A Story of Disruption Innovation

Here’s a must-share story from Airbnb’s CPO and Cofounder on disregarding the naysayers—and sometimes the rules, as learned at GrowCo15.

Airbnb has changed the way people think about travel, their homes, government regulations, and even how we think about strangers.

It’s true the company currently has pushback from regulators and hotel operators.

But it is also true there are now more than a million listings on Airbnb’s site. The company is valued at $10 Billion. And, in 2014 alone, the so-called “force of social upheaval” had 10 million people use the service.

But the story of Airbnb is not one of overnight success by any means.

Cofounder and Chief Product Officer Joe Gebbia described how in the early days, the founding team did raise a round of funding, what he jokingly shared with the crowd, was what they call “the Visa round.”

At that point, they were making barely $200 per week through the Airbnb service, so professional investment/funding was not an option. When the credit cards were maxed out, they were running in to some serious trouble.

At 2 AM one night, they decided they would forge their own path. 

“When you’re in the trough of sorrow, the only way out …is creativity,” said Joe.

They came up with an idea to offer politically themed breakfast cereal.

It was during the 2008 Presidential Election. “We came up with Obama-O’s—the breakfast of change—and Cap’n McCains because he was an Officer in the Navy,” explained Joe. “That tagline was a Maverick in Every Box.”

When the breakfast cereal was featured on CNN, they ended up making $20,000 in sales from the breakfast cereal, he said, laughing along with the amused GrowCo audience.

So did the cofounders give up on the struggling company, given they could easily find traction and success with other pursuits?

The answer was no, and it highlights the lesson the team learned, explained Joe.

“If we made decisions based on spreadsheets, and modeling and graphs and forecasting, all of those things told us to stop,” said Joe. “They all said, ‘this is not going to be a business that’s going to work.’ And all of the roads basically let to quit, or start something else, like go get a job.”

It was a strange idea, they knew, but that was not enough to make them quit.

“For us, there was a much deeper belief that something existed here, and the spreadsheets and analysis couldn’t persuade us otherwise.” Joe said it really came back to the original three people who stayed with the co-founders in their apartment. (The three original Airbnb tenants stayed with Gebbia and cofounder Brian Chesky in their San Francisco apartment in 2007.)

“We got to provide hospitality to them, at a level that gave us such delight. They got to feel like they belonged in San Francisco, they got to see the city through our eyes…and we became economically empowered,” explained Joe.

In Spring 2009, Joe and his cofounders had the opportunity meet with Paul Graham, with the hopes of being accepted into Y-Combinator—the well-known startup accelerator that typically exchanges funding, advice and connections for company equity.

He says the breakfast cereal story actually is what gave the Airbnb team a bit of edge with Paul.

“He practically admits to us [in our meeting] that he thought our idea was completely bizarre and strange, but he believed in us as entrepreneurs. If we could sell breakfast cereal for $40, we could figure out our website, so that’s how we got in,” Joe said.

It May Have Been Disruptive, But It Still Required Grit

Airbnb is a story about perseverance. Today, Airbnb offers more lodging than any hotel chain in the world. And, despite how crazy the idea may have seemed at one point, there are now more than 25 million people who’ve let strangers enter their home (and in some cases, treehouses) with Airbnb.

Some cities have already changed how they approach and tax Airbnb transactions. Time will tell what happens to the infectious Airbnb company, as well as the sharing economy in general.

Know of another business story involving disruptive innovation? Let us know!