Sharing Economy

Airbnb

2016.05

5 Things you can learn from Airbnb
Sharing Economy
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Founded in 2007, Airbnb is a lodging-rental sharing service that has expanded to 190 countries and 34,000 cities and is valued at $25 billion.

  • In 2007, two students from Rhode Island School of Design gathered together in SF to conceive a new idea for a business.
  • While struggling to find a way to pay the rent, an idea sparked. They offered an air mattress and complimentary breakfast for $80 to three attendees who could not find a lodging for a design conference in SF.
  • After numerous trials and errors, they devised the current Airbnb’s model (the house owner letting a part of the house for a rent)
  • During the 2008 Presidential Election in the U.S., they offered the service including breakfast cereals in cities where the candidates visit to make a speech.
  • In 2009, with the $20,000 funding from Paul Graham’s Y Combinator, they moved the service to the biggest market: New York.
  • In 2009, they met the housing owners one by one and solved their issues, took picturesque photos of their lodging, and grew fast.
  • In 2009, their service started to grow even faster since renting the whole house.
  • In 2009, Airbnb’s growth was even more accelerated with the $600,000 seed investment from Sequoia Capital.
  • Gaining momentum for growth, Airbnb has become a start-up that has expanded its service to 190 countries and 34,000 cities and is valued at $25 billion.

However, their business did not go smooth in the beginning. They had four obstacles ahead of them.

  • Finding early users and homeowners and using word-of-mouth: how could Airbnb satisfy both customers and homeowners? What can Airbnb do to make them love the service and spread word-of-mouth?
  • Scale-up_Users/Homeowners: How can Airbnb reassure the homeowners who feel anxious about renting their home to a stranger? How can Airbnb reassure the lodgers who feel anxious about staying in a stranger’s home?
  • Scale-up_Investors: How can the co-founders persuade the investors who think this business model is outrageous to invest in their business?
  • Persisting: How can Airbnb persist the difficult inception period without borrowing money, when it is so difficult to find investors?

They challenged these obstacles head on.

  • Persisting: The co-founders provided the service including breakfast cereals at cities where presidential candidates visit during the U.S. Presidential Election season--there was a very high demand for lodgings and limited supply. The co-founders shared a strong conviction about their business model and focussed on getting things done.
  • Good Mentor / Investor: While they were persisting through the difficult days, they met Paul Graham at Y Combinator who invested in their business. Paul highly valued their persistence.
  • Finding early users and homeowners and using word-of-mouth: With Paul’s advice, the co-founders headed to New York where lodging business is unbalanced. While staying in New York, they met the homeowners one by one, listened to their issues, took high-quality photos of their homes, and uploaded them on the website. Customer satisfaction level increased and the number of customers started to increase.
  • Building trust: With confidence in User Experience, Airbnb started to share the users’ reviews on the website. This converted the fear of the unfamiliar into the excitement about something new and attracted numerous customers.

The co-founders offer the following advice for young startups.

  • It is difficult to find the first 100 and 1,000 customers. Do not think about scaling up from the beginning. Focus on satisfying one customer at a time.
  • The best way to satisfy a customer is to listen to their issues and solving them. Get the feedback and improve. Do not be negligent in communicating with the customers.
  • When your startup is still young, focus on providing a quality service rather than finding a source for funding. Believe in your team and find a mentor who believes in the value of the service and who will invest in your business.
  • If your initial customers are satisfied, gather their reviews. The fastest route to becoming a trustworthy service is to share the customers’ reviews.

How did Airbnb start the business? How did the co-founders overcome the initial hardships? What are the differences between Airbnb and other start-ups? What created these differences?

With your Ringle tutors who use Airbnb often, think about the ways how young start-ups can persist and find better ways to express yourself in English.

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