How to fund the next AirBnB of xyz?
so i have an idea for the next AirBnB of xyz (a different market..not hotel/travel...not competing with AirBnB...but...a geolocated peer-to-peer marketplace, taking advantage of underutilized assets and matching supply with demand).
I spent some time going over the AirBnB website, and added up all the tech that i'll need to recreate from scratch (i'm a developer, i write code and understand the full tech stack..backend database, user interface, messaging, maps integration, transaction processing, web services, ect..)....and it will take me over a year by myself to recreate the AirBnB site with basic functionality (and i think that's aggressive). Realistically, i'll need to hire a team of developers.
I'm estimating the total cost of dev work to be round 3-6mm to recreate the AirBnB platform (i'm a developer, maybe my estimate is low?)...so i guess i'll need to raise funds in stages.
AirBnB raised 600k from Sequoia for about 10% as their seed...then 7mm for 10% 1 year later. I suspect that's exactly what i'll need to do. I don't necessarily need to raise from Sequoia (would be nice), but i do need to raise capital.
a few more details.
Sticking with the AirBnB analogy, for my peer-to-peer marketplace the target population is around 40 million "guests", and 10 million "hosts" (not competing with AirBnB, but the analogy works well)
My online surveys saw greater than 60% interest....but i think a homerun would be 1-5%. AirBnB has captured 20% of the US lodging industry.
Guests would on average use the service 50-100 times a year, and generate ~$5 revenue to the platform each time.
A conservative estimate if the marketplace is successful gets to $500 million platform revenue per year with 1% penetration/adoption...$3 billion/year with 6% adoption (modeling based on the AirBnB model and growth history).
I think i've got a good shot at getting into YC or 500 startups, but do i need to give away 6% for 125k?
You’re not going to be able to raise money (let alone $3-6M) from the vast majority of VCs without a product or a team. That’s almost in Series A range (really pre-A) - meaning you’d have to have around 0.5M revenue already.
First off you need to do customer discovery and actual research. Also find a team that’s interested. You should talk to the supply and demand side (probably at least 100 people total), investigate the space, etc.
Then, focus on creating an MVP - this can be even a landing page describing the future product and allowing people to sign onto a mailing list. MVPs don’t need to be “products” in the way we traditionally think of them. Think of it as a minimum viable experience for a user. For example, Dropbox started with a shitty animated video that went viral and got them thousands of signups on their email list. That’s traction. Someone might fund that. Zappos started as a “concierge” MVP (look it up). The founder basically took pictures of shoes in stores, then when someone ordered them online he’d go buy them and ship them himself. Yes it burned money but it provided proof of traction. That’s what you want in an MVP - validate your hypothesis that your product is actually solving a problem and is wanted by customers. This is evidence that your idea is good.
To fund it initially you’re going to have to go to family/friends/angels and really convince them that you and your team (which you have to find btw, no one will invest in one person with an idea unless you’re exceptional and have exited before). Then once you’ve built something more concrete you can start talking to pre-seed/seed investors. Here you have to do all the legwork, market sizing, unit economics, product roadmap, etc etc.
tl; dr No one is going to fund one guy with an idea. You must validate the idea, assemble a qualified team to execute it, and have strong rationale as to why this will work and evidence backing that up. Then you can talk to VCs, apply to accelerators, etc. Also, there are plenty of resources online for what I’ve mentioned above (which is not exhaustive). Make sure you read up - and good luck!
I really wouldn't worry about giving away 7% for $125K. If the company becomes as big as you're imaginging it will be, that 7% will be negligible (what's a few million when your company is worth billions?). If it doesn't, 7% of $0 is $0.
AirBnB raised 600k for 10% from Sequoia as their "seed round" after YCombinator.
What does that 600k pay for? 4 employees at 100k each + 200k of tech / advertising for 1 year?
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