FALL 2018 | BUAD 492

INTRO TO I&E FINAL

THINK BIGGER: A LOOK INTO THE STARTUP
STORY OF AIRBNB
JAKE WANG

INTRODUCTION
Founded in 2008, Airbnb’s mission is to create a
world where people can belong through healthy
travel that is local, authentic, diverse, inclusive OVERVIEW
and sustainable. 
- Airbnb.com Introduction 1

The Business Model 2

I must admit, I never would have guessed the Airbnb
Opportunity Discovery 3
story was so fascinating. Maybe that's a testimony to
Lessons from Prototyping 4
the simplicity of the product in its current form - and
Founders Profile 5
evidence of the remarkable entrepreneurial mindsets
Airbnb's Success 6
present in the founders Brian Chesky, Joe Gebbia, and
Nathan Blecharczyk. References 7

This paper will take a high-level look at the Airbnb

startup story through the lens of concepts learned in
BUAD 492 Intro to Innovation & Entrepreneurship.

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THE BUSINESS MODEL

Airbnb’s concept is simple - turn unused living space into extra CLICK HERE TO SEE
cash. Guests are attracted to the promise of safe, easy, and THE CANVANIZER
affordable travel. The interaction breaks down barriers between MODEL!
strangers, creating a community between its users, and fulfilling
a fundamentally human need for connection. These are the
basic value propositions in Airbnb’s model.

Travelers are segmented from business to leisure, budget to luxury, and hands-off to those
seeking the authentic local experience. And where’s the money? All online - the company
earns its fee-based revenue off the transactions between hosts and guests, handled
seamlessly through their primary distribution channel, the Airbnb website/mobile app.

In addition, its ecosystem of guests

becoming hosts (and vice versa)
encourages organic growth through
word-of-mouth spread.

Airbnb maintains its customer relationships by ensuring users are satisfied with their
experience and promoting a positive public image.

This suggests key partners, aside from investors/VCs, include the hosts themselves and
local governments (i.e. in discussing regulation issues vs. the economic benefits of
tourism.) Key resources include the website/app functionality and the data produced from
operations. Less obvious is the use of the company’s name as a verb, suggesting the
company has become more than a service and part of a culture [6].

Naturally, Airbnb understands their user experience is a critical component for continued
success. To improve their value propositions, key activities include data analysis, user
engagement, and marketing. These activities can be costly, and accordingly, customer
acquisition (especially during the early stages) is a major component of the cost structure.

