March 2011 Yesterday Fred Wilson published a remarkable post about missing Airbnb. VCs miss good startups all the time, but it's extraordinarily rare for one to talk about it publicly till long afterward. So that post is further evidence what a rare bird Fred is. He's probably the nicest VC I know. Reading Fred's post made me go back and look at the emails I exchanged with him at the time, trying to convince him to invest in Airbnb. It was quite interesting to read. You can see Fred's mind at work as he circles the deal. Fred and the Airbnb founders have generously agreed to let me publish this email exchange (with one sentence redacted about something that's strategically important to Airbnb and not an important part of the conversation). It's an interesting illustration of an element of the startup ecosystem that few except the participants ever see: investors trying to convince one another to invest in their portfolio companies. Hundreds if not thousands of conversations of this type are happening now, but if one has ever been published, I haven't seen it. The Airbnbs themselves never even saw these emails at the time. We do a lot of this behind the scenes stuff at YC, because we invest in such a large number of companies, and we invest so early that investors sometimes need a lot of convincing to see their merits. I don't always try as hard as this though. Fred must have found me quite annoying.
    from: Paul Graham
    to: Fred Wilson, AirBedAndBreakfast Founders
    date: Fri, Jan 23, 2009 at 11:42 AM
    subject: meet the airbeds

    One of the startups from the batch that just started, AirbedAndBreakfast,
    is in NYC right now meeting their users.  (NYC is their biggest
    market.) I'd recommend meeting them if your schedule allows.

    I'd been thinking to myself that though these guys were going to
    do really well, I should introduce them to angels, because VCs would
    never go for it.  But then I thought maybe I should give you more
    credit.  You'll certainly like meeting them.  Be sure to ask about
    how they funded themselves with breakfast cereal.

    There's no reason this couldn't be as big as Ebay.  And this team
    is the right one to do it.

    --pg

    from: Brian Chesky
    to: Paul Graham
    cc: Nathan Blecharczyk, Joe Gebbia
    date: Fri, Jan 23, 2009 at 11:40 AM
    subject: Re: meet the airbeds

    PG,

    Thanks for the intro!

    Brian

    from: Paul Graham
    to: Brian Chesky
    cc: Nathan Blecharczyk, Joe Gebbia
    date: Fri, Jan 23, 2009 at 12:38 PM
    subject: Re: meet the airbeds

    It's a longshot, at this stage, but if there was any VC who'd get
    you guys, it would be Fred.  He is the least suburban-golf-playing
    VC I know.

    He likes to observe startups for a while before acting, so don't
    be bummed if he seems ambivalent.

    --pg

    from: Fred Wilson
    to: Paul Graham,
    date: Sun, Jan 25, 2009 at 5:28 PM
    subject: Re: meet the airbeds

    Thanks Paul

    We are having a bit of a debate inside our partnership about the
    airbed concept. We'll finish that debate tomorrow in our weekly
    meeting and get back to you with our thoughts

    Thanks

    Fred

    from: Paul Graham
    to: Fred Wilson
    date: Sun, Jan 25, 2009 at 10:48 PM
    subject: Re: meet the airbeds

    I'd recommend having the debate after meeting them instead of before.
    We had big doubts about this idea, but they vanished on meeting the
    guys.

    from: Fred Wilson
    to: Paul Graham
    date: Mon, Jan 26, 2009 at 11:08 AM
    subject: RE: meet the airbeds

    We are still very suspect of this idea but will take a meeting as
    you suggest

    Thanks

    fred

    from: Fred Wilson
    to: Paul Graham, AirBedAndBreakfast Founders
    date: Mon, Jan 26, 2009 at 11:09 AM
    subject: RE: meet the airbeds

    Airbed team -

    Are you still in NYC?

