"This article written by Paul Graham in 2011 shares his email exchange with Fred Wilson about investing in Airbnb. This exchange illustrates the kind of dialogue that occurs between investors when discussing the potential of a startup. While Graham is insistent on the potential growth and success of Airbnb, Wilson adopts a more cautious approach. This provides insight into what kind of arguments a startup can present to convince investors and what an investor looks out for when evaluating a startup.

---

# Subject: Airbnb (The Email Exchange Process During Investment in Airbnb: A Dialogue Between an Entrepreneur and Investor)

March 2011

Yesterday Fred Wilson published a remarkable [post](http://avc.com/2011/03/airbnb) about missing [Airbnb](http://airbnb.com). 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

---

Relevant Keywords: Airbnb investment history, Paul Graham and Airbnb, Fred Wilson and Airbnb, Y Combinator startups, Airbnb early stage investment, venture capital decision making, startup investment conversation, Airbnb growth strategy, Airbnb market potential"