12 ms·

Airbnb, My $1B Lesson

504 points by rvcamo 11y ago

sokoloff 11y ago
Does it strike anyone else as unseemly to share the pitch deck? I get that it's 7 years ago, but still seems like something a little out of bounds to me.
- bbcbasic 11y ago
  I upvoted you because it is useful to get answers to this, and thought the downvotes are a bit harsh.
- swampthinker 11y ago
  The deck has available online for a few years now. You can find it with a quick Google search.
- ghshephard 11y ago
  Pitch decks have a pretty short life time, after 3-4 years of active business development, they don't have that much relevance, and after 7 years they are historical curios more than anything else. And, as others have noted, this particular pitch deck is in the public view already.
- presty 11y ago
  http://www.businessinsider.com/airbnb-a-13-billion-dollar-startups-first-ever-pitch-deck-2011-9?op=1 http://www.businessinsider.com/airbnb-a-13-billion-dollar-st... edit: actually arenavc posted the deck https://arenavc.com/wp-content/uploads/2015/07/airbnb-original-deck-2008.pdf https://arenavc.com/wp-content/uploads/2015/07/airbnb-origin... and much more https://arenavc.com/wp-content/uploads/2015/07/AirbnbEventScheduleFinal.doc.pdf https://arenavc.com/wp-content/uploads/2015/07/AirbnbEventSc... https://arenavc.com/wp-content/uploads/2015/07/Airbnb-Events-and-Growth-Projections.jpg https://arenavc.com/wp-content/uploads/2015/07/Airbnb-Events...
taylorhou 11y ago
This happens the other way around as well for founders. Cheers to Paige for the insight and thoughtful conversations we've had. He's most likely got a nice investment in a few future unicorns.
Leszek 11y ago
It's very interesting hearing a story from the VC's side. One always reads about the trials and tribulations of startups trying to raise capital, but I've never considered that there might be similar issues and competition on the investors' side.
- hkmurakami 11y ago
  Sequoia arguably strongarming its way to owning 100% of the Whatsapp series A instead of allowing other funds to join would be a prime example of this is recent history.
  - wooderson 11y ago
    How on Earth did they strongarm anybody? Whatsapp didn't want to meet with any investors. Sequoia put in a lot of effort to be allowed to invest at all.
pjy04 11y ago
What bugs me is that the founders went back on the deal that was agreed upon in person.
- deleted 11y ago
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  - swimfar 11y ago
    Are those startups still around? Could you list some examples? (Note: I'm not being facetious. I'm genuinely curious)
- andrewstuart 11y ago
  A deal ain't a deal till its signed off. I make deals and negotiate all the time and I've negotiated thousands of times. It's a very good sign when you have a verbal agreement but you're a fool if you think that's a finished deal. It's the quick and the dead - if people are serious about a deal then they need to move quickly, wrap it up and sign it. If you are selling something (yourself, your company, shares in your company), you should ALWAYS continue negotiations and keep talking to interested parties until one of them signs. The tardy buyers/investors/employers who think they can stretch it out and take their time miss out, that's all - and it's important to understand that the mistake is theirs for not signing, it is not the seller being unethical. And if you are the sort of person who says "I made a verbal deal and my word is my bond.", then you might get played by people who will take advantage of that and not sign, perhaps hoping for more information, more favorable conditions, a better deal to come along. They won't hesitate to drop the verbal deal if it suits them. Every negotiation has a number of properties and variables. One of the absolutely key properties is the time profile. If you do any negotiating then you need to understand how to play the time profile. You can say to buyers "I'm offering something good here but only for X period of time." Or "I'm happy to agree to these terms but only for two weeks and everything is back on the table after that." Or "Great that we have a verbal deal, you need to understand I'll be talking to others until I have a signature so if you are interested then you'd better move quick." Or "If you pay the agreed amount on time then I'll give you a guarantee on our services, pay it late, no guarantee", or "OK happy to go with this investment deal, but I want the cash to hit the account by the 8th August and the deal is off if it's late." Time profile is one of the most interesting and valuable aspects of any negotiation and can completely change the true value of the deal. If you like it then you'd better put a ring on it.
mangeletti 11y ago
The most interesting takeaway for me is the spreadsheet of stats. I find it highly motivating to see how meager their start was. You hear all the time from startups, "We weren't an overnight success. We worked hard for years...", but seeing stats like these in hindsight really sends that message.
beambot 11y ago
