Airbnb's cofounder made an incredibly compelling pitch for startups to join Y Combinator: 'We were 13 weeks away from walking away from it all'
Airbnb's cofounder Nathan Blecharczyk was asked at an event if there was a time when they almost shut down the business. In 2008, the startup couldn't raise a dollar of venture capital. It had two customers, including Airbnb chief executive officer Brian Chesky. The cofounders made a pact that if they came out of startup accelerator Y Combinator and were "not in a materially better place" after 13 weeks, they would walk away. Blecharczyk said the accelerator gave the company the guidance and focus that it needed to survive. Visit Business Insider's homepage for more stories.
There are pages and pages of Google search results that answer the question: "Is Y Combinator worth it?" For some, the storied startup accelerator has been a springboard for success. Y Combinator has spun up 102 companies that are valued north of $150 million, according to the most recent count in 2019. Stripe has the highest valuation of any graduate, followed closely by Airbnb, which is expected to have an exit through a direct listing sometime this year. At a recent event, Airbnb's cofounder Nathan Blecharczyk said there might not have been an Airbnb without Y Combinator. In a fireside chat at New York University Stern School of Business last week, Blecharczyk was asked if the founders ever almost shut down the business. Blecharczyk, who is also Airbnb's chief strategy officer, reflected on a time when it couldn't raise a dollar of venture capital. The business had two customers, including chief executive Brian Chesky. A 13-week stint in the Silicon Valley accelerator gave the company the jolt it needed to survive, Blecharczyk said at the event. You can watch a video here.
Y Combinator gives founders the chance to move to the Bay Area for $150,000 in seed funding and three months of mentorship from some of tech's most recognizable entrepreneurs and investors. The program isn't entirely altruistic. The accelerator takes 7% of the company's ownership and gains the right to invest in future financing rounds, or pro rata. Still, Blecharczyk's recollection of the experience makes a compelling pitch for founders on the verge of walking away. Here's the story of how 13 weeks at Y Combinator saved the Airbnb cofounders from shutting it down:
"There was really only one time where we almost gave up," Blecharczyk said, "and that was at the end of the first year, where we had been unsuccessful in raising the capital. The recession had just began, this was the end of 2008. And after trying for a year, when do you know that it's just not a good idea and it's time to give up? "There were three of us. No one of us really wanted to abandon the other two. Because we were all really dependent on one another." They made a pact, Blecharczyk said. "We would apply to Y Combinator, an accelerator program. It's only 13 weeks long. They give you a small, small amount of money, at least now they give you more. And it culminated in demo day. "And we thought, OK, if we can get into this program, then we can admit to each other that we'll give it 13 more weeks. And we'll be super serious and regimented. But at the end of the 13 weeks, if we're not in a materially better place we all agree that it will be time to quit, and it won't be an awkward conversation."
The cofounders hustled over the next 13 weeks, Blecharczyk said. They were living together in an apartment where they worked from 8 a.m. to midnight, breaking only to eat, work out, or buy groceries. The startup was on a mission to get hosts to love the service. The cofounders met all of their hosts in New York on stays at their homes. They wrote reviews and hired professional photographers for the properties to bolster their listings. "Things really turned around during that period, so we never had to have that difficult conversation," Blecharczyk said. "But it really came down to that. We were 13 weeks away from walking away from it all. "It was during that period that we got some advice that caused us to reflect about meeting our users, doing things that don't scale, photographing the properties, that really started the flywheel going and allowed us to show growth every single week.
