Brian Had No Money, No Investors, and One Crazy Idea. It Worked

One quick thing before we get to today’s story: I get asked all the time how I built this newsletter - with almost 20,000 of you getting it and a crazy 52% opening it every week.

The first answer is, people like newsletters. Heck, look, you reading one right now!

And, despite what you may think, the technical part is not the hard part. The hard part is just starting. So I put together an easy, do-it-in-under-an-hour, step-by-step guide for you. Everything you need to know, distilled down, doable pronto, and I am offering it for only $17. Such a deal! 😀 Why? Because if you have a small business, or want to have one, your people need to hear from you! Grab it here, or in the “Steal This Strategy” box below.

OK, now let me tell you about two broke roommates, a hot glue gun, and the scrappiest startup move I have seen in a long time!

It was 2007. Brian and Joe were living in San Francisco, unemployed and behind on rent.

When a big design conference came to town and every hotel room sold out, they spotted a big, but kinda weird, opportunity. They blew up three air mattresses, put up a website they called “Air Bed and Breakfast,” and rented out their floor to strangers for $80 a night.

It was definitely odd. It was scrappy. But it also was, in their minds, maybe the seed of something much bigger.

They were wrong – at least for a while.

They rebuilt the site, rebranded it as Airbnb, and went out to raise $150,000. The pitch was simple: unlock all the spare bedrooms in the world and let travelers sleep in them. Investors were not exactly lining up. Seven VC rejections in all, five of them in writing. Two did not even pick up the pen.

By the fall of 2008, Brian and Joe each had $20,000 in credit card debt. Their startup was on life support. And then, as was his way apparently, Brian got creative.

The Breakfast of Champions

It was election season, and Barack Obama and John McCain were everywhere. Brian and Joe – both designers after all – had an idea. They designed two custom cereal boxes:

“Obama O’s: The Breakfast of Change” and “Cap’n McCain’s: A Maverick in Every Bowl.”

Ha!

They bought cheap cereal in bulk, hand-drew the logos, printed the boxes, and sat in their apartment with a hot glue gun sealing 1,000 boxes, one by one.

Then they sold them as limited-edition collector’s items for $40 a box.

Yep. Forty bucks. For a $4 box of cereal. And they sold out. Perez Hilton bought one. Katy Perry bought one. The “cereal guys,” as the news stations began calling them, made $30,000. Enough to keep the lights on. Enough to survive.

The Man Who Almost Said No

But here is where things finally turned around –

In early 2009, Brian and his co-founders applied to Y Combinator, the legendary Silicon Valley accelerator run by a man named Paul Graham. Graham was skeptical. The idea of strangers sleeping in each other’s beds struck him as, well, creepy.

And the interview did not go especially well. But then, as the founders were heading out the door, and almost on a whim, Brian set a box of Obama O’s on the table.

Graham stared at it. He picked it up. He turned it over.

Then he looked at Brian and said something that would become one of the most quoted lines in startup history:

“If you can convince people to pay $40 for a $4 box of cereal, maybe, just maybe, you can convince strangers to live with each other.”

Airbnb got into Y Combinator and they got the $20,000 seed check. They got the mentorship and the network. They got the Demo Day that led Sequoia Capital to write a check for $585,000.

The two broke roommates who could not pay their rent in 2007 were on their way to building the world’s biggest hospitality company.

Today, Airbnb is worth $75 billion. Brian still keeps an Obama O’s box on his desk. Not as a trophy. As a reminder of what scrappy looks like when it works.

The Takeaway

My dear old dad – the best entrepreneur I ever knew – used to say that it was both “good news and bad news” when a business ran out of conventional options. Because that is when you find out what you are actually made of.

Brian Chesky had no money, no investors, and no runway. So he grabbed a hot glue gun and made cereal. It was ridiculous. It was desperate. And it was exactly the kind of move that told Paul Graham everything he needed to know.

Maybe you have a hot glue gun moment waiting for you too – some crazy, unglamorous, totally-beneath-a-serious-entrepreneur idea that just might be the thing that saves everything. Maybe your $40 cereal box is out there. Will you make it?

Steal This Strategy

🛠️ Resource: Launch Your First Newsletter in Under 60 Minutes. Brian Chesky started with an air mattress – you can start a newsletter in an hour. Let me show you how.

📰 Article: Brian Chesky’s Own ‘7 Rejections’ – the actual emails. Chesky published the actual investor rejection letters. Read them when you need a reminder that “no” is not the end.

🎙️ Podcast: Growth In Reverse – Newsletter & Email Growth. The must-listen show for anyone serious about turning a newsletter into a real business. Exactly what Brian would have downloaded.

TODAY’S POLL

About Steve

Steve Strauss is the best-selling author of The Small Business Bible (and 17 other books), Inc.’s small business columnist, a lawyer (non-practicing), and an entrepreneur. He sold his last venture, TheSelfEmployed.com to Mark Cuban & Zen Business. Need help with your small business or newsletter? Contact Steve!