>ABNB reminds me of Etsy in that it facilitates real commerce in a marketplace model directly between two people.
Interestingly enough, I still tend to side with Fred's assessment of AirBnB's future. All my experiences with it as a user have been too unreliable to expect that it can scale to truly massive usability. Selling your old guitar online is a lot different than renting a room to someone. Renting a room has so much more of a personal aspect to it.
There are so many more subtleties to actually having a stranger come and stay in your house than there are to sending a stranger a book, guitar, etc via USPS.
Regardless, I still think there's a massive market out there for this type of thing, I just don't see it swallowing up the whole Hotel industry.
So, PG is a good salesman, and he hit the nail on the head with this comment:
Just wait till all the 10-room pensiones in Rome discover this site.
If you ever read a Rick Steves guide (which are not exactly the scariest guidebooks on the planet -- they're fairly comfortable middle-class NPR stuff) or tour around Europe in backpacker mode you will become familiar with the pension, aka the German zimmer or the English B&B. These are rooms. In pubs, or very tiny hotels, or people's homes. Which get rented out. They are very common, they have been a tradition forever, and they aren't very formal. Maybe you call ahead. Sometimes that doesn't even work. Sometimes you call ahead but then the landlord forgets your reservation. But ultimately you turn up, meet the landlord, get taken to the room, you look around for two minutes, you say "si" or "no" and fork over a night's rent, and there you go. It's not like buying a house or getting married or anything.
Yes, it's a bit more subtle to rent a room than to deal in used books. But it's not that subtle.
Why I think the people on Airbnb are 'cool' is that its a small population that has a lot in common (young or young-at-heart, singles and couples without kids, internet natives, own a macbook, would love to hitchhike Europe while submitting correspond reports for the NYTimes). As it grows, I'm worried that everyone's not going to find everyone else 'cool' on Airbnb.
I wasn't around for the early days of Craigslist, but I imagine it was easy to like people you found on Craigslist because they were probably very similar people to be on Craigslist so early. But now, after scale and popularity, that's gone.
I wonder if Airbnb might lose the 'cool' people edge after scaling.
also money talks in this case. As has been brought up elsewhere in this thread, there is a huge market here for unused space that AirBnB is exploiting. Even cool people like saving/making money.
About the only downside Iv'e experienced so far is that I have to wash sheets all the time (most people stay with us for 2-3 days and since we now have between 70%-100% occupancy thats a lot of sheet washing.
I'm also about to go to Paris and the value proposition of airbnb there is even better (try hipmunk's hotel search in Paris). We are staying in a private entire apartment on the seine with a view of the eiffel tower for about $130 a night.
Lastly, we can have the room available for our friends and family when they come and visit (which is the point of having a guest room in the first place). My parent stay there (for free, of course) about 2 nights a month.
Here in my neighborhood, in Chicago, one can find a room for about $40/night; 15 nights and I already have half my rent. So yes, having a roommate might be less work (but that depends on what you consider "work") but I can make more money renting a room out by the night.
I stayed in like 4 airbn places in SV and learned:
1) That it certainly not for everyone, some ppl just dont need all this fun and pretty happy with avg hotel room.
2) If you think that its not for you, still please give it a try, there is a very serious chance that you will absolutely love it. (I was super skeptical too)
3) I dont pay Airbnb fee on second stay and just contact my 'paid friends' directly. They need to consider this and if its a problem in scale.
4) I absolutely love it and will only stay in hotel in worst case scenario if all my "paid friends" in area cant host me.
That's a really good point. A common theme in Paul's argument is that "AirBnB could be the next eBay." But eBay's worst nightmare is buyers and sellers communicating directly, saving each other money while cutting the company out of the revenue loop.
AirBnB is almost more like a dating service than a marketplace... a 'buyer' and 'seller' who prove compatible with each other will never need to use the service again, at least not in the same city.
I've been out of the travel/hotel game for about 4 years now, but I worked in it on and off from ~'97 through to '07.
It's an industry ripe for a new player to do a Paypal style end run around the traditional banking/creditcard industry.
I don't know whether Airbnb are that player (I'm 100% sure pg and Fred are _much_ better judges of that then I am), but I'm also at least 99% sure that it _won't_ be any of the existing big players (Sabre, Gallileo, Pegasus, MyFideleo, Worldres were the large players I worked with) that revolutionise the hotel booking business.
