Nate Blecharczyk at Startup School 2013

[Applause] Wow, there are a lot of you! That's awesome to see. You know, I got some emails over the last 24 hours from people saying how excited they were to come to this talk. I want you to know I'm humbled by that, and, uh, also a little intimidated. I hope this is good.

So, um, I wanted to start by showing you how crazy success can be, uh, through some charts and numbers. Uh, and then maybe paint a little bit more realistic picture for what it takes. See if, where do you got to point this thing? Oh, there we go. That way up and to the right. Yes!

All right, here's what we all hope, right? You launch your company and in the first year you see hockey stick growth. Um, and for us, this is the number of guests who booked through Airbnb cumulatively. And, uh, pay attention to the numbers on the Y axis as I flip through this. So, hopefully year two comes along and you keep growing—still hockey stick growth. But then year three, year four!

And if you're really lucky, in year five you still have that hockey stick. Now, what happens when you append five hockey sticks together? What does that look like? That's a really big hockey stick! And so it took four years to service our first four million guests, but in the last nine months alone, we've done another five million.

And Brian was fortunate enough to come to Startup School back in 2010, so three years ago. Fun fact: You know, back then it seemed like we were a pretty big deal, but since then we've grown 73x! That's just like mind-bending, right? You just lose track of what that means. On any given night, we have 150,000 people around the world staying in our accommodations.

So, this makes it look easy, right? Um, it's not. Of course, if you are this success, it will be the hardest thing you ever do. Think about it in terms of like the Olympics or something, right? If you're going to compete in the Olympics for gold, what would that take? What kind of training would you have? You'd probably start pretty young and you'd work up towards that, right? And you might go to the Olympics multiple times before you actually succeed.

And I really think that's similar to the startup journey. So I want to tell you a little bit about our journey. So, I got started at a pretty young age. I was 12. When I was 12, one day I was home sick from school, and I picked up a book on my dad's bookshelf. He was an electrical engineer and computer enthusiast, so he just happened to have a book. I picked it up, I started reading it, I got into programming, taught myself how to program, and started publishing my work on the internet.

At the age of 14, someone saw what I was doing and called me up and said, "Hey, I saw your work! I'll pay you $1,000 to write me this program." So I go tell my dad, I said, "Dad, someone on the internet wants to pay me $1,000!" He's like, "Son, no one's going to pay you $1,000 on the internet." I'm like, "Whatever, Dad, I'm going to do this for fun anyways."

So I write this program in like 30 days, and the guy actually pays me. This is the beginning of a business that I ran throughout high school. I made enough money to pay my tuition to go to college. Um, but more importantly, it built confidence in me. And you need that confidence. I mean, this is going to be a long journey; you're not always going to be successful. You're going to fail more times than you succeed, and somewhere you need to get that confidence so you persevere.

For me, I was fortunate enough to have that at a very young age. So I go to school, and perhaps surprisingly, coming out of school, I, uh—I get a corporate job. And, uh, well, I found myself not learning very much. I wasn't satisfied by the pace, and after seven months, I quit. When I go to quit, my boss says, "Oh, you can't leave us! You're our most productive engineer!"

Which I chuckled to myself because half the time I'd been trading stocks anyways. And so I took this as a sign that this was a place that I wasn't learning. And on this journey, every experience should be additive. It should be building up to that moment, right, when you go to the Olympics. I found myself not being challenged there and had to move on.

And so I headed out west and joined a startup. And there I learned everything not to do, which is actually really valuable. Um, as soon as I joined, the two lead engineers quit. I should have taken that as a warning sign, but nonetheless, it was a good experience. I helped take a vision, distill it to a product spec, hire a team, and build a product in nine months. I learned a lot of things.

Um, it was challenging, I worked really hard, it didn't end the way I had hoped, but along the way I learned a ton of stuff. And I think back, and there's a lot of things that I've done—hobbies, projects, favors, stuff like that—a lot of them I lost interest in, maybe they weren't successful, but thinking about it now, every one of those experiences helped me to be successful now. Every one of those experiences prepared me for Airbnb, um, and I encourage you to think about your experiences that way.

So when I moved out to the West Coast, I needed a place to live, and so naturally I went to Craigslist. And there, I met Joe and moved into Rous Street. We were roommates just by chance. Rous Street is also where we ran the company out of for a couple years. Living with Joe, I noticed a couple things about him. First, we were both up late into the night working on our projects.

