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How the Founders of Airbnb Attracted Investors with a Story

Executive Summary

Airbnb tried for years to use reason and logic in their investor pitches. While they made a strong case for their idea for residents to rent out rooms to strangers, not one investor would bite their whole first year in business.

  • Telling a founder story in conjunction with data has proven to be successful for a majority of Shark Tank participants who acquired deals.
  • Your brand's story is its biggest weapon. Only your company could come up with your idea in the specific way you did.
  • A founder story turns skeptics into believers.

By this point, we know the Airbnb story. It’s a classic tale of innovation sparked by the age-old question, “what if…” Two San Francisco-based college graduates rented out air mattresses to conference attendees with great success.

That’s when the roommates had an idea. What if this wasn’t a one time thing? What if, instead of making rent one month, they scaled this idea and made rent every month, allowing anyone to rent their space for a random, awesome experience at the startup cost of just a couple of air mattresses? This was the beginning of Airbnb as we know it today.

But what’s often overlooked is just how important storytelling was to the company in its early days, back when Airbnb had just two customers, not millions, and was struggling to survive.

#startuplife

Startups always face challenges, and Airbnb had a few extra hurdles.

Namely, while the idea of turning surplus home space into a business using the sharing economy seems obvious now, it wasn’t at the time. Think about it. Someone says to you, “Why don’t you have some strangers stay at your place this weekend? . . . What? No, they aren’t friends or friends of friends. They’re just strangers who found you on the internet. Maybe you can make breakfast for them too.” For many people that’s an instant no, and that’s how many investors responded to the idea too.

Jeff Jordan is a general partner at the venture capital firm Andreessen Horowitz, a firm that, for the record, can sniff out a unicorn from a decade away. Skype, Facebook, and Twitter are just a few of their successes. So imagine the burn when Jordan said, “The first time I heard about Airbnb I thought it was possibly the stupidest idea I’d ever heard.” That is a soul-crushing comment for any entrepreneur, Brian Chesky included.

The only thing that likely made it easier for Chesky, one of Airbnb’s founders, in the early days of the company is that Jordan’s “stupidest idea” sentiment was one Chesky heard a lot. In the first year of business, every venture capitalist Chesky pitched turned him down. As he told Fast Company, “People thought we were crazy. They said strangers will never stay with strangers, and horrible things are going to happen.”

But how do you effectively communicate potential to an investor who, in the palm of their hand, holds the power to grant the opportunity of a lifetime or sign your dream’s death certificate?

Sell Yourself

Every week several million viewers tune into the ABC show Shark Tank. And every week hopeful entrepreneurs stand before a panel of intimidating judges and pitch their idea or business or product or service in the hopes that one of the sharks will invest.

The pitches often start the same.

The entrepreneurs introduce themselves and state the terms of the investment they seek.

They briefly describe their product or business.

Then, well, there are a couple of options. An obvious choice is to talk math. Armed with the knowledge that investors want to make money (and often nothing else), entrepreneurs seek ways to convince investors that saying yes to this risk is a great idea. What better way to persuade someone than with cold, hard facts? Logic is always the best policy. Rely on numbers. Things like market size and conversion rates and ROI and marginal cost. It’s reassuring for the entrepreneur and sounds really official to the decision makers.

I will stop there to say it’s important to have your numbers straight, but as we learned in an earlier chapter, straight numbers are almost never enough. What is the secret formula for getting a life-changing deal?

Telling a founder story seems to be at least a part of it. In fact, in an analysis of season six of Shark Tank (smack-dab in the middle of the show’s run), my team coded all 116 pitches based on our story criteria and determined that 76.7 percent of the aired pitches told a story. Of those who did, more received a deal than didn’t. Perhaps part of the reason is, when it comes to a new product or idea, you’re selling yourself as much as anything else.

Skeptic to Believer in One Story Flat

Although his pitch wasn’t broadcast on national television, Brian Chesky and Airbnb were swimming with their own sharks as they searched for someone to grant them the funding they needed to launch what they suspected, what they knew in their bones was an incredible company.

But no amount of math in the world was going to bridge the entrepreneur-investor gap. There was an overwhelming lack of confidence in the idea, and investors just couldn’t see how it would all come together. With logic leading to nothing but dead ends, the young company had no option but to turn to the power of story to convince the investors they approached. The only person who could tell that story was the founder. And the only story he had was himself.

Remember Jeff Jordan, the venture capitalist who was convinced Airbnb was the worst idea he’d ever heard? He’ll stand by that claim but then add that after hearing Chesky speak, he was sold. When Jordan met with Chesky, he said, “I went from complete skeptic to complete believer in twenty-nine minutes.” Why? Because Chesky is a storyteller. “Every great founder can really tell a great story,” Jordan told Business Insider. “It’s one of the key things in a founder, that you can convince people to believe.”

With one simple story, his founder story, Chesky demonstrated what Jordan calls a founder/product fit. A story that illustrates the birth of an idea. A story that inherently says no other guy could have come across this idea at this time and in this way.

That fateful day, Brian Chesky faced one of the most intense experiences for an entrepreneur, and the thing that turned skeptics into believers was his story. It was enough to overcome any objections, create faith, and ultimately get a yes. A $112 million yes.

Excerpted with permission from Stories that Stick by Kindra Hall, copyright Kindra Hall.

Bring It Home

In the past, I worked for a start-up marketing agency. We started with a few solid clients, enough to keep what few members we had on our team financially stable. But, we struggled to scale. I remember sitting in 5-hour meetings where we tried to define our value propositions, describe what made us different from every other creative agency out there. We couldn't.

Now that I look back on those meetings, I realize the source of our struggle stemmed from our inability to recognize our own story. We all had worked at marketing agencies that left us burnt out, where we were expected to cut corners with our clients, and where we weren't utilized per the skills we brought to the table in our initial interviews. So, we teamed up to create a space that valued the client-agency relationship and the employee-agency relationship. We had a founders story, we just didn't know how to convey it. What's your founder story? Join the conversation on our blog! ~ HarperCollins Leadership Essentials

Kindra Hall author of Kindra Hall

Kindra Hall

Kindra Hall is a keynote speaker and award-winning storyteller. She has been published at Entrepreneur.com and Inc.com, and as a contributing editor to Success magazine. She speaks for and works with brands of all sizes to help them harness the power of storytelling.

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