How 3 Legendary Startups Went from Nothing to $1B Valuations

How 3 Legendary Startups Went from Nothing to $1B Valuations

By Justin Biel, trends editor at Grow Wire
⏰ 7-minute read

In short:

  • Successful companies that began as unicorn startups share commonalities in their founding stories and the steps they took to gain traction.

  • Although every business’s journey is different, these common traits can provide benchmarks for entrepreneurs who are mulling a new venture or product launch.

  • Airbnb, GoPro and Snapchat display common “unicorn traits” including the tendency to stem from problems the founders experienced firsthand and scrappy approaches to prototyping and funding.

 

There's no straight path to success in the world of startups. Entrepreneurs each face different challenges, and each company requires its own evolution and journey. However, by studying the similarities between great startups, we can identify traits -- both of the impetus for big ideas and the steps that carried these ideas out -- that tend to signify a company will be a showstopper.  

Famously successful startups like Snapchat, GoPro and Airbnb share many commonalities. (These three particularly have young founders who eventually became billionaires, and all enjoyed unicorn status at one point, as privately-held startups valued at $1 billion or more.) By studying their stories and recognizing patterns, earlier-stage entrepreneurs can better assess their own ideas and engineer their next steps for the best shot at success.  


1. The founders started businesses after seeing an opportunity or experiencing a problem in their own lives. 


🦄 Snapchat

Evan Spiegel, Bobby Murphy and Reggie Brown were students at Stanford University when they launched the photo-sharing app Snapchat. Brown came up with the idea for a social media app where photos would disappear, thinking it could remove the stress of sending racy photos -- or, put more vaguely, the stress that came with the permanency of posting a photo on typical apps. He shared his concept with Spiegel, who thought it was a million-dollar idea. The duo subsequently recruited Murphy to help design the product.   

🦄 GoPro

Nick Woodman started two unsuccessful businesses prior to founding GoPro. To recover from those early disappointments, he took a surf trip to Australia and Indonesia. That's when Woodman's billion-dollar idea surfaced for a cost-effective, high-quality, handheld camera he could use to capture photos of himself while surfing. 

🦄 Airbnb

In 2007, roommates Brian Chesky and Joe Gebbia were struggling to pay rent as aspiring entrepreneurs in San Francisco. After realizing that hotels across the city were booked for an upcoming industrial design conference, the duo decided to rent out airbeds in their apartment to conference attendees. That business would later blossom into AirBed and Breakfast, known today as Airbnb. 

🐴 Other successful startups

The best ideas don’t always come from studying market trends. Often, they come in the form of problems or experiences in day-to-day life. Take female activewear brand Kadyluxe for example. Dancer Kady Zinke founded the startup because she wanted padded-knee pants to dance in but couldn’t find any. Sophie Chiche, meanwhile, built a chain of “urban sweat lodges” called Shape House after visiting sweat lodges which she found grimy. 

⭐️ The lesson

In starting a company or launching a new initiative, the key is to pay attention to your everyday ideas and consider whether the problems you encounter might affect others, too. Do you have a solution to this problem? Is it different than what anyone else is doing in the market? If so, you might be onto something.   

 Bobby Murphy (L) and Evan Spiegel (center) celebrate Snap Inc.'s IPO with Thomas Farley (R), president of the NYSE, in 2017.

  

2. They built their own prototypes. 


🦄 Snapchat

Under the direction of Spiegel, Murphy got to work on the first prototype of the product, building a website in his free time on which users could post images that disappeared after several seconds. Afterwards, the trio converted the concept into an app called Picaboo, which Spiegel presented to classmates, professors and a handful of VCs as part of his “Design and Business Factors” class. 

🦄 GoPro

During his surf vacation, Woodman began testing his idea by strapping a camera to his wrist with rubber bands. He continued evolving the concept back at home, creating several other prototypes before launching the Hero HD camera, which would become GoPro’s most successful product.

🦄 Airbnb

To test their idea, Chesky and Gebbia, who were designers by trade, self-funded and designed their own website to attract the first Airbnb guests. The founders charged $80 for a night on an air bed with breakfast in the morning. Without any marketing for the website, they received three bookings for stays during the design conference. 

They repeated this model, targeting cities in which hotel rooms were scarce during conferences including Austin, Texas during South by Southwest and Denver, Colorado during the Democratic National Convention. The latter lead to over 600 bookings, as the co-founders contacted Obama supporters and encouraged them to use the site to get more Democrats to the convention.