We'd work a long day at work and then would stay up even later working on different side projects, uh, and even on the weekend. And it's rare that you find people with that kind of work ethic. That's something really special. You know, the worst thing is to have a partner that doesn't work as hard as you. So I noticed that about Joe. I also noticed that Joe could do a lot of things I couldn't do. He was a designer and he was making beautiful physical products. He had just an immense mind for creativity.

Um, and we started helping each other out, and we're like, "Wow, we got really complementary skills!" And so we kind of filed that away. Meanwhile, Joe knew Brian from back at the Rhode Island School of Design. They had been classmates, and at graduation, Joe had told Brian, "Someday, I think we're going to start a company together." I'm not sure if Brian took that seriously at the time, but fast forward, the three of us decided we should start a company together.

That, with our skill sets, we could take on anything. And I can't stress this enough—choosing your partners has got to be maybe the most important decision you'll ever make. Whether, uh, you know, personally and in love or otherwise in business. You can change your idea, you can pivot your company, you can't change your partners without starting over.

And so I see so many people rushing into these relationships. I mean, you should really give that a lot of thought; this is something that hopefully will last years. So the question was, what are we going to do? At this point, this is like January 2008. And so Joe and Brian tell me about something that had happened a couple months ago, in October 2007. They had decided to quit their jobs to become entrepreneurs, also known as unemployed.

And at the same time, the rent on the apartment was raised, and I decided to move out, and they didn't have enough money now to pay rent. So they had a math problem. Well, they're both designers and they just so happened that there was going to be an international design conference in San Francisco the following weekend. And on the homepage for this conference, they saw that all the hotels were sold out.

So they thought to themselves, "Why don't we rent out that vacant room to designers who need a place to stay?" But that room had no furniture. So, well, Joe had some air beds though! So instead of calling it a bed and breakfast, they called it an air bed and breakfast! Right? And they put up a simple WordPress blog and emailed a few designers—uh, bloggers who wrote about it.

And within 24 hours, three designers wrote to them and said they wanted to stay. There was a 35-year-old woman from Boston, a father of four from Utah, and a man from India—not what they were expecting. They were expecting guys like themselves who wanted to crash, and here they had three very different people who wanted to stay. But they had a great experience that weekend. Not only did they have a place to stay and make $1,000, but they all went to the conference together and had a great time.

So much so that the woman from Boston ended up moving to San Francisco six months later, and the man from India invited John and Brian to his wedding a couple years later. So like real relationships were formed out of this just this one weekend project. And when we talked and thought about this, we were like, "That's powerful! Something happened here; maybe we can do this for other events, other people!"

And so that's what, uh, we talked about and that's what they were sort of pitching me on. I was a little hesitant. So as the engineer amongst us—I'm the only engineer— I was very cautious knowing that, you know, these projects, they can kind of go on and on and on, and, uh, you know, scope creep. And you've got to be realistic about what you can accomplish.

So we talked it over a bit and then wanted things like verification and reviews and Facebook integration. I'm like, "Whoa, whoa, whoa!" We wanted to do it like in a month, right? I'm like, "Yeah, I'm good, but not that good!"

Um, and so they finally pitched me on airbed and breakfast light, right? Which is really the same thing, minus a couple of those fancy features, and after a couple beers, I agreed to do this—sometimes that's how it happens! And so we were off and running. And again, we are making a pretty simple site, right?

We had different events in our database and you could put up airbeds or extra rooms in association with those events—it was really a directory service. There were no payments, there were no reviews, it was really just a search engine and classifieds. So we cranked this out in three weeks and our whole goal was to launch it for South by Southwest because, you know, we had heard Twitter had launched there the year before, and we're like, you know, so that's a sign we should launch in 2008 at South by!

So we cranked this thing out and about, let's say, about 12 people put up properties or rooms, we'll say, and, uh, Brian goes down there and actually stays on an Airbnb. And it's a great experience! The host picks him up at the airport, brings him to the house, and the guy's wife makes them both dinner.

The room's all set up! At the end of the night, the host asks Brian, "Do you have the money?" 'Cause this was before we handled the transaction. And Brian's like, "Oh man, I forgot to go to the ATM!" The host says, "Oh hey, no problem! Just bring it tomorrow, okay?"

So the next night they're in the kitchen again and the host says, "Oh Brian, were you able to go get that money?" Brian had forgotten again, and suddenly things got weird, right? Because this guy started thinking to himself, "Who is Brian? This guy I just met on the internet, who's not fulfilling his end of the bargain and paying for my hospitality?"

