How A Box Of Cereal And Acting Like A Cockroach Helped Airbnb Become A Billion-Dollar Business

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When Airbnb's founders were just getting started, they had no way to fund their short-term apartment rental business. They maxed out a binder full of credit cards and racked up tens of thousands of dollars in charges.

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When they ran out of credit cards, the founders needed a new idea. It was during the McCain-Obama election, so they decided to turn boxes of Cheerios and Captain Crunch into political schwag. CEO Brian Chesky recalls contacting a print shop who shipped him 1,000 cardboard boxes labeled "Obama O's" and "Captain McCain."

With a hot glue gun, Chesky and his cofounders built the boxes and stuffed them with cereal. "It was like origami in my apartment," he told the crowd at South by Southwest.

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Chesky and his co-founders were able to land themselves on a national TV show and they sold out of the cereal, which offset some of the cost of their apartment rental company, Airbnb.

Later, Chesky and his co-founders pitched Paul Graham to get into his Silicon Valley startup accelerator program, Y Combinator.

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Chesky says the interview didn't go well, but in a last-ditch effort, his co-founder whipped out a box of Obama O's and handed it to Graham.

Graham asked, "What's this?"

They explained how they were funding their startup. Graham was impressed. That was in 2008, right after the financial market crashed. Graham told Chesky and his team that he was looking for startups that wouldn't die during the nuclear winter.

"He was basically looking for cockroaches [to let into his accelerator program]," Chesky recalled. "He said we were cockroaches and that's why he funded us."

Airbnb grew quickly after Y Combinator. Now investors have given it $120 million and say the company is worth multiple billions.

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