Nairobi recently hosted some of the world’s most accomplished entrepreneurs. American Brian Chesky, founder and CEO of Airbnb – a peer-to-peer apartment rental service that is an alternative to hotels – is one of those who jetted into Nairobi for the Global Entrepreneurship Summit (GES).
Chesky and co-founder Joe Gebbia, who is now chief product officer of Airbnb, started the business in 2008 to raise extra income for rent. Today the service has been used by over 40 million people in more than 34,000 cities across 192 countries. Airbnb is valued at US$25.5bn, while 33 year old Chesky is believed to have a personal net worth of $1.89bn. While in Nairobi, for his maiden trip to Africa, Chesky interacted with dozens of entrepreneurs and described the experience as “memorable”.
Simple ideas, big business
Speaking to a group of entrepreneurs at Nairobi’s iHub innovation space, Chesky shared his personal journey in entrepreneurship. He noted that “great companies are started by people just solving their own problems”.
Growing up, Chesky never contemplated becoming an entrepreneur. When he enrolled at the Rhode Island School of Design, his mother made him promise to get a job with health insurance after graduating, which he did. But he hardly enjoyed the work, so he quit. With just $1,000 in the bank, Chesky packed his things and drove to San Francisco in October 2007.
“I get to San Francisco and Joe (his co-founder) tells me rent is $1,150. I thought what am I going to do? I probably should have asked [the cost of renting] before I moved up to San Francisco.”
But that weekend an international design conference was being held and most hotels were fully booked.
“We said: ‘What if we turned our house into a bed and breakfast for the design conference?’ Unfortunately I didn’t have any beds. But Joe had just gone camping and had three air mattresses. We inflated them and we called it the AirBed and Breakfast,” said Chesky.
The small things in an entrepreneur’s life that they would like to see change, Chesky said, can become big business, even if initially it doesn’t seem like a “huge world problem”.
Although Airbnb is a success today, eight years ago many people didn’t think it would ever take off. Even Chesky’s mentor thought it a poor idea and suggested he should look at other options.
“I remember telling my mom about Airbnb and [she] said…‘let me send you money. That is crazy, you cannot have strangers staying at your home’,” he recalled.
“If you start a company you have to be willing to be ridiculed and thought of as ridiculous. If you have an idea most people will think it’s crazy – and if they didn’t think it was crazy maybe they’d have done it themselves.”
Despite his mother’s misgivings, Chesky and Gebbia opened their home to three strangers and made over $1,000. They also built friendships with their guests and the idea of meeting new “ordinary people” and making extra money became attractive. So in early 2008 they got an engineer and embarked on building a website that would allow people to book someone’s home the same way they’d book a hotel room.
“I thought that we were going to build [the website] and like Facebook it would be really popular in two weeks. It would spread all over the country, go all over the world and it would become this huge success. But that is not what happened. We ended up launching three months later and I thought thousands of people would use us. Instead we got two customers and I was one of them. A lot of people look at Airbnb and see us as an overnight success, but it wasn’t at all like that.”
Towards the end of 2008, they decided to launch the business a third time because they were struggling to get users. Chesky and his co-founders spent their time talking to hundreds of people daily telling them to list their homes on Airbnb. They were told it was the “worst idea ever heard of”, and that the service would be used by “serial killers”. Today Airbnb has more than 1.5 million listings.
Hitting rock bottom
Airbnb recently raised an additional $1.5bn in funding, giving it a valuation of more than $25bn. But back in 2008, Chesky received many rejections from investors. He was trying to raise $150,000 in exchange for 10% of the company which would have given it a valuation of just $1.5m.
To survive, the duo relied on credit card debts and in just a year amassed between $60,000 and $70,000 in debt. This was a frustrating time, and with every rejection by people who were smart, experienced and had a good reputation, Chesky began to believe them.
“I would go to bed at night, my heart pounding [unable to] sleep. I would get up [wondering] how I got myself in this position?… This was probably rock bottom.”
“We weren’t sure if we were going to continue working on Airbnb. We almost stopped working on it. [But] I thought back to that very first weekend with those three people that stayed with us. We believed that if people could experience what we experienced that weekend that this would be an idea that would spread around the world.”
In 2009 the co-founders joined an incubator called the Y Combinator where one of their advisors urged them to shift focus from trying to scale the business, to offering better service to the few customers they had. The duo flew to New York, which was their biggest market with 25 hosts, and visited them all. One suggested Airbnb should have photographers to take pictures of the homes so Gebbia and Joe got cameras and became the company’s photographers. And to offer better customer service the two put their mobile phone numbers on the website.
Later in the year as the housing crisis hit the US, many people started using Airbnb to raise extra income to save their homes.
“Little by little… city by city it started growing. It started growing because we stopped focusing on growing, we stopped focusing on being successful – and we started focusing on building something people love.”