Following is the transcript of a CNBC interview with Joe Gebbia, Co-founder and CPO of Airbnb. The interview was broadcast on Managing Asia on 23 March 2018, 5.30PM SG/HK time.
All references must be sourced to a "CNBC Interview'.
Interviewed by Christine Tan, Anchor, CNBC.
Joe Gebbia: It's a crazy story. Imagine this, you had two guys living in an apartment and we quit our jobs to become entrepreneurs. We didn't know what we wanted to work on but we knew each other from design school and that if we were in the same room together we could come up with a big idea.
And suddenly we get a letter from our landlord who said, 'Dear Joe your rent has gone up 25 percent'.
This hit us like a ton of bricks. Suddenly, we're on the verge of getting evicted. We had to come up with a way to save our apartment. So I'm in the living room one day and I'm on my laptop looking at the website for design conference that's coming to San Francisco. It's so big, the hotels are sold out. In big red letters, it says hotels sold out. I glanced over the top into the vastness of our living room and think what if I took my airbed out of the closet, blew it up on the floor and then we were to host a designer who wanted to stay for the design conference? I emailed Brian, he loved the idea, and before we knew it, we had two more airbeds, and we started to think about the experience of maybe this is more than just a place to sleep? What if we pick our guests up from the airport, what if we give them breakfast in the morning, what if we give them a map to San Francisco?
So, before we knew it we had this concept called Airbed and breakfast. We were three guys, working out of our living room, to try to make this thing work.
Christine Tan (CT): Sounds crazy.
Joe Gebbia: It was crazy, it was totally absurd that we're three guys in our living room trying to make this website work. We failed three times. We were on our fourth attempt. We were starting to see the numbers go up, and so we did what any other entrepreneur would do. We went out to speak to investors, because who doesn't love a graph that's moving up to the right. So we met with the best in Silicon Valley – the guys who picked Youtube, Paypal and Google.
Each of them looked at us in the face and said 'this is crazy', 'this is weird', 'this is never going to work at scale', 'you're not going to have people scale in people's homes around the world'. And everybody passed.
So after the national convention, the numbers tanked and we entered what's called the trough of sorrow. So at the start of the startup, it was the launch and initiation, there was a wearing off of novelty, and then there's a trough of sorrow.
CT: How long were you stuck in that phase?
Joe Gebbia: Too long. You can say you have two gears - you have product and market and the product market fit isn't there yet. There was this invisible gap between it, and you couldn't figure what it was and you had to get the business moving, the momentum going. So for many, many months, our growth was completely flat. We were making maybe 200 dollars a week at best. This was bleak. If you crunched the numbers, and you put into a spreadsheet, the net result would have said, shut this business down and go and work on something else, because there was not a market here. But we had this intrinsic belief in ourselves. Only because we had guests staying in our apartment. We had our first-hand experience on what it was like - the magic that can unfold when you welcome people from around the world.
CT: So that intrinsic belief that you could actually make things work, it led the three of you to be really creative, to find another source of funding?
Joe Gebbia: Well, that's right. So after we got rejected by all the investors, as an entrepreneur, you get really good at reframing things. So every rejection that we took, we viewed it as an invitation to keep going.
They said, 'No'.
We said, 'Cool, thank you. Let's keep going'.
What happened was we were not making a lot of money on the side. Investors said no. we only had one resort at this point, we raised a round through Visa. We called it the Visa round, except Visa didn't really know about it! We actually took out credit card after credit card, we filled up binders.
CT: You max-ed it out?
Joe Gebbia: We definitely max-ed it out. I wouldn't necessarily recommend that. It was high anxiety and high stress.
CT: It was high risk.
Joe Gebbia: You can say it was high risk. The credit card bills kept going up and we really had no idea when they were going to get paid off. It was the period I think in the life cycle of a startup where most people want to give up because it was really hard. The world is against you and you have to hang on to somewhat irrational belief that your idea is good, and it's worthy. If you keep fighting, if you keep going, there'll be enough people out there who will adopt it and accept it and see the same thing that you do.
CT: Well, your tenacity actually got you accepted into a startup accelerator in San Francisco. When did things actually start to take off? Do you remember?
Joe Gebbia: We got into a program called Y Combinator in Silicon Valley. We made this commitment to each other that we would do whatever it took to become profitable by demo day. So for us, we jokingly referred to it as ramen profitability, which means that we made just enough money to pay rent and buy ramen. So that was our goal and we had to get to 1,000 dollars a week in order to make ramen profitability.
So, here we are in Y Combinator and in our first session with our advisor, Paul Graham asked us maybe the single most important question in the history of Airbnb.
CT: What was that?
Joe Gebbia: He asked, 'Where are your customers?' We said, 'Well, you know, we don't really have that many customers. The business isn't going that well, but New York City is showing promise.'
We had about 30 hosts. So Paul said, 'Your customers are in New York and you're here in San Francisco, what are you still doing here? Go to New York. Go meet your people.'
It was the single best piece of advice we ever got. So we packed up our bags, we hopped on a flight and we went to New York. One of the things that we learned prior to that was that our hosts didn't have great photos of their listings. People maybe were using their camera phones or taking pictures at night and it wasn't really presenting their homes in the best possible light. So as a design student, I've done photography my whole life, took photography courses at the Rhode Island School of Design. Brian and I would rent this really nice camera, and we would go door to door throughout Manhattan and Brooklyn taking photos of host properties for free.
We'd show them the photos after we took them, and they'd just be like, 'Oh my god, my apartment looks amazing. Do you want to stay for coffee or tea?' So we'd sit down on the sofa.
CT: So you got to know your hosts?
Joe Gebbia: We got to know our hosts and in getting to know them they started to tell us all the problems with our service.
So one of the greatest questions I ever learned in design research is to ask a customer, 'Tell me a story about a time you faced a challenge using our service?', and that single question can unlock so many possibilities and insights into how to close the gap between your product and your market.
What happened next was magical. We came back from New York with a lot of feedback, a lot of photos, we uploaded the photos, we made changes and alterations to our service, and suddenly the numbers…
CT: Just spiked?
Joe Gebbia: Went from 200 dollars to 400 dollars. I said to Nate, 'Is there a bug in the system?'
CT: You couldn't believe it?
Joe Gebbia: There wasn't, we couldn't believe this. So we showed the results to Paul Graham, our advisor, and he looked at us and said, 'What are you still doing here? Go back to New York City'.
CT: So by demo day you were profitable?
Joe Gebbia: Before demo day, we were profitable.
CT: Did you ever think the company would be in such hyper growth?
Joe Gebbia: I mean, in our wildest dreams. For me, one of my personal inspirations was designers in the mid-20th century named Charles and Ray Eames. Their iconic furniture is in the Museum of Modern Art and it's still sold globally. One of the precedents of their work, one of the ethos of their work was to make the best design for the most people for the least price, and I feel like in some form or fashion, we've channeled a piece of the Eames thru Airbnb. By democratizing travel, by making it as accessible to as many people as we can by leveraging the power of the Internet. So for me, it's truly a dream come true. On New Year's Eve, we had three million people staying in Airbnbs all over the world on a single night.
CT: So the sky's the limit. So what's the next big phase of growth for the company?
Joe Gebbia: The first is that we've taken one segment of the travel experience – accommodations, and we've turned it on its head. We've reinvented it, reimagined it. In the long term, we want to take the same values of community first - great design, global platform, and apply it to each moment of the travel journey, because accommodation is just one decision of many.
So imagine the future coming to Airbnb and we help you discover a destination you didn't even know existed, we help you figure out how to get there, we help you figure out where to stay…
CT: Sounds like you want to be a travel agent?
Joe Gebbia: And then figure what you do once you do arrive.
CT: Am I correct?
Joe Gebbia: We want to offer the whole trip. We want to do it through the convenience of our app, through a design-centric community, people-first, people-powered platform. So you've already seen the results of this. We've launched "Experiences" just over a year ago, which allows our community to host outside the home, to share their passions with guests coming to get a local experience.
CT: So you're focused on experiences, for travel?
Joe Gebbia: Right.
CT: And you're focused on accommodation?
Joe Gebbia: That's right.
CT: Are there any other sectors in the travel business that you want to really get into?
Joe Gebbia: We'll see. You know, it's a bright future and there's a lot to get into.
CT: Like airline bookings?
Joe Gebbia: We'll see.
CT: So you're not saying no to that?
Joe Gebbia: We're going to take things one at a time.
CT: But the aim is to be a one-stop travel platform…
Joe Gebbia: Absolutely.
CT: For everyone…
Joe Gebbia: Absolutely.
CT: And that includes air flights, hotels, accommodations, experiences, everything?
Joe Gebbia: Think of the whole travel journey through one divide, one app, and through Airbnb's values in one place. So we recently just launched Airbnb Plus.
Airbnb Plus is a new way for people to find places that have been pre-vetted and pre-qualified by people that we deploy and send on the ground. So these are places that have great personality, they've got great design style and they're verified for cleanliness. So for people like my mum who are huge fans of Airbnb, I sometimes have to convince her to use our service, because she cares a lot about cleanliness and she wants some things to be consistent. Now with Airbnb Plus, my mum is diving into Airbnb and she's so excited. So for anybody out there who, you know, wants the certain moments of consistency, they want clean and consistent experience, Airbnb Plus is for them.