If it's bad form for a VC to break a handshake deal, it's equally-bad for a startup too... no? Doesn't that reflect poorly upon the founders? It's so important that YC went through the effort to codify the process: http://www.ycombinator.com/handshake/ http://www.ycombinator.com/handshake/
- jacques_chester 11y ago
  The codified "handshake" process, you'll notice, has a written step and includes a core element of contract formation: offer & acceptance. https://en.wikipedia.org/wiki/Offer_and_acceptance https://en.wikipedia.org/wiki/Offer_and_acceptance IANAL, TINLA.
  - beambot 11y ago
    FTA: "At the end of September, we agreed on terms and I flew up to San Francisco to do a closing dinner at a little café next to Brainwash. We had some good food and wine and I thought things were solid. We shook hands and planned to formally close the investment the next day." I'm gonna go out on a limb and assume that the investor already possessed emails saying "Let's do this" with numbers in it. Is that different than a signed term sheet? You bet -- it's not legally binding! But it also meets all the requirements of the gentleman's agreement -- aka YC Handshake protocol: 1. The investor says “I’m in for [offer].” 2. The startup says “Ok, you’re in for [offer].” 3. The startup sends the investor an email or text message saying “This is to confirm you’re in for [offer].” 4. The investor replies yes.
    - jacques_chester 11y ago
      I'm starting to get out of range of my recollection of law at this point. On the tangent of the protocol as the protocol, I also note that it is meant to be exclusive. That is, you don't construct it by piecing together the individual events -- it's written as a once off 2-phase transaction with no other intervening steps to prevent shenanigans and mistakes.
    - jsprogrammer 11y ago
martin_ 11y ago
If there's one thing I've learned since working at startups and rounds of funding it's definitely: The deal isn't done until the money is in the bank
loahou04 11y ago
Its an interesting read to hear about other investors who have missed out on deals. I actually tried investing into a startup this year and completely failed due to governmental regulations. Even though i worked my ass off saving for 2 years to have discretionary income in order to invest as i wanted to I did not meet the requirements of being an "accredited investor" and so i missed out on the funding round. I spent at least a month getting everything ready and going back and forth with the founders meeting with them emailing them back and forth to find out from a newsletter that they had closed without me. I guess until the SEC opens it up i'm shit out of luck and am better off going to a roulette table at a casino...
- quadrature 11y ago
  Why would you want to invest in a startup ?, VCs can pull it off because they are playing with a lot of money and can eat the (completely inevitable) losses. It sounds like you only have enough to invest into one startup, thats an incredible amount of risk to take.
  - jkarneges 11y ago
    People also start companies, which is even riskier. Angeling into one startup may be better than never trying anything at all.
    - quadrature 11y ago
      Yes but picking between investment opportunities is a bit different than starting a company. If you have enough money to buy a significant chunk in an angel round then you also have enough money to open yourself up to other less risky investment opportunities.
      - jkarneges 11y ago
        Some people like living on the edge. Angels are a certain kind of crazy. Also high risk -> high reward, right? 10x in 7 years can be game changing.
therealarmen 11y ago
Deck: $2.1B in revenue by 2011 Reality: $500M in revenue in 2014 Moral: Even the most successful startups don't hit their seed-stage revenue projections :)
napoleond 11y ago
Let me get this straight: in June 2008, Airbnb got intro'd to a bunch of investors, who all said no [1]. In September of 2008, Airbnb had a $250k round on the table that valued them at 2.5M[2]. And then, also in September 2008 (before YC usually does interviews) they rejected that offer for YC, who ended up giving them $20k[3], with a valuation presumably around $250k?? (Although Brian Chesky says that didn't happen until November, it sounds like they got some kind of verbal confirmation earlier?) The timeline is weird. 1. https://medium.com/@bchesky/7-rejections-7d894cbaa084 https://medium.com/@bchesky/7-rejections-7d894cbaa084 2. https://arenavc.com/2015/07/airbnb-my-1-billion-lesson/ https://arenavc.com/2015/07/airbnb-my-1-billion-lesson/ 3. http://www.quora.com/How-much-money-did-Airbnb-raise-What-is-the-companys-financing-history http://www.quora.com/How-much-money-did-Airbnb-raise-What-is...
- deleted 11y ago
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  - princeb 11y ago
    > Investors, if you want a deal, cut a check: it's not complicated. Founders don't have time for your games - you're the one with the cash, they're the ones with burning ships actually doing something. this makes it sound like investors simply crawl out of bed one day and say something uncomplicated like "mm I feel like giving money away to some startup for breakfast"
    - deleted 11y ago
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  - paigecraig0231 11y ago