And, uh, the hospitality basically wore off at that point. And so reflecting on this, on this, um, experience, we thought to ourselves, "Oh man, wouldn't it be good if we could just handle the money up front?" So that, like, upon arrival, uh, the focus could be on hospitality, right?

Um, and so this is why we later started handling the payments. It wasn't because we wanted a business model or something; it was all in the interest of the experience. Um, you know, people also afterwards were asking us, "Like, I'm going to London not for an event, but I still want to use your service!" And we’re like, "Oh no, you know, it has to be for an event!"

Whatever, they're like, “Wait a minute, does it?" And so we came up with a new vision, which was, uh, why don't we make it just as easy to book someone's home as a hotel? And we had this motto: three clicks to book it!

So basically, you would just go to the homepage like any travel site, type in where you want to go, look through some search results, and then click into a profile. And if you liked it, you'd hit book it—so three clicks to book it!

So down at South by, Brian met Michael Cyel. Now, Michael, at the time, was CEO of Justin.tv, later then Social Cam, later to be acquired last year. And Brian pitched Michael on what we were doing, and of course he was pitching it, right?

And Michael's like, "Wow, that sounds really cool! You know, I know these angel investors who, like, over dinner could write you like a 50k check! Like, I'll make those introductions!" And we're like super excited by this, right? Because we didn't know any investors! How were we going to get money?

And so the next day, or next week, you know, Michael gets the time to actually look at the website, and then he realizes that like we hadn't actually really been pitching him like heavy and, uh, maybe we weren't as far along as we had made it out to be. And so he says, "You know, I'll make those introductions, but before I do that, you really—there's a few things you need to do. There's a few things you need to build, progress you need to show before this is going to be realistic."

And so every week, Joe and Brian would head down to the offices at Justin.tv, meet with Michael, give him a progress update, uh, try to keep him excited about what we were doing. And, uh, you know, things got tough around this point. So I, at this point, decided to move back to Boston.

So I had been doing long distance with my girlfriend for three years, um, and I had to really figure things out—did I want to get married or not? So, you know, I had some other priorities in my life that had suddenly come up, and I was in Boston. And, you know, suddenly the pace really slowed down, right?

And, meanwhile, we got these things that we're supposed to build for Michael, and Michael's wondering as they come in every week, like, "Man, like why is it taking you so long to build these features?" Right? Like, "Your co-founder must not be a good engineer!" And, like, meanwhile I'm like, "Guys, have you like been straight with Michael and told him that, like, you know, I'm doing some other things and, like, set his expectations?" But of course, they hadn't, right?

Because they wanted to make sure he didn't lose interest, right? I mean, we were desperate; we needed to raise money. And I tell you the story because, like, this is the—this is real life! Like, this is how it is, and sometimes your partnership isn't always high fives, right? There's a lot of stress when you're starting a company and no one's getting paid, and you've got to work through those moments.

So eventually we get it done and Michael makes those introductions to those angel investors, and so we, uh, we start having these meetings. And I'm still in Boston, so Joe and Brian are going to the meetings, and, you know, I would always ask, “How'd the meeting go?” I'm like, “Oh yeah, they found it like really interesting. They're going to like get back to us soon,” right? Like really vague statements, right? I'm like, "Oh, okay, that's good, I guess?"

So, you know, only later did I kind of get the full story about what was going on. So this one time, they go down to University Cafe, meet with this, this, uh, well-known angel investor. And, um, the guy has a smoothie and they're pitching him. The guy's just drinking a smoothie, just kind of nodding his head, listening.

Halfway through it, he just gets up and leaves; he doesn't even finish the smoothie! And Joe and Brian are like, "Did he have to use the restroom? Maybe put some money in the meter?" They, like, sit around for half an hour; he never comes back. They're like, "You know, what the f? You know, is this how it is?"

I mean, but you know, I guess, I guess we didn't have much to show at that point. We weren't—we weren't ready for it, I guess. Um, this other time happened to coincide with one of my trips out, and I'm like, "Oh great! I get to go to one of these pitches finally!"

And so the night before, we're looking at the slide deck, kind of reviewing who's going to do what, and we come to this slide, right? And it's like how much money are we going to make three years from now? Like in 2011 or something, right? It's like $200 million three years from now. I'm like, "Oh guys, like, if you do that math, like that's—you know, how you break it out? Here, that's like 30,000 transactions per day! Like, that doesn't sound realistic!"

