The Exchanges

Q Alright, so you pay off your credit card bills, and, and then what, you go back to air bed and breakfast?

A Well, we got to this, this sort of fateful dinner one night with one of our mentors. It was, uh, Michael Seibel and Justin Kahn, And so, um, we're out to dinner with them, and they had been helping us the last couple of months, and we're kind of like, at the end of the rope, and they can tell, and they're like, you guys need some help. You should participate in this incubator program called Y Combinator. So we're at dinner, and we look it up on our phones, and the deadline was the night before. So we're like, ah, come on. But they end up emailing the guy who runs it, a guy named Paul Graham, who they knew, and they say, you know, hey, Paul, there's these guys, they've got this concept, and, and they'd really benefit from being in your program. You know, would you take a look at their application if they send it to you? And Paul writes back and says, yeah, if they get it to me by midnight tonight.

AI assessment note: “Well, we got to this, this sort of fateful dinner one night with one of our mentors.”

Q Yeah. So, so at what point did you, were you able to actually attract money from investors? Was it around that time?

A It's precisely around this time. So, what I've learned is that when the gears start to click, investors can hear that, and they actually, this time, they came to us, and we had offers coming in from a variety of different groups, and the one that shocked us the most was Sequoia Capital, which was a pre, it is a preeminent Venture capital firm in Silicon Valley that we thought, well, maybe one day, like a year from now, we'll go talk to them, but actually they were knocking on our door to talk to us, and we ended up closing a deal with them. We got our first round of financing, which was a huge relief. We could pay rent comfortably, and we could hire, start to hire a team.

AI assessment note: “It's precisely around this time.”

Q So what'd you do? What, how would you guys do next?

A Well, we knew that we needed a great technical expertise, and funny thing, the roommate who moved out so that Brian could move in was a guy named Nate Bucharczyk. Nate was an engineer who found me on Craigslist, and as we lived together, there were some similarities in how Nate and I worked, which is that we come home from our day jobs, and in the evening, we would both work maniacally on our own projects. And I'd look over my shoulder. I remember thinking to myself, this guy has a work ethic just like I do. If I ever need an engineer, I think I'm gonna call Nate. So here we are, January of, 2008. So I meet Nate for a drink. I, I tell him about this, this weekend experiment with these three guests. And, uh, Nate loved the idea. He's like, we can use the internet to actually get people off the internet. How cool is that?

AI assessment note: “So here we are, January of, 2008. So I meet Nate for a drink.”

Q So this is the dude that inspired what would eventually become Airbnb. So how did you, so you're in your apartment, your rent's going up 25%, and what, you say, let's just rent out a room in our apartment?

A Well, I'm looking at my laptop, and there's a design conference that's coming to San Francisco, the Industrial Designers Conference, right? And on the conference website, in big red letters, it said, hotels sold out. And I'm thinking, oh man, what a bummer. Designers want to come last minute. They're not going to have a place to stay. And in that instant, I look up, and I'm looking around the living room, and I go, wait, we have so much extra space here, and I have airbeds in the closet, and the idea of hosting people on airbeds had gradually become natural to me. And the thinking is, there'll be more than just the place to sleep. We can cook breakfast in the morning. We'll pick them up from the airport. We'll give them a neighborhood guide and a map to San Francisco.

AI assessment note: “I look up, and I'm looking around the living room, and I go, wait”

Q All right, so you get into Y Combinator, and, uh, what, what does it, like, what does it do for you guys? What, what happened there?

A Y Combinator was a game changer for us, and I'll never forget the first office hours that we had with Paul Graham. He sits down with us, and he goes, where's your market? And we look at each other, and we're like, ah, we don't really have a market. No one's really using the website. But we go, you know, New York is showing some promise. We have 30 hosts in New York who are renting their, their extra rooms out in their homes, and he goes, so let me understand, your, your customers are in New York City, but you're here in Mountain View. And we're like, yeah, we're here for your program. And then he goes, what are you still doing here? Go to New York City. And he points his finger at you. He's got this thing where he like looks at you and points his finger. And it was in this moment, sitting in this room, this tiny room where something profound changed for us. Because up until this point, we had subscribed to the mythology of Silicon Valley. Yeah. Which is that You have to solve things in a scalable way. Right. Because what happens when one day the rocket ship takes off? You don't want to get left behind because your code held you back. And so we had tried to solve our problems by, by coding our way through it. And if you remember, that didn't get us anywhere because we were in the Midwest of, of analytics.