Joe Gebbia: I see a listing that completely changed my point of view of the power of our platform. It wasn't a bedroom. It wasn't an apartment. It wasn't a home.
CT: What was it?
Joe Gebbia: It was an entire private island in Fiji for 400 dollars a night. I saw this and I said, 'oh my goodness'. The power of this platform and the power of the community to bring their creativity to this platform are truly endless.
CT: So your fast growth has obviously caught the attention of city regulators who have now started to impose restrictions on short-term rentals. They've also tried to tighten loopholes to extract tax payments. You've been blamed for causing rents to rise and contributing to a housing shortage. How do you deal with regulators who say Airbnb properties are illegal?
Joe Gebbia: Well, we've struck deals with over 400 governments worldwide, 400 cities in municipalities, both on finding fair and balanced regulations and also paying taxes. So we love working with governments, we love working with the cities to make it work for everybody.
CT: How tedious is the whole process?
Joe Gebbia: I mean it's all an investment, and we love working alongside cities. We've got a lot of case studies of cities that we worked really well with, in fact entire countries like Japan, the Diet recently passed nationwide legislation to allow home sharing throughout the entire country of Japan which is incredible because there's about eight million empty homes throughout Japan right now as they experience population decline. They also have very ambitious tourism goals and not enough traditional accommodation to meet those goals. So there's actually a perfect match where we can partner with Governments and we can work with legislators to help create fair and balanced regulations to help them meet their goals.
CT: Let's look at some of these destinations like Berlin and Barcelona for instance. These are some of Airbnb's top 10 cities, but the restrictions you face there, how do you address concerns that listings are slowing, and that the usage of your home platform is actually peaking?
Joe Gebbia: Well you know I think again we work alongside cities, we're happy to work alongside governments to, to strike these fair and balanced regulations.
CT: Well, in some tough markets like Singapore for instance, I mean Airbnb has said that it's looking to make concessions to appease the government. What are some of these concessions you're trying to make?
Joe Gebbia: I think the team's probably better-tasked to answer that question, but say again we've struck partnerships with over 400 cities worldwide and we're happy to do that in Singapore too.
CT: Here in Asia we've seen a big spike up when it comes to Airbnb bookings. In China alone for instance, listings have gone up by something like 180 percent, making it your second fastest growing market in the world. What did you have to do to really nail the Chinese market? I understand you went to great lengths to localize Airbnb in China?
Joe Gebbia: Well, first of all, I think it needed our attention from leadership, and my cofounder Nate Blecharczyk is helping run and oversee China right now. He has got eyes and ears at the very top of the company. Second is that China represents an incredible opportunity for us.
One of the things that we learned in our research is that there's close to 400 million millennials in China right now. We learned about the millennial population in China is that they want to travel outside China but not quite like their parents did. They're not looking for the tour package. They don't want the tour bus. They want to experience local neighborhoods. They want to shop at local grocery stores. They want to stay with hosts. So, we're incredibly excited because the potential of being able to tap into that market and be able to help an entire generation experience countries outside China through the lens of our community is really exciting to us.
CT: But you're facing a lot of competition in China as well. I mean the whole market for instance is dominated by local rivals not to mention Jack Ma's Tujia. They're really dominating and capturing the home-sharing market in China. What are you doing to grow your listings in China and increase your home sharing-platform usage?
Joe Gebbia: Well, everything is based on community, so you can imagine that our efforts are about building our community. We're taking our playbook from the early days of Airbnb when we used to travel to New York, and to D.C., and to Boston and Los Angeles and to Paris by going and sitting down and meet with our community members, talking to them about what do they want in our service, especially if we're going to localize it for China, what is it that they need in order to be great hosts on our platform.
CT: What sort of growth are you seeing from China? Could it be your biggest market one day?
Joe Gebbia: We'll see, we'll see. We had growth of north of a 150 percent year-over-year outbound from China. Its' an incredibly exciting market, we've got a very passionate team in China right now. That's building products specifically for the Chinese market.
CT: So for 2017, you posted your first full year of profitability. Bookings were up something like 150 percent, how does this year look like?
Joe Gebbia: Growth is looking very good for the company this year.
CT: Now that you've achieved profitability, is there talk among the three founders about when you might go for a public listing?
Joe Gebbia: I mean we're in no rush. We've got a business to focus on right now, so there's no need, no plans at this moment.
CT: But could it happen sometime soon?
Joe Gebbia: There's no plan at this moment.
CT: Are there things you want to nail down before you go for that public listing?
Joe Gebbia: I think we just want to tend to our services to the community.
