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Airbnb co-founder Nathan Blecharczyk

Rachel Idzerda/The Globe and Mail

Being a founding member of one of the mega-startups of Silicon Valley doesn't seem to have changed the lifestyle of Nathan Blecharczyk, the chief technical officer and co-founder of Airbnb.

There are almost not enough superlatives to describe Airbnb, which in a few short years has gone from the cute fascination of millennial tech people to a globe-crossing phenomenon in hospitality. The private company was reported to have raised $1.5-billion (U.S.) from private equity funds in June, and a further $100-million in November. Those deals put the value of the company in the $25-billion range.

An example of its global reach is New Year's Eve: Airbnb has announced that it expects one million people will stay in its accommodations – in 34,000 cities in 190 countries – to ring in 2016.

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Like a lot of disruptive companies, it has created controversy and pushed boundaries with governments and special interest groups, but for its thousands of hosts, it has unlocked entirely new forms of income and added a third option for travellers, between staying in hotels or crashing with friends or family.

Mr. Blecharczyk, while not confirming the speculated valuation, seems unaffected by the dramatic way his circumstances have changed since 2007 when he co-founded the company in San Francisco with chief executive officer Brian Chesky and Joe Gebbia (whose title is chief product officer).

"I have this really large number that's on paper, which is very cool, although a little embarrassingly large, but it's frankly abstract," he says over lunch at Portland Variety, a café on Toronto's King Street West. "I honestly don't think about it. It's not real to me. Even if it was, I wouldn't know what to do with it. I ride my bike to work still. I own the same car as before I started the company, not much material has changed in my life."

While he is a billionaire on paper, he stays in Airbnb rentals when he travels, and he is a host himself, renting out the in-law suite at his house in San Francisco.

Mr. Blecharczyk, who is just 31 years old, cuts an unassuming figure. A skinny six-foot beanpole in a dark blue shirt open at the neck, no jacket. On the day we met, he still had a little leftover TV makeup from an appearance on BNN. He was in Canada for a friend's wedding, and thought he'd do some media, and meet some local Airbnb "hosts" while he was travelling. His dominant features are his large, dark intense eyes, and a surprisingly deep voice. He sometimes speaks quickly, but he never seemed hurried. He ordered an avocado sandwich, unavailable, but regarded the second choice roast vegetable sandwich as "a good outcome." Feeling self-conscious around the healthy Californian, I went with a kale dish a friend recommended.

Airbnb is one of those head-slappingly obvious companies that created billions of dollars of new value out of a market that no one realized was untapped until it started to take off in 2008 and 2009. At base it's an app that helps people turn their spare rooms or condos into short-term bed and breakfasts (it calls those folks hosts; renters are called guests). Airbnb provides the platform for guests to discover and book a host's space. The guests may be people who are looking for a cheaper option to a hotel, and if not cheaper, then something a little different than the existing hospitality options. Guests and hosts review each other and rate accommodations on cleanliness, location and value.

And yet, for its obvious logic now, there was a moment in 2008 when the company almost shut itself down.

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"We started this company during the recession; we had been working on it for 12 months," says Mr. Blecharczyk. Determined to give it one last try, the founders applied to famed incubator Y Combinator to go through its 13-week startup boot camp. "We had approached investors on our own, and had failed to get second meetings. We'd been paying for the company out of pocket, so we were in debt."

Coming out of Y Combinator, the company got a $600,000 injection of seed funding, and with the time and focus of the program, they built a $200-a-week business into about $4,500 a week in revenue. Estimates from its most recent fundraising suggest the company is earning almost $100-million a month now. To this day, Airbnb remains one of YC's greatest bets (it took 6 per cent of equity for its assistance).

The first breakthrough city for Airbnb was New York. When the founders visited during their YC period, they only had 40 hosts. Mr. Blecharczyk says a combination of beer nights and home visits managed to turn the hosts into evangelists for the company. There are 36,000 listings in New York City today.

But in many ways New York City is also the company's original sin when it comes to a problem that has plagued a number of similar startups that take aim at monetizing economic activities that are either flatly illegal or do not conform to civic regulatory structures. In New York State, renting an apartment (and most single-family dwellings) for less than 30 days is illegal. In early December, Airbnb turned over reams of data that showed that most (55 per cent) of its listings in New York City broke those rules. To crack down, the city is mulling stiffening its fines significantly. In response, Airbnb has relied on arguments that the users are middle-class folks seeking to supplement incomes.