"At the time, we had been making $200 a week every week for the last five months. Nothing we did moved that number. So that's why we were in such a state of despair. And our goal over the 13 weeks was to get $1,000 a month. "We ended up getting to $4,300 a week and basically every week showing progress. And we were then able to raise money and never had to have the awkward conversation." About a year later, the startup changed its name from Air Bed & Breakfast to Airbnb. It was last valued at $31 billion in 2017.SEE ALSO: How 3 guys turned renting air mattresses in their apartment into a $31 billion company, Airbnb Join the conversation about this story » NOW WATCH: Inside a $12,000-a-night Airbnb in Hollywood
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A YC-backed hourly home rental startup says demand is booming amid city-wide shutdowns, but its future depends on quarantine-weary workers staying put
Globe, an hourly home rental startup backed by Silicon Valley accelerator Y Combinator, said that it...Globe, an hourly home rental startup backed by Silicon Valley accelerator Y Combinator, said that it has completely reworked its business model during the pandemic-induced shelter-in-place orders across the United States. The new model relies heavily on listings from property managers who have seen a drop in requests for rentals they've previously hosted on Airbnb. Cofounder and CEO Manny Bamfo told Business Insider that the strategy and upfront technical investments paid off handsomely with a significant increase in demand. To comply with local ordinances, Bamfo said Globe is only available for "essential" activities like job interviews or working space that falls within three blocks of a guest's home address. As massive tech companies like Facebook and Shopify embrace long-term remote work, Bamfo said Globe could provide a default office for digital nomads, but his startup's model is dependent on high-density cities that many workers are fleeing. Click here for more BI Prime stories. An hourly home rental startup is trying to make lemonade out of lemons during the coronavirus pandemic. Globe allows its users to rent empty homes, apartments, and rooms by the hour. When it launched at Silicon Valley accelerator Y Combinator's annual Demo Day in September, cofounder and CEO Manny Bamfo proclaimed that it would become a second space for constrained professionals unhappy with open office floor plans, or traveling workers who wanted privacy instead of coworking spaces. But over the last three months, Globe's entire world spun off its axis as states enacted shelter-in-place orders to stave off the coronavirus pandemic. Offices closed, workers toiled at home, and kitchens and living rooms became the de facto second spaces Globe once wanted to provide. The same tectonic shifts have revealed cracks in the bedrock under Globe's big brother, home-sharing startup Airbnb, as most non-essential travel ground to a halt. All of a sudden, the young startup's future looked a lot less promising. "We worked with hosts that would open up their spaces in the middle of the day while they were at work, but in mid-February through early March, that part of our business tanked," Bamfo told Business Insider. "We were terrified." But Globe's biggest weaknesses, namely that it was relatively young and had less cash in the bank than Airbnb, also made it easier to adapt. In the span of a few weeks, Bamfo said his team had reworked the host process to accommodate property managers fleeing Airbnb. Before February, Globe essentially let anyone with a lease rent out empty space in their homes while they were away. The process of renting out a space on Globe was quick and simple, and almost anyone could do it. Now, Bamfo said they've created an official application and listing process, something the property managers had become accustomed to when listing on Airbnb. The sudden halt in non-essential travel meant that rental managers were often sitting on tens of empty properties and losing money, fast. So they reached out to Globe about listing their city-bound properties on Globe as work spaces, or private places to take calls, or oases for harried parents in need of an hour of silence. According to Bamfo, the pivot worked. "Right now there are 10 million property managers or Airbnb hosts that don't have any demand for travel," Bamfo said. "And then there are all these people that are saying, 'I need space,' so there is an organic pull that we are getting." '100% essential' Operating a functional home-sharing startup is not an easy feat to pull off in a pandemic, and Bamfo said the team has made significant investments in the technical and screening processes to ensure Globe remains compliant with city and state ordinances. Now, guests have to provide what amounts to a temperature selfie — a photo of themselves with their temperature reading on a thermometer — to Globe before they get their booking details. Hosts are provided sanitization kits — a collection of wipes, gloves, and soap sourced from professional cleaning crews — when they list properties on the site. Guests are encouraged to book spaces only for essential activities like job interviews within their apartment buildings, or within three blocks of their home addresses, to help limit travel as much as possible. However, Bamfo said that safeguard is operating on an honor system at the moment. But for Globe to emerge victorious from the current economic environment, it will need to operate fully above board and in good standing with the cities where its spaces are located. "We find mental health to be an essential need and work is an essential need," Bamfo said. "Travel is 100% non-essential, but work is 100% essential. We are in a global economic crisis and we need the opportunity to work, so we find it 100% essential to have space to get work done." High density, high risk, high reward As restrictions loosen in some of Globe's current markets, the fact remains that the business is built for cities and the white-collar workers who live there. The current safeguards that limit how far a guest can travel to get to a Globe space are optimized for high density housing like high-rise apartments. Even when the pandemic subsides as a threat, people seeking a private respite for a few hours are likely to look for building close by. But study after study has found that many of those metro-area workers, Globe's target customer base, are gearing up to flee cities once restrictions are lifted. Months cooped up working from kitchen tables or couches in pricey apartments, often with a roommate or partner, have erased some of the appeal of city life. Thursday, Facebook announced that it expects to move roughly half of its 50,000 employees to permanent remote work, a policy that could substantially rework the dynamics of California's pricey Bay Area. "A lot of our hosts were relying on revenue from Globe to make their rent," Bamfo said. "In the markets we are in, rent is expensive." If the predicted urban exodus does in fact play out with young professionals fleeing to the suburbs or small towns, Globe could be looking at a future less favorable than Airbnb's, which profits from the travel market under normal conditions. But Bamfo remains optimistic. "At this moment, our future is bright," Bamfo said. "We are trying to make homes work better for our world right now. We can't all cram into offices and we can't all cram into our homes. We need a middle ground, and that's Globe."SEE ALSO: See the deck that top growth-stage investor Insight Partners is using to prepare its founder network to weather a prolonged economic downturn Join the conversation about this story » NOW WATCH: What makes 'Parasite' so shocking is the twist that happens in a 10-minute sequence
Some large Airbnb investors have slashed their internal valuations of the company by more than 30% as the pandemic halts travel
The home-sharing startup Airbnb was most recently valued at $31 billion in a 2017 funding round....The home-sharing startup Airbnb was most recently valued at $31 billion in a 2017 funding round. It's had its valuation cut by a couple of its investors recently — the mutual-fund managers Principal Global Investors and Hartford Funds. The coronavirus pandemic has shut down travel, cutting into Airbnb's revenues and raising questions about if people will want to open their homes to strangers once a vaccine for COVID-19 is introduced. Despite the pandemic, one mutual-fund investor, Macquarie, has increased its valuation of Airbnb since the virus broke out in the US. Visit Business Insider's homepage for more stories. Several mutual-fund managers have slashed their internal valuations of the $31 billion home-sharing unicorn Airbnb. The startup, founded by Joe Gebbia and Brian Chesky, has been hit hard by the coronavirus pandemic, which has halted travel worldwide. A recent story in The Wall Street Journal said Airbnb hosts who are reliant on the app for income were in danger of defaulting on their mortgages, and the market-research firm AirDNA estimated Airbnb saw $1.5 billion in bookings canceled in mid-March. The startup's equity is held by several mutual funds, though not all mutual-fund investors have updated their portfolio holdings since the end of March, when the virus' impact was felt most intensely in the US. The mutual-fund managers Hartford Funds and Principal Global Investors, however, have made significant cuts to their internal valuations of the startup. Hartford's $744 million International Equity Fund said Airbnb's shares were worth $85.27 each at the end of March — a decrease of more than 32% compared with fund's valuation of the startup in the fall. Read more: Airbnb says it's going to focus on longer-term stays, but analysts worry its short-term rental roots will make it hard to grab a piece of the $18 billion market Principal's $9.7 billion Large Cap Growth Fund, which Morningstar rates as five stars, cut its valuation of the startup by more than 30% from the end of February to the end of March. The manager values its equity in Airbnb at $81.36 per share. Some of the industry's biggest players, such as Vanguard and Fidelity, own the startup's equity in their funds but have not yet updated their holdings to reflect the managers' view on Airbnb after the pandemic. One fund though, Macquarie's Optimum Large Cap Growth Fund, believes the startup is worth more now than it was in the fall, when equity markets were near all-time highs. The $1.6 billion fund valued its shares of Airbnb at $116.03 each at the end of March — an increase of about $3 a share since the firm's report at the end of September. Hartford and Principal declined to comment, and Macquarie did not immediately respond to requests for comment. Airbnb saw a huge upsurge in cancellations right after the outbreak was declared a pandemic and COVID-19 cases started to rise in the US. It's also seen a big drop-off in new bookings as governments around the world have limited the movement of their citizens to try to contain the disease. Read more: Airbnb is facing an unprecedented threat from the coronavirus. Here are the veteran execs on Airbnb's board of directors who will be critical to CEO Brian Chesky's success or failure. In recent weeks, Airbnb has raised $2 billion in debt financing as it tries to stay afloat during the crisis. It's also been trying to keep its property managers above water, pledging some $265 million to them in the form of grants and partial reimbursements for cancellations. In a statement to Business Insider, Airbnb said: "The global pandemic has required the country to shelter in place, upended the economy, led to unemployment figures last seen during the Great Depression and impacted everyone, including restaurants closing, hotels shuttered, airlines grounded, amusement parks shut, access to beaches and parks denied, conferences and festivals canceled, sporting events and concerts postponed, schools closed and graduations delayed. We believe that this is temporary: travel will bounce back over the long term and we are well-positioned to weather the storm and come back stronger."SEE ALSO: Airbnb and RXR Realty are scrapping a partnership at Rockefeller Center that the home-sharing giant's CEO touted as a '21st-century hospitality model' DON'T MISS: Companies in ailing sectors like energy and retail are adopting poison pills as their shares tank. We tracked down 41 recent moves — and the activist investors they're fighting off. Join the conversation about this story » NOW WATCH: Why electric planes haven't taken off yet
Airbnb employees chipped in $1 million from their own pockets to help economically devastated hosts, and that says something beautiful, and scary
Airbnb employees thought that 2020 would be a time of celebration for them as the short-term...Airbnb employees thought that 2020 would be a time of celebration for them as the short-term rental startup was expected to go public in one of the most anticipated IPOs of the year. Instead they found themselves digging into their own pockets to donate to their customers to keep just a small portion of them afloat. Employees contributed $1 million collectively to a $17 million fund that will offer up to $5,000 to badly hurt hosts. (Airbnb founders kicked in $9 million and investors kicked in $7 million). It's a beautiful gesture that points to a bigger problem. The small businesses owners that are the backbone of the sharing economy are shouldering more than their fair share of business risk. But there are some hopeful signs of how this could change, and the sharing economy could truly become a win-win. Visit Business Insider's homepage for more stories. As the COVID-19 crisis brought travel to a screeching halt, the people that rent rooms, condos and all sorts of other abodes on Airbnb suddenly found themselves with little to no income. What's more, Airbnb instituted cancellation policies that allowed guests to get full refunds, a policy that made sense given the situation but which left many hosts with the short end of the stick. GoFundMe campaigns have sprung up across the nation to help small businesses like bookstores and restaurants survive until the virus recedes and people begin to roam about again. And in that vein, Airbnb employees created the Airbnb Superhost Relief Fund, a program intended to help at least some of its highest-rated hosts, known as "superhosts" to survive. The fund is limited to superhosts who can prove Airbnb is their main source of income, have been on the platform for at least a year and have two or less properties (a nod to regulatory pressure to limit hosts building big hotel-like businesses on Airbnb, with multiple listings). The fund is invitation-only; Airbnb chooses who can apply. Superhosts will get up to $5,000 apiece as a grant, not a loan, although they'll be responsible for their own taxes. Airbnb's weathly founders put $9 million into this fund. Company investors put in $7 million. And Airbnb's employees contributed $1 million from their own pockets, the company says. Airbnb has its share of highly paid engineers, but it also has an army of of hourly workers. "While I can't be certain I will receive an invite