    We'd like to meet if you are

    Thanks

    fred

    from: Paul Graham
    to: Fred Wilson
    date: Mon, Jan 26, 2009 at 1:42 PM
    subject: Re: meet the airbeds

    Ideas can morph.  Practically every really big startup could say,
    five years later, "believe it or not, we started out doing ___."
    It just seemed a very good sign to me that these guys were actually
    on the ground in NYC hunting down (and understanding) their users.
    On top of several previous good signs.

    --pg

    from: Fred Wilson
    to: Paul Graham
    date: Sun, Feb 1, 2009 at 7:15 AM
    subject: Re: meet the airbeds

    It's interesting

    Our two junior team members were enthusiastic

    The three "old guys" didn't get it

    from: Paul Graham
    to: Fred Wilson
    date: Mon, Feb 9, 2009 at 5:58 PM
    subject: airbnb

    The Airbeds just won the first poll among all the YC startups in
    their batch by a landslide.  In the past this has not been a 100%
    indicator of success (if only anything were) but much better than
    random.

    --pg

    from: Fred Wilson
    to: Paul Graham
    date: Fri, Feb 13, 2009 at 5:29 PM
    subject: Re: airbnb

    I met them today

    They have an interesting business

    I'm just not sure how big it's going to be

    fred

    from: Paul Graham
    to: Fred Wilson
    date: Sat, Feb 14, 2009 at 9:50 AM
    subject: Re: airbnb

    Did they explain the long-term goal of being the market in accommodation
    the way eBay is in stuff?  That seems like it would be huge.  Hotels
    now are like airlines in the 1970s before they figured out how to
    increase their load factors.

    from: Fred Wilson
    to: Paul Graham
    date: Tue, Feb 17, 2009 at 2:05 PM
    subject: Re: airbnb

    They did but I am not sure I buy that

    ABNB reminds me of Etsy in that it facilitates real commerce in a
    marketplace model directly between two people

    So I think it can scale all the way to the bed and breakfast market

    But I am not sure they can take on the hotel market

    I could be wrong

    But even so, if you include short term room rental, second home
    rental, bed and breakfast, and other similar classes of accommodations,
    you get to a pretty big opportunity

    fred

    from: Paul Graham
    to: Fred Wilson
    date: Wed, Feb 18, 2009 at 12:21 AM
    subject: Re: airbnb

    So invest in them!  They're very capital efficient.  They would
    make an investor's money go a long way.

    It's also counter-cyclical.  They just arrived back from NYC, and
    when I asked them what was the most significant thing they'd observed,
    it was how many of their users actually needed to do these rentals
    to pay their rents.

    --pg

    from: Fred Wilson
    to: Paul Graham
    date: Wed, Feb 18, 2009 at 2:21 AM
    subject: Re: airbnb

    There's a lot to like

    I've done a few things, like intro it to my friends at Foundry who
    were investors in Service Metrics and understand this model

    I am also talking to my friend Mark Pincus who had an idea like
    this a few years ago.

    So we are working on it

    Thanks for the lead

    Fred

    from: Paul Graham
    to: Fred Wilson
    date: Fri, Feb 20, 2009 at 10:00 PM
    subject: airbnb already spreading to pros

    I know you're skeptical they'll ever get hotels, but there's a
    continuum between private sofas and hotel rooms, and they just moved
    one step further along it.

    [link to an airbnb user]

    This is after only a few months.  I bet you they will get hotels
    eventually.  It will start with small ones.  Just wait till all the
    10-room pensiones in Rome discover this site.  And once it spreads
    to hotels, where is the point (in size of chain) at which it stops?
    Once something becomes a big marketplace, you ignore it at your
    peril.

    --pg

    from: Fred Wilson
    to: Paul Graham
    date: Sat, Feb 21, 2009 at 4:26 AM
    subject: Re: airbnb already spreading to pros

    That's true. It's also true that there are quite a few marketplaces
    out there that serve this same market

    If you look at many of the people who list at ABNB, they list
    elsewhere too

    I am not negative on this one, I am interested, but we are still
    in the gathering data phase.

    fred