Because of tussles like that (and other similarities), Airbnb is often yoked to Uber, a similar-age startup that offers ride-sharing and unregulated taxi services around the world. Both refuse to go public despite billions in private funding and sky-high valuations ($50-billion plus for Uber) and both are often tagged as leaders of the new "sharing economy" that their models unlocked. The difference may be in tone. Uber has a renowned take-no-prisoners attitude with regard to ignoring orders from civic authorities – it rides into town with a pugnacious approach and rarely retreats.

"We are less confrontational, and we try to more pro-actively open a conversation with cities," Mr. Blecharczyk says. "There's a variety of different special interest groups; there's hotels, there's labour unions, there's neighbourhood associations. Some of them have specific concerns, others see this as an opportunity where they wield power, and when you have power, it's an opportunity to get something in exchange."

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There just aren't as many examples of Airbnb thumbing its nose at the authorities. There was an advertising campaign in October by Airbnb featuring what some thought was insensitive griping about the company paying back taxes, which Airbnb later apologized for after it angered locals in San Francisco who are considering a ballot measure to restrict short-term rentals. The issue of who should pay hospitality taxes in jurisdictions that have them illustrates the problem Airbnb's rapid expansion created.

"The host is legally responsible to pay their tax, they are the ones earning the income and it's the city's job to collect tax. We have gone on record saying we're willing to partner with cities who are willing to partner with us, to collect and remit tax. We've done this in seven cities, mostly in the U.S., but we're looking to do this globally," Mr. Blecharczyk says.

Tellingly, Airbnb has a higher valuation than most of the world's hotel chains with the exception of Hilton (although the proposed merger of the Starwood and Marriott chains has the potential to overshadow Airbnb as well). Even more astonishing than the billion-dollar cash injections the company has received is Mr. Blecharczyk's assertion that the company doesn't have an immediate need for its bursting war chest.

"We're not capital intensive, we don't need the money, we have very strong economics in our business and it's a very sustainable model," he says. Airbnb's cash comes from its 3-per-cent cut of bookings and a 6– to 12-per-cent fee from guests, a nice slice when total bookings are estimated to be higher than $2-billion in recent quarters. "Our business has more than doubled every year, same last year and this year. What's staggering is that we can maintain that kind of momentum at this scale."

The plan for the money is to leverage Airbnb's success in all these cities and start offering new services to its travellers. It recently began testing "Journeys" in San Francisco, a sort of package-tour lite that includes meals, planned excursions and even a ride from the airport (using Uber's rival Lyft).

In seven and a half years, the company has grown from three guys to 2,000 employees, and even though Airbnb is still not profitable, it expects to get in the black in 2016.

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That success has pushed Mr. Blecharczyk to start thinking about what he should do with his new status.

"I realized that I'm increasingly in a position where I know a network of people and I'm able to connect more or less anyone. I have incredible wealth and I think there's a great responsibility to use this position to do good stuff," he says. He pauses to take a bite of his sandwich and stew a little on the next part of his answer.

"The hard part is I want to do it in a very thoughtful way. How can I not only give my money but also my entrepreneurial mindset to do really transformative social good? My thoughts aren't necessarily well developed, but it's certainly in the back of my mind: What's next?"



Age: 31

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Place of birth: Boston

Education: Bachelor of science degree in computer science from Harvard University.

Family: Wife and a daughter.

Early years: "I started coding at the age of 12, had my first business at the age of 14. I made almost a million dollars in high school, enough to pay for my college education. More importantly, it instilled in me a self-confidence that I can build things that people want, that I can teach myself anything ... because I taught that to myself on weekends and after school."

Most rewarding part of his job: "Talking to hosts and asking them, 'what does Airbnb mean to you?'… I get amazingly heartfelt stories about the people that they met, about the money that they earned, about the mindset of empowerment they got through this and how they then applied that to their own business. How hosts have gotten out of abusive relationships because they now can afford their own place, all kinds of things I never set out to do but are incredible feel-good stories that give me a lot of sense of accomplishment in my life."

Airbnb in Canada: "Canada is a top 10 country in terms of travellers spending money on Airbnb. Canadians were into Airbnb from the very beginning. As a destination, Montreal, Vancouver, Toronto ... these are top destinations within North America. That's reflected in the number of properties you see there: 9,000 in Montreal, 4,500 in Toronto, 7,000 or so in Vancouver."

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On hotels: "No hotels have gone out of business because of Airbnb … Airbnb is not a perfect substitute for a hotel. We excel at different things. Hotels excel at their amenities, consistency of service. Eighty-five per cent of our guests say they prefer to live like a local, they prefer to be off the beaten path."

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