In my previous post, I talked about how to identify opportunities. Here’s an example of how Airbnb identified the opportunity, along with the lessons we can learn.
The Problem That Almost Wasn't
In October 2007, Brian Chesky and Joe Gebbia faced a problem familiar to many twenty-somethings. They couldn't afford the rent on their San Francisco apartment. But instead of panicking or moving back home, they noticed something interesting. A major design conference was coming to town and all the hotels were fully booked.
What happened next illustrates one of the most fundamental principles of entrepreneurial opportunity identification:
The best opportunities often hide in plain sight, disguised as personal inconveniences.
Chesky and Gebbia didn't set out to disrupt the hospitality industry. They bought three air mattresses and created a basic website called "Air Bed & Breakfast." They offered conference attendees a place to sleep plus breakfast for $80 a night. Three people took them up on it.
Most people would have stopped there, pocketed the rent money, and moved on. But Chesky and Gebbia recognised they'd stumbled onto something bigger.
Identifying the Opportunity: Five Key Insights
1. Spotting Underutilised Assets
The founders recognised that millions of people had spare rooms sitting empty while travellers were paying premium prices for impersonal hotel rooms. This wasn't a new phenomenon, but nobody had connected the two.
This demonstrates a critical entrepreneurial skill: seeing value where others see nothing. Empty space isn't just empty space when you understand both supply and demand.
2. Recognising Converging Trends
Several trends were aligning in 2007-2008 that made the timing right:
The sharing economy concept was emerging (though not yet named)
Social media was teaching people to trust online strangers
The 2008 financial crisis made both hosts and guests more price-conscious
Smartphones were becoming ubiquitous, enabling mobile bookings
Successful entrepreneurs don't spot opportunities in isolation. They recognise when multiple trends converge.
3. Understanding Changing Consumer Behaviour
The founders observed that travellers, particularly younger ones valued authentic experiences over standardised hotel stays. They wanted to "live like a local" rather than exist in the tourist bubble.
This insight came from direct observation and conversation with their early guests. One of their first renters told them the experience felt more authentic than staying in a hotel. That feedback became a cornerstone of Airbnb's proposition.
4. Identifying Market Inefficiencies
The hotel industry had massive inefficiencies that seemed permanent:
High fixed costs created high prices
Limited supply in popular destinations during peak times
Geographic concentration in tourist areas
Impersonal, standardised experiences
Meanwhile, residential real estate had the opposite problem. An abundant but fragmented supply with no effective distribution mechanism. Airbnb didn't create new supply. They created the marketplace to connect existing supply with unmet demand.
5. Testing and Validating Cheaply
The founders validated their idea with air mattresses and a basic website. When initial traction was slow, they flew to New York and photographed the hosts' properties themselves. Bookings tripled.
This allowed Airbnb to learn what mattered: trust, quality photos, and good experiences.
From Air Mattresses to Global Platform
What began as a way to pay rent evolved into a platform facilitating billions in transactions. But the core opportunity identification principles remained constant:
The founders observed how people used their platform and adapted. When they noticed guests and hosts wanted to connect beyond the booking, they added messaging features. When they saw hosts struggling with pricing, they built smart pricing tools. When trust issues arose, they implemented verification and review systems.
Each iteration addressed real observed needs rather than assumed ones. This iterative approach to opportunity identification didn't stop after the initial launch. It became embedded in how Airbnb operates.
Lessons for Opportunity Identification
The Airbnb story offers several transferable lessons:
Start with observation, not invention. The founders didn't invent a new need. They observed an existing friction between supply and demand and created a bridge.
Your constraints can reveal opportunities. Needing to pay rent led to the initial insight. Limited resources forced creative validation. Sometimes limitations focus attention on what matters. Remember the lessons from eatbigfish. Constraints can be beautiful.
Look for "obvious in hindsight" opportunities. The best opportunities often make people say, "Why didn't I think of that?" They seem obvious once someone does them, but they require genuine insight to spot first.
Trust small signals over conventional wisdom. Three people sleeping on air mattresses wasn't much data, but it was real behaviour that contradicted expert opinion. Empirical evidence from actual customers beats theoretical objections.
The Opportunity That Keeps Growing
The opportunity Airbnb identified in 2007 continues expanding. The platform now includes experiences, restaurant reservations, and long-term stays. The core insight about underutilised assets and authentic experiences has proven applicable far beyond spare bedrooms.
This illustrates a final lesson about opportunity identification. The best opportunities aren't just big, they're expandable.
They open doors to adjacent opportunities that weren't visible at first.
What started with three air mattresses became a company valued at over $100 billion at its peak. But it began with two entrepreneurs who needed rent money, possessed strong observational skills, and recognised that their personal problem might reflect a broader opportunity.
The question for aspiring entrepreneurs isn't whether opportunities like Airbnb still exist. It's whether you're observing your world closely enough to spot them.