#391 2008 · Airbnb (Obama O's / Cap'n McCain's) · Startup fundraisingcostly-signal
Airbnb's founders were about to be evicted and couldn't raise a normal seed round, so they sold election-themed cereal for $40 a box — and the stunt itself was worth more than the money.
the problem
a startup with a hard-to-explain idea can't raise conventional funding, and no one investor will take the pitch seriously enough to write a check
background
By mid-2008, Airbnb's founders Brian Chesky, Joe Gebbia and Nathan Blecharczyk were broke and facing eviction from their San Francisco apartment, having failed to raise meaningful funding for an idea — strangers renting spare rooms from strangers — that most investors found implausible on its face. Conventional fundraising had stalled; nobody was willing to bet money on the concept itself.
With the 2008 US presidential election dominating attention, the founders decided that rather than keep pitching the idea directly, they'd demonstrate something more concrete: that they could get people to pay real money for something objectively silly, as a proxy for their ability to sell an unconventional product at all.
the move
The founders designed and hand-assembled roughly 1,000 novelty cereal boxes branded 'Obama O's' and 'Cap'n McCain's,' playing on the election, and sold them at $40 each — a wildly inflated price for a box of cereal, justified only by the novelty and story.
the payoff
The stunt raised about $30,000, enough to keep Airbnb operating for several more months, but its more important effect was persuading Y Combinator co-founder Paul Graham to invest and admit the company to Y Combinator's accelerator — Graham later said the reasoning explicitly was that founders who could convince people to pay $40 for a $4 box of cereal could plausibly convince strangers to sleep in each other's homes.
what came after
The Obama O's story is one of the most frequently cited examples in startup culture of a scrappy, unscalable stunt functioning as proof-of-founder-capability rather than proof-of-concept for the actual product — cited in startup accelerator pitch training as evidence that demonstrating raw persuasive and execution ability can matter more to early investors than the underlying business idea itself.
references
- [1]Airbnb CEO says he wooed first investor with boxes of cerealCNBC, 2023cnbc.com
- [2]How The Airbnb Founders Sold Obama-Labelled Cereal Boxes To Grow Airbnb In Its Early DaysOfficeChai, 2023officechai.com