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Business, 7 MIN READ

7 Airbnb Startup
Strategies to Adopt

January 24, 2020
ALEX SLOBOZHAN
With a valuation of $30+ billion and the intention to go public in 2020, Airbnb is a far cry from most aspiring tech startups. The company that revolutionized the way we travel was founded in 2007 by two friends strapped for rent money. Airbnb history is worthy of a movie adaptation, and there are plenty of records you can find online to get inspired. Instead of going over the company's milestones, I'd like to share seven Airbnb startup strategies you can apply to one day turn your enterprise into yet another unicorn.

Find the Solution to a Problem in the Right Time

The sharing economy's prime examples, such as Uber and Airbnb, would not be possible at any other time. The economic slump in the late 2000s made renting a room or even a bed in your apartment more palatable than ever. Similarly, the spiking unemployment rates convinced thousands of people to take up driving for Uber as a chance to make ends meet. The timing was critical for Airbnb startup success, as even five years earlier, the concept would have been too revolutionary to consider.

However, being in the right place at the right time wasn't enough. Joe Gebbia and Brian Chesky rented air mattresses to the attendees of the Industrial Design Conference. The shortage of hotel vacancies made their enterprise viable, and soon they had the first three clients that paid $80 each for an air mattress to sleep on and a home-cooked breakfast to go with it. Once Chesky and Gebbia understood their one-time venture could turn into a profitable business, Airbnb startup was born, though its name was Airbed and Breakfast at the time.
Airbnb startup

The company made first sales because Chesky and Gebbia identified the problem (no free hotel rooms for conference attendees) and offered a viable solution (airbed and breakfast combo). At any other time, when San Francisco wasn't choke-full of designers, their enterprise wouldn't have had the same success. Before you move onto MVP development or fundraising, you should have a clear idea of what problem your product can solve and how many people will benefit from it. Use our startup checklist to ensure you've got everything sorted.

Look for Funding Everywhere

In desperate need of funding, Airbnb founders put their design skills to use and created election-themed cereal boxes for both presidential candidates (Obama O's and Cap'n McCain's). After selling over 500 boxes, the team was up nearly $30,000, though they had to survive on unsold Cap'n McCain's, which they later described as one of the lowest points in their business venture.
Airbnb history

Airbnb team also joined the Y Combinator class in 2009 and received an additional $20,000 to develop their fledgling platform further. Despite their best efforts, the Airbnb business model seemed too far-fetched for many investors. Fred Wilson and Union Square Ventures famously rejected the pitch to regret it later. Investors had trouble believing the enterprise headed by two Rhode Island School of Design alums could produce a working product without reliable technical partners. Additionally, investors had doubts about the idea of short-term renting to strangers. Still, the startup ran a successful seed round and received the much-needed $600,000 in 2009 from Y Ventures and Sequoia Capital.

It might be surprising, but Airbnb startup followed the same steps many companies do. The founders had to be creative about found-raising and rely on savings and side hustles to get the project off the ground. You shouldn't expect to receive the seed capital as soon as you get a million-dollar idea. Be ready to survive on your own until you get into an incubator program or gain enough attention from the investors.

Highjack the Target Audience from the Competition

Though there is no exact date for this growth hack implementation, there's proof that Airbnb implemented its Craigslist integration in 2010 or earlier. At the time, Craigslist was the number one choice for short-term hosting opportunities, and the Airbnb team decided to tap into its vast potential. Every property added to Airbnb was automatically listed on Craigslist. The team developed a bot to generate unique URLs and fill in the form fields.

Unlike many Craigslist offers, Airbnb properties had better, more personalized descriptions and professional photos. As a result, they got more attention from the audience. Moreover, once users tried Airbnb and had an enjoyable experience, they were likely to forego Craigslist and go straight to Airbnb in search of vacation housing. Later, the startup also resorted to poaching listings from Craigslist. Both strategies culminated in a significant increase in rental offers and paying customers.

Airbnb business strategy relied on targeting a platform rich with potential customers. Some of their approaches might seem a little underhanded, but the superior quality of their services ensured all parties involved were happy with the results. Your startup growth hacks might not be as straightforward, but you should always be on the lookout for platforms, blogs, and meetups rich with potential customers.

Start with the Best Experience and Go from There

Airbnb business plan always relied on following the customer demand and providing an outstanding online and offline experience. The team focused on hands-on experience with Airbnb service to gain a better understanding of their customers. For instance, Brian Chesky booked different listings and stayed there over the course of several months. Similarly, the founders booked 24 places in New York when the market failed to explode like expected.

