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Lessons from Airbnb's Rejections

• zabramow 11y ago
  The amazing thing, to me at least, about that story (and these lessons) was that they heard no from warm intros.
  • robotnoises 11y ago
    Are warm intros considered a slam-dunk?
    • zabramow 11y ago
      Not at all. But these guys were pitching AirBnB and they are considered some of the most impressive executing founders on the planet. Law of averages would get them one "yes."
      • seiji 11y ago
        the most impressive executing founders on the planet. Big note: after-the-fact. They aren't gods. You're seeing post hoc fanboy hero worship of single-unit success. Sure, celebrate accomplishments, but don't elevate people to being more-than-people.
      • brandnewlow 11y ago
        There was a time from 2008-2011 or so when Airbnb was just another YC startup that got funny headlines now and then. Casual observers didn't know that they were growing very big and were going to be a big big business.
  • seiji 11y ago
    heard no from warm intros. My last round of warm intro (thanks sam) VC partner talks had 100% failure rate too. There's no pattern you can draw here. I had great talks with some two-partner firms. Other two-partner firms did the whole "yes, but only if you're more successful in another 18 months." I did get one absolute "not this time, but stay in touch" decline that was exceedingly professional. SV Angel was the nicest in that they further warm-intro'd me to another 3-5 people. The worst contact was a16z actually. Go figure?
    • zabramow 11y ago
      Ok. But be honest, were you pitching something as good as AirBnB. We can be passionate about what we are building and try to raise capital without thinking our concept is as good as AirBnB. Given that, I would have suspected a warm intro would have done the job. My guess is that the founders (if you gave them truth serum) would say that they thought AirBnB was going to be huge all along. I could be wrong on that.
      • seiji 11y ago
        Let's not be revisionist. The original Airbnb concept was actual air beds and hosts that would actually make breakfast. That was the business. That is what the VCs passed on because it's kinda crazy. VCs can't pre-detect when founders will be willing to sacrifice their original cute, but untenable, ideas and move to where demand actually sits. This whole massive illegal sublet renting thing isn't what those VCs passed on. Those VCs passed on literal air mattresses on floors. Sidenote: it looks like the mark is now officially "Airbnb", but their logo says "airbnb", even though it was originally AirBnB? No company with multiple capital letters is ever presented correctly.
        • thaumasiotes 11y ago
          > Let's not be revisionist. The original Airbnb concept was actual air beds and hosts that would actually make breakfast. Really? I would have guessed that the "and breakfast" part just came from the common English term "Bed & Breakfast", which is to me synonymous with motel, hotel, hostel, inn, etc. I wouldn't expect breakfast to be a bigger feature at a bed & breakfast than at any similar business that went by a different word.
• acconrad 11y ago
  These are tough lessons to take at face value. Unicorns are even harder to replicate so their path to success is also fraught with unique challenges. The whole "keep going" and "don't give up" mentality is admirable, but it's also admirable to know when your product-market fit isn't there, or when it's time to close up shop. A healthy dose of skepticism and reality is the needed yang to balance the yin of persistence and resilience.
  • zabramow 11y ago
    Agreed. But you don't need to investors to figure that out. You can get that from your users or customers.
  • jl 11y ago
    It's true, not all ideas are good and it's important to be flexible-minded about these things. But as I mentioned, the Airbnb founders knew from their own experiences using their product and from their user base (albeit small at the time) that Airbnb felt like a good idea. I've seen founders give up based on the equivalent of these 7 rejections from investors so I wanted to remind people to persevere. I'm sure glad the Airbnbs did.
  • etblg 11y ago
    The key may be in the fact that we call them 'unicorns'
    • InclinedPlane 11y ago
      Indeed. One thing I've realized over time is how common it is to suddenly realize something, perhaps years later than you should, that should always have been blindingly obvious. I like to call such experiences "duh-piphanies". What's interesting is that this happens all the time technology and invention. Take something like the "hesco bastion", it's just a giant, foldable, wire reinforced cloth sided bucket that you put dirt and rocks in using earth moving equipment. It's something that could have been built a hundred years ago. But it wasn't invented until the '90s, and since then they've seen widespread adoption in a huge variety of uses. Similar examples exist in every industry. The rise of Google is a true Unicorn tale. The story of hardcore CS nerds rebuilding a product that was already ubiquitous with a crowded market and re-inventing it down to the algorithmic level, defying every norm on the way there. But most innovative products have some element of blinding obviousness about them. Uber? Maybe we could use the worldwide communications network that every has a constantly connected terminal to in their pockets at all times to dispatch cabs instead of, you know, telephones or just having cabs circulate in high-demand areas. Dropbox? Network file storage that leverages the speed of the modern internet and modern storage technologies to remove the hassle of dealing with networked files. Square? What if people could just run an app on their portable computing devices which are already vastly more powerful and constantly internet connected instead of using crusty custom-built PoS hardware and systems? Stripe? Imagine if banking embraced the technology of the late '90s. And so on. 90+% of the "Unicorns" are just the sensible application of technology to already well-known problems, and just doing it well and monetizing properly. That shouldn't be so exceptional, but somehow it is. I think that's more an indictment of the silicon valley way of doing things than anything else. And the thing is, the rate of return to VCs when a Unicorn hits is so big that it covers the losses from all the bozos.
