Born to help make the rent, Airbnb grew from good design

Airbnb might be one of the hottest startups in Silicon Valley, but it didn’t start with such glamorous roots. In fact, it started with an air mattress.

“Airbnb was born out of necessarity. Our rent went up. It was born out of a problem,” said Joe Gebbia, the company’s co-founder and chief product officer at GigaOM’s RoadMap conference in San Francisco Monday. “By inflating the air bed, it began that design process.”

Gebbia said that about five years ago, he and his co-founders were looking to make some extra money, and by hosting a few visitors in San Francisco, they were able to make some extra money and forge a social bond with their visitors. And then it occurred to them that the product could work for other people too.

Now, Airbnb has raised about $120 million in financing after a round last summer, when it was valued at about $1.3 billion. Gebbia says the site, which allows users to post rooms for rent and book visitors, sees more than 1,000 new listings every day. It’s booked more than 10 million nights so far.

“We started with airbeds,” he said. “And people have listed private rooms, and then… boats and treehouses and castles and villas.”

When someone listed their island in Fiji on the site for relatively decent prices, that’s when Gebbia realized Airbnb had reached a new level of business.

“I just remember sitting back in my chair, and saying, ‘this totally redefines the experience,'” he said.

Airbnb was one of the noted successes of Paul Graham’s Y Combinator incubator, and he said Graham was instrumental in pushing them in their early days to really consider who their customers were. The team was located in Mountain View at the time, but most of their customers were in New York, so they got on a flight and headed to New York, where they started talking to the people listing their homes on the site.

“Our conversations with them illuminated everything that was wrong with the product,” he said, saying it took off afterwards.

Gebbia said in the 1990s, the real consumer challenge for the internet was bringing customers online, but that’s changing now, and Airbnb is at the forefront of this change.

“Airbnb is about the nexus of the online and offline to create the perfect customer experience,” he said.

Check out the rest of our RoadMap 2012 live coverage here, and a video recording of the session follows below: