It is interesting and a bit ironic that AirBnb accepted funding from YC - who did not believe in their idea [1], and rejected the only investor that not only believed in their crazy idea, but actively sought them out and tried to woo them. Did they go with YC because of its brand, name recognition, or because it offered them better terms?<p>Of course, it is all counterfactual, but could Airbnb have been as successful had they <i>not</i> joined YC? Recall that PG told them to do things that do not scale - by taking professional photos of rentals in NY - which may have been critical to their early success.<p>And although PG was initially skeptical of their idea, he quickly changed his thinking about how big Airbnb could become. Revealed in another interesting trail of emails exchanged between PG and Fred Wilson (who also passed on Airbnb). [2]<p>[1] <i>"In fact, when we funded Airbnb, we thought it was too crazy. We couldn't believe large numbers of people would want to stay in other people's places"</i><p><a href="http://www.paulgraham.com/founders.html" rel="nofollow">http://www.paulgraham.com/founders.html</a><p>[2] <a href="http://www.paulgraham.com/airbnb.html" rel="nofollow">http://www.paulgraham.com/airbnb.html</a><p><a href="http://avc.com/2011/03/airbnb/" rel="nofollow">http://avc.com/2011/03/airbnb/</a><p>Edit: spelling
If it's bad form for a VC to break a handshake deal, it's equally-bad for a startup too... no? Doesn't that reflect poorly upon the founders?<p>It's so important that YC went through the effort to codify the process: <a href="http://www.ycombinator.com/handshake/" rel="nofollow">http://www.ycombinator.com/handshake/</a>
Let me get this straight: in June 2008, Airbnb got intro'd to a bunch of investors, who all said no [1]. In September of 2008, Airbnb had a $250k round on the table that valued them at 2.5M[2]. And then, also in September 2008 (before YC usually does interviews) they rejected that offer for YC, who ended up giving them $20k[3], with a valuation presumably around $250k?? (Although Brian Chesky says that didn't happen until November, it sounds like they got some kind of verbal confirmation earlier?)<p>The timeline is weird.<p>1. <a href="https://medium.com/@bchesky/7-rejections-7d894cbaa084" rel="nofollow">https://medium.com/@bchesky/7-rejections-7d894cbaa084</a><p>2. <a href="https://arenavc.com/2015/07/airbnb-my-1-billion-lesson/" rel="nofollow">https://arenavc.com/2015/07/airbnb-my-1-billion-lesson/</a><p>3. <a href="http://www.quora.com/How-much-money-did-Airbnb-raise-What-is-the-companys-financing-history" rel="nofollow">http://www.quora.com/How-much-money-did-Airbnb-raise-What-is...</a>
Deck: $2.1B in revenue by 2011<p>Reality: $500M in revenue in 2014<p>Moral: Even the most successful startups don't hit their seed-stage revenue projections :)
It's very interesting hearing a story from the VC's side. One always reads about the trials and tribulations of startups trying to raise capital, but I've never considered that there might be similar issues and competition on the investors' side.
The most interesting takeaway for me is the spreadsheet of stats. I find it highly motivating to see how meager their start was. You hear all the time from startups, "We weren't an overnight success. We worked hard for years...", but seeing stats like these in hindsight really sends that message.
If there's one thing I've learned since working at startups and rounds of funding it's definitely:<p>The deal isn't done until the money is in the bank
Does it strike anyone else as unseemly to share the pitch deck? I get that it's 7 years ago, but still seems like something a little out of bounds to me.
"Over the last seven years, I’ve discovered and invested very early in a handful of highly valuable companies (Wish, Lyft, Zenpayroll, Postmates, AngelList, Plated, Styleseat, Klout, etc.) as well as plenty of disasters."<p>Any middle ground between "highly valuable" and "disaster"?