    See my reply to beambot below. TLDR : my fault not Airbnb As to posting details of the deal I've held off on this for years as I never wanted to hurt them and I don't see any way these early numbers are going to impact Airbnb. The specific point was to (1) demonstrate that the metrics many investors look for at this stage are meaningless and reinforce that founders working in the right Cardinal direction is what's important (at least to me). The other details (events, feature list, budget) are documents we were brainstorming on and I wanted to see (1) how they think and (2) how fast they think. The point about the bugs, intros, etc isn't to demonstrate that I added meaningful value. Instead these docs demonstrate tte quality of the founders and their focus and planning. As for "bossing" people around you're missing the context of this interaction. If you and I are sitting down figuring out your budget, user acquisition and product am I bossing you around when I ask to see results? I'll admit I'm demanding but i certainly don't believe in bossing founders around. If I have to boss you around then I'm walking away from the deal - I like to back founders who's own internal demands and expectations are higher than my own. Either way appreciate all the thoughts here. I've waited seven years to start discussing startups / funding etc and you'll find that this and future posts will often focus on founder qualities.
ARolek 11y ago
Time kills all deals.
late2part 11y ago
Hey Paige - If I negotiate a potential financing with Arena, and it doesn't work out, will you take all of my emails and publish them as well?
- paigecraig0231 11y ago
  If your emails had anything hurtful, embarrassing, proprietary or damaging to yourself or your company I wouldn't publish them. In this case these emails and documents make ME look like a novice investor and speak highly of the Airbnb founders. I have no problem exposing my own failures and mistakes but I'd never expose yours unless you were cool with it. This event was a very important lesson for me and made me a better investor. Most people commenting here are thinking short-term; but the consequence of this Airbnb deal was critical to my development. I learned to move fast and invested a great deal of time and energy into becoming a better investor.
  - sown 11y ago
    I think it's actually makes you look secure in your self, maybe even a bit gutsy. I'm not sure what the right word would be here, but it I like it. Someday, I hope to join the ranks of VCs but I figure I need to figure things out first.
  - giarc 11y ago
    Did you ask Brian et al for permission to post emails? Is that something that is required or just a courtesy (regardless if they are harmful etc)
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AndrewKemendo 11y ago
Jesus. I didn't know any VC/Angels worked that hard to get into a deal. Hell, in my experience it's like they actively try NOT to fund companies.
free2rhyme214 11y ago
I'm not sure what the big fuss is over this. Here's the story in one sentence: an angel recognized Airbnb's potential but never got the deal in writing so they used it as leverage for a better offer. Paige invested in Lyft, Twitter and Postmates. He's doing fine and learned from this.
arasmussen 11y ago
Thanks so much for writing this, I love learning about cases where seemingly concrete rules can be bent. Take a look at Uber who is constantly being told that what they're doing is illegal and their response is essentially "but it's better so the laws need to be fixed". I think that's the same attitude you want when doing everything you can to get back in the deal. Always be optimistic and don't give up to soon.
pitchups 11y ago
It is interesting and a bit ironic that AirBnb accepted funding from YC - who did not believe in their idea [1], and rejected the only investor that not only believed in their crazy idea, but actively sought them out and tried to woo them. Did they go with YC because of its brand, name recognition, or because it offered them better terms? Of course, it is all counterfactual, but could Airbnb have been as successful had they not joined YC? Recall that PG told them to do things that do not scale - by taking professional photos of rentals in NY - which may have been critical to their early success. And although PG was initially skeptical of their idea, he quickly changed his thinking about how big Airbnb could become. Revealed in another interesting trail of emails exchanged between PG and Fred Wilson (who also passed on Airbnb). [2] [1] "In fact, when we funded Airbnb, we thought it was too crazy. We couldn't believe large numbers of people would want to stay in other people's places" http://www.paulgraham.com/founders.html http://www.paulgraham.com/founders.html [2] http://www.paulgraham.com/airbnb.html http://www.paulgraham.com/airbnb.html http://avc.com/2011/03/airbnb/ http://avc.com/2011/03/airbnb/ Edit: spelling
- forgetsusername 11y ago