AI assessment note: “Y Combinator was a game changer for us, and I'll never forget the first office hours”

Q of Fanatics, right, biggest sports apparel brand probably in the world, um, and you're gonna, it'll be a lot for you to learn from that episode, but, You know, multi-billion dollar business. Um, Joe, when you think about, about growth at this stage, eight million dollar brand, uh, really good category. College sports. It just seems like there's endless growth. What do you think? What should she be thinking about?

A Well, JL, you've, you've already done the thing that I would have advised, which is to bootstrap as long as you can. You know, that was one of the best things that we ever did at Airbnb is that we built up value, you know, Scraping by, uh, without giving out, you know, too much of the company too early. And so as we went into fundraising, as we knew it was time to scale, as we approved out our model on our own dime effectively, um, it allowed us to go into investor conversations, having a real seat at the table, having a full hand of cards to, to work with, uh, as we got into discussions with them. And it seems like you may be at that time. You know, you've got years behind you. You've got clear, you know, success. You've got, you know, real revenue. And I'll give you one other piece of advice, which is the best time to go raise money is when you don't need it. And so if you're in a position where you've got, you know, ramen profitability, where you're able to cover your expenses and your costs, and it's effectively unlimited runway. You have a unique advantage to go out to seek investment at this point. And so I think it's really where I would start is what, where do you want to end up? Like, what is your biggest dream for where you could take this company? And I'd work backwards from that.

AI assessment note: “the best time to go raise money is when you don't need it”

Q and Slack was kind of an accident because it was this internal messaging system that they created just so the engineers could talk to the marketing people, and it was this amazing serendipitous pivot. How did you, how did you guys know that you should just keep pushing forward? Was it, were you talking about this? Was, was Brian saying, let's, we gotta keep pushing forward. Were you saying it?

A Here's where I go to when I think of that question. We had an experience that those investors didn't. We had three people stay in our home. We, for five days, we knew exactly what that felt like. It was magical. I mean, getting to show them San Francisco, getting to, like, really go from strangers to friends, but in such a short arc of time, for us was, like, really inspiring, and, and one thing you just reminded me of is, um, A piece of advice that Paul Graham, who started Y Combinator, um, gave us and gives all the startups, which is very simple. In a startup, do one thing, don't die. Keep going. Just figure out a way to keep going. I think your story about Stuart is so on point because it's just like, keep going. You don't know, like, what you'll uncover or what other idea you'll stumble onto. Like, you'll never get to idea C if you haven't tried A and B first. And if you get off on A, forget about it.

AI assessment note: “We had an experience that those investors didn't. We had three people stay in”

Q Yeah. And so were you, like, freaking out?

A Of course, I went, ran to my, my online banking and was like, oh my god, oh my god, can I make rent next month? And Brian, the same thing, and we realized that we, we almost couldn't, we weren't getting paychecks at this point. Yeah. So, this is a moment where our backs are against the wall, and I feel like all the creative training that we'd received started to pay off, because we started to think about, okay, well, how can we design our way out of this? And that was when I, I Reflected on a previous experience that I had back in Providence. The day before that I, I drove cross country, I sold off all my stuff, and when I was having that yard sale, this guy pulls up in this, the red Mazda Miata, and he starts looking at my stuff, and I'm getting pretty annoyed because I'm ready to go home, but he ends up buying a piece of art that I was selling, so we get to talking, and he tells me all about How he's about to go into the Peace Corps, and he's driving cross-country, and he doesn't know a soul in Providence, so I invite him out for a drink that night, and I make the mistake of asking him, so where are you staying tonight? And he makes it worse by saying, actually, I don't have a place. And I'm thinking, oh man, I mean, what do you do?

AI assessment note: “Of course, I went, ran to my, my online banking and was like”

Q Yeah. Wait, at what point did you and Brian look at each other and go, okay, man, I think this is our business. Was it like right after that door closed and clicked?