All together, these nine elements compose Airbnb’s basic business model.
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OPPORTUNITY
DISCOVERY & BEYOND
It might look like a lucky accident… but sold-out
hotel rooms aren’t unusual. What did Airbnb do
differently?
Amy Wilkinson (The Creator’s Code) says
innovators “stay alert [for] fresh potential, a
vacuum to fill, or an unmeet need.” [13] And
founder Joe Gebbia in particular excels at a skill
described in HBR’s The Innovator’s DNA –
association [8].
Linking his airbed-hosting experience in
Providence, his unused living room space, and a
hotel room shortage, Gebbia acted as a sunbird
and repurposed resources people typically
consider part of their personal sphere into
accommodations for strangers. As an architect,
the team envisioned Airbnb not as a mere
alternative to hotels, but as an experience. Then
practicing the innovator skill of experimentation,
they made a little bet. Their MVP was the first
version of the website – AirBedandBreakfast.com
No one could have predicted
people from around the world
would be sending resumes to
stay on an airbed.
With this unexpected success,
Gebbia looked to exploit it- “What if
we made it possible for other
people to host guests in their home
and show off their city?" [11]
Initially, the Silicon mentality of
being scalable stalled the team.
They ignored the value of
genchi genbutsu – it wasn’t
scalable. But to get out of the
trough of sorrow, they had to
evolve their problem definition.
Gebbia says, “it wasn’t until we
sat down with out early
adopters, some of our most
passionate customers [that] they
revealed to us the mysterious
gap in our product and our
market – the inefficiencies of our
user interface.” [11]
The sum of these methods
presents an outline of
opportunity discovery in the
Airbnb story, and perhaps a
takeaway for moving beyond:
“Fall in love with the
problem… not the solution.”
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LESSONS FROM PROTOTYPING
The Airbnb team is good at moving fast.
Since its conception in 2007, the company
has relaunched its initially barebones
website multiple times. The first prototype
was a perfect example of a MVP - the
website only stated who they were, the
concept, and the price. Utilizing design
thinking and customer journey mapping,
the Airbnb team designed an end-to-end
experience that resonated with its first
three users – Kat, Michael, and Amol.
But the second iteration of the website
wasn’t so much a good prototype, as a
good lesson in prototyping. Having found
an opportunity to exploit, the team
relaunched around the SXSW conference
only for it to fail. As Gebbia says, “We think
it’s the next greatest thing [but] nobody
took us upon the idea. [It] was completely
demoralizing.” [11]
However, they did learn two things: (1) in-
person transactions of money were
awkward and (2) their original guests were
emailing them about Airbnb’ing in cities
where there weren’t conferences, violating
their original understanding of the
opportunity.
The team added online
transactions to their next
prototype and applied the “get out
of the building” approach a bit in
Denver, but more so in New York
as they visited their early adopters.
With Paul Graham’s help, the team
refocused on their market and
recognized an interesting pattern:
bad photos.
“There’s been like 5 launches in
the history of the company, but
people only know about one of
them… the other 4 were,
basically, failures.” – Joe Gebbia
So, they visited their hosts to take
better ones and while doing so,
entered “design-research mode.”
Gebbia says, “In those moments
we saw how our perfectly
designed interface completely and
utterly failed.” [11] Talking to
their customers proved to be a
game changer. The improved
photos raised their revenue from
$200 to $400 in a week.
More importantly, they learned
users struggled to use their
product, taking as much as four
times more clicks than expected.
The takeaway?
Good prototyping considers
user feedback.
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 FALL 2018 | JAKE WANG

FOUNDERS PROFILE:
AN ENTREPRENEURIAL
MIDNSET
In Masters of Scale with Reid Hoffman,
Brian Chesky talks about their motto to
“do everything by hand until it was
painful.” [10] Indeed, all three founders Source credit: CNBC 2016 Disrupter Full Coverage [5]
seem to reflect the qualities of passion, grit, and hustle. As Gebbia describes about co-
founder Nate Blecharczyk, “I remember thinking, this guy has a work ethic just like I do.” [11]

The need to achieve, passion, future focus, idea generation, execution/action orientation,
persistence, interpersonal sensitivity… the Airbnb founders excel on these dimensions of
the entrepreneurial mindset. Their passion to connect with their users and make Airbnb
not only a place to stay, but also an experience is remarkable.

Chesky says, “If you can belong out of

With each iteration of the website, the
your comfort zone, there’s a moment
team has proven not only can they
of transformation where the person
execute reliably and quickly, but they can
you were […] dies, and a new better
also persist in the face of failure.
version of yourself is reborn.” [10]

And this thought seems to be the driving force behind Airbnb’s ‘experiences’ feature [1].

Gebbia himself embraces nonconformity in his thinking, demonstrated by his advice to

the audience at IDEO: “be a pirate… don’t wait for permission - just go.”[9] This works for
them, as a certain amount of daring is required for new ideas. [4]

But the most interesting trait is their interpersonal sensitivity. This may go back to their
design thinking roots (“become the patient”), but what I’ve noticed in the founders again
and again is their ability to empathize with the user. They storyboard the end-to-end
experience, borrowing from Hollywood to recreate the perfect trip experience. They listen,
ask questions, and connect with users’ aspirations.

The result? A successful, people-centric startup.