  >"but could Airbnb have been as successful had they not joined YC?" These guys had a good idea, some luck, and were able to execute. I doubt that the "brand" of their money or broad aphorisms from VCs had much to do with any of it. For all intents and purposes, money is money. There's an element of "tech celebrity" in the Valley, and big-name VCs are part of that. In reality, successful businesses around the country are built, every day, by hard-working entrepreneurs who bootstrap it (because their business is making money) or get funding my more traditional means. I don't think VCs have any "secret sauce" for success.
  - eonw 11y ago
    frbo.com had been up and operating for many years before airbnb came around. "good idea" in this case wasn't original, so that would leave luck or connections. maybe it wasnt the YC money that helped as much as YC's connections. in the end we will never really know, but it wasnt the "good idea" part that made them successful.
jondubois 11y ago
If YC hadn't invested, nobody would have ever heard of AirBnb. This is a case where the investor added a great deal of value to the business. YC is at the center of a large network of investors, startups and bloggers and somehow its investment decisions ultimately influence the habits of technology consumers in general. I think it was a lose-lose situation for the author.
- jsprogrammer 11y ago
  Is every successful company from YC? Is every YC company successful? You must answer yes to both to believe: >If YC hadn't invested, nobody would have ever heard of AirBnb.
  - jondubois 11y ago
    I'm exaggerating of course. But I'm sure it did make a massive difference.
ashleyblackmore 11y ago
"Over the last seven years, I’ve discovered and invested very early in a handful of highly valuable companies (Wish, Lyft, Zenpayroll, Postmates, AngelList, Plated, Styleseat, Klout, etc.) as well as plenty of disasters." Any middle ground between "highly valuable" and "disaster"?
- infinite8s 11y ago
  I think in most VCs minds, there is no middle ground (ie everything not highly valuable is effectively written off as a disaster).
codeshaman 11y ago
> After 6 weeks of work, I didn’t get to invest. That's supposed to be considered a bummer :). Hey, at least you still have your money ! In fact, who knows, maybe with your investment, Airbnb wouldn't have turned out that great after all. Maybe you would have lost your money, which would have reduced your reputation and you would have ruminated over it, got depressed, separated, started using drugs and drinking, get arrested for a drunk mishap, resisting arrest and attacking an officer with a tennis ball, then jail time... the wheel of misfortune once set in motion is hard to stop :).
arcosdev 11y ago
I think I just puked in my mouth a little reading this.
- jacquesm 11y ago
  Would it inconvenience you very much to not use such language on HN?
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philliphaydon 11y ago
Interesting to know you look for startups to invest in. I've always wounded how start ups find investors and approach them. I'm working on a personal project that I would love to do full time but with no savings and living in Singapore so have to have a job to stay here. Also scared to look for investors because I don't want them to try change my ideas since I believe in what I'm building.
andreasklinger 11y ago
Why are those metrics considered to be bad? I am obviously judging with hindsight and without daily deal noise here but if i look at them: * Within the first weeks first revenue * Within 4 months numbers that by themselves each look promising (40-60% response rate although crap product, good revenue per night, good nights booked, etc) Personally i dont expect any of those metrics nowadays to be further away than 1.5-2x better The "only" big q's left is: * is the market big enough it's worth scaling the quantity * is that team capable of doing it I feel like i am missing something here (obviously i judge from hindsight) but what about this numbers is "bad metrics"?
jmtame 11y ago
I think the fundamental lesson here is speed. What took Paige 3 weeks or more to accomplish took YC 10 minutes, and then they said yes and signed the paperwork. Remember, this was unheard of before YC came along (granted, there's more money involved in Paige's side of things, but even that doesn't matter). Founders recognize this and respect it, and it's going to be what distinguishes the good future dealmakers from the bad ones. Thanks for sharing this Paige. Excellent write up and valuable lessons learned.
damonpace 11y ago
If I remember correctly, Airbnb struggled to raise after YC as well. Sequoia came in and gave them $600k quietly after Greg McAdoo synthesized and reframed the Airbnb vision (See Nathan's Startup school speech from 2013). Why didn't Paige participate in funding after demo day?
jongraehl 11y ago
Some grist for Silicon Valley (Mike Judge's show): > On a tactical level, I repeat this creative destruction almost weekly as I analyze an individual deal; on an operational level I do it every few months (re-evaluating my deal flow, co-investor network, deal structures, etc.); at a strategic level I sit down almost every year and question my overall philosophy on founders, theses, markets, etc. [shorter: I don't only regret my mistakes but also try to learn from them.] Otherwise a well-told story. Thanks.

