It’s a funding struggle that no one believed in. During these trial and error phase of AirBnB website, they had to use credit cards so much so that they faced a heavy debt.
This AirBnB success story is the best example of staying positive during the real business struggle. Check it out!
Probing for ways to come out of debts, they focused on a political event.
The Democratic National Convention event as mentioned in the above phase was going to be conducted in a stadium with a holding capacity of 80,000 people. But the event had only 17000 hotel rooms.
They thought to grab this opportunity that can even help them to raise funds and come out of heavy debts.
Within the first week of the website launch, almost 800 properties got listed. Meantime the news highlighted an increasing number of people interested to participate in this event but there aren’t any places to stay.
The three founders of AirBnB wrote to reporters that they have 800 listed properties on their website for people to book a homestay. Soon they got into the news stories and came live in CNN interview. The business got a great response from the event participants with almost 100 people booking a stay on their website.
But one week after the event, the business got into zeros. They were unable to get the expected bookings and guest response towards airbnb.com.
This was when they were literally in a big pool of debt. The toughest struggle behind AirBnB success story.
To survive and finance the company they thought to generate the press.
Brainstorming on how to convince the political reporters who are all focused on the upcoming elections to be held in November 2008 made them conclude-
‘There’s a lot done with airbeds, let’s do something with breakfast!’
They designed a precidenciary themed cereals ‘Obama Oats’ by getting the boxes printed, going to the supermarket and re-stuffing the cereals into the Obama themed boxes.
Instead of just sending emails to the reporters, they sent approx 100 of each box to each reporter in order to raise questions.
It worked! This made them come live on CNN again.
And they even sold the Obama cereal boxes for $40 each whereas the actual cost of each of these boxes was $1 to $2.
And unexpectedly earned $30,000 within a week from which they were only able to clear out their outstanding debts.
This is how they tried coming out of debts that just happened out of the blues.
The real battle that made them scrappy!
Still facing the debts, they also tried to raise money in the traditional way of reaching out to many venture capitalists and investors.
But things got worse with rejections from everywhere.
The fall of 2009- totally jobless, no source to raise money except the $30,000 earned selling Obama cereals which just cleared their outstanding debts.
Things got more bleak with recessions in the global economy.
This was the time when they had 90% chances to give up and only 10% chances to raise funds.
One of their advisers said to apply in Y Combinator a program run by Paul Graham. They tried to apply and finally got selected for an interview which didn’t go well.
As they were walking out, Joe gave a box of Obama Cereals to Paul Graham. Listening to the Obama Cereals story, Paul Graham loved it and led the three AirBnB founders into the program.
This was the point where things started getting good. With developing connections and pitching mentors through Y Combinator, they got their first round of funding of $5,85,000 in the year 2009.
This funding was still not enough to pick up a pace in their business.
But this investment was done by Sequouia – one of the leading venture capital firms which dragged the attention of other powerful VC firms onto AirBnB.
Hey folks! Here starts the interesting sensation of AirBnB.