Some people secure startup investments with well-organized pitches and PowerPoints. Airbnb CEO Brian Chesky and his two co-founders did it with $40 boxes of cereal.
And it was almost by accident, Chesky said at a recent Stanford Graduate School of Business event.
When Chesky and his two co-founders — Joe Gebbia and Nathan Blecharczyk — launched the company in 2008, investors were skeptical of the idea that people would casually invite strangers into their homes for overnight stays. Rejected by the VC world, the trio turned to their own customers for fundraising dollars, Chesky said.
Specifically, they sold self-designed cereal boxes featuring then-presidential candidates Barack Obama and John McCain as a breakfast option in Airbnbs. The cereal proved popular, selling more than 1,000 boxes and making $30,000 for the company, Chesky said.
That turned at least one investor’s head back in their direction, he added: Tech startup accelerator Y Combinator co-founder Paul Graham offered them an investment specifically because of the cereal.
“If you can convince people to pay $40 for $4 boxes of cereal, maybe, just maybe, you can convince strangers to live with each other,” Graham told the trio, according to Chesky.
Y Combinator was responsible for one of Airbnb’s earliest investments, giving the then-startup $20,000 in exchange for 6% of the company, according to Crunchbase. Airbnb and Y Combinator didn’t immediately respond to CNBC Make It’s request for confirmation.
Today, Airbnb has a market capitalization of $75.13 billion. The company helped create and popularize the modern on-demand lodging industry, normalizing the idea that investors initially thought would never take on.
It might have never happened without the cereal: Airbnb was rejected by multiple major investors during its first year of operations, Chesky noted in a 2015 Medium post. “The investors that rejected us were smart people, and I am sure we didn’t look very impressive at the time,” he wrote.
But while rejection doubtlessly stings, it’s not always the end of the world for startups. For example, Bumble CEO and co-founder Whitney Wolfe Herd was rejected by investors several times while trying to launch her dating app, she said at the Aspen Ideas Festival last summer.
Investors weren’t keen on the idea of women solely initiating conversations with matches, and told her the platform would fail because it defied social norms, Wolfe Herd said. She used the no’s as motivation and evidence that her ideas were future-facing, she added.
“I just retrained my brain from Day 1: Every time I got a hurtful email or tweet or some investor telling me [the idea for Bumble] was stupid, I just got really excited about it,” Wolfe Herd said. “People generally don’t know how to see things that don’t exist yet, so you just have to believe in yourself.”
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