Airbnb: From Scrounging for Rent to a $1 Billion Valuation

A business born of a need to find a way to pay the rent receives funding that values the company at more than $1 billion.

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By Laura Lorber

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Airbnb: From Scrounging for Rent to a $1 Billion ValuationStill on the fence about launching that startup? Perhaps today's news about Airbnb may inspire you to action.

In 2007, roommates Brian Chesky and Joe Gebbia had trouble paying their rent. Today they announced that the business born of that need received funding that values their company about $1 billion.

The backstory: To raise the cash to pay their landlord, Chesky and Gebbia decided to rent out their San Francisco apartment to conference-goers seeking an alternative to hotels in their area. They pocketed $800. Then they built a business, Airbnb, helping other people do the same. Of course it wasn't a straight line to success. They struggled to break even, attended Y Combinator's startup bootcamp, eventually landed funding which helped them expand and now have more than 100,000 listings in more than 16,000 cities and 186 countries.

Here are three takeaways for would-be entrepreneurs from their experience thus far:

  1. Solve a problem. The service helps would-be B&B'ers connect with travelers seeking affordable and interesting accommodations.

    "We didn't start with some entrepreneurial thesis," Chesky told Entrepreneur.com in 2009. "It just worked beautifully for us and others we talked to, and we went from there."
  2. Generate buzz. In the summer of 2008, the company piggybacked on a big news story: The Democratic National Convention in Denver, where hotels had been sold out for months. Media outlets like the The New York Times and CNN reported on travelers finding rooms through the company.

    It was "the golden opportunity," Chesky said in 2009. "We would be nowhere today if not for that."
  3. Tap into a trend. The recession has more people looking to save a few bucks, as well as more people looking to make a few bucks on the side as "micropreneurs."

    "We started realizing there is a growing trend of people who are doing this and making a living on Airbnb," Chesky told the New York Times. "That's what turned this into a movement and tipped it into the mainstream."

Does Airbnb's concept merit the $1 billion valuation? Leave a comment and let us know what you think.

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