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Blitzscaling 18: Brian Chesky on Launching Airbnb and the Challenges of Scale

Greylock・102 minutes read

Brian Chesky co-founded Airbnb, which started with a makeshift bed and breakfast using air beds for conferences, evolving into a global platform where people could book homes like hotels. Despite initial doubts and financial struggles, Airbnb grew gradually, focusing on customer satisfaction and a unique seven-star design experience, eventually becoming an online-to-offline business connecting the online world with the real world.

Insights

Brian Chesky, the CEO of Airbnb, started the company with a simple idea born out of personal inconvenience, highlighting the potential for significant success from seemingly small or silly ideas.
Airbnb's early days were marked by relentless hustle, multiple launches, and financial struggles, showcasing the importance of persistence and creativity in entrepreneurship.
Airbnb's success was fueled by a focus on customer satisfaction, personalized service, and the concept of seven-star design, aiming to exceed typical five-star experiences and create a meaningful impact on customers' lives.
Airbnb's growth was driven by the network effect, word of mouth, and a unique emphasis on culture, with a transition from short-term tasks to long-term strategies, highlighting the importance of hiring, managing, and creating a strong company culture for scaling and overcoming challenges.

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Recent questions

How did Airbnb start?
By offering air beds for conferences.

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Summary

00:00

"Brian Chesky: Airbnb's Unconventional Path to Success"

Brian Chesky is the CEO and co-founder of a prominent unicorn company, Airbnb, known for its unique approach and success.
Chesky's background includes studying industrial design at Rhode Island School of Design, not initially considering entrepreneurship.
Inspired by a design conference's hotel shortage, Chesky and co-founder Joe Gebbia created a makeshift bed and breakfast using air beds, leading to the birth of Airbnb.
The initial concept was to offer air beds for conferences, evolving into a platform where people could book homes worldwide like hotels.
Despite initial doubts and a brief exploration of roommate matching websites, Airbnb's success grew gradually, with a pivotal launch at South by Southwest in 2008.
Chesky reflects on the journey, emphasizing that seemingly small or silly ideas can lead to significant success, often stemming from solving personal inconveniences.
The early days of Airbnb required relentless hustle, with multiple launches to garner attention and press coverage, showcasing the importance of persistence in entrepreneurship.

10:01

From Air Beds to Cereal Entrepreneur: Journey

The first launch of the business only had three people present.
The second launch was named Air Beds and Conference United States, with only two customers, one being the speaker.
Initially, the concept required staying in an airbed during events like South by Southwest.
The idea evolved to allow booking with direct payments, a novel concept at the time.
The product was redesigned multiple times, with a focus on simplicity and ease of booking.
The founders faced financial struggles, accumulating tens of thousands of dollars in credit card debt.
To gain traction, they launched during the Democratic National Convention, offering unique presidential-themed breakfast cereals.
Despite initial skepticism and financial challenges, they managed to sell $30,000 worth of cereal to fund the company.
The founders adopted the core value of being a "Cereal Entrepreneur" to symbolize their unconventional journey.
Eventually, they sought help from Y Combinator, despite initial doubts, leading to a pivotal turning point for the business.

20:14

"From Cereal Box to Global Success"

Paul Graham funded the company with a $4 box of cereal sold for $40, leading to the idea of convincing strangers to stay in other strangers' homes.
Being likened to cockroaches by Paul Graham was seen as a compliment, signifying resilience in a challenging environment.
Y Combinator provided a structure for full-time work and living together, eliminating distractions and focusing on the startup.
Paul Graham's advice emphasized having 100 customers who love the product rather than millions who just like it, promoting organic growth.
The founders dedicated three months to intense work, focusing solely on the startup, creating a serious rhythm.
By doing things that don't scale, like meeting hosts in person and improving their listings, the company built a loyal customer base.
The goal was to be Ramen profitable, sustaining the business on minimal expenses, which attracted a $600,000 investment from Sequoia Capital.
The network effect of Airbnb naturally grew as travelers became hosts and spread the idea globally, targeting events and PR for growth.
Word of mouth and PR were the primary growth strategies, with a focus on educating hosts in different cities through meet-ups.
Meeting hosts in person and providing personalized service led to increased engagement and market expansion, with a relentless focus on customer satisfaction driving growth.

30:24

"Seven-Star Design: Elevating Customer Experience"

The concept of seven-star design is introduced, aiming to exceed the typical five-star rating system used in marketplace businesses like YouTube, Airbnb, and Uber.
The goal of seven-star design is to create a product that customers love so much they would share it with others and have a meaningful impact on their lives.
The idea is to go beyond the expected five-star experience, where customers would not just leave a five-star review but would request a sixth star due to the exceptional quality.
Examples are given to illustrate the difference between a five-star and a seven-star experience, such as airport pick-up scenarios.
The concept is further extended to imagine what an eight-star, nine-star, and even a ten-star experience would entail, with humorous and exaggerated scenarios.
The importance of designing not just the website or app but the entire customer experience, including the offline aspect, is emphasized.
The realization that the product customers are buying is not just the website or app but the overall experience, including the host and the sense of belonging.
Airbnb is described as an online-to-offline business, part of a new wave of the internet that connects the online world with the real world.
The application of design principles to the office space is discussed, with the idea that everything, including the office environment, can be designed to enhance the overall experience.
An example is given of how Airbnb reinvented their office space by modeling meeting rooms after apartments listed on their website, creating a unique and creative environment that has become a competitive advantage in hiring.

