Airbnb's cofounder made an incredibly compelling pitch for startups to join Y Combinator: 'We were 13 weeks away from walking away from it all'
- Airbnb's cofounder Nathan Blecharczyk was asked at an event if there was a time when they almost shut down the business.
- In 2008, the startup couldn't raise a dollar of venture capital. It had two customers, including Airbnb chief executive officer Brian Chesky.
- The cofounders made a pact that if they came out of startup accelerator Y Combinator and were "not in a materially better place" after 13 weeks, they would walk away.
- Blecharczyk said the accelerator gave the company the guidance and focus that it needed to survive.
- Visit Business Insider's homepage for more stories.
There are pages and pages of Google search results that answer the question: "Is Y Combinator worth it?"
For some, the storied startup accelerator has been a springboard for success. Y Combinator has spun up 102 companies that are valued north of $150 million, according to the most recent count in 2019. Stripe has the highest valuation of any graduate, followed closely by Airbnb, which is expected to have an exit through a direct listing sometime this year.
At a recent event, Airbnb's cofounder Nathan Blecharczyk said there might not have been an Airbnb without Y Combinator.
In a fireside chat at New York University Stern School of Business last week, Blecharczyk was asked if the founders ever almost shut down the business. Blecharczyk, who is also Airbnb's chief strategy officer, reflected on a time when it couldn't raise a dollar of venture capital. The business had two customers, including chief executive Brian Chesky.
A 13-week stint in the Silicon Valley accelerator gave the company the jolt it needed to survive, Blecharczyk said at the event. You can watch a video here.
Y Combinator gives founders the chance to move to the Bay Area for $150,000 in seed funding and three months of mentorship from some of tech's most recognizable entrepreneurs and investors.
The program isn't entirely altruistic. The accelerator takes 7% of the company's ownership and gains the right to invest in future financing rounds, or pro rata.
Still, Blecharczyk's recollection of the experience makes a compelling pitch for founders on the verge of walking away.
Here's the story of how 13 weeks at Y Combinator saved the Airbnb cofounders from shutting it down:
"There was really only one time where we almost gave up," Blecharczyk said, "and that was at the end of the first year, where we had been unsuccessful in raising the capital. The recession had just began, this was the end of 2008. And after trying for a year, when do you know that it's just not a good idea and it's time to give up?
"There were three of us. No one of us really wanted to abandon the other two. Because we were all really dependent on one another."
They made a pact, Blecharczyk said.
"We would apply to Y Combinator, an accelerator program. It's only 13 weeks long. They give you a small, small amount of money, at least now they give you more. And it culminated in demo day.
"And we thought, OK, if we can get into this program, then we can admit to each other that we'll give it 13 more weeks. And we'll be super serious and regimented. But at the end of the 13 weeks, if we're not in a materially better place we all agree that it will be time to quit, and it won't be an awkward conversation."
The cofounders hustled over the next 13 weeks, Blecharczyk said. They were living together in an apartment where they worked from 8 a.m. to midnight, breaking only to eat, work out, or buy groceries.
The startup was on a mission to get hosts to love the service. The cofounders met all of their hosts in New York on stays at their homes. They wrote reviews and hired professional photographers for the properties to bolster their listings.
"Things really turned around during that period, so we never had to have that difficult conversation," Blecharczyk said. "But it really came down to that. We were 13 weeks away from walking away from it all.
"It was during that period that we got some advice that caused us to reflect about meeting our users, doing things that don't scale, photographing the properties, that really started the flywheel going and allowed us to show growth every single week.
"At the time, we had been making $200 a week every week for the last five months. Nothing we did moved that number. So that's why we were in such a state of despair. And our goal over the 13 weeks was to get $1,000 a month.
"We ended up getting to $4,300 a week and basically every week showing progress. And we were then able to raise money and never had to have the awkward conversation."
About a year later, the startup changed its name from Air Bed & Breakfast to Airbnb. It was last valued at $31 billion in 2017.