Union Square Ventures has invested in a lot of great startups, including Twitter, Tumblr, and Etsy.
But one big startup it missed out on was Airbnb. Airbnb has become a major success. It’s reportedly closing a new round of funding that values it at $US10 billion.
A few years ago Fred Wilson, a partner at USV, wrote about why his firm missed on Airbnb.
Airbnb is a peer-to-peer, short-term apartment rental solution that’s often used in place of hotels. A home owner hands over keys and a bedroom to a stranger in exchange for cash. But when Airbnb was first presented to Wilson and his team in 2009, the idea wasn’t as compelling.
“Airbnb was a marketplace for air mattresses on the floors of people’s apartments,” Wilson writes. “They had ideas for taking on other listings but they had not yet made much progress on them. We couldn’t wrap our heads around air mattresses on the living room floors as the next hotel room and did not chase the deal.”
Wilson said, “We made the classic mistake that all investors make. We focused too much on what they were doing at the time and not enough on what they could do, would do, and did do.”
Now Union Square Ventures has a subtle reminder about Airbnb in its office. It has a box of “Obama O’s” which are just generic Cheerios with an illustration of Obama on them. In 2008, the Airbnb founders made boxes of cereal with Barack Obama and John McCain. It sold the boxes for $US40 at the convention parties. The money it made from selling cereal was used to fund the company in its earliest stages.
Wilson calls this “a story of pure unadulterated hustle.” Any time a startup says it can’t raise money, Wilson tells the story of how Airbnb got its money to get off the ground.
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