41:42

"Airbnb's Cultural Reinvention Through Innovative Spaces"

The speaker saw an opportunity to reinvent a gray office space with cubicles, attracting CEOs for inspiration.
Initially, Airbnb was run from a three-bedroom apartment, unlike traditional companies that secure office spaces.
Due to rapid hiring, the apartment became crowded, leading to meetings in unusual places like bathrooms and stairwells.
The speaker decided to live in various Airbnb homes for almost a year to test them and experience different environments.
The company's culture emphasized that work was not just a job but a calling, requiring a deep passion for the product.
Every employee at Airbnb goes through functional or technical interviews along with culture interviews to assess core values.
A core values council of 12 experts advises on cultural matters and ensures alignment with the company's beliefs.
The speaker personally conducted interviews for the first few hundred employees to ensure cultural fit.
As the company scaled, cultural practices were institutionalized, including recorded onboarding sessions and weekly cultural emails.
Designing subtle touchpoints like key card messages reinforced the company's values and mission, crucial for maintaining culture as the company grew.

52:30

"Airbnb's Growth: Network Effect to Competitors"

The network effect led to guests becoming hosts and spreading the word.
Product market fit was achieved, leading to scaling.
Hiring and managing people became crucial post mid-2008.
Pre-product market fit, founders did most tasks themselves.
Post-product market fit, focus shifted to managing, vision creation, and hiring.
Learning to hire, manage, and transition to data-informed decisions was essential.
Moving from short-term to long-term thinking was necessary.
Creating roadmaps, strategies, and plans became vital.
The stages of survival, firefighting, and facing existential threats were outlined.
Competitors, like the Samwer Brothers, posed significant challenges to Airbnb's growth.

01:03:14

Groupon's European Expansion and Market Dominance

Groupon's rapid growth was largely due to its European business, CityDeal, which was acquired from the Oliver Samwer clone.
The Samwer brothers were known for cloning successful startups and had built a fast-growing startup.
Groupon faced a significant challenge when CityDeal raised $90 million after Groupon had raised $7 million.
CityDeal rapidly expanded, hiring 400 employees in 30 days and opening 20 offices, posing a threat to Groupon's market dominance.
Losing Europe would have been catastrophic for Groupon, as it was a crucial market for their business.
Groupon considered buying CityDeal but decided against it due to cultural differences and high costs.
Groupon's strategy was to focus on building a better community and product than CityDeal.
Groupon trained country managers and rapidly expanded its offices in Europe to compete with CityDeal.
Government regulatory challenges, such as dealing with New York City laws, posed significant obstacles for Airbnb.
Airbnb's approach to government relations shifted from fighting to building partnerships and understanding through a listening tour.

01:14:50

Paris Conference: Crisis, Collaboration, and Leadership Lessons

The speaker attended a conference in Paris with 5,000 hosts and family members, where they delivered two keynotes.
During a celebratory dinner for early employees, news of multiple attacks in Paris emerged, including shootings, hostage situations, and bombings.
Seven coordinated attacks occurred in various locations across Paris, where many employees and hosts were present.
Fear and panic spread as the speaker realized the severity of the situation and the potential for more attacks.
A makeshift command center was set up in a shower to coordinate and account for the safety of 645 employees and provide housing for those in need.
Collaboration with local and federal authorities was initiated to ensure the safety and well-being of employees and hosts.
Efforts were made to cancel the conference, fly employees back, and provide support to those affected by the crisis.
The speaker reflected on the intense experience, likening it to the challenges faced in the early years of Airbnb and emphasizing the weight of responsibility.
When discussing learning strategies, the speaker highlighted the importance of seeking expertise from definitive sources to efficiently acquire knowledge.
The speaker emphasized the significance of selecting co-founders who are better than oneself, emphasizing trust, admiration, and compatibility in a founding team.

01:25:38

"Keys to Successful Collaboration and Entrepreneurship"

To ensure successful collaboration, it is crucial to work with people you like, trust, and admire, ideally with a long history together.
Complimentary skills rather than overlapping ones are beneficial for partnerships.
Transitioning from a designer to an entrepreneur involves recognizing inherent entrepreneurial traits and starting projects immediately.
Conviction and resilience are essential during tough times, with passion and belief in the idea being crucial for success.
The unique insight that staying with others in their homes is rewarding and cost-effective led to the creation of Air Bed and Breakfast.
Conviction is built over time through repetition, exploration, and real-life experiences, essential for leadership.
Successful companies often create markets rather than investing in existing ones, requiring foresight into emerging markets.
Challenges faced currently include scaling the company culture for growth and diversifying products beyond the core offering.
Maintaining a startup mentality within a growing company and developing multiple revenue streams are key focuses for continued success.

01:37:17

"Challenges of Starting Business Within Successful Company"

Starting a new business within an existing successful business presents unique challenges and opportunities, such as utilizing internal resources and funding, but also facing resistance from existing team members who may inadvertently hinder progress by questioning focus and priorities, highlighting the need for established companies to evolve by creating new products to remain competitive in the market.

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