A I wish, I wish it was, but I can't say that it, that was the case. So that December, we both went home for holiday. And at our respective New Year's Eve parties, everyone would ask, so what are you doing in San Francisco? Say, well, we're entrepreneurs. Well, what are you entrepreneuring? And we didn't really have very much other than to say, Well, let me tell you about this time where we hosted these three guests on air beds in our apartment, and one of two things happened. People either said, oh my god, that's the coolest thing in the world. Where can I do that? Or they said, that is the most bizarre, creepiest thing I've ever heard, and they left the conversation. Yeah. And I think one of the things that I've learned is that great ideas, I think they usually start out as polarizing. They're not kind of like, eh, that's kind of ok. They either really tug on somebody's Emotions or a latent desire that they have that's never been answered before, or they really perturbed them in some way. But as long as there's people who, who really gravitate towards the idea, to me, that's a signal that you might be onto something.

AI assessment note: “I wish, I wish it was, but I can't say that it, that was the case.”

Q Do you go everywhere, right? You'd be everywhere.

A I think I'd go everywhere. I would try to like figure out how do I get this in front of my core customers? If that's the grandparents or the parents, obviously it's like, you know, is it on like one of the morning shows or somewhere where they're like consuming content and you get to appear. And I think, um, now as I'm looking at your brand, I'm reminded of, um, one of Seth Godin's books. It was called all marketers are liars. And this was like, um, Like my template early on when I first read it back in 2005, 2006, somewhere in that time. I think it's probably worth reading that because it would really, it might spark an idea of how you can take the brand that you already have, which is already in a great spot, and elevate it to the next level to get people's attention. And the kind of thing that, like, what would get you on a morning show?

AI assessment note: “I think I'd go everywhere. I would try to like figure out”

Q people who are starting businesses now, and there's going to be skepticism around some of their ideas. When a founder hears criticism, right, sometimes it's warranted. Sometimes it's right. Sometimes it makes sense. Um, from, you know, sort of from your perspective, when do you know that you should stick to your vision rather than versus, like, completely adjusting course or massively pivoting to a completely different idea or model?

A I think, Guy, this is one of the toughest things about being an entrepreneur. You have to, like, You gotta nurture the connection with your heart and with your gut, because there are times where it gets really tough, and the world is against you, and really smart people are telling you you're crazy, and if you don't have some signal coming from, you know, deep within you, a conviction, you know, you're gonna get sucked into what other people think and what other people say, and I think, you know, look, I'm no expert at this. This is Something that's honed over a lifetime. I think it's, it's just about listening to your body, listening to your heart, um, and, you know, in Airbnb's case, that's, that's what we did, and I can't explain, there's no scientific method behind it, it's just a feeling that we had something, and I'll tell you why, Guy, it's because we experienced it firsthand. We had those three guests stay with us that one weekend in San Francisco, And for every person who said that will never work at scale, I just thought to myself, well, they haven't experienced it yet.

AI assessment note: “it's because we experienced it firsthand. We had those three guests stay with us”

Q So you guys have, have obviously grown much, much bigger since then, uh, bigger than, than most or all hotel chains. And you have some similar challenges to, to companies like Uber, um, with some cities saying, hey, you know, you guys should be regulated like hotels. Um, so how do you, how do you respond to that?

A I think about that question in the context of innovations over the last hundred years, and there are three examples that come to mind of new ideas that entered the world that had a pretty rough start, but are now so commonplace in every day that you'd laugh if you thought like, oh wow, like people were against that at one point. So ATM machines at one point, and I think it was the 19 seventies, were, uh, had a lot of criticism Uh, and I think there were actually laws being written against them in certain states throughout the U.S. because it was this new and different way of, of banking where you didn't have to go inside and, and, and talk with a, you know, a person behind a desk who could maybe upsell you on other services. You just went to a, you know, a computer in a wall and, and retrieved your money. But of course, can you imagine today without ATM machines? No. Uh, the VCR I think is another great example. It was first patented in the mid-twentieth century, but it didn't really become a product until The, the eighties, the early eighties, because it was met with such resistance from incumbent industries that didn't want people to watch movies at home. The car is another example where, when the Model T came out in 19 oh eight, um, you know, it represented a new way to travel, a new way to, a new form of transportation, and there were certain cities that were against the ca…

AI assessment note: “I think about that question in the context of innovations over the last hundred years”