I'm not saying I wouldn't check hotel deals, but reading honest reviews from people who really stayed in each room, and sometimes getting to half off a hotel works great for me. They are definitely moving into 'high on my list' for travel, personal and business. I'm guessing I'm not alone here.
writing on the wall: https://skitch.com/webwright/rieyj/airbnb-search
Note the # of entire home/apt entries. My guess is that these (with B&Bs, inns, and eventually hotels) will dominate the listings.
ABNB has a challenge with positioning moving forward-- a LOT of people think they are all about renting a room in a stranger's house, sharing a common area, etc. But their growth speaks for itself.
I opted for ABNB literally 5 out of 6 times this past February. All successful.
1. The collective level: are there enough people who trust strangers that Airbnb can make tons of money, and help out those people? It looks like the answer is yes.
2. The individual level: are you okay with trusting some random strangers from the internet? I think you probably should be -- people tend toward decency, overall -- and it's possible to change the way you feel about something with a little effort.
-- Their website design
-- Their code (Rails? Jquery?)
-- Their hosting / scalability / "cloud" strategy
-- Source control methods, dev environment, tools
-- APIs, "ecosystem", social media, "viral rate" etc.
-- And more...
Basically, all the things that most of us here spend most of our time discussing.
1) Idea / Team
3) Talk to people with money
4) Go to #2
That's all Fred is looking at in that phase-- because even an awesome team won't build a venture-sized business in a tiny or low-growth market.
At our Demo Day, there was two teams that had a veritable investor feeding frenzy around them-- and they were both attacking markets that were either huge/rich or markets that were growing like gangbusters (and they had the good sense to talk as much about the market opportunity as they did about their product).
Sure the operational factors are important (and that's why they get discussed here), but they're secondary to size of the market and the nature of the solution when it comes to how big the investment opportunity is.
I rented a room in L.A. using Airbnb. The owner of the room said he made $4000 in 3 months on two rooms that would have otherwise been vacant. If you're making this much money for people you've tapped into one helluva market.
Have you ever given a similar vote of confidence to founders who didn't live up to your expectations?
Moreover, if you do pump a startup and you are wrong, then to explain the situation is often to piss all over the work of said startup.
1) Improved the perceived standing of PG among the entrepreneur-class. It proves that he really adds value the way he says he does - hawking, what can easily be seen as a very weird idea at a time when not many people see it.
2) Improved my perception of Fred. Even though he passed on the deal, he is stand-up enough to not only admit it - but allow PG to post this email exchange that shows that he was "one of the old guys" that were skeptical. It also shows that he wasn't just pulling PG's chain, but was really debating it internally.
So many 'business' people think that long waffling sentences seem clever and impressive. Nothing is further from the truth.
This is longer, but it actually means something. Instead of saying that he needs more data in order to make a decision, he's said that he needs more time to make a decision. The data comes natrually.
A "data-gathering-phase" is the phase that everyone is always in about everything. I am currently in a "data-gathering-phase" with respect to whether or not I should make another cup of coffee. My current cup is cold, but still contains liquid. So it's not a sure thing that I should make myself another cup of coffee. On the other hand, hot coffee is nice. I can't decide, so I will continue to gather temperature and flavor data until I make a decision or I spill my coffee.
See how meaningless that is?
This has gone viral!
In the end, I can somehow understand, and don't find it 'wrong' or 'meaningless' per se.
This would also not preclude, "you know, I was wrong... still interested in some cash?" It's a business transaction, not dating.
Furthermore when you come off as rude the first time, you discourage them from asking the second time. What if they come back with an idea that is good, and a team that rocks? Don't close doors that you don't need to close.
The format seems more IM-over-email than "email where important shit goes down."
Arriving in a new city without internet it was great to have HH and be able to find 10 hostels and know they are going to be open. I guess McDonalds wifi etc. means Airbnb could have been a competitor, but the ease of finding accommodation reliably, of a reliable standard, and at more affordable prices meant we used HH far more than Airbnb.
Having said that, the times we could manage to find a room that was genuinely free, and appeared to be genuine people with a spare room, were some of the highlights of our travels. The people and the rooms were both fantastic, and it's this "home away from home" and social aspect I think Airbnb should be pushing. I think at the same time they should be working hard to remove the listings that I could best describe as dodgy guys trying to run a hotel out of an apartment building without adhering to local hotelier laws as we found these far too prevalent in some cities.