Its an interesting read to hear about other investors who have missed out on deals. I actually tried investing into a startup this year and completely failed due to governmental regulations. Even though i worked my ass off saving for 2 years to have discretionary income in order to invest as i wanted to I did not meet the requirements of being an "accredited investor" and so i missed out on the funding round. I spent at least a month getting everything ready and going back and forth with the founders meeting with them emailing them back and forth to find out from a newsletter that they had closed without me. I guess until the SEC opens it up i'm shit out of luck and am better off going to a roulette table at a casino...
I'm not sure what the big fuss is over this.<p>Here's the story in one sentence: an angel recognized Airbnb's potential but never got the deal in writing so they used it as leverage for a better offer.<p>Paige invested in Lyft, Twitter and Postmates. He's doing fine and learned from this.
I think the fundamental lesson here is speed. What took Paige 3 weeks or more to accomplish took YC 10 minutes, and then they said yes and signed the paperwork. Remember, this was unheard of before YC came along (granted, there's more money involved in Paige's side of things, but even that doesn't matter). Founders recognize this and respect it, and it's going to be what distinguishes the good future dealmakers from the bad ones.<p>Thanks for sharing this Paige. Excellent write up and valuable lessons learned.
Thanks so much for writing this, I love learning about cases where seemingly concrete rules can be bent. Take a look at Uber who is constantly being told that what they're doing is illegal and their response is essentially "but it's better so the laws need to be fixed". I think that's the same attitude you want when doing everything you can to get back in the deal. Always be optimistic and don't give up to soon.
If I remember correctly, Airbnb struggled to raise after YC as well. Sequoia came in and gave them $600k quietly after Greg McAdoo synthesized and reframed the Airbnb vision (See Nathan's Startup school speech from 2013). Why didn't Paige participate in funding after demo day?
Why are those metrics considered to be bad?
I am obviously judging with hindsight and without daily deal noise here but if i look at them:<p>* Within the first weeks first revenue<p>* Within 4 months numbers that by themselves each look promising (40-60% response rate although crap product, good revenue per night, good nights booked, etc)<p>Personally i dont expect any of those metrics nowadays to be further away than 1.5-2x better<p>The "only" big q's left is:<p>* is the market big enough it's worth scaling the quantity<p>* is that team capable of doing it<p>I feel like i am missing something here (obviously i judge from hindsight) but what about this numbers is "bad metrics"?
This happens the other way around as well for founders. Cheers to Paige for the insight and thoughtful conversations we've had. He's most likely got a nice investment in a few future unicorns.
> After 6 weeks of work, I didn’t get to invest.<p>That's supposed to be considered a bummer :).<p>Hey, at least you still have your money !<p>In fact, who knows, maybe with your investment, Airbnb wouldn't have turned out that great after all.<p>Maybe you would have lost your money, which would have reduced your reputation and you would have ruminated over it, got depressed, separated, started using drugs and drinking, get arrested for a drunk mishap, resisting arrest and attacking an officer with a tennis ball, then jail time... the wheel of misfortune once set in motion is hard to stop :).
Some grist for Silicon Valley (Mike Judge's show):<p>> On a tactical level, I repeat this creative destruction almost weekly as I analyze an individual deal; on an operational level I do it every few months (re-evaluating my deal flow, co-investor network, deal structures, etc.); at a strategic level I sit down almost every year and question my overall philosophy on founders, theses, markets, etc.<p>[shorter: I don't only regret my mistakes but also try to learn from them.]<p>Otherwise a well-told story. Thanks.
If YC hadn't invested, nobody would have ever heard of AirBnb. This is a case where the investor added a great deal of value to the business.<p>YC is at the center of a large network of investors, startups and bloggers and somehow its investment decisions ultimately influence the habits of technology consumers in general.<p>I think it was a lose-lose situation for the author.
Interesting to know you look for startups to invest in. I've always wounded how start ups find investors and approach them. I'm working on a personal project that I would love to do full time but with no savings and living in Singapore so have to have a job to stay here. Also scared to look for investors because I don't want them to try change my ideas since I believe in what I'm building.
Jesus. I didn't know any VC/Angels worked that hard to get into a deal. Hell, in my experience it's like they actively try NOT to fund companies.