatedly tries to convince Fred to invest it. Thanks for sharing the inside story. :)
- DevX101 16y agoYou won me over PG. I'm applying to YC tomorrow.
- lurker19 16y agoWow. I did not get the pun in AirBnB until I saw it spellers out widhelm he lowercase b in airbed. The capital B is either a branding miss or an intentional branding effort to look more upscale than Airbed.
- bconway 16y agoBased on previous discussions, I think it's done intentionally to reflect a pivot (away from airbeds).
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- dr_ 16y agoThis is great stuff. You can't blame any VC for being cautious at that early a stage though, and although the idea of hotels using airbnb to list their vacancies hasn't happened yet, as far as I can tell, it may not even matter. I have just started trying them to rent my apt in NYC, lets see how it goes. Personally as a "landlord" I feel like I do a great job accomodating my tenant, but on a site like craigslist, which is where I'd been posting my listings, this never gets reflected as there are no opinions/ratings, etc. As a result, I can't "stand out" from other landlords. It's not hard to get tenants in NYC, but I can imagine in some other parts of the country or world this may be a bigger issue. This is where I hope airbnb comes in handy.
- cloudbrain 16y agoInteresting that completely missing from this conversation is: -- Their website design -- Their code (Rails? Jquery?) -- Their hosting / scalability / "cloud" strategy -- Source control methods, dev environment, tools -- APIs, "ecosystem", social media, "viral rate" etc. -- And more... Basically, all the things that most of us here spend most of our time discussing. Instead: 1) Idea / Team 2) Execute 3) Talk to people with money 4) Go to #2
- jorkos 16y agoThis is a great point....market potential seems to be top of mind more than anything else.....which reminds me of how Sequoia invests....clearly they got the larger vision (and presumably had more data points as they invested later)
- freshfey 16y agonot sure whether this is in 1) but the fact that they actually talked to their customers in NYC etc. is a huge point as well.
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- ig1 16y agoWhy would anyone talk about that stuff when pitching to a VC? Sure the operational factors are important (and that's why they get discussed here), but they're secondary to size of the market and the nature of the solution when it comes to how big the investment opportunity is.
- webwright 16y agoMARKET. http://pmarca-archive.posterous.com/the-pmarca-guide-to-startups-part-4-the-only http://pmarca-archive.posterous.com/the-pmarca-guide-to-star... That's all Fred is looking at in that phase-- because even an awesome team won't build a venture-sized business in a tiny or low-growth market. At our Demo Day, there was two teams that had a veritable investor feeding frenzy around them-- and they were both attacking markets that were either huge/rich or markets that were growing like gangbusters (and they had the good sense to talk as much about the market opportunity as they did about their product).
- quickpost 16y agoFascinating conversation. Thanks for giving insight into how these deals work... >ABNB reminds me of Etsy in that it facilitates real commerce in a marketplace model directly between two people. Interestingly enough, I still tend to side with Fred's assessment of AirBnB's future. All my experiences with it as a user have been too unreliable to expect that it can scale to truly massive usability. Selling your old guitar online is a lot different than renting a room to someone. Renting a room has so much more of a personal aspect to it. There are so many more subtleties to actually having a stranger come and stay in your house than there are to sending a stranger a book, guitar, etc via USPS. Regardless, I still think there's a massive market out there for this type of thing, I just don't see it swallowing up the whole Hotel industry.
- ryandvm 16y agoMy take on it is that Airbnb is great unless you're the kind of person that doesn't trust strangers. Sadly, in the United States, the tendency to not trust strangers has been on the upswing for the last few decades.
- pjscott 16y agoI think the trusting-strangers thing actually comes down to two questions: 1. The collective level: are there enough people who trust strangers that Airbnb can make tons of money, and help out those people? It looks like the answer is yes. 2. The individual level: are you okay with trusting some random strangers from the internet? I think you probably should be -- people tend toward decency, overall -- and it's possible to change the way you feel about something with a little effort.