• hitlin37 11y ago
  this shows how so many out there got the travel wrong before airbnb figured it out.
• davidglauber 11y ago
  Well written! Thank you Jessica for sharing your thoughts. My personal note on rejections: When I decided to step up and found, I've made a decision to stop asking for permission from others and build something by myself. I remind myself of that on every rejection. No rejection will define what I'm going to be. Rejection only define how better I'm going to become next time, until no investor/partner/person will wanna miss-out.
• mangeletti 11y ago
  I think the most salient point is #5. This principle is similar to concepts in data science and medical statistics (esp patient reported outcomes). Take the answer as fact (you can worry about outliers later), and take the reasons and justifications with a grain of salt.
• robotnoises 11y ago
  > When investors aren't sure what to make of these ideas, they write them off as inconsequential. Don't be misled by this into thinking your idea actually is inconsequential. And perhaps that means it's time to change-up your pitch?
• pdq 11y ago
  Lots of these lessons are missing the bigger point. The original investor rejections had it right on the business model, except missed the determination of the founders. Sleeping on airbeds and having hosts serve breakfast is a niche market. Airbnb changed their name and pivoted into the vacation rental rental space, and now shared rooms and "bed and breakfast" are a tiny fraction of their listings, but this opened up a much bigger market. IMO, this is the big lesson.
  • onedev 11y ago
    I don't understand how so many people are missing this
    • justicezyx 11y ago
      That would be quite dull considering pivoting has always been one of the most important business practices of startups...
  • technotony 11y ago
    What always gets me with this story is Couchsurfing, which had proved people were willing to host strangers years before Airbnb launched. I'm not sure why so many investors missed this data point.
    • dougmccune 11y ago
      But CouchSurfing didn't prove there was a profitable business there. And Airbnb is basically proof of that. If Airbnb stuck with the "stay in a shared room with strangers" approach they also wouldn't have figured out how to make money. As other commenters have pointed out, they shifted to a wholesale vacation rental model (ie HomeAway and VRBO) and that changed everything. They got the benefit of sticking to the "sharing" narrative while making money from the pure vacation rental market.
      • bananaboy 11y ago
        CouchSurfing did prove that there was a market out there waiting to be tapped though. AirBnB were able to capitalise on it.
• davnicwil 11y ago
  > New ideas often seem crazy at first (e.g. renting out an airbed in your apartment to a stranger) N.B. I'm currently travelling and using Airbnb almost exclusively for accommodation, if that's somehow relevant. Airbnb seems to have become the cliche example of a 'crazy idea' that turns into a unicorn and, honestly, I struggle to see why people think the idea, per se, was crazy or groundbreaking. It's not a crazy idea. In fact it's a very natural, obvious idea, that has existed forever. People have rented, and sub-let, rooms for decades. The problem has always been high barrier to entry (on both sides) and therefore low liquidity in the market, such that short term 'holiday' type lets are too much of a hassle to be tenable, and only longer term lets have been feasible. The idea has always been there, what's not really been there until Airbnb, and what is their remarkable achievement, is the building of a singular, reputable, trustworthy, easily accessible marketplace for this, to get the liquidity to where it needs to be to be workable. It's the execution on this, not the idea itself, that's the remarkable thing. If it was such a crazy idea, it would have taken much, much longer (+10 years perhaps) to have truly caught on. The fact that they've had such rapid growth points to the fact that a lot of hosts and travellers were ready for it and just waiting for the opportunity to take part in the short term lets marketplace.
  • zdean 11y ago
    Agreed...I remember using VRBO before Airbnb was a thing. For historical reference, VRBO was purchased as an 11 year old company by Homeaway in 2006, 2 years before Airbnb was started.
    • jedrek 11y ago
      AirBNB-like services are older than the internet, AirBNB just made them sexy and much easier to use as a landlord.
      • pouzy 11y ago
        Take Cuba as an example and their casas particulares: https://en.wikipedia.org/wiki/Casa_particular https://en.wikipedia.org/wiki/Casa_particular They have their own Airbnb there, without internet.
• baby 11y ago
  What about if your idea will never succeed? You also need to understand when to stop and move on. With airbnb, there were rejections, but there were also two facts that makes me believe it was a different story: * They could already make it profitable by just starting to use their own service * There was an idea of making the world a better place by doing this. This might sound cheesy but I truly believe airbnb, couchsurfing, blablacar and others have really changed the world and how people travel/interact with each other, in a good way. I'm sure I'm not the only one who can see that.
