I'd love to see more of these genuine, high-level business conversations. It can be difficult to learn and understand what really goes on "at the top", because probably every top exec is under some pressure to appear superhuman.
Most of the time I've had access to these conversations it seems like 10-20% of the time there is some really insightful and/or groundbreaking discussion going on.
The rest of the time, it's something like this:
A: I've always found that business is about increasing revenue and decreasing costs
B: I've also always thought that way
A: Great! I'm glad we're on the same page
It is interesting to see how PG is selling this to Fred. This is exactly the kind of people you want to work with in a startup. People who believe in you and are not afraid to show it.
Yeah, I don’t know much about PG’s communication style, but in intra-VC communication, this is 100 max over the top support, hair-on-fire. Good for PG, and his words were prescient in ‘09, prescient in ‘11 and still prescient in ‘18. Not many times my you can say that.
Ps funny on the eBay name drop. The original marketplace model, and still doing well, but dot think vc’s reference it as often anymore.
Love his passion. I know it's possible PG himself missed out on a startups by convincing people not to invest in a simialr way, but the fact that he's not afraid to express his opinion is just as useful.
This pg quote has an r/LateStageCapitalism vibe to me: "They just arrived back from NYC, and when I asked them what was the most significant thing they'd observed, it was how many of their users actually needed to do these rentals to pay their rents."
> > But I am not sure they can take on the hotel market
> Not an inaccurate assessment.
Not sure. I have stayed in AirBnBs on vacation in other countries and I have stayed in them many times on business, first during a conference when all the rooms were booked ( -- our admin suggested it!) and then after that was so great (we had a whole house for a half dozen team members) we almost always use it. Most people prefer it, though some prefer to have their own place rather than share, even though everyone has their own bedroom. We give everyone a choice and most people choose an airbnb over a hotel.
I assume "take on" doesn't mean "replace" but "become a significant player". It doesn't work in Manhattan nor, somewhat surprisingly does it in Omaha, but in most major conurbs its fine.
This is just from memory. Correct me if I’m wrong.
2005: mobileride.com in Boston, phone-based ridesharing with voluntary cash exchange, shut down in 2006 with regulatory warnings
2006: zipcar hires some of mobileride team and enters rideshare business with shared zipcar rentals among BU students
2007: zimride starts with pre-arranged rideshare at Cornell, works with campus transportation directly to keep it legal.
2007: google rides opens as a platform for several tiers of ride hailing services, dominates the market and then shuts down in 2010
2010: Uber starts in NYC as high-end livery, not sure if they got the license or not, but tweaks business model to have many on-demand part-time drivers instead of full-time, but pays much better portion of fare.
2012: Sidecar in San Francisco allows anybody to accept rides and mobile payments but calls them gratuities instead of fare. Regulators show their will to inaction. Uber responds with massive push into taxi services, completely flouts regulation, and Zimride births Lyft to do the same. CALPERS is rescued from bankruptcy by investment in AirBnB and Uber.
I think that's the main reason why they passed on Airbnb. The VCs themselves were too far away from the initial target market, and could neither relate with the "airbed and breakfast" user base, nor see how it could scale.
Because they didn't do rooms in an already occupied house (and still don't). AirBnb started with renting couches or spare beds. They only moved into whole houses later, after they built up a reputation, and more importantly, built up their system of tracking the reputation of the renters.
Because the tech was terrible and they did nothing to facilitate the transaction. There was no trust model -- hosts posted their own reviews, usually from paper guestbooks and guests had to mail checks to untrusted hosts weeks in advance. There was no escrow or arbiter upon arrival. Most picture quality was terrible. Because of the transaction difficulty, the concept couldn't scale down to smaller rentals (rooms, etc) for smaller periods of time.
The only thing technical were that the sites usually had a calendar, but it was impossible to tell when and if it had actually been updated, so you had to be in contact with a dozen property owners to find a place with availability.
These services showed the potential but were little more than a collection of classified ads.
Personally I only even think about VRBO for group trips in vacation rental type areas. I think I've booked 10x the trips with Airbnb, more than half of them for just me solo.
Not sure how VRBO's mobile presence compared to Airbnb when Airbnb started gaining traction but that could be a factor?