🐴 Other successful startups

Early prototypes, often self-funded and developed by the founding team, produce crucial momentum and learning opportunities for any new venture. Prototypes offer a path to test early concepts, get feedback and discover ways to enhance the product or service. Non-unicorn examples include Henry W. Brands, the founder of Coast Products, who developed a prototype of a knife to make the job of salmon fisherman easier and safer. After designing the product himself, Brands sold it locally.

⭐️ The lesson

When starting a business or launching a new product, use prototypes to test business assumptions and refine your idea. If possible, build the prototype yourself, or with a small team. Developing and refining early prototypes is a common trait of successful ventures.  

GoPro founder Nick Woodman built his own rough prototype of the now-famous action camera.


3. They pushed through doubt to create products that changed the market.


🦄 Snapchat 

At the time of Snapchat’s founding, the idea of ephemeral photo-sharing was new and unexplored. Many folks didn't understand the concept initially, including the VCs in Spiegel's Stanford class, who missed out on the deal of a lifetime. Today, Snapchat is known as a social media phenomenon among consumers aged 13-29, with over 190 million daily users producing 2.1 million snaps every minute.  

🦄 GoPro 

Woodman wanted a camera that could take great surfing photos but didn't cost an arm and a leg. He developed GoPro so that “regular people” could produce the same quality of action photos typically reserved for the pros. As a result, GoPro single-handedly created the action camera category, a booming one expected to reach $9.38 billion by 2023. 

🦄 Airbnb

Prior to Airbnb’s founding, the concept of renting out space in a shared home and empowering individual homeowners to make profits from doing so was a novel idea. (Investors like Paul Graham at Y Combinator and Jason Calacanis initially thought it was ridiculous.)

In the face of massive doubts, Chesky and Gebbia soldiered on, eventually expanding the concept from shared spaces to include all types of accommodations. Today, Airbnb has lodging available in 191 countries and over 4 million total listings -- more listings than the top five major hotel brands combined.  

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🐴 Other successful startups

Companies that offer entirely new products and experiences excel by becoming category kings. They develop new market niches and are rewarded for finding unique solutions to urgent, unmet needs. As another example, Candace Nelson created a new form of food retail when she launched Sprinkles Cupcakes, the world’s first cupcake-only bakery. And when Wing Lam launched Wahoo’s Fish Taco, it was arguably the first time a restaurant north of the Mexico border had focused entirely on fish tacos.

⭐️ The lesson

Test the “unicorn-ness” of your startup concept or new product by determining whether it has the potential to carve out an entirely new category in your market. Is your offering different than anything else out there? Does it satisfy a need currently unmet anywhere? If so, you’re on the right track.

Airbnb co-founder Joe Gebbia overcame investor doubts to build his company.


4. They cleverly funded the early stages before raising capital the traditional way.


🦄 Snapchat 

Snapchat’s beginning was all about sweat equity: Spiegel, Murphy and Brown built out the concept and initial prototypes in their free time. After attaining an initial user base, the team wasted no time raising capital, acquiring three rounds’ worth of funding ($13.5 million in Series A, $80 million in Series B and $50 million in Series C) between 2012 and 2014. The company, now known as Snap, currently has a market capitalization of $22 billion.

🦄 GoPro  

Woodman scraped together money in GoPro’s early days, relying on his savings, a $235,000 loan from his father and an additional $30,000 he made selling necklaces purchased on his surf trip to Indonesia. He eventually closed an $88 million Series A round led by Riverwood Capital. Today, the company’s market capitalization is $682 million.

🦄 Airbnb

Chesky and Gebbia struggled to get by financially in Airbnb’s earliest days, relying mostly on credit cards. Then, in a now-famous funding move, the pair started selling cereal to fund their business. (Yes, cereal.) While renting rooms around the National Democratic Convention, they sold “Obama O’s” and “Cap’n McCain’s” as a side project. The cereal sales generated a badly-needed $30,000 to keep Airbnb going. Later, the founders joined illustrious startup accelerator Y Combinator and received an additional $20,000 for the business. They raised an additional $7.2 million of venture capital funding in November 2010. Based on its last funding round, Airbnb was valued at $35 billion

🐴 Other successful startups

Securing early capital is a struggle that every entrepreneur must endure. Whether you finance through friends and family, business loans, personal savings or by selling cereal, you need to find early money to bring your idea to life. Hammitt founder Tony Drockton, for example, sold his house and lived out of his garage when he needed to cut living expenses and re-focus on the growth of his handbag line. Jarred Winn saved up for years to invest $10,000 of his own money in starting Winn Solutions, a blockchain-focused marketing agency. 

⭐️ The lesson

When starting a new venture, be prepared to scrape by in the early days. And don’t fret if it comes down to selling cereal. It could be a sign that you're a determined founder capable of leading your company to success.