Airbnb's Cereal Box Rescue

Air mattresses and an empty bank account

In 2007 two design school friends, Brian Chesky and Joe Gebbia, could not cover the rent on their San Francisco apartment. A big design conference was in town and every hotel was full, so they inflated three air mattresses, put up a simple website and charged guests for a bed and breakfast. It worked well enough that they pulled in engineer Nathan Blecharczyk and turned the idea into a company called AirBed & Breakfast.

The problem was that almost nobody else used it. Through 2008 the founders kept relaunching, kept getting turned down by investors and kept putting expenses on credit cards. By the fall they were deep in debt and running out of options.

The cereal idea

The 2008 US presidential race was everywhere, and the founders noticed that political merchandise sold itself. So they bought plain cereal, designed their own collectible boxes, and sold them as Obama O's and Cap'n McCain's. Each numbered box went for $40. The boxes were folded and glued largely by hand, and the founders pitched them to bloggers and journalists, the same way they had been pitching their room-sharing site.

The press loved the gag. Accounts from the founders put the haul at roughly $30,000, enough to wipe out a large chunk of their debt. The Obama boxes sold out while the McCain boxes moved slowly, and the leftovers famously became the founders' own breakfast for a while.

Why it impressed investors

When the team interviewed at the startup accelerator Y Combinator, partner Paul Graham was not sold on renting out air mattresses. The cereal story changed the conversation. A team that could invent a product, manufacture it and sell it out on almost no money was a team that would not quit. Airbnb joined the Winter 2009 batch, shortened its name in 2009 and went on to grow into a global travel platform, listing on the Nasdaq in December 2020.

The boss lesson

The cereal had nothing to do with home sharing, and that is the point. Early founders often face a gap between the business they want and the cash they have. Creative, legal side hustles can buy time, and the hustle itself becomes proof of grit for investors, partners and customers.

The bigger takeaway is to keep the core idea alive while you solve the immediate problem. The founders never abandoned their site. They simply found a scrappy way to stay in the game long enough for it to catch on.

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