
Lessons from Airbnb's Rejections - zabramow
http://foundersatwork.posthaven.com/7-important-lesson-from-airbnbs-7-rejections
======
davnicwil
> New ideas often seem crazy at first (e.g. renting out an airbed in your
> apartment to a stranger)

N.B. I'm currently travelling and using Airbnb almost exclusively for
accommodation, if that's somehow relevant.

Airbnb seems to have become the cliche example of a 'crazy idea' that turns
into a unicorn and, honestly, I struggle to see why people think the idea, per
se, was crazy or groundbreaking.

It's not a crazy idea. In fact it's a very natural, obvious idea, that has
existed forever. People have rented, and sub-let, rooms for decades. The
problem has always been high barrier to entry (on both sides) and therefore
low liquidity in the market, such that short term 'holiday' type lets are too
much of a hassle to be tenable, and only longer term lets have been feasible.

The idea has always been there, what's not really been there until Airbnb, and
what is their remarkable achievement, is the building of a singular,
reputable, trustworthy, easily accessible marketplace for this, to get the
liquidity to where it needs to be to be workable.

It's the execution on this, not the idea itself, that's the remarkable thing.
If it was such a crazy idea, it would have taken much, _much_ longer (+10
years perhaps) to have truly caught on. The fact that they've had such rapid
growth points to the fact that a lot of hosts and travellers were ready for it
and just waiting for the opportunity to take part in the short term lets
marketplace.

~~~
zdean
Agreed...I remember using VRBO before Airbnb was a thing. For historical
reference, VRBO was purchased as an 11 year old company by Homeaway in 2006, 2
years before Airbnb was started.

~~~
jedrek
AirBNB-like services are older than the internet, AirBNB just made them sexy
and much easier to use as a landlord.

~~~
pouzy
Take Cuba as an example and their casas particulares:
[https://en.wikipedia.org/wiki/Casa_particular](https://en.wikipedia.org/wiki/Casa_particular)
They have their own Airbnb there, without internet.

------
pdq
Lots of these lessons are missing the bigger point. The original investor
rejections had it right on the business model, except missed the determination
of the founders. Sleeping on airbeds and having hosts serve breakfast is a
niche market.

Airbnb changed their name and pivoted into the vacation rental rental space,
and now shared rooms and "bed and breakfast" are a tiny fraction of their
listings, but this opened up a much bigger market. IMO, this is the big
lesson.

~~~
technotony
What always gets me with this story is Couchsurfing, which had proved people
were willing to host strangers years before Airbnb launched. I'm not sure why
so many investors missed this data point.

~~~
dougmccune
But CouchSurfing didn't prove there was a profitable business there. And
Airbnb is basically proof of that. If Airbnb stuck with the "stay in a shared
room with strangers" approach they also wouldn't have figured out how to make
money. As other commenters have pointed out, they shifted to a wholesale
vacation rental model (ie HomeAway and VRBO) and that changed everything. They
got the benefit of sticking to the "sharing" narrative while making money from
the pure vacation rental market.

~~~
bananaboy
CouchSurfing did prove that there was a market out there waiting to be tapped
though. AirBnB were able to capitalise on it.

------
more_original
"Don't worry about people stealing an idea. If it's original, you will have to
ram it down their throats." \-- Howard H. Aiken

The real difficulty seems to be to distinguish between ideas that genuinely
deserve rejection and ones that are only rejected because they're new and seem
crazy at first.

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n72
Anyone know why airbnb became so much bigger than flipkey, vrbo, and homeaway?
Was it just being lucky to be being based in SF and the associated network
effect? I.e. people could have theoretically used the aforementioned companies
to rent their room in SF or NYC, but they didn't.

~~~
hamburglar
I have no experience with flipkey or pre-homeaway VRBO, but I can tell you
that the smooth rental experience of AirBnB makes it much, _much_ more
appealing to use than VRBO. My VRBO experiences always involved strange
inconsistent booking procedures and calendar management, and the website was
clunky and old tech with lots of state-destroying page navigations. And one
thing AirBnB has really nailed is that it can be really important to have
great communication between the two parties in the transaction, not only
through the mechanics of booking, but through your entire stay. There's a ton
of redundancy in communication channels (email/sms/web/phone) for a
transaction, and the result is that you never have to say "oh, I need to go
run the app to send them a message" or log into a web page (oops I booked this
on my desktop and I'm not logged in on mobile) or look up a phone number or
anything like that. It's one big multi-transport conversation that is _easy_
to use, so if you need to communicate, it just happens, rather than being
something you have to work for.

------
acconrad
These are tough lessons to take at face value. Unicorns are even harder to
replicate so their path to success is also fraught with unique challenges. The
whole "keep going" and "don't give up" mentality is admirable, but it's also
admirable to know when your product-market fit isn't there, or when it's time
to close up shop. A healthy dose of skepticism and reality is the needed yang
to balance the yin of persistence and resilience.

~~~
etblg
The key may be in the fact that we call them 'unicorns'

~~~
InclinedPlane
Indeed. One thing I've realized over time is how common it is to suddenly
realize something, perhaps years later than you should, that should always
have been blindingly obvious. I like to call such experiences "duh-piphanies".
What's interesting is that this happens all the time technology and invention.
Take something like the "hesco bastion", it's just a giant, foldable, wire
reinforced cloth sided bucket that you put dirt and rocks in using earth
moving equipment. It's something that could have been built a hundred years
ago. But it wasn't invented until the '90s, and since then they've seen
widespread adoption in a huge variety of uses. Similar examples exist in every
industry.

The rise of Google is a true Unicorn tale. The story of hardcore CS nerds
rebuilding a product that was already ubiquitous with a crowded market and re-
inventing it down to the algorithmic level, defying every norm on the way
there. But most innovative products have some element of blinding obviousness
about them. Uber? Maybe we could use the worldwide communications network that
every has a constantly connected terminal to in their pockets at all times to
dispatch cabs instead of, you know, telephones or just having cabs circulate
in high-demand areas. Dropbox? Network file storage that leverages the speed
of the modern internet and modern storage technologies to remove the hassle of
dealing with networked files. Square? What if people could just run an app on
their portable computing devices which are already vastly more powerful and
constantly internet connected instead of using crusty custom-built PoS
hardware and systems? Stripe? Imagine if banking embraced the technology of
the late '90s. And so on.

90+% of the "Unicorns" are just the sensible application of technology to
already well-known problems, and just doing it well and monetizing properly.
That shouldn't be so exceptional, but somehow it is. I think that's more an
indictment of the silicon valley way of doing things than anything else. And
the thing is, the rate of return to VCs when a Unicorn hits is so big that it
covers the losses from all the bozos.

------
mdevere
Investors like to categorise ideas into macro tech trends and hypotheses.
There's a good reason for this but it also means you can miss the biggest
ideas (the space-defining ideas).

I imagine a lot of investors looked at Airbnb and thought, "cute". Then
someone coined the phrase, "sharing economy", in the wake of its growing
success and a lot of other "cute" ideas raised money.

From my experience, what investors often lack is an understanding of the
vision. I remember someone describing Airbnb to me back in 2010. I said it
would never catch on for XY&Z obvious reasons, including it sounded like a bad
experience. That's because I wasn't pitched the vision correctly. I bet the
Airbnb guys took a long time to figure out the right way to pitch it.

Investors like to be objective/data-driven and therefore don't spend too long
building an emotional relationship with the product. Again, there's a reason
for that, but sometimes founders have products that don't look like anything
that exists elsewhere, so it's super important to convey how it really works.

------
andrewstuart
There's encouragement here for entrepreneurs to persist in the face of
rejection.

It's hard to say the investors did anything wrong however. Anyone can pick a
winner in hindsight. May as well make a list of winning lotto numbers and say
"see the ones you didn't pick"?

------
mangeletti
I think the most salient point is #5.

This principle is similar to concepts in data science and medical statistics
(esp patient reported outcomes). Take the answer as fact (you can worry about
outliers later), and take the reasons and justifications with a grain of salt.

------
simonebrunozzi
The idea was not crazy. Before AirBnB came to be, a "free" version of it,
called Couchsurfing, already existed.

Hat tip to the AirBnB guys for finding a way to make money out of that idea.

------
davidglauber
Well written! Thank you Jessica for sharing your thoughts.

My personal note on rejections: When I decided to step up and found, I've made
a decision to stop asking for permission from others and build something by
myself. I remind myself of that on every rejection.

No rejection will define what I'm going to be. Rejection only define how
better I'm going to become next time, until no investor/partner/person will
wanna miss-out.

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robotnoises
> When investors aren't sure what to make of these ideas, they write them off
> as inconsequential. Don't be misled by this into thinking your idea actually
> is inconsequential.

And perhaps that means it's time to change-up your pitch?

------
baby
What about if your idea will never succeed? You also need to understand when
to stop and move on.

With airbnb, there were rejections, but there were also two facts that makes
me believe it was a different story:

* They could already make it profitable by just starting to use their own service

* There was an idea of making the world a better place by doing this. This might sound cheesy but I truly believe airbnb, couchsurfing, blablacar and others have really changed the world and how people travel/interact with each other, in a good way. I'm sure I'm not the only one who can see that.

