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The inside story of Youniversity Ventures, Keith Rabois' investing group that turned a $380,000 Airbnb seed investment into $600 million

Dec 10, 2020

Business Insider An icon in the shape of a person's head and shoulders. It often indicates a user profile. Log In US Edition Registration on or use of this site constitutes acceptance of our Close icon Two crossed lines that form an 'X'. It indicates a way to close an interaction, or dismiss a notification. Good This story is available exclusively to Business Insider subscribers. Become an Insider and start reading now. Airbnb became a publicly traded company Wednesday valued at $100 billion with shares soaring 115%. But the company was on the brink of extinction in 2008 and investors stayed away. Today, Sequoia gets the credit for being the first major backer of Airbnb when it led the company's seed round in 2009. But another investment group called Youniversity Ventures, started by VC Keith Rabois, Eventbrite cofounder Kevin Hartz and YouTube cofounder Jawed Karim, invested in that seed round, too. Rabois told Business Insider how Airbnb CEO Brian Chesky sold him on the company in three minutes with one simple statistic. Today, Airbnb's IPO, which values the company at a whopping $100 billion, is helping Silicon Valley's biggest venture firms add to their 2020 fortunes, including Greylock, Founders Fund, and Andreessen Horowitz. The company's shares soared 115% at the open of its trading debut today. But most of these firms only put their money into the company after it took off and was becoming successful. Prior to that, most investors dismissed the company , concerned that the home rental market was too small and that two of the three founders, Brian Chesky and Joe Gebbia, were designers. Only the other founder, Nathan Blecharczyk, was an engineer. Things got so bad that that in 2008, shortly after Airbnb was founded, it was already on the brink of extinction. That year, Chesky and Gebbia were out of money and failing to garner an investor. Chesky famously discussed its seven VC rejections letters when he attempted to raise $150,000 for a 10% stake that year. To survive, they sold collectible cereals , bagging $30,000 in cash to get themselves out of debt. Today, Sequoia and its former partner Greg McAdoo are credited with being the first large venture firm to place a bet on Airbnb. McAdoo led the firm's $600,000 seed round around the time Airbnb finished its four-month stint at Y Combinator in April, 2009. But in early 2009, another firm was eager to lead the round: Youniversity Ventures. It was an early-stage investment group created in 2008 by PayPal-mafia member Keith Rabois, YouTube cofounder Jawed Karim and Eventbrite cofounder Kevin Hartz. The three pooled their networks and ideas to find exciting new internet consumer companies to back, Rabois told Business Insider. Rabois, who is now a general partner at Founders Fund, says he met Airbnb's cofounder Brian Chesky in early 2009, around the same time as McAdoo, and he decided to invest just three minutes into their first meeting. "He went into this monologue explaining Airbnb. I interrupted him and said, 'This is the coolest thing I've seen since YouTube, and I need to invest. How do I do that?'" Rabois recalled. Rabois was an executive at internet company Slide at the time. The thing that hooked Rabois was a single statistic that Chesky shared showing 30 people on Craigslist trying to find a home, apartment, or condo to temporarily rent in the Bay Area. "The friction of posting that in a very poorly designed product like Craigslist, which was not designed for this use case, demonstrated that there must be 10 to 100 times, 1,000 times, the number of people that would actually do this," Rabois said. That detail reminded him of an experience he had at PayPal in the early 2000s: Fifty-four eBay sellers had put a "Please pay me with PayPal" message into their listings on the online auction's website. Rabois said that seeing that demand was like an "epiphany" for PayPal's executive team. "It felt like there was the same evidence of mass market opportunity," Rabois said of Airbnb. Hartz and Karim shared Rabois' enthusiasm for the company, and the three were drawn to how Airbnb revived the then-forgotten era of people opening up their homes to strangers before the era of hotels, according to Leigh Gallagher's 2017 book The Airbnb Story. "This was almost a reversion to a very standard practice," Hartz said of the company in the book, adding that Chesky, Gebbia, and Blecharczyk felt like an "ideally balanced founding team." Youniversity Ventures, now called Y Ventures, wanted to lead Airbnb's seed round, though Sequoia's offer proved more attractive. Still, the firm allotted Rabois, Hartz, and Karim a $30,000 stake in the round. The group also landed a stake in Airbnb's following round led by Greylock, and Rabois said his fund put a total of about $380,000 into the company. Today, with this successful IPO, that's stake is worth about $600 million, Rabois estimates. Rabois, who in 2013 was in talks with Airbnb to become the company's next chief operating officer, says the IPO also speaks to just how long the time span is for investors to see the fruits of their early investments. "It reminds you of how long term the horizon of building an important, iconic company is," he said. Read more:

Greg McAdoo Investments

1 Investments

Greg McAdoo has made 1 investments. Their latest investment was in Boom Supersonic as part of their Series B on January 1, 2019.

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Greg McAdoo Investments Activity

investments chart

Date

Round

Company

Amount

New?

Co-Investors

Sources

1/4/2019

Series B

Boom Supersonic

$100M

Yes

Caffeinated Capital, Emerson Collective, Michael Marks, Paul Graham, Ron Conway, Sam Altman, SV Angel, Undisclosed Investors, and Y Combinator

5

Date

1/4/2019

Round

Series B

Company

Boom Supersonic

Amount

$100M

New?

Yes

Co-Investors

Caffeinated Capital, Emerson Collective, Michael Marks, Paul Graham, Ron Conway, Sam Altman, SV Angel, Undisclosed Investors, and Y Combinator

Sources

5

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