When you have a market and a suitable product, but the pair don't seem to fit, there's a word for that discord, according to Airbnb cofounder Joe Gebbia. People in the startup world call it the "Trough of Sorrow," he said, and it's something Airbnb became familiar with early on.
You could say that Airbnb's quirky approach to overcoming the challenge was an election-year miracle.
Gebbia told the full story to NPR's Guy Raz on this week's "How I Built This" podcast, describing a survival technique that's only tangentially related to what Airbnb, the sharing economy behemoth, actually does.
It was during the presidential election of 2008 and Gebbia and cofounder Brian Chesky were at the end of what Gebbia called a "Visa-round."
"You know those binders where you keep baseball cards? I had one of those except there weren't baseball cards in it, they were credit cards. We would go through Visa after Visa, to Mastercard then finally to AmEx, just maxing out credit cards," said Gebbia. And they weren't paying that round of debt down, and making enough revenue to get out of that financial hole seemed improbable at the time.
They were in that sorrowful period, when a lot of founders might consider quitting, said Gebbia. But he and Chesky came up with a wonky idea. While discussing how they might make breakfast part of the guest experience, they started playing with the idea of politically themed cereal. And they ran with it.
How they made it happen: They hired an artist to make 500 boxes of Obama Os and Cap'n McCain's, and sold the boxes for $40 each on the justification that they were collectors' items. Gifts of free cereal to media outlets won them press attention and the Obama Os sold out, said Gebbia. They used the revenue to pay off their credit card debt.
But still they were struggling. A pair of mentors recommended they apply to startup accelerator Y Combinator, which they did--past deadline, but a mentor was able to convince YC cofounder Paul Graham to take a look at their application, said Gebbia. Graham granted them an interview, but was unimpressed with their idea to build a business around strangers sleeping at other strangers' homes.
The first words out of Graham's mouth, as Gebbia recalled, were: "People actually use this? Well that's weird." And "it kind of went downhill from there," said Gebbia. Until the pair remembered as they were leaving that they had a box of Obama Os to give Graham.
Graham asked where the pair got the box, according to Gebbia, and they explained they had made it. "And he goes, 'Wait, you guys funded your company based on selling breakfast cereal?'" The answer was, of course, yes.
"On the ride home, we get a phone call from Paul Graham to inform us that he'd like to offer us a spot in the Y Combinator program, and we later found out that the reason wasn't because of our idea," said Gebbia. "It was because through the breakfast cereal we had proven to him that we had hustle, that we had grit. If we could figure out how to sell breakfast cereal for 40 dollars a box, we could figure out how to make our website work."