YC absolutely does hustle for you like this, and it's the best kind -- genuine.
Mark Pincus is better known as the founder of Zynga, unless this is another Mark Pincus.
It just seemed a very good sign to me that these guys were actually
on the ground in NYC hunting down (and understanding) their users.
I don't mean this in a negative way. It actually is just evidence that paul graham is a badass.
By the by, I was very impressed with the founder I talked to (Nick), and I would suggest that if you are a superb developer who is itching to join an existing startup, get in touch with Hackruiter. If they think you are a good fit, they may very well be able to either make the right connections on your behalf or at least point you in the right direction.
It possibly shows why Sequoia are the best.
pg: Did they explain the long-term goal of being the market in accommodation the way eBay is in stuff? That seems like it would be huge. Hotels now are like airlines in the 1970s before they figured out how to increase their load factors.
fw: So I think it can scale all the way to the bed and breakfast market. But I am not sure they can take on the hotel market.
The problem is, the regulatory system (not to mention the neighbors) do not want unlicensed, widespread "crowd-sourced" illegal hotel rooms, and are working hard to block them:
Paul Graham talks about the 'eBay' of accommodation -- but a huge percentage of eBay's revenue comes from professional sellers, which is exactly what will run afoul of regulation in the rental/hotel market.
hotel chains won't be sitting idly while few geeks eat their market.
oh and btw, isn't eBay kinda dead thanks to Craigslist?
AirBnB has raised $7.8M (at, what, around a ~$40M valuation at the time? 6% of which would be over $2m). Is it really that incredible that someone would send a few emails for a shot at that kind of money?
Which, again, isn't to denigrate him at all. He's obviously very good at what he does and deserves a lot of respect for it.
More prosaically, if you can delay the company's getting to break-even, they'll need more rounds of investment, which mean you can buy more of the company.
And then, of course, there are personal feuds. Remember what happened to Scout Electromedia? Their shutdown probably had as much to do with investors being pissed off about being ignored as with any actual rational assessment of their future prospects.
It's not the end of the world.
I was thinking about the impact of hotel chains' business traveler kick-back schemes (euphemistically known as "rewards" programs) on the independent room providers (a phrase I just coined to run the gamut between someone renting out his spare room and a boutique hotel) ability to attract business travelers. How, as a business renting out 40 rooms in a single city, do you compete with Marriott who can offer some guy and his wife a free weekend stay anywhere in exchange for funneling his company's (or even his company's client's) dollars toward their brands? What if ABNB offered up to these independent operators a rewards program similar to those offered by the big chains? They would move beyond be a transaction facilitator toward being closer to a consumer brand. I believe that lower-end hotel chains basically follow this model -- independent owners become franchisees of the brand as a way to get bookings, have a recognizable brand, etc. While I doubt that too many of today's ABNB bookings are business-related, that number will surely increase. I love playing armchair QB :)
It's a great business.
Does this mean that ideas are more important than investors really let on?
Thanks for sharing the inside story. :)
If I remember correctly, USV didn't exactly pass, but made a play around the time Sequoia did.
I could be wrong but I don't imagine too many people push back so hard on @paulg like that.
I have great respect for @fredwilson for pushing back and then admitting in a very public way that he felt he made a big mistake.
The best line of the email is @paulg describing @fredwilson: "He is the least suburban-golf-playing
VC I know."
Glad this story was shared and glad there is continued mutual respect there -
Just curious what the norm is around the vc/angel circles. Are most people pretty direct/candid? or do they mostly hide behind business speak?
Both Fred and PG are willing to
a) admit mistakes and
b) be totally transparent about it and
c) publish that transaction for others to learn from put them BOTH in a class above and beyond traditional VCs.
Are you "other" guys listening out there? This is why YC is eating your lunch with new startups...
- had he seen couchsurfing at the time?
http://www.couchsurfing.org (launched as beta in 2003)
Are Airbnb copycats?
(The Disqus link doesn't quite work all the time tho...)
The capital B is either a branding miss or an intentional branding effort to look more upscale than Airbed.
Thanks for publishing this exchange. I've never known you to be anything but exceedingly polite and thoughtful; now I learn you're doing good work behind the scenes too. Inspiring!
I was under the impression that YC introductions were pretty much the equivalent of "hey, here are some guys...invest in them"...but here you can see that there is a lot more pressure....bordering on begging
Team > Idea.