The $30,000 of Cereal That Kept Airbnb Alive

In October 2007 two young designers in San Francisco could not pay their rent. Brian Chesky and Joe Gebbia had moved to the city to start something of their own, and so far that something did not exist. Then they noticed that a big design conference was coming to town and that the hotels were full.

They had a spare room and three air mattresses. They put up a simple website offering a place to sleep and breakfast in the morning, and three strangers paid to stay. The site was called AirBed & Breakfast. It made enough to cover the rent that month, and not much else.

What followed was a year of nearly failing. The company that came out of it would be worth $86.5 billion on its first day as a public company. In between, there was cereal.

A year of no

A third founder, Nathan Blecharczyk, Gebbia’s former roommate and an engineer, joined to build a proper site. The three relaunched the service more than once in 2008, timing each launch to an event when hotels would be scarce. Bookings came in bursts and then dried up.

Investors were not interested. On June 26, 2008, a friend named Michael Seibel introduced the founders to seven well-known Silicon Valley investors. They were trying to raise $150,000 at a valuation of $1.5 million. For $150,000, in other words, an investor could have bought 10% of the company.

Five of the seven wrote back to say no. The other two never replied. Chesky published the rejection emails in 2015, with the names removed, so that other founders would see them. The reasons were the polite ones every founder hears: not our area, not big enough, not for us. Underneath was a doubt that nobody quite wrote down. Would anyone really sleep in a stranger’s home?

The founders kept going on credit cards. By the summer the debt was piling up and the website was earning almost nothing.

Breakfast for the election

The 2008 US presidential race gave them an idea. They bought plain cereal in bulk, designed their own boxes and turned it into two limited editions: “Obama O’s” and “Cap’n McCain’s.” Each box carried a number on top, like a collector’s print. They priced them at $40.

According to Gebbia, they made 500 of each. They sent boxes to political reporters, got the press coverage they wanted, and sold the Obama O’s out. The Cap’n McCain’s sold less well. The founders ended up eating them to save money on food.

The cereal brought in about $30,000, Blecharczyk said years later. It went toward the credit card bills. It did nothing for the rental business. It did keep the company alive long enough for one more application.

The box on the table

Airbnb applied to Y Combinator, the startup program run by Paul Graham. In the interview, Graham was unconvinced. He didn’t like the idea of strangers sleeping in each other’s homes.

As the founders were about to leave, Gebbia pulled out a box of Obama O’s. Graham was struck by the stunt and changed his mind. As Blecharczyk recalled it, Graham told them the cereal showed how resourceful they were. In the founders’ telling, he compared them to cockroaches: people who simply would not die.

In January 2009 Y Combinator put $20,000 into the company. The founders used much of the program in New York, where many of their hosts were. They met them in person, listened to what went wrong and photographed apartments themselves to make the listings look better.

Graham was soon pushing them on investors. On February 9 he told Fred Wilson of Union Square Ventures that the Airbeds had just won a poll among all the startups in their batch by a landslide. After their New York trip, he passed on what the founders had found most surprising: how many of their hosts needed the rental income to pay their own rent. Graham argued the business would grow even in a recession. “So invest in them!” he wrote.

The miss

Wilson met the founders. His firm’s two junior members were enthusiastic, he told Graham; the three senior partners did not get it. He wrote that the business was interesting but that he wasn’t sure how big it could become, and Union Square Ventures passed.

Two years later Wilson wrote publicly that his firm had missed Airbnb even though it loved the team. He called it a big mistake and said a box of the founders’ cereal would stay in the firm’s conference room as a reminder. Graham then published their whole email exchange.

From $40 boxes to the Nasdaq

In March 2009 the company shortened its name to Airbnb. In April Sequoia Capital led a seed round of about $600,000. A Series A of around $7 million followed in 2010. From there Airbnb grew into a global marketplace for short stays, with hosts in almost every country.

Then, in 2020, the pandemic stopped travel almost overnight. Bookings collapsed. Airbnb raised emergency money on expensive terms and cut about a quarter of its staff. For a few months it looked as if the company might go back to where it began.

It recovered faster than almost anyone expected. On December 10, 2020, Airbnb started trading on the Nasdaq. The shares had been priced at $68. They opened at $146 and closed at $144.71. By CNBC’s count, that put the company’s market value at about $86.5 billion at the end of its first day. Counting options and other securities, Reuters put the figure above $100 billion.

In 2025 Airbnb reported record revenue of $12.2 billion, from 533 million nights and experiences booked. The 10% that seven investors turned down for $150,000 in 2008 would have been worth billions, even after years of dilution.

What the record shows

• Sell what you can, while you build what you want. The cereal had nothing to do with home rentals. It paid the bills anyway.
• Proof of character can open doors that proof of concept can’t. Graham disliked the idea but backed the people.
• Timing beats size. $20,000 at the start of 2009 mattered more than any later round, because without it there would have been no later round.
• Investors miss things too. Seven rejections in 2008 said more about the moment than about the company.

Other founders in this archive also kept a company alive with very little. Sara Blakely started Spanx with $5,000 of savings. FedEx’s founder took his last $5,000 to a blackjack table in Las Vegas. And Instagram, another San Francisco startup, went from nothing to a $1 billion sale in less than two years.