Note there is a survivor bias here.
Might be even more interesting to see PG's email exchanges with other VCs on some then successful but later failed startups.
I would be very curious to see what barriers to entry AirBnB has developed vs. say, Uber. While both are marketplaces, Uber benefits tremendously from understanding traffic patterns, from seeing how people ride, from being able to give drivers the option of traveling certain directions, etc. All of that data is worth billions of dollars and not easily discovered, and technically quite challenging to gather and exploit.
From what I can tell, AirBnB has a brand and a web application. Technically, I can't imagine the latter is more complicated than the average e-commerce site delivered at scale. I am having trouble understanding how big data can create an advantage (maybe to help owners price their rentals?). If a competitor pops up, there's no reason owners can't list on multiple sites without facing any penalties.
AirBnB is not a company I'd invest in for the long term, while I would invest in Uber/Lyft. So, what am I missing?
Airbnb has a global network effect: If I booked my last two holidays on Airbnb, I am more inclined to do it also for the next one out of convenience. I'm already verified anf signed up and I know the interface etc... This requires a global network of hosts.
Any competitor has to build a global network of comparable density to be compatible.
On the other hand, Uber's network effect and synergies are mostly localized to cities. If I move to a new city and there is a competitor with lower prices, chances are I'll install their app eventually, even if it takes me a few weeks.
Airbnb, like Uber, took advantage of regulatory inefficiencies instead of market inefficiencies. The model is do something (in the minds of regulators) illegal, quickly enough that you can become large enough to get a seat at the table when the regulations are reworked.
The counter example to these companies are the ones that quickly raised capital to dump scooters on public streets before they could be shut down by cities. None of the players were able to grow large enough to have a say in the reforming of the laws that regulate them (SF learned its lesson from Uber and moved quickly, limiting their participation to asking for proposals).
This is framed to present a VC as "missing out" in the financial sense. Ultimately a VC is liable to its capital partners in far more ways. If Airbnb had all of its assets seized by the federal government as an illegal enterprise (just as an example), we would be applauding their foresight and brilliance in avoiding this otherwise lucrative opportunity.
I think there's some truth that these guys dodge/ignore/lobby down regulations, but there's this narrative now that that's all they do. Being able to flag a taxi through an app is amazing, so is being able to rent a flat from a stranger with confidence that it will be give and work out. Regulation arbitrage is only a fraction of their value, and the regulations are often just rent seeking by those with power. Insane taxi Union/medallions, ban on flat renting to preserve property values etc.
> The counter example to these companies are the ones that quickly raised capital to dump scooters on public streets before they could be shut down by cities.
I live in NYC, and I’m frequently in Westchester (the county immediately north of NYC, for those not familiar with New York). There’s been a large influx of Lime bikes in the past several months. My opinion on Lime - the bike/scooter company - has quickly evolved from idle curiosity, to weak dislike, to outright disdain. That evolution started happening when I saw Lime bikes being parked in arbitrary places that blocked pedestrian foot traffic, but I think the straw that broke the camel’s back was when someone parked a Lime bike directly in the spot I usually place my garbage.
Sometimes the hustle of skirting regulation seems to be a net positive. Company culture notwithstanding, I’m happy overall that Uber exists as a concept. I don’t have a savvy opinion about their future, but I enjoy Uber rides significantly more than yellow cabs. Likewise I’ve stayed in Airbnbs before and enjoyed the experience, though I wouldn’t say it’s changed my day to day life as much.
But other times it seems like companies are being actively negligent in their awareness of the legislations they’re flippantly ignoring and the consequences of doing so. I don’t have a lot of sympathy for a system being disrupted which depends on the artificial scarcity of taxi medallions. On the other hand I find it very frustrating when my sidewalk or park is “disrupted” by a random bright green bike that yells at you if you try to move it without paying.
I wish there were a way to easily categorize the behavior of companies - between those whose cavalier approach to disruption mostly impacts existing incumbents, and those whose approach is actually a pain to end users. Sometimes the laws are legitimately outdated or very inefficient, and disregarding them vastly improves the user experience. But other times - like with Lime - it feels as though companies are pointing to those examples so they can get away with a “product” that automatically opts you into a “new normal” just because a subset of people use it.