- webwright 16y agoStrangers renting rooms are only a piece of their future. HomeAway (vacation rentals) just bought a superbowl commercial and are reporting revenue of $100M+. writing on the wall: https://skitch.com/webwright/rieyj/airbnb-search https://skitch.com/webwright/rieyj/airbnb-search Note the # of entire home/apt entries. My guess is that these (with B&Bs, inns, and eventually hotels) will dominate the listings. ABNB has a challenge with positioning moving forward-- a LOT of people think they are all about renting a room in a stranger's house, sharing a common area, etc. But their growth speaks for itself.
- jmm 16y agoI wonder if missed investments like this have the senior guys listening to the junior members a bit more, or whether the young guys are wrong enough to keep it biz as usual.
- jasonmcalacanis 16y agoawesome
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- nopassrecover 16y agoIn my experience, Airbnb's biggest competitor is HostelHero and I found this much more convenient than Airbnb while traveling (if only because hostels nearly always have space, unlike the many rooms we encountered on Airbnb advertised as free but suddenly not when you book them). Arriving in a new city without internet it was great to have HH and be able to find 10 hostels and know they are going to be open. I guess McDonalds wifi etc. means Airbnb could have been a competitor, but the ease of finding accommodation reliably, of a reliable standard, and at more affordable prices meant we used HH far more than Airbnb. Having said that, the times we could manage to find a room that was genuinely free, and appeared to be genuine people with a spare room, were some of the highlights of our travels. The people and the rooms were both fantastic, and it's this "home away from home" and social aspect I think Airbnb should be pushing. I think at the same time they should be working hard to remove the listings that I could best describe as dodgy guys trying to run a hotel out of an apartment building without adhering to local hotelier laws as we found these far too prevalent in some cities.
- edw519 16y agoNice, pg. Have you ever given a similar vote of confidence to founders who didn't live up to your expectations?
- ecuzzillo 16y agoThe idea with this kind of thing, as far as I can tell, is to be as nuts (i.e. risk-friendly) as you can possibly get away with. If you're never wrong, that's probably an indicator that you could get away with being a lot more nuts. Moreover, if you do pump a startup and you are wrong, then to explain the situation is often to piss all over the work of said startup.
- pg 16y agoMaybe not quite that persistent, but I've definitely tried to sell investors on startups that didn't end up doing very well. Even by the end of the 3 months we are far from perfect at predicting who the big winners will be.
- chriseidhof 16y agoWhat could YC/Airbnb have done to prevent this? Anything you guys would do differently in hindsight?
- zyfo 16y agoPrevent what exactly?
- _pius 16y agoCould there possibly be a better pitch for YC than this? Awesome read!
- ShabbyDoo 16y agoUnrelated to start-up investment, just a random thought about ABNB: I was thinking about the impact of hotel chains' business traveler kick-back schemes (euphemistically known as "rewards" programs) on the independent room providers (a phrase I just coined to run the gamut between someone renting out his spare room and a boutique hotel) ability to attract business travelers. How, as a business renting out 40 rooms in a single city, do you compete with Marriott who can offer some guy and his wife a free weekend stay anywhere in exchange for funneling his company's (or even his company's client's) dollars toward their brands? What if ABNB offered up to these independent operators a rewards program similar to those offered by the big chains? They would move beyond be a transaction facilitator toward being closer to a consumer brand. I believe that lower-end hotel chains basically follow this model -- independent owners become franchisees of the brand as a way to get bookings, have a recognizable brand, etc. While I doubt that too many of today's ABNB bookings are business-related, that number will surely increase. I love playing armchair QB :)
- Duff 16y agoYou can also hook into the kickback schemes by partnering with major reward programs like Amex Membership Rewards. Or work with state governments to have a voucher program like what Ireland has for BnBs. It's a great business.
- ajaimk 16y agoIs it just me or just Brian Chesky reply 2 minutes before PG sends the intro? Time differences won't account for it since NYC is ahead of SF
- ajaimk 16y agoThe content is wonderful to read through but the time frame that this conversation takes place over (a month) has a lot to say in itself.
- marcamillion 16y agoSo this post has done two things in my estimation. 1) Improved the perceived standing of PG among the entrepreneur-class. It proves that he really adds value the way he says he does - hawking, what can easily be seen as a very weird idea at a time when not many people see it. 2) Improved my perception of Fred. Even though he passed on the deal, he is stand-up enough to not only admit it - but allow PG to post this email exchange that shows that he was "one of the old guys" that were skeptical. It also shows that he wasn't just pulling PG's chain, but was really debating it internally.