~~~
dandanisaur
Agreed with all of this! Understanding when to stop/failing fast needs to be
accepted. I was worried that these articles could be taken the same way as the
guy who hacked a VCs voicemail because he was told he needed to 'hack stuff'
and 'hustle'.

------
paulpauper
Here we go again

What's being ignored is that the odds of your company becoming the next Air
BNB or even 1/100 as successful as Air BNB are pretty slim.

I dunno what the stats on y combinator is, but I imagine the vast majority of
start-ups are will never be sold for over $100 million

But I wish I were there, no doubt. I like the idea and I would have pitched
then $10k as throwaway money and be a millionaire 100 times over.

------
zabramow
The amazing thing, to me at least, about that story (and these lessons) was
that they heard no from warm intros.

~~~
seiji
_heard no from warm intros._

My last round of warm intro (thanks sam) VC partner talks had 100% failure
rate too. There's no pattern you can draw here. I had great talks with some
two-partner firms. Other two-partner firms did the whole "yes, but only if
you're more successful in another 18 months." I did get one absolute "not this
time, but stay in touch" decline that was exceedingly professional. SV Angel
was the nicest in that they further warm-intro'd me to another 3-5 people. The
worst contact was a16z actually. Go figure?

~~~
zabramow
Ok. But be honest, were you pitching something as good as AirBnB. We can be
passionate about what we are building and try to raise capital without
thinking our concept is as good as AirBnB. Given that, I would have suspected
a warm intro would have done the job. My guess is that the founders (if you
gave them truth serum) would say that they thought AirBnB was going to be huge
all along.

I could be wrong on that.

~~~
seiji
Let's not be revisionist. The original Airbnb concept was _actual_ air beds
and hosts that would _actually_ make breakfast. That was the business. That is
what the VCs passed on because it's kinda crazy. VCs can't pre-detect when
founders will be willing to sacrifice their original cute, but untenable,
ideas and move to where demand actually sits.

This whole massive illegal sublet renting thing isn't what those VCs passed
on. Those VCs passed on literal air mattresses on floors.

Sidenote: it looks like the mark is now officially "Airbnb", but their logo
says "airbnb", even though it was originally AirBnB? No company with multiple
capital letters is ever presented correctly.

~~~
thaumasiotes
> Let's not be revisionist. The original Airbnb concept was _actual_ air beds
> and hosts that would _actually_ make breakfast.

Really? I would have guessed that the "and breakfast" part just came from the
common English term "Bed & Breakfast", which is to me synonymous with motel,
hotel, hostel, inn, etc. I wouldn't expect breakfast to be a bigger feature at
a bed & breakfast than at any similar business that went by a different word.

------
pbreit
The lesson it seems to me is that that is not the correct way to go about
raising a small, $150k round. Founders should be able to round that up from
friends and family.

~~~
andrewstuart
"Friends and family round" has to be one of the worst concepts I've ever
heard.

Great way to destroy your most precious and important relationships.

~~~
pbreit
If that's your attitude, probably not cut out for founding.

~~~
rktjmp
"Probably don't have enough wealthy friends & family" you mean?

Actually re-reading your comment I'm still not sure what you mean? If you're
not willing to sacrifice relationships to start a company, then you're not cut
out for founding? Isn't that a pretty unhealthy position to take in life?

~~~
pbreit
Resourceful people should be able to find people relatively close to them that
could kick in $5-50k x 3-10. You don't need to have a wealthy family or circle
of friends.

The potential to sacrifice relationships is the complete wrong way to look at
it. Investing is not only opportunistic, it can help someone realize a dream.

Correct, if these are your first thoughts, you are going to struggle mightily
as a founder.

~~~
andrewstuart
Very naive.

~~~
pbreit
It's really not naive. Starting a startup is hard. If you and 1-3 others are
not resourceful enough to round up $150k from your networks, no matter what
you're financial means, you are going to have a very difficult go of it. This
is not the hard part.

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hitlin37
this shows how so many out there got the travel wrong before airbnb figured it
out.

