Brian Chesky and The Airbnb Story (from Broke to Billionaire)
With a net worth of $4.1BN at the age of just 38, Brain Chesky has come a long way from renting out air mattresses on his floor and struggling to afford his rent.
In his high school yearbook, Chesky demonstrated his sense of humour by quoting Jerry Seinfeld:
"I'm sure I'll amount to nothing."
He thought it was funny - his dad however did not!
In 1999, Chesky attended the Rhode Island School of Design, where he studied industrial design and captained the hockey team.
During his time there, he also met future AirBnB co-founder Joe Gebbia.
According to Gebbia, after graduation, he pulled Chesky aside and said:
"Before you get on the plane, there's something I need to tell you. We're going to start a company one day, and they're going to write a book about it."
Chesky then moved the LA to work in industrial design.
However, he realised early on that it wasn't something that he wanted to do for the rest of his life.
So, he moved the San Francisco with Gebbia.
In October 2007, a designers conference in San Francisco caused all the hotels to be sold out.
Chesky and Gebbia were struggling to afford rent for the month and Gebbia pitched Chesky the idea to rent out space for those who couldn't find a place to stay.
Realising the potential of their idea, a few months later Gebbia and Chesky were joined by their engineering friend Nathan Blecharczyk.
At this point, Chesky was $25K in credit card debt, and Gebbia was tens of thousands of dollars in credit card debt.
They weren't getting much traction either...
In 2009, they shortened their name to Airbnb.
In the same year, they picked up a $600K seed investment from Sequoia Capital - Chesky describes it as going from only eating leftover cereal to "ramen-profitable."
By 2011, Airbnb was already in 89 countries and had hit 1 million nights booked on the platform.
That same year, Airbnb joined the "unicorn" club - as some of Silicon Valley's biggest VCs put $112MM into the startup, valuing it at over $1BN.
Shortly after, they had some controversy to contend with:
One host had their place completely trashed, and other hosts started to complain about guests throwing wagers or leaving their place in disgusting shape the following morning.
As a result, Airbnb started implementing a coverage policy - upping it to a $1MM "Host Guarantee" by summer 2012.
As well as this, the company also had a growing problem of people getting fined or evicted from renting their place out on Airbnb.
Cities soon had a growing problem with Airbnb rentals, and the company's regulation headaches began.
This culminated in mid-2016, when Airbnb became a Federal Trade Commission target after three senators asked for an investigation into how companies like Airbnb affect soaring housing costs.
Of course, soaring housing costs have nothing to do with the Fed printing trillions after 08...
In October 2016, New York Governor Andrew Cuomo signed a bill imposing steep fines on Airbnb hosts who break local housing rules.
The hotel industry actually claimed credit for these events:
The American Hotel and Lodging Association - the trade group that counts Marriott International, Hilton Worldwide and Hyatt Hotels as members - said the federal investigation and the New York bill were "notable accomplishments."
This makes sense of course: Airbnb has brought hotel pricing down in many places during holidays, conventions and other big events when room rates should be at their highest and the hotel industry generates a significant portion of its profits.
Speaking of profits, Airbnb first became profitable during the second half of 2016.
Airbnb's revenue grew more than 80% from 2015 to 2016.
In 2017, Airbnb raised $1 billion in funding, bringing total funding raised to more than $3 billion and valuing the company at $31 billion.
After a $200 million profit in 2018, Airbnb posted a loss of $322 million in 2019.
In September 2019, Airbnb announced its plan to go public in 2020.
So how does Airbnb make money and why are they now posting losses?
Airbnb makes money by charging a service fee — a percentage of the total — to both the people who rent out their space (hosts) and those who stay there (guests). The lion’s share of expenses and work fall on the hosts — they buy or rent the property, coordinate with guests, clean up after them — while Airbnb collects fees.
There are four main reasons why they are now posting losses:
1) Safety Issues
2) Tech and Admin Costs
3) Marketing Spend
4) Acquisition Costs
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