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- charlief 16y agoFred Wilson tweeted: Reading the email discussion between paul graham and me with 20/20 hindsght is both useful and painful http://twitter.com/fredwilson/status/48456993614200832 http://twitter.com/fredwilson/status/48456993614200832
- ivankirigin 16y agoIt just seemed a very good sign to me that these guys were actually on the ground in NYC hunting down (and understanding) their users. That's a funny comment from paul because he was the one to tell them to go to NYC. That they went is to their credit, but still. I think of this sometimes with the pitch coaching for demo day. How many investors think "that's a great way to phrase that" when watching a presentation and what they are actually hearing is PG? When you've seen a few of them, it is quite stunning. I don't mean this in a negative way. It actually is just evidence that paul graham is a badass.
- sinzone 16y agoHe told them, but they did it.
- brianchesky 16y agoWe were already meeting our users over the previous year, including at the DNC and Inauguration. We had ambivalence to continue to do so city-by-city because, as we were warned by others, it didn't scale. PG gave us permission to continue these efforts, and to "do things that don't scale." It was one of the greatest pieces of advice we ever received.
- bumbledraven 16y agoI talked with one of the founders of Hackruiter (YC S10) last weekend and he told me Paul gave them the same advice! The two founders (or "the Hackruiters" as PG would say) are scheduling days completely full of half-hour 1-on-1 in-person meetings in different cities with people who might be interested in joining a startup. This is one of the most un-scalable processes I can imagine. By the by, I was very impressed with the founder I talked to (Nick), and I would suggest that if you are a superb developer who is itching to join an existing startup, get in touch with Hackruiter. If they think you are a good fit, they may very well be able to either make the right connections on your behalf or at least point you in the right direction.
- sportsTAKES 16y agoFascinating - I could be wrong but I don't imagine too many people push back so hard on @paulg like that. I have great respect for @fredwilson for pushing back and then admitting in a very public way that he felt he made a big mistake. The best line of the email is @paulg describing @fredwilson: "He is the least suburban-golf-playing VC I know." Glad this story was shared and glad there is continued mutual respect there -
- seiji 16y agoHow long have you had twitter disease? We're working towards a cure as fast as we can.
- atrevisan 16y agoAll other important factors aside, everything comes back to scalability. This helps further drill that point.
- danvoell 16y agoThanks for sharing PG, this is fascinating! We as entrepreneurs are generally busy trying to sell you and we rarely get to see your approach when "pitching" one of your companies. Your point by point break down of a market and how a company can grow into it is very insightful. I am taking note of your use of character validation (cereal story), peer validation (YC poll), market/community focus validation (out talking to users) and master vision for my own future investment communications. So short, subtle, and to the point, love it!
- bluekite2000 16y agoAirbnb is a good startup but the founders struggled so much at first without gaining any significant traction. And even with PG's endorsement they still had trouble getting funding from a progressive-minded VC. I wonder if they (Airbnb's founders) could make it to this point without YC.
- zaidf 16y agoLesson: even pg can be rejected. It's not the end of the world.
- nupark 16y agoThis exchange cements my concerns about AirBNB only being huge if they can end-run the hotel regulatory system. pg: Did they explain the long-term goal of being the market in accommodation the way eBay is in stuff? That seems like it would be huge. Hotels now are like airlines in the 1970s before they figured out how to increase their load factors. fw: So I think it can scale all the way to the bed and breakfast market. But I am not sure they can take on the hotel market. The problem is, the regulatory system (not to mention the neighbors) do not want unlicensed, widespread "crowd-sourced" illegal hotel rooms, and are working hard to block them: http://www.frommers.com/articles/6912.html http://www.frommers.com/articles/6912.html Paul Graham talks about the 'eBay' of accommodation -- but a huge percentage of eBay's revenue comes from professional sellers, which is exactly what will run afoul of regulation in the rental/hotel market.