Like, they're going to, like, you know, the BS meter is going to go off on that. So I'm like, "How about like $20 million? That's more realistic." They're like, "Okay, sure, sure!" You know where this story is going.

So the next day we drive down to Sand Hill, we're pitching the VC, and we come to this slide, and they had changed it to this—yeah, exactly. Well, I don't think it actually mattered too much. I don't think the investor was interested in this from the start, um, but I was like, "Guys, come on! Like, what is this all about?"

Brian's like, "Oh, you know, I was talking to Sam Altman. He's like, he told me that like investors don’t want M's; they want B's, baby!" And it's true! Investors want B's! But we hadn't connected the dots between the air beds and the billions yet, so it didn’t work out.

So at this point, we kind of put the fundraising on hold. It's clearly not working out. I think we burnt all our leads, and, um, well, on the horizon is the Democratic National Convention coming up in Denver. And we're reading about this event, and it's going to be held at the stadium—Stadium holds like 80,000 people—we look it up, there's like only 17,000 hotel rooms in Denver!

Like, okay, people are going to need our solution. Um, we use this as a basically rallying call to get focused and build that new vision we had—that three clicks to book it. Um, you know, we hadn't really made much progress on that, so we said, "Okay, it's only three months away! If we start now and are really focused, we can get this out in time!"

And we're going to handle the payments and do reviews and all that, and so we hustle, we launch maybe a couple weeks before the event. Uh, we get like 800 properties on there the first week. I mean, sure enough, like the locals are looking to get out of town, make some extra money.

Um, and sure enough, the news is doing stories like, "Hey! Historic event! All these people want to participate, but they can't afford to, there's no place to stay!" Etc. So we're like, "Whoa! Like, perfect!" So we start writing to like some local blogs saying we actually have 800 properties that are definitely available.

Uh, you should, uh, you know, check us out or write something. And they do! And like within a day that's picked up by the local news, and like within a day later, like CNN International picks it up and we're doing like video interviews, right, with CNN! And it's like, "Whoa!" Yeah, like, this is what launching your company should be like, right?

Like a lot of attention, uh, you know, a lot of clicks to this website. Yeah, but a week later there was nothing; it was back to square one. And this is, uh, Paul Graham's classic diagram of a life cycle of a startup and it's so true. I mean, everybody goes through this—you launch your company, you get like a lot of attention, you get this big spike, but it really doesn't matter 'cause like a week later you realize that everyone's attention has moved on, you're not really relevant—who cares?

And unfortunately—that's the beginning of something called the trough of sorrow. This is like the worst; it's a really hard period where you work really hard and nothing you do matters. It's very demoralizing. And so basically, between August and the end of the year, it was only four months, but it seemed like an eternity!

We worked really hard and nothing we did seemed to matter. And at the same time the whole financial crisis happens, right, and markets collapse, and SEO sends out this presentation saying like "No one's going to be able to raise money again, and you know, it's time to start saving your money," etc. And they're like, "Oh, just like on top of everything, like it's already hard enough to get investors to give us money, and now this!"

And it really seemed like the end of the road. Like we were really asking ourselves, when do you know it's time to quit? And I think we've probably all thought about that, right? What we realized was before we can quit, we got to give it 100%.

And Michael Cyel, who'd still been giving us advice along the way, he saw the state we were in and he's like, "Guys, you got to get focused!" He had gone through Y Combinator with Justin.tv. He's like, "This will be good for you!" So like the application was like due that night, so we like totally scrambled, submitted an app, and, um, got accepted for an interview.

Did the interview—I don't think PG liked our idea; he actually told us later he didn't like it at all! I mean, it was pretty obvious actually from the interview. Like the interview went off the rails within the first minute and he was trying to, like, pitch us on something else—not a good sign, not a good sign!

Um, but we did some of one thing, which was that we were determined, that we had persevered through a lot and that we knew how to create things. And he basically said later, "I thought you guys were cockroaches," right? And he's got this saying—you know—the hardest thing is you need people who will never give up, right? You got to persevere, there's going to be so many setbacks, and he's looking for cockroaches.

So we arrive at Y Combinator super excited and again, like, this is our three-month period to get really focused and we get really regimented, alright? So I moved back from Boston back to the West Coast. We're all living together, we're waking up at 8:00 a.m., going to bed at midnight. We're doing everything together.

We're, uh, going to the gym, eating—I'm sleeping at the foot of Joe's bed on an air bed of course. Um, it's 100% focus! We're doing a six s days a week and meanwhile, you know, this financial crisis PG tells us, "Like, no one's going to be able to raise money at the end of this thing, so it's up to you to get to profitability."

And so we have this goal of ramen profitability by, uh, by March, which is basically for us, $1,000 a week—enough to pay rent and buy ramen. And we make this graph! We update it every week, and we put it on the mirror in the bathroom, we put it over the fireplace, everywhere!

Like we cited this graph throughout the day and it made us focus. And so there's a few pieces of advice that we got at kind of the start of YC that made the world of difference. And one was this thing that Paul Buite said. Paul—Paul's the, uh, creator of Gmail, and he basically said, "It's better to have a few users who love you than a thousand users that like you!" Right?

Really find those few evangelists and build for them! So we kind of put that in the back of our head. Meanwhile, PG said, "Do things that don't scale!" And like we had been thinking about like how do we make this website where people can completely do it themselves, fully automated, like hands off—like that's what the web's all about, right? And he’s like, "No, it's okay! Like, do things that don't scale."

And he says, "So where are your users?" I say, "Our users are everywhere!" He's like, "Well, where are most of your users?" I say, "Okay, uh, New York!" So he's like, "Like, go to New York, meet your users." And we're like, "Aren't we supposed to be here at YC doing, like, you know, in Mountain View and stuff?" He's like, "No, just just go there, meet them all!"

So that's what we do. We go to New York, we meet every single user—all 40 of them! It was a start! You got to start somewhere; that's a manual number. And so, you know, beforehand, we're calling up these users, and we're saying, "Oh, um, you know, we can send a professional photographer over to your place and get some pictures taken. Would you like that?"

They're like, "Oh yeah, sure!" So then Joe and Brian show up, right? They're the professional photogs, like, "Hey, co-founders of the company here to take pictures." A little weird, but, you know, they're already there, so they opened the door, took the pictures, and while they're there they sat at the computer, gave them a little lesson, got some feedback.

We would invite them out to the bar later on to get some beer, built a rapport, told them our story, really tried to get them to root for us. And so we'd then go back home and we then call them up and we would say, "Hey, looking at your profile and, um, you know you only have a paragraph on there, you got a really nice place. Do you mind if we like help describe it a little better?"

Right? Just fill it out, change your title, and by the way, the price seems a little high! We just maybe start at $75 a night, you know, if you get too many inquiries, you can always raise it! So we could have never asked this of people if they had never met us, right?

But because they were rooting for us, it made all the difference. And so by the end of this exercise, we had 20 or 40 really good-looking properties in New York that we had basically fully curated. When we did that, that's when they started getting booked— that's when we started getting traction!

So around this time is towards the end of, um, of, uh, YC, and there's a speaker that comes every week during dinner. And so that week, Greg Madoo from SEO Capital was coming, and we had saw Greg speak at Startup School actually earlier that year. And Greg was talking about like great surfers and like big waves—like real, figuratively—and talking about how they invested in companies like Intel and Cisco and how like these are the kind of companies that SEO is in the business of finding.

And so like, you know, of course we're like, "Well, that's not us!" Right? Like, we're not Cisco! But you know, here he was at dinner and so of course we had to pitch him, right? That's what you do! So after dinner, we show him our stuff, walk him through it, and then he's like, "Let me see if I got this straight."

And he basically repitches it back to us and he does like a way better job. And we're like, "Yeah! Like, what you said!" Like, we couldn't believe it! Like, this guy gets it like he gets even better than we do. And so within two weeks, we had a term sheet that we had signed and we raised $600,000 in seed from them!

And I mean, from there, it's been up and to the right. And you know, all this though had to happen before that happened, right? Um, and you know, kind of reflecting back on it, on one hand, it looks like so much happened so quickly, right? Like how could you ask for more? And I mean, how could you? But it looks really easy.

And it did happen, you know, relatively quickly. At the same time, that journey was a really tough one. And what I want you to take away is that this is a long journey and perseverance is what matters the most. And you might fail this time, but if you think of every single experience as a building block to that final competition, if you make sure you pace yourself so that you don't quit too early, uh, and you know have to basically bail, you can do amazing things!

And so I hope that today, uh, you were not only inspired, but you got some practical tips, and I expect to see a lot of great things from you. Thank you!