How to build the next Airbnb?
Author: Yannick Oswald - check out his blog here
Last week, I had two Qoorio meetings of 45mins each in one day in Paris. For a total of 1h30mins of meetings, Qoorio has generated EUR 180 for me that day. If I multiply this with, let's say 4 weeks x 2 days of sessions (with 1h30mins of sessions per day), I would generate EUR 1440 in cash. I think this is a very compelling figure for 12 hours of great discussions with interesting people. I believe everyone has unique knowledge that is worth sharing. You should give Qoorio a try. It is an enriching and rewarding experience.
This concept might sound weird to you at first. But, if you think about it... renting out your knowledge for a certain period of time is no different from renting out a room in your apartment, for example.
Creating these C2C marketplaces is always a challenge as you have to figure out the ‘chicken and egg’ challenge to drive liquidity (see a post on this here). Before launching a marketplace, think about the following KPIs, and if your transactions' nature can drive a healthy business.
But rental marketplaces such as Airbnb are especially tricky. It is just harder than for purchase marketplaces to incentivize your supply enough to get liquidity.
There is just a lot of friction to get supply onboarded and make transactions happen. Let's look at an example: to rent out your apartment on Airbnb, (1) you need to set up and promote your listing, (2) update your calendar, and, once you got a booking, you need to be comfortable with the person staying at your place. (3) Once a booking is accepted, you need to welcome and hand over the keys to your guests. (4) After the visit, you need to make sure your place is cleaned before the next guest arrives. These are 4 significant steps to take care of. So, why do people rent out their homes on Airbnb nevertheless? The reason is simple: the amount of money one can earn on the platform outweighs these challenges. In other words, the AOV (average order value) is high, and if you have a strong listing, the demand for it and, thus, the booking frequency are high as well. Successful listers can even make so much money that they hire subcontractors to take care of the logistics, such as cleaning or exchanging keys, and still make a living out of their Airbnb presence.
To be successful, rental marketplaces essentially need to allow the best suppliers to make a living out of them, and ensure that the other suppliers' incentives are the right ones on a per-transaction basis. For example, renting your home for EUR 100 per night is more than many people's annual income. If you rented it every night, it would put you in the top 0.75 percent of income earners worldwide. The sooner a platform can prove to its suppliers that they can do well, the sooner it will hit an inflection point. But there are very few categories where the AOV for renting something is high enough to warrant renting it out.
Here a quick overview of the critical challenges of C2C rental marketplaces:
But if you crack the transaction process, C2C marketplaces can create category-defining opportunities. Just have a look at the recent kick-ass IPO of Airbnb: 'The reason Airbnb's opportunity is so enormous is partially because it created a new category. While the company describes its market as simply 'the growing travel market and experience economy,' that underplays Airbnb's effect on the industry. By building trust into the platform, Airbnb normalized the renting out of spare rooms or empty homes. The result was an enormous influx of new supply, without the capital requirements. Guests that might not have been served by the old model were welcomed into this new category of hospitality. This is to say that not only has Airbnb changed the travel industry, it's expanded the market in the process.' But to get there, the team had to invent an entirely new experience and kill the insane amount of friction in it. Soon after they raised the first venture dollars, for example, they hired professional photographers to shoot pictures of every listing in NYC to make them more appealing to guests. The founders personally traveled city to city and stayed in Airbnb listings to better understand the product and experience. And the list goes on.
It takes a lot of conviction and effort to build successful C2C rental marketplaces. We have many in our portfolio and have seen founders do it successfully. Please do reach out if you are working on a crazy idea in the comment section below. We would love to chat.
Here a picture from last week at the HQ of our company Sybel. It shows some of the first titles that were on the platform. It is a great reminder of how far we have come with close to a thousand titles now and tens of thousands of episodes and subscribers. 2020 was an excellent year for the company... Give it a listen.
Life is awesome,
About the Author
My name is Yannick and I am an early stage VC @ Mangrove Capital Partners and a Kauffman fellow, Class 23.
Check out Yannick's blog here