Their hands-on experience with New York hosts resulted in another feature - photos of the rentals taken by professional photographers. Gebbia and Chesky did the first batch themselves after renting $5,000 worth of professional equipment. Quality photos instantly increased the customers' interest in New York properties and made them 2.5 times more likely to be booked. Now the company works with thousands of freelance photographers offering this feature across major cities.

Airbnb startup team realized that customers want to see what they are paying for, so they designed a photography program that would benefit both homeowners and their visitors. When working on your MVP, focus on features crucial to your customers, such as a user-friendly interface or one-click forms, they will pay off in the long run.

    Keep Regulatory Compliance in Mind

    While its popularity and profits were on the rise, Airbnb lean startup ran into legal troubles. Real estate owners started fining or evicting people renting out their flats and houses to short-term travelers. In 2014 the regulatory problems peaked, with many cities banning Airbnb rentals. The city of New York led the charge and banned all hosts. It became illegal to sublet NYC real estate for less than 30 days.
    how did Airbnb start and grow
    Even San Francisco, the cradle of Airbnb, restricted short-term rental deals. The company had to spend over $8 million to deal with a citizen-led ballot program designed to reduce the number of Airbnb rentals. To deal with compliance complications, the startup started collecting hotel taxes and transferring them to the host cities, as well as share some data with authorities as a part of the Airbnb Community Compact.

    Airbnb set out to revolutionize the way people travel without taking into account the pushback by local and national authorities, as well as hospitality industry incumbents. Despite some financial losses, the company found ways to cooperate with city authorities and continue operations in the largest cities across the globe. Whichever niche your startup will inhabit, you should consider legal aspects and regulatory compliance from the get-go, especially when it comes to personal data protection.

    Build and Nurture Customer Trust

    Despite the Airbnb profit stats and significant growth, the company hit a snag mere days after receiving $112 million in a Series B funding round. One of the rental owners posted photos of their trashed house. The story exploded, and the Internet was filled with posts and comments once again, questioning the company's business model.
    Airbnb profit
    Despite initial shock and misunderstandings, Airbnb reacted quickly and offered compensation. Later, the company adopted a $1 Million Host Guarantee. Moreover, Airbnb provided in-depth information and suggestions for homeowners to ensure the safety of their properties. By addressing the problems quickly and decisively, the company turned a scandal into a tiny hiccup. It gained an asset in the form of their $1 Million Host Guarantee that further increased user trust.

    Even the most successful startups deal with unexpected problems. If your pre-mortem analysis fails to uncover the risks, stay flexible in devising ways to resolve conflicts with minimum reputational losses. You can afford to decrease the profit margin, but you can't afford to lose your customers' trust.

    Expand the Brand into Adjacent Markets

    An average traveler spends between $1,000 and $2,000 on a week-long vacation. Airbnb set out to cover the majority of this sum. While hosting and renting still generates a significant share of Airbnb profit, other ventures are gaining traction. Experiences offered by locals were an instant hit with many travelers, while discerning customers enjoyed an expanded range of luxury services.

    Airbnb Neighborhoods is another example of the startup's branching into adjacent niches. Instead of catering to travelers, the platform helps people make most of their city and neighborhood.

    Expansion and scaling were always a significant consideration for the Airbnb team. They continued to find unsolved problems and offer innovative and high-quality solutions outside the hosting and renting niche. Once your primary product starts generating revenue, you should consider expanding your offers to incorporate a well-rounded experience for your customers.

    Takeaway

    Is Airbnb a startup? How did Airbnb start and grow? How much did Airbnb startup cost? Besides answers to these and other questions, I hope you remember seven strategies this hugely successful company used and implement them to duplicate its outstanding results:

    1. Focus on solving your customers' problems, but keep the market landscape in mind.
    2. Rely on your savings and unorthodox fundraising tactics before you go looking for angel investors.
    3. Find your target audience's favorite online resources and highjack them to increase traffic and brand visibility.
    4. Even if your offer isn't unique, make the customers' experience perfect to gain trust and loyalty.
    5. Keep an eye out for regulatory and compliance issues to prevent financial losses.
    6. Identify and mitigate risks that can undermine the customers' trust before they ruin your reputation.
    7. Once the original product becomes profitable, branch out to new niches to expand the company potential.
      Freshcode team keeps up the most efficient solutions to power up our customers' startups. So don't hesitate to contact us if you have any profound ideas for starting your business successfully!
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