504 points by rvcamo 11y ago

Does it strike anyone else as unseemly to share the pitch deck? I get that it's 7 years ago, but still seems like something a little out of bounds to me.

bbcbasic 11y ago
I upvoted you because it is useful to get answers to this, and thought the downvotes are a bit harsh.
swampthinker 11y ago
The deck has available online for a few years now. You can find it with a quick Google search.
ghshephard 11y ago
Pitch decks have a pretty short life time, after 3-4 years of active business development, they don't have that much relevance, and after 7 years they are historical curios more than anything else. And, as others have noted, this particular pitch deck is in the public view already.
presty 11y ago
http://www.businessinsider.com/airbnb-a-13-billion-dollar-startups-first-ever-pitch-deck-2011-9?op=1 http://www.businessinsider.com/airbnb-a-13-billion-dollar-st... edit: actually arenavc posted the deck https://arenavc.com/wp-content/uploads/2015/07/airbnb-original-deck-2008.pdf https://arenavc.com/wp-content/uploads/2015/07/airbnb-origin... and much more https://arenavc.com/wp-content/uploads/2015/07/AirbnbEventScheduleFinal.doc.pdf https://arenavc.com/wp-content/uploads/2015/07/AirbnbEventSc... https://arenavc.com/wp-content/uploads/2015/07/Airbnb-Events-and-Growth-Projections.jpg https://arenavc.com/wp-content/uploads/2015/07/Airbnb-Events...

taylorhou 11y ago

This happens the other way around as well for founders. Cheers to Paige for the insight and thoughtful conversations we've had. He's most likely got a nice investment in a few future unicorns.

Leszek 11y ago

It's very interesting hearing a story from the VC's side. One always reads about the trials and tribulations of startups trying to raise capital, but I've never considered that there might be similar issues and competition on the investors' side.

hkmurakami 11y ago
Sequoia arguably strongarming its way to owning 100% of the Whatsapp series A instead of allowing other funds to join would be a prime example of this is recent history.
- wooderson 11y ago
  How on Earth did they strongarm anybody? Whatsapp didn't want to meet with any investors. Sequoia put in a lot of effort to be allowed to invest at all.

pjy04 11y ago

What bugs me is that the founders went back on the deal that was agreed upon in person.

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- swimfar 11y ago
  Are those startups still around? Could you list some examples? (Note: I'm not being facetious. I'm genuinely curious)
andrewstuart 11y ago
A deal ain't a deal till its signed off. I make deals and negotiate all the time and I've negotiated thousands of times. It's a very good sign when you have a verbal agreement but you're a fool if you think that's a finished deal. It's the quick and the dead - if people are serious about a deal then they need to move quickly, wrap it up and sign it. If you are selling something (yourself, your company, shares in your company), you should ALWAYS continue negotiations and keep talking to interested parties until one of them signs. The tardy buyers/investors/employers who think they can stretch it out and take their time miss out, that's all - and it's important to understand that the mistake is theirs for not signing, it is not the seller being unethical. And if you are the sort of person who says "I made a verbal deal and my word is my bond.", then you might get played by people who will take advantage of that and not sign, perhaps hoping for more information, more favorable conditions, a better deal to come along. They won't hesitate to drop the verbal deal if it suits them. Every negotiation has a number of properties and variables. One of the absolutely key properties is the time profile. If you do any negotiating then you need to understand how to play the time profile. You can say to buyers "I'm offering something good here but only for X period of time." Or "I'm happy to agree to these terms but only for two weeks and everything is back on the table after that." Or "Great that we have a verbal deal, you need to understand I'll be talking to others until I have a signature so if you are interested then you'd better move quick." Or "If you pay the agreed amount on time then I'll give you a guarantee on our services, pay it late, no guarantee", or "OK happy to go with this investment deal, but I want the cash to hit the account by the 8th August and the deal is off if it's late." Time profile is one of the most interesting and valuable aspects of any negotiation and can completely change the true value of the deal. If you like it then you'd better put a ring on it.

mangeletti 11y ago

The most interesting takeaway for me is the spreadsheet of stats. I find it highly motivating to see how meager their start was. You hear all the time from startups, "We weren't an overnight success. We worked hard for years...", but seeing stats like these in hindsight really sends that message.

