"If you are not embarrassed by the first version of your product, you've launched too late."

Reid Hoffman

In our last post, we looked at how to present an idea clearly. This post shows those principles at work in a real company. Airbnb is useful to study precisely because its idea sounded strange, and its early numbers were small.

The idea nobody believed in

In 2008, Brian Chesky, Joe Gebbia and Nathan Blecharczyk were trying to turn spare rooms into a business under the name AirBed & Breakfast. Many investors doubted that strangers would stay in each other's homes.

To stay afloat, Chesky and Gebbia sold election-themed novelty cereal boxes for $40 each, raising tens of thousands of dollars. They joined the Y Combinator accelerator in January 2009 with a $20,000 investment. Y Combinator's Paul Graham has said he doubted the idea itself, but backed the founders for their persistence. At that point, the business was earning about $200 a week.

The pitch that raised $600,000

Later in 2009, the founders pitched investors with a deck of about ten slides. Sequoia Capital led a seed round of roughly $600,000. The deck followed the structure from our last post.

  1. Problem. It named three frustrations with booking accommodation, in plain words.

  2. Solution. Each frustration was matched with a benefit: save money, make money, share culture.

  3. Customer and market. It showed that people already rented rooms through Couchsurfing and Craigslist, proving demand existed. It then sized the market and narrowed it to a slice it could reach.

  4. Business model. One line: a 10% commission on each booking.

  5. Proof. Screenshots of a working product for search, listings and booking.

  6. Team and ask. Short bios of the three founders, and a clear statement of what they wanted.

It was not a perfect deck

Later reviewers have pointed out thin traction numbers and loose market maths. It still worked because it was short, honest about what the business was, and easy to repeat to someone else. At the earliest stage, investors back the team and the problem more than the spreadsheet.

What a student founder can borrow

  • Prove the behaviour already exists. Airbnb did not ask investors to imagine demand. It pointed to people already doing the same thing, badly, on other platforms. This is exactly what your ten conversations are for.

  • Keep the business model to one line. If you cannot say how you earn in a sentence, the model is not ready.

  • Show a working product, however rough. Airbnb's first version was far from polished, which is the point of Hoffman's line above.

  • Fund the early days creatively. The founders did not wait for investors. They found a way to earn first.

Try it

Take your own ten-slide outline from last week and match it against the six parts above. Mark any part that is missing or vague, and fix the weakest one first.