CEREAL Entrepreneur

How Airbnb founders sold cereal to keep their dream alive

In 2007, Airbnb co-founders Brian Chesky and Joe Gebbia moved to San Francisco after graduating from the Rhode Island School of Design. With no jobs, they struggled to pay for rent. Seeing how often San Francisco hotels would get fully booked — especially during conferences or events — they sensed an opportunity. They came up with the concept of an “Air, Bed & Breakfast” which entailed offering an air mattress and breakfast in their apartment. Given the relatively low tariff of USD 80 per night, they swiftly managed to secure 3 guests. This embarked their entrepreneurial journey.

Despite of initial success, they struggled to get more users to sign on the platform. To remain afloat, they reached out to potential investors for funding. After meeting with 15 Angel investors, all of whom ended up passing on the idea, and half of them did not even bother replying to Airbnb’s introductory email. Out of desperation, they decided to use credit card for short term funding which quickly escalated to multiple credit cards and ultimately led to Brain racking up USD 30,000 in credit card debt.

Hoping to sign-up more users, they targeted the 2008 Democratic National Convention in Denver, Colorado where Obama was set to speak before 80,000 people. Even though usage spiked for the event, they didn’t gain the day-to-day traction necessary to pay off their outstanding debt and become a profitable business.

Since Air beds were not working out they thought of selling breakfast cereals. As the presidential campaign gained momentum, they used their designing skills to develop custom-designed Obama and McCain themed cereal boxes with catchy titles of “Obama O’s: The Breakfast of Change” and “Capn’ McCains: A Maverick in Every Bite.” After securing hundreds of printed boxes from a Rhode Island School of Design connection, they bought and filled their shopping carts with the cheapest cereal in the market. Back in their apartment, they hand-folded the boxes and sealed them with a hot-glue gun.

By pitching the product as a limited-edition collector item, they sold them for USD 40 a box. Oddly enough, they ended up selling USD 30,000 worth of cereals which fueled them to stay afloat. This strategy also helped them to raise enough capital on Y Combinator and thereafter things were fairly smooth.

There is no shortcut to success or anything like instant success. Founders were creative when they had the least resources and they believed in their product. Even for a company like Airbnb, it took over a year to secure investor funding. As of 2021, the company has over 150 million users worldwide, with over 6 guests checking into an Airbnb listing every second, properties listed in 100,000 cities and market capitalization of USD 80+ billion. It is safe to say that the co-founders won’t be racking up any credit card debts going forward.

The oak fought the wind and was broken, the willow bent when it must and survived.

― Robert Jordan, The Fires of Heaven

Sources: 

https://www.wired.com/2017/02/airbnbs-surprising-path-to-y-combinator/

https://news.airbnb.com/about-us/

https://www.valuethemarkets.com/2020/08/27/airbnb-ipo-is-a-40-billion-valuation-possible-in-2020/