How Airbnb Started: Three Air Mattresses, Cereal Boxes and a Rent Deadline

The problem: rent was going up and money was not

In 2007, Brian Chesky and Joe Gebbia were two designers sharing an apartment in San Francisco. Chesky had just moved there from Los Angeles, and the rent was higher than he could comfortably pay. Money was tight, and the pressure to find extra income was real. They did not have a business plan. They had a rent deadline.

The opportunity hiding in a sold-out city

Around that time, a big design conference was coming to San Francisco. The two roommates noticed something simple: hotels in the city were fully booked, and many attendees would struggle to find a place to sleep. They also had something most people overlook, which was spare floor space in their own living room.

They bought three air mattresses, built a basic website, and offered what they called an “air bed and breakfast”: a place to sleep, a simple morning meal, and a local host who could show visitors around. Three guests booked and paid around $80 each. The money covered part of their rent, but the more valuable thing they got was proof. Strangers were willing to pay to stay in someone’s home.

Adding a third founder and launching for real

Early in 2008, Chesky and Gebbia brought in Nathan Blecharczyk, a software engineer who had been Gebbia’s former roommate, to build the technical side of the idea. Together they launched the site and targeted big events, where hotel shortages are most obvious. The first months were slow. Many people thought the idea was strange or even unsafe, and investors were not convinced.

The cereal boxes that kept the company alive

By 2008 the founders were running out of money and had accumulated significant credit card debt. The U.S. presidential election was underway, and they came up with an unusual way to fund the company. They designed limited-edition cereal boxes themed around the candidates, called “Obama O’s” and “Cap’n McCain’s,” and sold them for about $40 each.

The boxes got press coverage and sold well enough to bring in roughly $30,000. That helped them pay off their debt and keep the business going. The lesson is easy to miss: they did not wait for the perfect investor. They found a creative way to raise small amounts of cash from people who liked the story.

Y Combinator and the push to fix the real problem

In 2009 the team was accepted into Y Combinator, the well-known startup program led by Paul Graham. According to the founders’ own accounts, Graham pushed them to focus on the users they already had. The company’s bookings were strongest in New York, so the founders travelled there and visited their hosts in person.

What they found was that the listing photos were poor, which made guests less likely to book. So they rented a camera and took better photos of the listings themselves. Bookings improved. It was a small, manual, unscalable fix, and it taught them something important about their business: quality of presentation drives trust, and trust drives bookings.

What this story teaches anyone starting a small business

• Start with what you already have. The first product was a living room floor and three air mattresses, not a finished platform.
• Look for a shortage. A sold-out city created demand that hotels could not meet.
• Test before you build. Three paying guests proved the idea before any serious investment.
• Raise small money creatively. The cereal boxes were a bold, low-cost way to stay alive.
• Do things that do not scale. Visiting hosts and taking photos by hand revealed what customers actually cared about.

A note on accuracy

This story is based on interviews and accounts given by the founders over the years. Numbers such as guest payments and cereal-box revenue are approximate and appear in slightly different forms in different retellings.

What would your version of “three air mattresses” be? Tell us in the comments below what you already own that someone else might pay to use.