Use Customer Cash to Finance Your Start-Up

Airbnb is one of the most celebrated start-ups of the past decade, and its creation story is well-known: In 2007 two design school graduates dusted off some air mattresses and rented out space in their San Francisco apartment to conference attendees who couldn’t find hotel rooms, netting $1,000. A year later they made national headlines by helping people find lodging during the Democratic National Convention in Denver. By 2012 Airbnb had raised $120 million in venture funding and was valued at more than $1 billion. But familiar as this story may be, an often-overlooked fact is essential to understanding the company’s success: The business model is structured so that advance customer cash helps finance growth, making Airbnb less dependent than many other start-ups on early outside funding.