CT: When Airbnb was born in 2008, it was three guys in startup mode trying to make a lot of money. At what point did you realize you needed a formal management structure?
Joe Gebbia: Well, when you're three guys working out of a living room, a management structure is the last thing on your mind. You just have to get the business working. I think it's true for any entrepreneur, you have this idea, you have this ambition to put it in the hands of as many people as possible as quickly as you can. At a certain point, things tip and you realize that you do need a management structure.
So what's been important for us is that we continue to hire people who are better than us, and I often think that if I'm the smartest guy in the room, then I'm in the wrong room. So it's probably around 2010, 2011 that we started to think about actually building out a management team, and since then, I've worked with some of the most amazing people.
CT: It's really unusual for three founders to get along so well after working in the business for so long. It has been 10 years since Airbnb was founded. Do you guys really get along?
Joe Gebbia: (Laughs) I think you know, it's like any relationship - you have to invest in it, you have to put the time in. I think we all care about each other so much and the basis of our relationship is rooted in the friendship.
CT: Are you guys always on the same page when it comes to where and how to drive the business? Any disagreements?
Joe Gebbia: Of course we have disagreements, but we also have respect for each other and we're able to reconcile our disagreements. The best part is that we've got three different points of view that we can find the best answer between the three of us. So it has been such a joy working with Brian and Nate, we often say, 'No, two of us couldn't have done this alone'. It really took the three of us, we're like a three-legged stool, if you took a leg out, the stool would fall over.
CT: What do you guys disagree about, just out of curiosity?
Joe Gebbia: Well, we did this personality assessment one time where they plot your personality on concentric circles with these quadrants. We literally made it an equilateral triangle. So we have such different points of view and such different perspectives that we're able to balance each other out. I think one thing that comes to mind is design – it's something that we're so passionate about that often times we would have disagreements about what the best design is because we care about putting the best experience in the hands of our customers.
CT: So it goes way back, to 2008 when you, Brian and Nate were roommates all together, has that friendship changed over the years?
Joe Gebbia: The friendship hasn't changed. I'd say it has evolved right. We've grown up together with the last 10 years of stewarding this business, stewarding our community, stewarding our talent all over the world.
I think if anything we've learnt from each other. I think each of us are our best teachers and the best part is it's all within the friendship. So we still get together, we still grab dinner, we still talk about the vision of where we want the company to go.
CT: Is it all work, work, work that you guys talk about?
Joe Gebbia: Not always, of course not right, we all have our personal lives too, so it's been a joy.
CT: So as chief product officer what are you in charge of?
Joe Gebbia: I have the privilege of working with our in-house design studio called Samara, and our humanitarian team called Human. Samara is thinking about the future of Airbnb and Human is working on ways to leverage our platform outside the cause of day to day business.
So it's about a couple of years ago in 2012, when Hurricane Sandy hit New York City, tens of thousands of people were displaced overnight. We got an email from a host in Brooklyn who said, 'I would love to volunteer my five guest rooms for free to those displaced, how do I do that?'
The problem was, on our platform, you had to have a transaction, a credit card to make a connection, and we said but why? So we reconfigured our entire platform in a couple days. We allowed that host and a thousand others to offer rooms to those displaced by Hurricane Sandy.
Eventually, we partnered with the City of New York to help provide housing to those displaced and it gave us a much bigger idea. What if we were able to provide housing to those who'd been displaced, anywhere in the world where we had homes in unaffected areas.
So since then we built up a platform called open homes, which allows Airbnb hosts or anyone with extra space to volunteer to those displaced, so any typhoon in Asia, any earthquake in Japan, any fire in Northern California or earthquake in Mexico City, our hosts can see these images on TV and say 'how can I help?'
CT: And this is all done for free?
Joe Gebbia: This is all done for free. These are people tapping into their natural generosity, saying, I've got something that somebody needs, and through Airbnb's platform of which we spend so much time connecting guests and hosts over vacation and travel, what if we use the same technology to connect them over shelter.
One other area that we got into was refugee resettlement. So when the families come in to get resettled into a country, there's this gap period before you find permanent housing and we recognize that's an opportunity where our hosts once said they wanted to help out. So open homes also work alongside refugee resettlement agencies like the IRC, Solidarity Now and the UNHCR to help place resettled families inside Airbnbs while they transition into their new life.
CT: And finally Joe as one of the co-founders of Airbnb, what lessons can you give other startups on how to be successful?
Joe Gebbia: One of the important lessons that we learnt early on was to go meet the people, to go talk to the customers, to achieve what I would call enlightened empathy which is getting into the shoes of the customers as close as you possibly can, to see the world through their eyes and to bring those insights back, combine them with your own point of view to create a new idea.