I am thrilled to announce that I have joined FirstMark to invest in early-stage consumer content and marketplace opportunities. With $1.1B in fresh capital and a proven track record of partnering with founders who build iconic products users love, FirstMark is the perfect place for me to return to investing after 5 years operating at Airbnb, where I started in Corporate Development working with our CFO, who later appointed me Chief of Staff to our Co-Founder & CSO.

What better way to start my journey at FirstMark than by sharing some of the timeless lessons from Airbnb’s founding in 2008 that are still relevant today for the next generation of leading consumer company founders. Is that you? If so, I’d love to meet you: DM on Twitter @derek_chu.

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Consumer Internet launched ~30 years ago in 1995 and the iPhone launched 15 years ago in 2007. Together, these products created network effects that would grow to reach 90% of the world and generate over $500 billion in revenue across content and commerce.

The Network Economy we all know today has strong roots anchored in hard times.

When the iPhone launched in 2007, it enabled a new generation of iconic startups to build network effects-driven businesses which have become the pillars of today’s “Network Economy”: Airbnb (ABNB*), Shopify (SHOP*), Pinterest (PINS*), Upwork (UPWK*), StubHub*, Riot Games*, Uber, and Instagram (*Note: FirstMark investment). Yet, when these businesses were launching, they went up against a commonly accepted narrative – “everything has already been built in consumer… how can you compete with the Facebook, Google, and Amazons of the world?”

Paradoxically, hard times are the best time to build. If you can grow users and revenue in a downturn, that means you’ve convinced consumers to give you hard-earned dollars to solve a real problem with technology instead of capital. Gradually, then suddenly, Pinterest, Instagram, Snapchat, and Discord built new networks outside of Facebook. Uber, DoorDash, and Instacart built local delivery infrastructure outside of Amazon. As we’ve seen with Facebook’s $36B investment in the Metaverse, even market leaders can’t just push a button or throw money and people at brute forcing product-market fit. There’s no substitute for passionate teams solving customer problems, and there’s always room for making products that users love.

The next great companies are being started now and will form strong roots by embracing constraints and making something users love. The roots that got Airbnb through its toughest year in 2020 were solidified during the hard times of 2008. Our rallying cry in the face of the pandemic was a clear north star: to “go back to our roots” of 2008 when we “made something users love”. As Airbnb CEO Brian Chesky counseled our team to persevere through crisis after crisis, “Constraints breed creativity.” Zero-interest rates created a world without constraints, which led to a lack of prioritization, over-hiring, and inefficiency. Constraints force you to make hard decisions and focus ruthlessly on the customer. Great founders embrace constraints and focus on making products that users love, which keeps them coming back to spend more time and money.

As I return to investing at FirstMark from Airbnb, I see these fundamental lessons of 2008 as more relevant than ever.

Flashback to 2008 (A Tale of Two Economies)

FirstMark and Airbnb were both founded in 2008. It was the best of times for the Internet economy: the iPhone put a distributed computing endpoint in every pocket and created a Cambrian explosion of new products. It was the worst of times for the global economy: GFC, mass layoffs, high rates/inflation, and Lehman/Bear Stearns were failing. Those were the harshest conditions in which to start a company, but they also presented the biggest opportunity.

Rick and Amish founded FirstMark in 2008, when capital was scarce and network effects were early. They invested in Pinterest when it was little more than a business plan, and in Shopify during an era when investing in Canadian companies was often overlooked.

Brian, Nate, and Joe founded Airbnb in 2008 and famously sold 1,000 custom cereal boxes to raise $30k and get into YC. After graduating, they were rejected by top investors at a $1.5m valuation (a 60,000x return at the IPO).

Neil founded Warby Parker at Wharton in 2010 and sold glasses on the internet out of his apartment. I reached out as a student trying to break into the worst job market in memory, and Neil inspired me to pursue a career in tech when it was considered fringe.

