What Every Startup Can Learn From AirBnB

From the various conversations I have on a daily basis, we have entered that strange part of the Silicon Valley cycle where entrepreneurs are starting to conflate huge amounts of investment dollars with the future success of their startups. They should learn from AirBnB, a San Francisco-based start-up.

Brian Chesky, CEO and founder of the company, stopped by last week to shoot a GigaOM Start-Up Sessions (video below), during which he shared the story of AirBnB and the lessons he learned in three years of chasing a dream.

Chesky has already learned some lessons he wants to share with his fellow entrepreneurs:

Conventional wisdom is overrated.

Being broke brings an incredible amount of discipline and focus.

What your company does in its childhood has a big impact on its future.

In solving your own problems, you solve problems for other people, and through this, an opportunity often arises.

AirBnB is a classic Silicon Valley story of bootstrapping, rejection and eventually success. It is an idea that defies all logic. In fact, by conventional wisdom, it seems like a pretty dumb idea. Who would want to rent spare rooms to strangers from strange cities in their homes? And would you rent a room in someones house, instead of a hotel? (Couchsurfing, a non-profit service which offers a similar service but for free took years to develop critical mass with its user base.)

Brian and his co-founder, Joe Gebbia, decided to start a company, and they moved to San Francisco. There were just two little problems: They didnt really have a startup idea and they didnt have the rent m! oney. Th ere was a design conference in the city, and there were no hotel rooms for rent. Joe and Brian thought, it would be cool to rent air mattresses to conference visitors and make enough cash from that to make rent. Three people bought into the idea.

That little idea turned into what is now AirBnB. Along the way, they brought in their third co-founder Nathan Blecharczyk. Today, you can rent a tree house, a castle, a lighthouse or a houseboat on AirBnB, which lists rooms from 9,000 cities in 175 cities. Between those three initial rentals to today, AirBnB has had tough journey. Brian and his co-founders sold special breakfast cereal in boxes that carried funky names (Obama Os and Breakfast of Change) to attendees of the Democratic National Convention in November 2008 so they could keep AirBnB going.

That was our seed money, laughs Chesky. That hustle convinced Paul Graham to take on AirBnB in his YCombinator program, though he initially didnt much care for the idea of the company. Today, looking back at those early days, Brian is pretty sure that lack of money has defined the company and its culture of frugality. That lack of money also made Chesky and his cohorts get used to rejection, which only helped steel their resolve.

AirBnB worked out of Brian and Joes apartment and when it ran out of space, Brian moved out of his bedroom and began living out of a suitcase. Over past six months, he has lived in 30 different locations he found on AirBnB. The more he used his service, the more he figured out ways to polish it.

Being broke and being cheap brings incredible amount of focus. When you dont have money you cannot have five strategies and you have to pursue one strategy, says Chesky. You cannot build things people dont really want.

Lately, AirBnBs fortunes have changed. Late last year it snagged $7.2 million in funding from Sequoia Capital and Greylock Partners, on top of the $600,000 it received in seed funding. That infusion of cash hasnt really changed Brian. He still lives out! of a su itcase (actually a duffel bag). Most of the money is for growing the company into new markets and new verticals.

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