Seems to me people often confuse something being illegal with something being an actual crime. They had the insight that these minor regulations can be easily broken to deliver value with very few repercussions
> quickly enough that you can become large enough to get a seat at the table when the regulations are reworked.
It also makes sense to do this in areas where no one is watching. For example Monkey Parking got shut down almost immediately during the same time SF was probably at it's height of negotiating what it was going to do with Airbnb rentals in SF. https://www.wired.com/2014/06/app-that-lets-users-sell-publi...
Also, Airbnb, like many other companies who tout "growth hacking", illegally (in the eyes of the craigslist ToS) used a technique to basically leverage Craigslist audience to grow their own.
I think this is a great observation, and well put.
FWIW, had you made the same comment a year ago, I'd have only seen Uber, not Airbnb, matching precisely the model you describe. The lore was (and perhaps still is) that Airbnb has a platform substantially different & far better than Uber (e.g. http://archive.is/kE5hq). MSM painted Uber as this ultra-aggressive startup in terms of both company culture and taking on regulators; meanwhile Airbnb was just this wholesome startup simply trying to help student's travel on a shoestring budget and helping people pay rent by letting someone sleep on their couch.
Anyway, that was my interpretation back then; but clearly I'm no Paul Graham. It's clear from his blog post that Paul never saw it this way. To him, Airbnb was always destined to be a platform that disrupted the hotel market. Of course if you're going to 'disrupt' the hotel market in any medium-to-large city, that means thousands of residential homes will need to be converted into short-term vacation rentals.
It was either a carefully planned timing, or merely circumstance, but Airbnb has scaled at exactly the right pace to (like you mention) "become large enough to get a seat at the table when the regulations are reworked". And unlike Uber they have powerful/wealthy friends who piggyback on the Airbnb platform. It seems like almost overnight Airbnb went from an airbed in some student's loft to Corporation-Owned-Whole-Home-No-Host-punch-in-a-pin-code-to-open-the-front-door-fully-automated "STRs".
Living in San Diego I couldn't hate it more. After city council passed a regulation to limit Airbnb's to primary residences (which I believe most SD residence were happy about), Airbnb & HomeAway, and other parties formed a coalition, and hired a bunch of people to gather signatures to skirt our city council's ruling and put this action on a ballet as a referendum (http://archive.is/Yf6GP). In theory I'm not opposed to voter referendum; but here is a case where Airbnb is clearly undermining the ability of our elected official's to govern our city. The voted regulations will now be put on hold until 2020; and there will be nothing but carpet-bombing adverts for the next two years brainwashing san diegans. There's no hope.
I see the regulatory inefficiencies as being totally different though.
It didn't make that much sense apart from protecting holders of medallions for it to be illegal to pay someone for a car ride, but I would actually like there to be laws protecting guests and innkeepers, and preventing the apartment across the hall from turning into a hotel.
Also you might want to notice that the last email from Fred is at 4:26am. In France that would be illegal in itself, sending a work email outside of the working hours. /s
Maybe the "do things that don't scale thing" where Airbnb came to the apartments and took photos of them themselves, to make the offering more interesting for customers?
Something I often notice when people complain about AirBNB being a problem in their city- Their city has 'peaked' like a star Quarterback in High school.
In my city which is experiencing growth, I find my AirBnB guests are often business travelers who are infulencers in their respected communities. There are some exceptions like college kids on summer vacation trying to hook up away from their parents house- but mostly business people.
I see complaints from Europeans about Tourism, but that should be a reflection on the achievements of their ancestors rather than the achievements of the current and recent generations.
Which complaints are you talking about? If you're talking about loutish guests, maybe. But landlords deciding they can get more money converting apartments into short-term rentals, in aggregate driving up rents, is a bigger problem the more in-demand the city is.
Well, we don't all agree that the changes are tantamount to "damage", first of all.
For my part, having lived much of my adult life in New Paltz, AirBnb has greatly increased the availability of NYC housing for me, as I typically only live in NYC for 3-10 days at a time.
I can understand that, if your desire is to live there perpetually for years, you might have a different perception.
