"Story of Making a 'Diamond' Out of Recession"

Wriiten by: Dr. Mili Bhatt (B.D.S, M.B.A) Campaign Manager at Accenture

The Mini Case study will highlight

1. How they come up with the idea of sharing houses with strangers.

2. How they managed to get first investor "Paul Graham"?with investment of $20,000.

3. How they faced COVID pandemic when their revenue reduced by 80%.

Airbnb

Founded by Brian Chesky , Nathan Blecharczyk , and Joe G. (2008)

This story starts with three ordinary people who happen to be friends. While searching for places to stay on rent at the time of recession, comes the idea of sharing own places/homes benefiting financially not only homeowners but also people searching to stay on a low budget.? Sharing houses with strangers sounds unconvincing to multiple investors they were exploring at that time. Oh wait!!! They were also packaging cereals and selling them as a part of another business considering a fruitful market that worked for them.

As per one article by Mary Hanbury on Business Inside India: "The idea came about after Chesky and Gebbia struggled to pay their San Francisco rent and decided to rent out airbeds in their apartment to make extra cash"

At such a difficult time of recession in 2008, when people were out of jobs and businesses were seeing a reduction in profit or bankruptcy or acquisition, no one could have thought that there could be an initiation of a multimillionaire business. However, the most important portion of their idea was providing value to people by giving earning potential to people already staying in their houses and also adding affordable houses to stay in the market.

However, after the idea generation, here comes the most difficult ladder one entrepreneur climbs in their journey and that is finding investment. After seeing multiple “No”s, one day they met Paul Graham, a beautiful soul. As much as his soul was beautiful his brain and passion were equally sparkling. He said one line and that was if these three people can sell packaged cereals in the market at the time of the recession, there is some potential in them.

Started the journey of the company with One successful investment of $20,000 by Paul Graham, facing complications in the journey of business. They also started with the advice of investors, to keep in personal contact and meet the homeowners and customers and ask about the difficulties they face while sharing houses.

As per Paul Graham: "It’s better to have 100 customers that love you than a million customers that just sort of like you". For this, They would fly during Y Combinator from Mountain View to New York and would go door to door and meet with everyone of Airbnb hosts and literally live with them.

They saw a little bit of resistance in the minds of customers while moving to stranger's house regarding whom they have no level of convergence or knowledge. In this scenario, after doing a user experience model study they got to know that after adding a small intro about the homeowner on the website, it was easy for people to connect and trust each other.

After a couple of years of running a successful business with multiple employees and spreading to enormous places, comes a massive roadblock during the COVID-19 pandemic, where some people stopped travelling and some went to their? native places to stay. Their business dropped by 80% in 8 weeks. Journalists were preparing the company will go bankrupt. In this challenge, they had to lay off multiple employees. On the other hand, for a while, Brian Chesky was anyway having a feeling of need to change the company structure due to watching multiple layers of structure like any other company working at that time. The COVID pandemic triggered him to do it anyway.

He learned 2 lessons during the pandemic: Be Optimistic and Decisive. He decided to change the entire running of the business internally, from a divisional structure to a functional organisation. He removed the marketing department and started doing it himself with 100 interviews that year. These three people decided to make a fluid organisation where every project will be reviewed every 2 weeks, 4 weeks and no one will be managers. Everyone worked together to reflourish the business.? For observation of data, it was noted that one year before the pandemic they lost 100 million dollars and after the pandemic, 3 years later they made 3.4 billion dollars.

Summary of Crucial Impact in this world by Airbnb:

Through their successful Airbnb business, they cured “one of the most common killer diseases” in the world and that is “Loneliness”. By bringing people together to one place and by providing an affordable stay to friends, couples or family who are out vacationing with their loved ones.

Bibliography:

Courtney, E. (2023, May 2). Working at Airbnb: Company insights, roles, and benefits. The Forage. https://www.theforage.com/blog/companies/working-at-airbnb

GeniusU Genie. (2023, July 13). Article title. GeniusU. https://app.geniusu.com/articles/3884022

Youtube Link: https://youtube.com/watch?v=YvA5RFhmLNA

Shetty, S. (2016, May 6). Airbnb tells us the story of its very first guest, and yes, it was an Indian! India.com. https://www.india.com/travel/articles/airbnb-tells-us-the-story-of-its-very-first-guest-and-yes-it-was-an-indian-3234370/

YouTube Link: https://youtube.com/watch?v=V6h_EDcj12k

Hanbury, M. (2019, May 20). Y Combinator's cofounder got flamed for using Airbnb's founders as an example of why you don't have to be 'rich kids' to create a tech unicorn. Business Insider India. https://www.businessinsider.in/y-combinators-cofounder-got-flamed-for-using-airbnbs-founders-as-an-example-of-why-you-dont-have-to-be-rich-kids-to-create-a-tech-unicorn/articleshow/69412616.cms

Twitter post by Startup Archive: https://x.com/StartupArchive_/status/1737446769519124584