- borism 16y agonot only regulation. hotel chains won't be sitting idly while few geeks eat their market. oh and btw, isn't eBay kinda dead thanks to Craigslist?
- dutchrapley 16y agoI love the succinctness of the email exchange.
- jscore 16y agopg seemed a bit direct in terms of what he wanted in his email, which I found refreshing. On the other hand, Fred seemed to 'beat around the bush' as when he said 'we are in data gathering phase'. Just curious what the norm is around the vc/angel circles. Are most people pretty direct/candid? or do they mostly hide behind business speak?
- fredwilson 16y agomaybe i knew this email was going to get published someday and was careful about what i said. it's kind of amazing that pg only was asked to redact one small thing in the entire thread
- jiffylu 16y agoThis seems right up USV's alley too. Marketplaces and platforms. If I remember correctly, USV didn't exactly pass, but made a play around the time Sequoia did.
- fredwilson 16y agoyup. right up our alley. in our wheelhouse. which is why i'm kicking myself for missing this one. this is our kind of deal.
- zby 16y agoI am surprised couchsurfing.org is nowhere mentioned - it was a working example already 5 years ago.
- andrewparker 16y agoYes but couchsurfing wasn't a business... it was more of a "movement". that was the concern: could couchsurfing be commercialized.
- andrewparker 16y agoNote that there is zero mention of VRBO or Homeaway in this entire email thread. That's the real opportunity (not hotels or bed and breakfasts) and neither Fred nor Paul saw it.
- mikeleeorg 16y agoI love the term "cereal entrepreneurs" from one of the commenters on Fred Wilson's post: http://www.avc.com/a_vc/2011/03/airbnb.html#comment-166898872 http://www.avc.com/a_vc/2011/03/airbnb.html#comment-16689887... (The Disqus link doesn't quite work all the time tho...)
- adrianwaj 16y agoFred: "I'm just not sure how big it's going to be" - had he seen couchsurfing at the time? http://www.couchsurfing.org http://www.couchsurfing.org (launched as beta in 2003) http://en.wikipedia.org/wiki/CouchSurfing http://en.wikipedia.org/wiki/CouchSurfing Are Airbnb copycats?
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- Lucadg 16y agoI have to admit that when I first heard of airbnb I thought: "wow, great idea! A paid couchsurfing!" And it makes sense to me as often I skipped on cs because I needed to be quiet in a room and work. You can't do that If you are a non paying host.
- lemming 16y agoI was wondering how ABNB would compete here as well. I guess just better/more marketing.
- fooandbarify 16y agoOne huge difference is that couchsurfing is free... do some chores around the place maybe to be nice, but the whole point is sharing and using each other's space for free. I think Airbnb is aiming for a different market, actually - for example, my parents would feel "weird" about crashing on a stranger's couch but booking a quaint and unique little bed and breakfast over the internet makes them feel cool. Conversely, I would feel bad about charging somebody to stay in my disgusting apartment but I'll happily host somebody just passing through.
- vessenes 16y agoHey PG, Thanks for publishing this exchange. I've never known you to be anything but exceedingly polite and thoughtful; now I learn you're doing good work behind the scenes too. Inspiring!
- startupcomment 16y agoAirbnb has definitely tapped into a latent market, but I wonder how such "rentals" may square with terms in lease agreements or condo association provisions. States and / or municipalities may quickly try to capture taxes, as Zipcar has discovered, or they may try to prevent or regulate such "rentals" on the basis of licensing, public health and safety, or other laws or ordinances. I wonder if the typical renter is properly reporting the income to the appropriate tax authorities.
- Lucadg 16y agoWe tried to use airbnb here in Bali to search for a house but we had to give up as there were too many kinds of accommodations. Houses dubbed as villas, rooms dubbed as houses, one floor dubbed as a full house and even a gazebo where we were supposed to stay 2 months. All this is fine but I wonder how usable it will become once you throw the hotels in.
- gacba 16y agoHere's what I appreciated: Both Fred and PG are willing to a) admit mistakes and b) be totally transparent about it and c) publish that transaction for others to learn from put them BOTH in a class above and beyond traditional VCs. Are you "other" guys listening out there? This is why YC is eating your lunch with new startups...