Perhaps living in a single place in perpetuity (especially near the center of a major metro/cosmopolitan hub) is just not as sustainable in an environment where smallish organizations like AirBnb (or the decentralized versions to come) can easily subvert statutory attempts to force a particular market outcome.
Also, in NYC in particular, the role of "rent control" is worth taking into account.
This is bullshit. I fund my startup by consulting 1-2 months per year at 40k/month. Zero people think it is impressive. But $25k of Obama cereal makes a better story.
[+] [-] hedgew|7 years ago|reply
[+] [-] alexpotato|7 years ago|reply
The rest of the time, it's something like this:
[+] [-] IndrekR|7 years ago|reply
[+] [-] jpeg_hero|7 years ago|reply
Ps funny on the eBay name drop. The original marketplace model, and still doing well, but dot think vc’s reference it as often anymore.
[+] [-] foobaw|7 years ago|reply
[+] [-] deleted_account|7 years ago|reply
[+] [-] quadrige|7 years ago|reply
[+] [-] gcb0|7 years ago|reply
[+] [-] foldr|7 years ago|reply
> But I am not sure they can take on the hotel market
Not an inaccurate assessment.
[+] [-] gumby|7 years ago|reply
> Not an inaccurate assessment.
Not sure. I have stayed in AirBnBs on vacation in other countries and I have stayed in them many times on business, first during a conference when all the rooms were booked ( -- our admin suggested it!) and then after that was so great (we had a whole house for a half dozen team members) we almost always use it. Most people prefer it, though some prefer to have their own place rather than share, even though everyone has their own bedroom. We give everyone a choice and most people choose an airbnb over a hotel.
I assume "take on" doesn't mean "replace" but "become a significant player". It doesn't work in Manhattan nor, somewhat surprisingly does it in Omaha, but in most major conurbs its fine.
[+] [-] tedmiston|7 years ago|reply
[+] [-] paxys|7 years ago|reply
[+] [-] jl2718|7 years ago|reply
2005: mobileride.com in Boston, phone-based ridesharing with voluntary cash exchange, shut down in 2006 with regulatory warnings
2006: zipcar hires some of mobileride team and enters rideshare business with shared zipcar rentals among BU students
2007: zimride starts with pre-arranged rideshare at Cornell, works with campus transportation directly to keep it legal.
2007: google rides opens as a platform for several tiers of ride hailing services, dominates the market and then shuts down in 2010
2010: Uber starts in NYC as high-end livery, not sure if they got the license or not, but tweaks business model to have many on-demand part-time drivers instead of full-time, but pays much better portion of fare.
2012: Sidecar in San Francisco allows anybody to accept rides and mobile payments but calls them gratuities instead of fare. Regulators show their will to inaction. Uber responds with massive push into taxi services, completely flouts regulation, and Zimride births Lyft to do the same. CALPERS is rescued from bankruptcy by investment in AirBnB and Uber.
[+] [-] mkolodny|7 years ago|reply
https://web.archive.org/web/20000620091420/http://www.craigs...
[+] [-] dopamean|7 years ago|reply
I would like to know more.
[+] [-] krn|7 years ago|reply
> The three "old guys" didn't get it
I think that's the main reason why they passed on Airbnb. The VCs themselves were too far away from the initial target market, and could neither relate with the "airbed and breakfast" user base, nor see how it could scale.
[+] [-] jamestimmins|7 years ago|reply
[+] [-] jonny_eh|7 years ago|reply
[+] [-] aogl|7 years ago|reply
It's quite cool how the transcript goes to say "There's no reason this couldn't be as big as Ebay. And this team is the right one to do it."
Turns out that literally was the case! Good call Paul!
[+] [-] mrnobody_67|7 years ago|reply
It seems there was already a marketplace for short term vacation rentals....
[+] [-] jedberg|7 years ago|reply
[+] [-] davinic|7 years ago|reply
The only thing technical were that the sites usually had a calendar, but it was impossible to tell when and if it had actually been updated, so you had to be in contact with a dozen property owners to find a place with availability.
These services showed the potential but were little more than a collection of classified ads.
[+] [-] tedmiston|7 years ago|reply
Not sure how VRBO's mobile presence compared to Airbnb when Airbnb started gaining traction but that could be a factor?