to apply, I cried tears of gratitude for the @Airbnb superhost grant fund. Losing my sole source of income overnight was tough," one host posted on Twitter. The employees' $1 million-worth of contribution to the fund is especially noteworthy given that Airbnb employees thought 2020 would be a jubilee year for them, as the company was expected to go public in one of the biggest IPOs of the year. That IPO is now on ice, and their employer is scrambling until the travel industry comes back. Airbnb has had to obtain $2 billion in two new financing deals this month. Such generosity by people who are facing their own uncertain future is beautiful. But it also shows a scary side of our the so-called sharing economy. It's not really sharing. You take the risk, I take the money The so-called independent workers running their own businesses are beholden to the tech company that owns the platform. The tech company assumes very little of the business's risk. In Airbnb's case, it doesn't hold the mortgages or clean the rooms or pay the utilities or the taxes. In Uber's case, it doesn't make the car payments or pay for the maintenance. For Amazon's third party sellers, the retail giant doesn't pay for the products. These platforms are built on the backs of these small business owners who don't share the power. If the platform changes a policy (which they have been known to do), they can devastate the people who risk it all to provide the platform with the products it sells. Because Airbnb has been so lucrative, some people have leveraged themselves to the hilt with many mortgages, an unwise risk in hindsight. Those people won't be helped by the Superhost Relief Fund, as one angry host points out in a tweet. "@Airbnb I don't understand [the] superhost relief fund NOT including the hosts who have dedicated everything to being AirBNB hosts (those w MANY listings). We are the ones whose sole income is #airBNB and we are the ones with HUGE mortgage costs sitting on our necks during #COVID2019" Airbnb says these hosts may have qualified for small business loans under the emergency funding CARES Act, but the $349 billion federal relief program for US small businesses ran dry on Thursday, the SBA said. If there were no Airbnb, those landlords would likely have been renting their rooms and apartments to long-term tenants. Airbnb properties are now flooding onto the rental market, which could lead to falling rents and, some say, will exacerbate an impending real estate collapse. Power to the suppliers Obviously, no one wants to go back to a world where there are no tech platforms and no opportunities to build a global small-businesses accessible with the tap of the smartphone. The platforms provide the software, hire the engineers and pay the bills for the big cloud services that link everyone together. But we may not want to go back to a world where the economic risk is not shared more equally by everyone. Whatever happens to the Airbnb property owners or the Uber drivers or other gig workers, the founders of these platforms are already billionaires and the well-paid engineers will likely land on their feet at other jobs. There may be two outcomes after COVID-19. We may see the rise of some form of a union for platform suppliers where suppliers can band together and, in essence, collectively bargain. The platform will be forced to consult with the suppliers before it tinkers with policies that could badly hurt them. We've already heard whisperings of tenant associations forming in some parts of the real estate world. Another intriguing potential outcome of the current crisis is the emergence of a new type of tech platform in which gig workers — that is, the "suppliers" in a platform business model — have greater control of their individual business. For instance, a startup called Dumpling is doing this for grocery delivery workers. It offers software that lets personal shoppers build a grocery shopping client base, independent of, say, an Instacart. Dumpling was named by VCs as one of the startups that will thrive in the post coronavirus world. Supply-side platforms like this would allow sharing economy workers to use the broader platforms — whether for grocery delivery, transportation or home rentals — while also building their own, truly independent businesses. Are you an Airbnb employee or insider with insight to share? Contact Julie Bort via email at firstname.lastname@example.org or on encrypted chat app Signal at (970) 430-6112 (no PR inquiries, please). Open DMs on Twitter @Julie188. Now read: Airbnb hosts will be charged fees if they cancel summer bookings due to coronavirus concerns Tech CEOs say they plan to scale back on real estate for offices now that they know everyone can work from home, and it's not good news for WeWork 18 startups that VCs say will thrive this year despite the economic crisis SEE ALSO: Airbnb hosts will be charged fees if they cancel summer bookings due to coronavirus concerns Join the conversation about this story » NOW WATCH: We tested a machine that brews beer at the push of a button