Airbnb founder Brian Chesky recently published a brief but fascinating post on Medium from Airbnb’s early days. Michael Seibel introduced the team to seven prominent Silicon Valley investors during Airbnb’s attempt to raise. They were attempting to raise $150,000 in exchange for 10% of the company’s equity. Airbnb has since gone on to grow explosively, with its valuation being worth an estimated $24 billion.
None of those investors bit. The post features E-mails from the investors all politely declining, citing reasons including a lack of expertise, a perceived too-small market segment, and concerns over Airbnb’s model.
It wasn’t just these investors. Fred Wilson has spoken candidly about how and why he passed on Airbnb, as has Chris Sacca. For his part, Chesky isn’t indulging in any schadenfreude, nor does he blame any of these big name investors, noting that Airbnb must have seemed unimpressive at the time.
Since the post went live I’ve seen a number of people on Twitter gleefully wield it as evidence that venture capitalists are morons, crooks, swindlers and not worth your time. Venture capitalists don’t have the best reputations; Google’s autocomplete speaks for itself.
For my part, I’m convinced that people have asked me if an app I’m working on is raising money (it isn’t, yet!) just as an excuse to regale me with their own VC horror stories.
I’m not suggesting that the entire VC industry can do no wrong (far from it), but I feel like this kind of misses the point. Semil Shah, for example, separated the noise from the signal:
The Noise: “Airbnb rejection” chatter glorifies proving investors wrong. The Signal: Very few sacrifice as much as Brian, Nate & Joe did.
— Semil (@semil) July 13, 2015
I went further in my idea of what the signal was:
@semil I think a better lesson to take from the Airbnb rejection letters is that success doesn’t live or die on approval of a particular VC
— Michael Carusi (@MichaelCarusi) July 13, 2015
Venture capitalists, even ones as smart and well known as Fred Wilson or Chris Sacca, won’t decide whether or not your business is a success. Most because venture capitalists, no matter how successful, are still people. Some of the responses simply noted that hospitality wasn’t an area of VC expertise, as David Binkowski noted. Others made a mistake that cost them 10% of a hugely successful startup. Nobody has a perfect track record.
Everyone extols how awesome rejection is, but that should come with a caveat that rejection can still be a painful, demoralizing and frustrating experience. It sucks to be told that your startup doesn’t have a broad enough market or that a seasoned investor doesn’t see a path to profitability.
At the same time, don’t let rejection allow others to define your success or failure. When you’re rejected in business, think of how Brian probably felt before Airbnb became what it is today.