Hard times create strong roots. If you stayed the course in tech in 2008, then you built strong roots to withstand crises. I learned to analyze the Internet at Credit Suisse, invest in it at Menlo, and build it at Airbnb. Rocketships are rollercoasters: even at iconic companies, it rarely feels “up and to the right.”

Lesson 1: Make Something People Love

When Airbnb went through YC in 2008, they famously defined product-market fit as “Make Something People Want.” Brian took it one step further and asked if we can “Make Something People Love” by focusing on 6-star experiences with early customers before scaling. Paul Graham advised Brian to focus on getting 100 customers to love us instead of 1,000 to like us. As a result, Airbnb surged to 1M bookings in 2008, 5M bookings in 2012, and 390M bookings in 2022. Pictured below is a real visualization of Airbnb trips taken in 2011 and 2016, which shows the organic network effect. When you up-level your product quality and “people love your service, they become your marketing department”.

Lesson 2: “Frontline Obsession” With Customers and Teams

An HBS study found CEOs spend <6% of their time with frontline teams and just 3% with customers. When we hired Amazon executives at Airbnb, the company experienced a step-change in growth and operational discipline. They instilled a written culture and “Frontline Obsession” of talking to customers.

We rotated every employee through Customer Support and added a company goal of reducing the top 10 CS ticket issues, much like Uber and DoorDash encourage their teams to become Drivers and Dashers. Brian routinely seeks user feedback for product changes and it comes from the top: “You always want to work on something new, but when you have a service like ours and so many people use it, it’s easy to forget what they actually want. You have to have their permission to do new things.”

Lesson 3: “Back to Our Roots as Cereal Entrepreneurs” in Hard Times

Airbnb kept growing from $1.7B in revenue in 2016 to $4.6B in revenue until 2020. When the Covid pandemic hit, our business dropped by 80% in 8 weeks and we made the difficult decision to lay off 25% of the team. To make it out of this existential crisis, Brian emphasized going “back to Airbnb’s roots” in 2008 when they were resourceful “cereal entrepreneurs” selling cereal to self-fund.

We listened to (and solved) customer problems with creativity instead of capital. To manage out of a crisis: We acted fast (reorganized into a single roadmap/team) and with all stakeholders in mind (refunded $1B Guest cancellations; started a $250m Host fund; pivoted to nearby/long-term stays). We raised more than needed ($1B from SilverLake) and preserved cash (cut marketing from $1B to $0).

The outcome of taking a “Cereal” entrepreneur’s mindset: Airbnb recovered from an 80% drop in revenue back to $3.3B revenue and a $100b IPO in December 2020.

Flash forward to 2023 (déjà vu)

We’ve come a long way since the halfway point of the internet, and here we are again. The Network Economy turned out larger than most investors thought ($500B+ in revenue), and there’s much more to be built.

It is the best of times (AI’s “iPhone moment”)—AI enables the same core jobs to be done 10x Better, Faster, and Cheaper. Founders can prototype an MVP, run business operations, and ship code with smaller teams and less capital than ever before.

It is the worst of times (SVB/FRB’s “Lehman moment”, liquidity crisis, high rates/inflation)—as we learned from 2008, those who set roots in hard times will build the next great companies that withstand crises, and there is no substitute for building products users love.

We at FirstMark have been here before as investors and operators. We’ve had to pick ourselves up and start something when it seemed hardest, build when it felt like “everything’s been done”, and double down on working in the trenches with our founders. We know what it takes to win, and we’re going back to our roots to do it. Our partners have again raised capital to weather tough times and back great people from the earliest days of Pinterest, Shopify, and StubHub to DraftKings, Vacasa, Omaze, Orchard, Ro, and HopSkipDrive.

We recently raised $1.1B across FirstMark VI and OF IV, and we’re eager to invest in Series A consumer content and marketplaces that make something users love. We’re a Network-Driven VC that’s open for business, and excited to partner as you start yours.