Startup 101: You just need 1) a great idea, 2) money, 3) marketing, right?
Just ask Brian Chesky, Billionaire CEO & Co-founder of AirBnB, who will tell you… err… the exact opposite.
Brian says of AirBnB: “It wasn’t supposed to be the big idea – it was supposed to be a way to pay the rent while we thought up the big idea.”
That was back in 2007, when Brian and AirBnB co-founder, Joe Gebbia, were broke and trying to figure out how to make rent. They decided to try and cash in on an upcoming design show in town, by renting space in their house. “We didn’t have any beds, so we pulled three airbeds out of the closet, inflated them, and called it the Air Bed & Breakfast.”
That’s where the idea began. They got three takers, and made rent. But Brian still didn’t think it was a business until he went home: “When I went home for Christmas, my parents asked what I was doing . I didn’t want to say I was unemployed so I said I was an entrepreneur.”
“When they asked what I was working on I told them about the Air bed and breakfast idea. After thinking about the idea more and talking about it more I decided that we should go back to the drawing board and do this idea.”
#1: To get started, you DON’T need a great idea. You just need customers who are happy to pay you to solve their problem.
In 2008, Brian and Joe tried to raise funding, but no one was interested. So they decided the best way to raise money was through their customers – and if their customers weren’t buying what they were selling, they’d just change the product.
As Brian recalls: “We got 80 bookings during the Democratic National Congress. The downside was, after the DNC we had no bookings, we were a year into the business, we were in debt, every investor said no… We were at rock bottom.”
2008 was the year of the U.S. presidential election. “In debt and desperate one midnight, we had the idea if the “air beds” in air bed and breakfast wasn’t working , maybe we can sell “breakfast” instead. We started thinking about president themed cereal and we convinced a producer to make cereal for us (called “Obama O’s and Cap’n McCain’s) and since we couldn’t pay them he would get a portion of the sales.”
“We hand folded 1,000 boxes of cereal, numbered each one, and sold them at $40 a box . We sold $30,000 worth of cereal and this is how we funded the company and came up with the phrase “be a cereal entrepreneur”.
#2: To get going, you DON’T need money from investors. You need cash generating products to keep you going.
Brian and Joe then joined the incubator, Y Combinator. There, they met their mentor, Paul Graham, who gave them the key to viral growth. Brian explains:
“Paul Graham gave us a series of advice that changed our trajectory. The most important of this advice was that it was better to have 100 people who loved us vs. 1M people who liked us. All movements grow this way.”
“The problem with Silicon Valley is when you build an app you are expected to make the app go viral and reach millions of people. This is the worst way to think about it — it’s much better to get 100 people to love you.”
“During YC, we would commute from Mountain View to New York City and we would meet with every single host. We would live with each of the hosts and write the very first reviews.”
“We asked the host “what if we had a button you pushed and a photographer showed up to take pictures of your home?” The hosts loved this idea and I went out and borrowed a camera from a friend. The hosts were shocked that the founder was also the photographer — in fact we would also hand deliver the rent checks to our first hosts too.”
Once they had their first 100 raving fans, AirBnB grew rapidly through word-of-mouth, and from those first 100, they multiplied by x100 to 10,000, and again by x100 to 1,000,000.
Today, AirBnB has over 1,500,000 listings in 34,000 cities, and as of this month (when they just raised $1.5 billion), AirBnB is worth $25.5 billion, and Brian is worth over $3 billion.
#3: To grow, you DON’T need clever marketing. You need customers who love you, and who happily recommend their friends, who then love you too.
What can you do to un-learn the lessons we’ve been taught to build an industrial age business where the factory is king, and re-learn the new lessons to grow an information age business where the customer is king and queen?
Focusing 100% on the customer also keeps you from getting distracted on the wrong thing. This year Airbnb changed their logo and came under heavy fire from the press for a logo that inadvertently looked anatomical in nature – Enough to create a PR crisis in many companies.
But when quizzed at a recent conference about his logo design choice, rather than get defensive, Chesky joked: “This logo is not allowed within a hundred feet of a school.” and added “I’d like our brand to be so iconic that you look at somebody naked and say, ‘You look like the Airbnb logo.’”
Following these three steps won’t necessarily make you a serial (or cereal) billionaire, but they will definitely help you get started faster, get going smarter, with less stress and more fun.
I’ll be sharing more tips for startups in the new year, so stay tuned in. And if you’re just getting started with your business, stick with it! It took Brian years of perseverance before AirBnB became the success it is today.
(You can read more on Brian Chesky’s story which he shared with LinkedIn’s Reid Hoffman at a Stanford class last month, visithttp://bit.ly/brian-and-reid)