beambot 11y ago

If it's bad form for a VC to break a handshake deal, it's equally-bad for a startup too... no? Doesn't that reflect poorly upon the founders? It's so important that YC went through the effort to codify the process: http://www.ycombinator.com/handshake/ http://www.ycombinator.com/handshake/

jacques_chester 11y ago
The codified "handshake" process, you'll notice, has a written step and includes a core element of contract formation: offer & acceptance. https://en.wikipedia.org/wiki/Offer_and_acceptance https://en.wikipedia.org/wiki/Offer_and_acceptance IANAL, TINLA.
- beambot 11y ago
  FTA: "At the end of September, we agreed on terms and I flew up to San Francisco to do a closing dinner at a little café next to Brainwash. We had some good food and wine and I thought things were solid. We shook hands and planned to formally close the investment the next day." I'm gonna go out on a limb and assume that the investor already possessed emails saying "Let's do this" with numbers in it. Is that different than a signed term sheet? You bet -- it's not legally binding! But it also meets all the requirements of the gentleman's agreement -- aka YC Handshake protocol: 1. The investor says “I’m in for [offer].” 2. The startup says “Ok, you’re in for [offer].” 3. The startup sends the investor an email or text message saying “This is to confirm you’re in for [offer].” 4. The investor replies yes.
  - jacques_chester 11y ago
    I'm starting to get out of range of my recollection of law at this point. On the tangent of the protocol as the protocol, I also note that it is meant to be exclusive. That is, you don't construct it by piecing together the individual events -- it's written as a once off 2-phase transaction with no other intervening steps to prevent shenanigans and mistakes.
  - jsprogrammer 11y ago

martin_ 11y ago

If there's one thing I've learned since working at startups and rounds of funding it's definitely: The deal isn't done until the money is in the bank

loahou04 11y ago

Its an interesting read to hear about other investors who have missed out on deals. I actually tried investing into a startup this year and completely failed due to governmental regulations. Even though i worked my ass off saving for 2 years to have discretionary income in order to invest as i wanted to I did not meet the requirements of being an "accredited investor" and so i missed out on the funding round. I spent at least a month getting everything ready and going back and forth with the founders meeting with them emailing them back and forth to find out from a newsletter that they had closed without me. I guess until the SEC opens it up i'm shit out of luck and am better off going to a roulette table at a casino...

quadrature 11y ago
Why would you want to invest in a startup ?, VCs can pull it off because they are playing with a lot of money and can eat the (completely inevitable) losses. It sounds like you only have enough to invest into one startup, thats an incredible amount of risk to take.
- jkarneges 11y ago
  People also start companies, which is even riskier. Angeling into one startup may be better than never trying anything at all.
  - quadrature 11y ago
    Yes but picking between investment opportunities is a bit different than starting a company. If you have enough money to buy a significant chunk in an angel round then you also have enough money to open yourself up to other less risky investment opportunities.
    - jkarneges 11y ago
      Some people like living on the edge. Angels are a certain kind of crazy. Also high risk -> high reward, right? 10x in 7 years can be game changing.

therealarmen 11y ago

Deck: $2.1B in revenue by 2011 Reality: $500M in revenue in 2014 Moral: Even the most successful startups don't hit their seed-stage revenue projections :)

napoleond 11y ago

Let me get this straight: in June 2008, Airbnb got intro'd to a bunch of investors, who all said no [1]. In September of 2008, Airbnb had a $250k round on the table that valued them at 2.5M[2]. And then, also in September 2008 (before YC usually does interviews) they rejected that offer for YC, who ended up giving them $20k[3], with a valuation presumably around $250k?? (Although Brian Chesky says that didn't happen until November, it sounds like they got some kind of verbal confirmation earlier?) The timeline is weird. 1. https://medium.com/@bchesky/7-rejections-7d894cbaa084 https://medium.com/@bchesky/7-rejections-7d894cbaa084 2. https://arenavc.com/2015/07/airbnb-my-1-billion-lesson/ https://arenavc.com/2015/07/airbnb-my-1-billion-lesson/ 3. http://www.quora.com/How-much-money-did-Airbnb-raise-What-is-the-companys-financing-history http://www.quora.com/How-much-money-did-Airbnb-raise-What-is...

