Sign up FAST! Login

Airbnb struggled to raise investment in the beginning.

Stashed in: Founders, Startups, 106 Miles, Silicon Valley!, Funding

To save this post, select a stash from drop-down menu or type in a new one:

Adam Satariano and Douglas MacMillan of SF Gate write:

Before the 6-year-old company took off, Chesky was so desperate for money that he was offering a 10 percent stake in Airbnb for $100,000. Everybody passed, Chesky recalled onstage at South by Southwest Interactive.

Today, that investment would be worth an estimated $250 million.

During those dark days, Chesky kept a binder full of credit cards to manage the debt he had accumulated to build the company. But eventually, investors came calling. Peter Thiel, one of Facebook's earliest backers, led a round of financing of about $150 million in Airbnb, valuing the San Francisco company at about $2.5 billion in October.

The site is now being used by 50,000 to 60,000 people a night, Chesky said. In June, Airbnb was booking 38,000 a night. During the festival, which began Friday, about 8,000 people booked accommodations in Austin through the site, according to Adweek.

Airbnb also has helped spawn the sharing economy, where people offer services directly to one another through online hubs. "The sharing economy could replace a huge part of the existing economy," Chesky said.

Many very successful companies like Airbnb struggled to find any funding at the beginning.

The question is, where is the next potentially huge startup that's struggling to raise funding right now?

Fred Wilson on passing on Airbnb's seed round:

But the idea was/is so good, so ripe, so fitting, considering the existing options at the time.  Obviously this has now been proven and accepted.I haven't done a ton of research, but do we know why investment interest was so sparse in the beginning?  Typical early stage pitching difficulty, unrefined website, or lack of refinement in the pitch?  Was it YCom's assistance that led to Thiel and then where it is today?

Venture capitalist Fred Wilson explains why he passed:

We made the classic mistake that all investors make. We focused too much on what they were doing at the time and not enough on what they could do, would do, and did do.

He goes on to say "We missed Airbnb even though we loved the team."

Read more about Fred's thoughts on passing on Airbnb:

That's logical. I think I was more interested in other (speculative) reasons why.

The speculative reason why is a common story with startups: Investors were afraid.

Until a startup is "de-risked", nobody wants to invest until everyone wants to invest.

What did they do from then on that was different from what they were doing at the time, based on the core service?

Not much.

There's a lot more details that have been refined, but it pretty much works the same as it ever has.

I thought so, too.  Obviously they've made nice design changes, maybe enhanced feedback/review systems, but beyond that..I guess the initial dismissal due to fear/risk.. is what any disruptive/niche idea comes across in its growth.  Now I am curious about how many legit disruptive ideas could have made it, but simply didn't.  Maybe those that should have made it, did (is that a general truth?).

You May Also Like: