Two boys who couldn’t pay their rent and became cereal entrepreneurs

It’s late 2007. Brian and Joe just moved over to San Francisco. They had no money, no jobs and had trouble paying the rent.

At that time there was a Design Conference in town and all hotel rooms were fully booked. What if they could rent out their apartment and earn some money?

Three Airbeds

They literally had no beds to spare. But, Joe had, from a past camping trip, still three airbeds laying around. And the idea for a new business was born: Airbed & Breakfast.

Their first customers, an 30-year-old Indian man, a woman from Boston and father of four from Utah, paid $80 per night to stay at Brian & Joe’s.

Opportunity Lurks

About a year later, they launched, after a couple of iterations, a new website. At that time there was a Democratic National Convention in Denver. All hotels were sold out. The opportunity lurks.

During that week they had 80 bookings : Obama supporters staying at homes of other Obama supporters. One week later, after de convention, all went back to normal: zero bookings.

Selling Cereals

One night, in September 2008, Brian & Joe were figuring out how to keep their company going. Well, they named it Airbed & Breakfast. So, half of their business was breakfast. Right?

They came up with another crazy idea: ‘What if we could provide breakfast for people during the election period? We could sell these people special branded cereals: Obama O’s.’

Cereal Entrepreneurs

Having Obama O’s cereals, they had to have Cap’n McCain’cereals as well. They sold 800 of these cereals for $4 each, with Obama and McCain fraternal in a box. Ultimately ended up selling over $30.000 worth of cereals. That was their first round of financing.

$31 Billion Company

The rest is history. Well, history. Airbnb, as the company is now called, is worth more than $31 Billion. That is more than three times the revenue of Hilton Worldwide. Much more.

And why? Because they are cheaper? No. Because they provide more service? No. Because they are in better locations? No. No. No.

Chicken & Egg

Of course, they deliver a different experience than the average hotel, but the real secret is in Airbnb’s Business Model. Simple, scalable, but extremely difficult to copy!

Brian explains: ‘to really get in to business was a classical chicken & egg problem’.

No one wanted to come to Airbnb and list their homes, because there were no travellers. Travellers didn’t come, because there were no homes for rent.

No one wanted to be the Guinea Pig.

Double Sided Platform

But, once you got this figured out and you get traction you’ll practically become invincible.

Nowadays Airbnb has over 2 million listings, in 190 countries and 34.000 cities. And more than 40 million travellers visiting these places all over the world.

Really Hard to Copy

We call this a double sided platform. Homes and travellers: you need both in order other to make it work. That’s really hard to copy!

Get in touch if you want to learn the strategy, tools and processes of Strategyzer to design better business models and to come up with new value propositions. Just like Airbnb.

Other Posts

Success message!
Warning message!
Error message!