  • dandanisaur 11y ago
    Agreed with all of this! Understanding when to stop/failing fast needs to be accepted. I was worried that these articles could be taken the same way as the guy who hacked a VCs voicemail because he was told he needed to 'hack stuff' and 'hustle'.
• paulpauper 11y ago
  Here we go again What's being ignored is that the odds of your company becoming the next Air BNB or even 1/100 as successful as Air BNB are pretty slim. I dunno what the stats on y combinator is, but I imagine the vast majority of start-ups are will never be sold for over $100 million But I wish I were there, no doubt. I like the idea and I would have pitched then $10k as throwaway money and be a millionaire 100 times over.
• more_original 11y ago
  "Don't worry about people stealing an idea. If it's original, you will have to ram it down their throats." -- Howard H. Aiken The real difficulty seems to be to distinguish between ideas that genuinely deserve rejection and ones that are only rejected because they're new and seem crazy at first.
• mdevere 11y ago
  Investors like to categorise ideas into macro tech trends and hypotheses. There's a good reason for this but it also means you can miss the biggest ideas (the space-defining ideas). I imagine a lot of investors looked at Airbnb and thought, "cute". Then someone coined the phrase, "sharing economy", in the wake of its growing success and a lot of other "cute" ideas raised money. From my experience, what investors often lack is an understanding of the vision. I remember someone describing Airbnb to me back in 2010. I said it would never catch on for XY&Z obvious reasons, including it sounded like a bad experience. That's because I wasn't pitched the vision correctly. I bet the Airbnb guys took a long time to figure out the right way to pitch it. Investors like to be objective/data-driven and therefore don't spend too long building an emotional relationship with the product. Again, there's a reason for that, but sometimes founders have products that don't look like anything that exists elsewhere, so it's super important to convey how it really works.
• deleted 11y ago
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• andrewstuart 11y ago
  There's encouragement here for entrepreneurs to persist in the face of rejection. It's hard to say the investors did anything wrong however. Anyone can pick a winner in hindsight. May as well make a list of winning lotto numbers and say "see the ones you didn't pick"?
• n72 11y ago
  Anyone know why airbnb became so much bigger than flipkey, vrbo, and homeaway? Was it just being lucky to be being based in SF and the associated network effect? I.e. people could have theoretically used the aforementioned companies to rent their room in SF or NYC, but they didn't.
  • ff_ 11y ago
    A catchier name.
  • hamburglar 11y ago
    I have no experience with flipkey or pre-homeaway VRBO, but I can tell you that the smooth rental experience of AirBnB makes it much, much more appealing to use than VRBO. My VRBO experiences always involved strange inconsistent booking procedures and calendar management, and the website was clunky and old tech with lots of state-destroying page navigations. And one thing AirBnB has really nailed is that it can be really important to have great communication between the two parties in the transaction, not only through the mechanics of booking, but through your entire stay. There's a ton of redundancy in communication channels (email/sms/web/phone) for a transaction, and the result is that you never have to say "oh, I need to go run the app to send them a message" or log into a web page (oops I booked this on my desktop and I'm not logged in on mobile) or look up a phone number or anything like that. It's one big multi-transport conversation that is easy to use, so if you need to communicate, it just happens, rather than being something you have to work for.
• simonebrunozzi 11y ago
  The idea was not crazy. Before AirBnB came to be, a "free" version of it, called Couchsurfing, already existed. Hat tip to the AirBnB guys for finding a way to make money out of that idea.
• pbreit 11y ago
  The lesson it seems to me is that that is not the correct way to go about raising a small, $150k round. Founders should be able to round that up from friends and family.
  • andrewstuart 11y ago
    "Friends and family round" has to be one of the worst concepts I've ever heard. Great way to destroy your most precious and important relationships.
    • andrewchambers 11y ago
      I agree, money issues are one of those things that can destroy relationships. Never borrow money from friends, be extremely careful when borrowing money from parents.
    • pbreit 11y ago
      If that's your attitude, probably not cut out for founding.
      • rktjmp 11y ago
        "Probably don't have enough wealthy friends & family" you mean? Actually re-reading your comment I'm still not sure what you mean? If you're not willing to sacrifice relationships to start a company, then you're not cut out for founding? Isn't that a pretty unhealthy position to take in life?
        • pbreit 11y ago
          Resourceful people should be able to find people relatively close to them that could kick in $5-50k x 3-10. You don't need to have a wealthy family or circle of friends. The potential to sacrifice relationships is the complete wrong way to look at it. Investing is not only opportunistic, it can help someone realize a dream. Correct, if these are your first thoughts, you are going to struggle mightily as a founder.