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- princeb 11y ago
  > Investors, if you want a deal, cut a check: it's not complicated. Founders don't have time for your games - you're the one with the cash, they're the ones with burning ships actually doing something. this makes it sound like investors simply crawl out of bed one day and say something uncomplicated like "mm I feel like giving money away to some startup for breakfast"
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- paigecraig0231 11y ago
  See my reply to beambot below. TLDR : my fault not Airbnb As to posting details of the deal I've held off on this for years as I never wanted to hurt them and I don't see any way these early numbers are going to impact Airbnb. The specific point was to (1) demonstrate that the metrics many investors look for at this stage are meaningless and reinforce that founders working in the right Cardinal direction is what's important (at least to me). The other details (events, feature list, budget) are documents we were brainstorming on and I wanted to see (1) how they think and (2) how fast they think. The point about the bugs, intros, etc isn't to demonstrate that I added meaningful value. Instead these docs demonstrate tte quality of the founders and their focus and planning. As for "bossing" people around you're missing the context of this interaction. If you and I are sitting down figuring out your budget, user acquisition and product am I bossing you around when I ask to see results? I'll admit I'm demanding but i certainly don't believe in bossing founders around. If I have to boss you around then I'm walking away from the deal - I like to back founders who's own internal demands and expectations are higher than my own. Either way appreciate all the thoughts here. I've waited seven years to start discussing startups / funding etc and you'll find that this and future posts will often focus on founder qualities.

ARolek 11y ago

Time kills all deals.

late2part 11y ago

Hey Paige - If I negotiate a potential financing with Arena, and it doesn't work out, will you take all of my emails and publish them as well?

paigecraig0231 11y ago
If your emails had anything hurtful, embarrassing, proprietary or damaging to yourself or your company I wouldn't publish them. In this case these emails and documents make ME look like a novice investor and speak highly of the Airbnb founders. I have no problem exposing my own failures and mistakes but I'd never expose yours unless you were cool with it. This event was a very important lesson for me and made me a better investor. Most people commenting here are thinking short-term; but the consequence of this Airbnb deal was critical to my development. I learned to move fast and invested a great deal of time and energy into becoming a better investor.
- sown 11y ago
  I think it's actually makes you look secure in your self, maybe even a bit gutsy. I'm not sure what the right word would be here, but it I like it. Someday, I hope to join the ranks of VCs but I figure I need to figure things out first.
- giarc 11y ago
  Did you ask Brian et al for permission to post emails? Is that something that is required or just a courtesy (regardless if they are harmful etc)

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AndrewKemendo 11y ago

Jesus. I didn't know any VC/Angels worked that hard to get into a deal. Hell, in my experience it's like they actively try NOT to fund companies.

free2rhyme214 11y ago

I'm not sure what the big fuss is over this. Here's the story in one sentence: an angel recognized Airbnb's potential but never got the deal in writing so they used it as leverage for a better offer. Paige invested in Lyft, Twitter and Postmates. He's doing fine and learned from this.

arasmussen 11y ago

Thanks so much for writing this, I love learning about cases where seemingly concrete rules can be bent. Take a look at Uber who is constantly being told that what they're doing is illegal and their response is essentially "but it's better so the laws need to be fixed". I think that's the same attitude you want when doing everything you can to get back in the deal. Always be optimistic and don't give up to soon.

pitchups 11y ago

It is interesting and a bit ironic that AirBnb accepted funding from YC - who did not believe in their idea [1], and rejected the only investor that not only believed in their crazy idea, but actively sought them out and tried to woo them. Did they go with YC because of its brand, name recognition, or because it offered them better terms? Of course, it is all counterfactual, but could Airbnb have been as successful had they not joined YC? Recall that PG told them to do things that do not scale - by taking professional photos of rentals in NY - which may have been critical to their early success. And although PG was initially skeptical of their idea, he quickly changed his thinking about how big Airbnb could become. Revealed in another interesting trail of emails exchanged between PG and Fred Wilson (who also passed on Airbnb). [2] [1] "In fact, when we funded Airbnb, we thought it was too crazy. We couldn't believe large numbers of people would want to stay in other people's places" http://www.paulgraham.com/founders.html http://www.paulgraham.com/founders.html [2] http://www.paulgraham.com/airbnb.html http://www.paulgraham.com/airbnb.html http://avc.com/2011/03/airbnb/ http://avc.com/2011/03/airbnb/ Edit: spelling

forgetsusername 11y ago
>"but could Airbnb have been as successful had they not joined YC?" These guys had a good idea, some luck, and were able to execute. I doubt that the "brand" of their money or broad aphorisms from VCs had much to do with any of it. For all intents and purposes, money is money. There's an element of "tech celebrity" in the Valley, and big-name VCs are part of that. In reality, successful businesses around the country are built, every day, by hard-working entrepreneurs who bootstrap it (because their business is making money) or get funding my more traditional means. I don't think VCs have any "secret sauce" for success.
- eonw 11y ago
  frbo.com had been up and operating for many years before airbnb came around. "good idea" in this case wasn't original, so that would leave luck or connections. maybe it wasnt the YC money that helped as much as YC's connections. in the end we will never really know, but it wasnt the "good idea" part that made them successful.

