By Andrew Rachleff, Sara Rosenthal
2013 | Case No. E470 | Length 13 pgs.

The Airbnb case describes the very early days of this startup, beginning with the founders’ original concept of renting out air beds and serving breakfast (“Airbed and Breakfast”) in their apartment to conference attendees as an alternative to expensive hotel rooms. The founders grew the business by providing finding lodging options in people’s homes for attendees of large events such as South by Southwest and the Democratic National Convention. Despite positive reviews and high spikes in activity associated with these events, the founders faced challenges achieving sustainable growth. In early 2009, they joined Y-Combinator and were forced to confront a series of decisions around how to improve the product such that it could grow into a profitable, long-term business.

Learning Objective

The major teaching points in this case focus on the theme of leveraging the things that are going right to build the business, rather than trying to fix what’s wrong. In the case of Airbnb, there were numerous issues that needed to be fixed or addressed that could potentially improve customer retention and acquisition. For example, perhaps the founders could have focused on building their inventory one city at a time in order to gain critical mass, or perhaps they should have been more diligent about auditing their inventory to make sure they were maintaining rigid quality standards. Could they improve the website to enhance the user experience, or did they simply need to help people get comfortable with the concept of staying in other people’s homes? Ultimately, Airbnb experienced the highest repeat bookings in listings that had professionally-shot photos on the site. By requiring this feature for all listings, they experienced a huge leap in new and repeat business, demonstrating how they were able to leverage the “good”, rather than fix the “bad”, to achieve the growth they desired.

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