Airbnb Followed the Textbook Advice for Growing Up, and It Failed

Last week, in a room crowded with startup founders, Brian Chesky, who built and runs the home rental company Airbnb, took the stage to talk about growing up.

He did not offer triumphs. He described a mistake. Most of the founders the writer spoke with afterward called it the best talk they had heard. Ron Conway, the veteran investor listening in the crowd, forgot to take notes, something he had never done before.

Chesky said the usual counsel for handling a bigger business was wrong. When Airbnb was expanding, well intentioned advisers told him he needed to lead the business in a particular manner to keep it expanding. That point matters because it is the common advice given to founders as companies grow, and his experience suggests it can damage the company it is meant to help.

The guidance, boiled down, was simple: bring in talented managers and then step aside and let them operate.

Chesky followed that guidance, and the outcome was disastrous for the company.

So he set the playbook aside and developed his own alternative, looking in part at how Steve Jobs, the Apple co-founder, had led his company.

So far, the new approach appears to be paying off. Airbnb's free cash flow margin, a measure of how much cash a business keeps from its revenue, now stands near the top in Silicon Valley.

He was not alone in the room. One after another, some of the most successful founders in the audience said they had lived through a similar breakdown. They had been told to step back and leave strong deputies alone, and doing so had damaged their companies.

Chesky had come to explain a failure. He left having described a turnaround.