jondubois 11y ago

If YC hadn't invested, nobody would have ever heard of AirBnb. This is a case where the investor added a great deal of value to the business. YC is at the center of a large network of investors, startups and bloggers and somehow its investment decisions ultimately influence the habits of technology consumers in general. I think it was a lose-lose situation for the author.

jsprogrammer 11y ago
Is every successful company from YC? Is every YC company successful? You must answer yes to both to believe: >If YC hadn't invested, nobody would have ever heard of AirBnb.
- jondubois 11y ago
  I'm exaggerating of course. But I'm sure it did make a massive difference.

ashleyblackmore 11y ago

"Over the last seven years, I’ve discovered and invested very early in a handful of highly valuable companies (Wish, Lyft, Zenpayroll, Postmates, AngelList, Plated, Styleseat, Klout, etc.) as well as plenty of disasters." Any middle ground between "highly valuable" and "disaster"?

infinite8s 11y ago
I think in most VCs minds, there is no middle ground (ie everything not highly valuable is effectively written off as a disaster).

codeshaman 11y ago

> After 6 weeks of work, I didn’t get to invest. That's supposed to be considered a bummer :). Hey, at least you still have your money ! In fact, who knows, maybe with your investment, Airbnb wouldn't have turned out that great after all. Maybe you would have lost your money, which would have reduced your reputation and you would have ruminated over it, got depressed, separated, started using drugs and drinking, get arrested for a drunk mishap, resisting arrest and attacking an officer with a tennis ball, then jail time... the wheel of misfortune once set in motion is hard to stop :).

arcosdev 11y ago

I think I just puked in my mouth a little reading this.

jacquesm 11y ago
Would it inconvenience you very much to not use such language on HN?

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philliphaydon 11y ago

Interesting to know you look for startups to invest in. I've always wounded how start ups find investors and approach them. I'm working on a personal project that I would love to do full time but with no savings and living in Singapore so have to have a job to stay here. Also scared to look for investors because I don't want them to try change my ideas since I believe in what I'm building.

andreasklinger 11y ago

Why are those metrics considered to be bad? I am obviously judging with hindsight and without daily deal noise here but if i look at them: * Within the first weeks first revenue * Within 4 months numbers that by themselves each look promising (40-60% response rate although crap product, good revenue per night, good nights booked, etc) Personally i dont expect any of those metrics nowadays to be further away than 1.5-2x better The "only" big q's left is: * is the market big enough it's worth scaling the quantity * is that team capable of doing it I feel like i am missing something here (obviously i judge from hindsight) but what about this numbers is "bad metrics"?

jmtame 11y ago

I think the fundamental lesson here is speed. What took Paige 3 weeks or more to accomplish took YC 10 minutes, and then they said yes and signed the paperwork. Remember, this was unheard of before YC came along (granted, there's more money involved in Paige's side of things, but even that doesn't matter). Founders recognize this and respect it, and it's going to be what distinguishes the good future dealmakers from the bad ones. Thanks for sharing this Paige. Excellent write up and valuable lessons learned.

damonpace 11y ago

If I remember correctly, Airbnb struggled to raise after YC as well. Sequoia came in and gave them $600k quietly after Greg McAdoo synthesized and reframed the Airbnb vision (See Nathan's Startup school speech from 2013). Why didn't Paige participate in funding after demo day?

jongraehl 11y ago

Some grist for Silicon Valley (Mike Judge's show): > On a tactical level, I repeat this creative destruction almost weekly as I analyze an individual deal; on an operational level I do it every few months (re-evaluating my deal flow, co-investor network, deal structures, etc.); at a strategic level I sit down almost every year and question my overall philosophy on founders, theses, markets, etc. [shorter: I don't only regret my mistakes but also try to learn from them.] Otherwise a well-told story. Thanks.