[+] [-] user5994461|7 years ago|reply
Whatever you think they are missing, there is actually already a site for that.
[+] [-] pram|7 years ago|reply
[+] [-] awakenrz|7 years ago|reply
[+] [-] runT1ME|7 years ago|reply
From what I can tell, AirBnB has a brand and a web application. Technically, I can't imagine the latter is more complicated than the average e-commerce site delivered at scale. I am having trouble understanding how big data can create an advantage (maybe to help owners price their rentals?). If a competitor pops up, there's no reason owners can't list on multiple sites without facing any penalties.
AirBnB is not a company I'd invest in for the long term, while I would invest in Uber/Lyft. So, what am I missing?
[+] [-] konschubert|7 years ago|reply
On the other hand, Uber's network effect and synergies are mostly localized to cities. If I move to a new city and there is a competitor with lower prices, chances are I'll install their app eventually, even if it takes me a few weeks.
[+] [-] dsl|7 years ago|reply
The counter example to these companies are the ones that quickly raised capital to dump scooters on public streets before they could be shut down by cities. None of the players were able to grow large enough to have a say in the reforming of the laws that regulate them (SF learned its lesson from Uber and moved quickly, limiting their participation to asking for proposals).
This is framed to present a VC as "missing out" in the financial sense. Ultimately a VC is liable to its capital partners in far more ways. If Airbnb had all of its assets seized by the federal government as an illegal enterprise (just as an example), we would be applauding their foresight and brilliance in avoiding this otherwise lucrative opportunity.
[+] [-] zimablue|7 years ago|reply
[+] [-] throwawaymath|7 years ago|reply
> The counter example to these companies are the ones that quickly raised capital to dump scooters on public streets before they could be shut down by cities.
I live in NYC, and I’m frequently in Westchester (the county immediately north of NYC, for those not familiar with New York). There’s been a large influx of Lime bikes in the past several months. My opinion on Lime - the bike/scooter company - has quickly evolved from idle curiosity, to weak dislike, to outright disdain. That evolution started happening when I saw Lime bikes being parked in arbitrary places that blocked pedestrian foot traffic, but I think the straw that broke the camel’s back was when someone parked a Lime bike directly in the spot I usually place my garbage.
Sometimes the hustle of skirting regulation seems to be a net positive. Company culture notwithstanding, I’m happy overall that Uber exists as a concept. I don’t have a savvy opinion about their future, but I enjoy Uber rides significantly more than yellow cabs. Likewise I’ve stayed in Airbnbs before and enjoyed the experience, though I wouldn’t say it’s changed my day to day life as much.
But other times it seems like companies are being actively negligent in their awareness of the legislations they’re flippantly ignoring and the consequences of doing so. I don’t have a lot of sympathy for a system being disrupted which depends on the artificial scarcity of taxi medallions. On the other hand I find it very frustrating when my sidewalk or park is “disrupted” by a random bright green bike that yells at you if you try to move it without paying.
I wish there were a way to easily categorize the behavior of companies - between those whose cavalier approach to disruption mostly impacts existing incumbents, and those whose approach is actually a pain to end users. Sometimes the laws are legitimately outdated or very inefficient, and disregarding them vastly improves the user experience. But other times - like with Lime - it feels as though companies are pointing to those examples so they can get away with a “product” that automatically opts you into a “new normal” just because a subset of people use it.
[+] [-] vasilipupkin|7 years ago|reply
[+] [-] mbesto|7 years ago|reply
It also makes sense to do this in areas where no one is watching. For example Monkey Parking got shut down almost immediately during the same time SF was probably at it's height of negotiating what it was going to do with Airbnb rentals in SF. https://www.wired.com/2014/06/app-that-lets-users-sell-publi...
Also, Airbnb, like many other companies who tout "growth hacking", illegally (in the eyes of the craigslist ToS) used a technique to basically leverage Craigslist audience to grow their own.
Mind you, this technique is also being encouraged by a partner at one of the most prominent VC firms in the valley. https://andrewchen.co/how-to-be-a-growth-hacker-an-airbnbcra...
Point is - it's very easy to blindly select what you feel is "right" vs "wrong" or "bad" vs "good"[0][1] when your money is on the line.