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 FALL 2018 | JAKE WANG

AIRBNB'S SUCCESS
Rather than stumbling upon a unique
market opportunity, I believe Airbnb is a
better example of the importance of
empathy and practicing an entrepreneurial
mindset. That hotel rooms often sell out
for popular events is not a secret.
Source credit: Airbnb Introduces the Bélo [3]
Anyone could have recognized that. But it was the Airbnb founders that were alert to spotting
the opportunity and able to associate their experiences and connect the dots into a solution.
This suggests that the mindset the founders was more important than the opportunity.

What about the business

model? The founders
weren’t industry insiders
with specialized
knowledge –  they were
three guys willing to
hustle and learn. At the
time, nothing like Airbnb
Source credit: The Airbnb Careers page [2]
really existed.

Indeed, people tended to think Airbnb was a bit weird, and like the investors who passed on
the opportunity to fund the startup, most of us wouldn’t have expected it to succeed – it’s a
service that has had to overcome the substantial problem of trust in a very personal
transaction between strangers.

According to Simon Sinek, “the goal is to do business with people who believe what you
believe.”[12] In recognizing this, I think Airbnb has been good about listening to people
who are as passionate as they are – the edge cases – and figuring out how to translate that
for the rest of the market. This was likely one part in overcoming the trust problem, by
improving listing photos and making the transaction online (and therefore less awkward in-
person). They didn’t guess at what users wanted, they listened.

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APPENDIX

REFERENCE LIST
[1] Airbnb. Host an experience on Airbnb. Retrieved December 8, 2018, from

https://www.airbnb.com/host/experiences?from_footer=1
[2] Airbnb. Careers at Airbnb. Retrieved December 8, 2018, from https://www.airbnb.com/careers

[3] Airbnb. (2014, July 24). Airbnb Introduces the Belo: The Story of a Symbol of Belonging | Airbnb
[Video file]. Retrieved December 8, 2018, from https://www.youtube.com/watch?v=nMITXMrrVQU
[4] Asimov, I. (2018, May 3). Isaac Asimov Asks, “How Do People Get New Ideas?”. Retrieved
December 8, 2018, from https://www.technologyreview.com/s/531911/isaac-asimov-asks-how-do-

people-get-new-ideas/
[5] CNBC.com staff. (2018, April 30). CNBC 2016 Disrupter Full Coverage. Retrieved December 8,
2018, from https://www.cnbc.com/2016/06/07/airbnb-2016-disruptor-50.html

[6] Definition of Airbnb. Collins English Dictionary. (2018, December 8). Retrieved December 8, 2018,
from https://www.collinsdictionary.com/us/submission/19697/Airbnb

[7] Drucker, P. F. (2006). Innovation and Entrepreneurship. New York, United States: HarperCollins.
[8] Dyer, J. H., Christensen, C. M., & Gregersen, H. (2015, September 15). The Innovator’s DNA.
Retrieved December 8, 2018, from https://hbr.org/2009/12/the-innovators-dna

[9] FirstRoundCapital. (2013, May 1). How design thinking transformed Airbnb from failing startup to

billion-dollar business [Youtube Video]. Retrieved December 8, 2018, from

https://www.youtube.com/watch?v=RUEjYswwWPY
[10] Masters of Scale, & Hoffman, R. (2018, November 29). Brian Chesky – Masters of Scale [Podcast].

Retrieved December 8, 2018, from https://mastersofscale.com/brian-chesky-handcrafted/

[11] NPR, & Raz, G. Airbnb: Joe Gebbia from How I Built This with Guy Raz [Podcast]. Retrieved

December 8, 2018, from https://www.stitcher.com/podcast/national-public-radio/how-i-built-

this/e/47942386
[12] Sinek, S., & TED. How great leaders inspire action [TED talk]. Retrieved December 8, 2018, from

https://www.ted.com/talks/simon_sinek_how_great_leaders_inspire_action/transcript?language=en

[13] Wilkinson, A. [The Creator's Code]. Retrieved December 8, 2018, from

https://www.amywilkinson.com/book/