[0] - http://www.paulgraham.com/good.html
[1] - http://www.paulgraham.com/ronco.html
[+] [-] subroutine|7 years ago|reply
FWIW, had you made the same comment a year ago, I'd have only seen Uber, not Airbnb, matching precisely the model you describe. The lore was (and perhaps still is) that Airbnb has a platform substantially different & far better than Uber (e.g. http://archive.is/kE5hq). MSM painted Uber as this ultra-aggressive startup in terms of both company culture and taking on regulators; meanwhile Airbnb was just this wholesome startup simply trying to help student's travel on a shoestring budget and helping people pay rent by letting someone sleep on their couch.
Anyway, that was my interpretation back then; but clearly I'm no Paul Graham. It's clear from his blog post that Paul never saw it this way. To him, Airbnb was always destined to be a platform that disrupted the hotel market. Of course if you're going to 'disrupt' the hotel market in any medium-to-large city, that means thousands of residential homes will need to be converted into short-term vacation rentals.
It was either a carefully planned timing, or merely circumstance, but Airbnb has scaled at exactly the right pace to (like you mention) "become large enough to get a seat at the table when the regulations are reworked". And unlike Uber they have powerful/wealthy friends who piggyback on the Airbnb platform. It seems like almost overnight Airbnb went from an airbed in some student's loft to Corporation-Owned-Whole-Home-No-Host-punch-in-a-pin-code-to-open-the-front-door-fully-automated "STRs".
Living in San Diego I couldn't hate it more. After city council passed a regulation to limit Airbnb's to primary residences (which I believe most SD residence were happy about), Airbnb & HomeAway, and other parties formed a coalition, and hired a bunch of people to gather signatures to skirt our city council's ruling and put this action on a ballet as a referendum (http://archive.is/Yf6GP). In theory I'm not opposed to voter referendum; but here is a case where Airbnb is clearly undermining the ability of our elected official's to govern our city. The voted regulations will now be put on hold until 2020; and there will be nothing but carpet-bombing adverts for the next two years brainwashing san diegans. There's no hope.
[+] [-] Reedx|7 years ago|reply
How quickly we forget... There were huge inefficiencies and Uber was an order of magnitude better than what we had.
Getting a taxi was difficult and unreliable. Ask anyone who used to use them in SF. Uber was like magic in comparison.
[+] [-] waylandsmithers|7 years ago|reply
It didn't make that much sense apart from protecting holders of medallions for it to be illegal to pay someone for a car ride, but I would actually like there to be laws protecting guests and innkeepers, and preventing the apartment across the hall from turning into a hotel.
[+] [-] spectrum1234|7 years ago|reply
[+] [-] cft|7 years ago|reply
[+] [-] raverbashing|7 years ago|reply
[+] [-] kitcar|7 years ago|reply
[+] [-] hobofan|7 years ago|reply
[+] [-] MrEfficiency|7 years ago|reply
In my city which is experiencing growth, I find my AirBnB guests are often business travelers who are infulencers in their respected communities. There are some exceptions like college kids on summer vacation trying to hook up away from their parents house- but mostly business people.
I see complaints from Europeans about Tourism, but that should be a reflection on the achievements of their ancestors rather than the achievements of the current and recent generations.
[+] [-] emodendroket|7 years ago|reply
[+] [-] timr|7 years ago|reply
[+] [-] iMuzz|7 years ago|reply
[+] [-] abcdcba|7 years ago|reply
[+] [-] jMyles|7 years ago|reply
For my part, having lived much of my adult life in New Paltz, AirBnb has greatly increased the availability of NYC housing for me, as I typically only live in NYC for 3-10 days at a time.
I can understand that, if your desire is to live there perpetually for years, you might have a different perception.
Perhaps living in a single place in perpetuity (especially near the center of a major metro/cosmopolitan hub) is just not as sustainable in an environment where smallish organizations like AirBnb (or the decentralized versions to come) can easily subvert statutory attempts to force a particular market outcome.
Also, in NYC in particular, the role of "rent control" is worth taking into account.
[+] [-] MrEfficiency|7 years ago|reply
[+] [-] dustingetz|7 years ago|reply