Where to get startup cash now
Bank credit is scarce and investors are skittish, but that didn't stop these 6 startups. They found creative ways to raise cash during the downturn.
San Francisco
Funding: Cereal sales; Y Combinator incubator
Amount raised: $30,000 from cereal; $20,000 from Y Combinator
Launched: August 2008
When AirBnB's founders first thought to build a Web site to help travelers to rent rooms in other people's homes, angel investors were intrigued but too wary to sink money into the fledging project, says CEO Brian Chesky.
So he and his cofounders lived off their savings and maxed out their credit cards until October 2008, when they realized that one of their ideas -- to create a fun breakfast cereal hosts could provide guests -- could be monetized in a big way. Taking advantage of the election year, they purchased huge quantities of bulk cereal, then pasted together cardboard boxes they'd paid an artist to brand as Obama O's and Cap'n McCain cereal. In two months, the entrepreneurs sold 800 boxes of cereal at $40 a pop, for a profit of more than $30,000.
Months later, the AirbnB team was accepted by the Y Combinator incubator, which gave them three months of support and training and an additional $20,000 to fly to New York -- their biggest market at the time -- to meet users, throw launch parties and promote the site. By the time they exited the incubator and presented their project to investors, AirBnB was profitable. In return, Y Combinator took an equity stake in the company. AirBnB's founders won't say exactly how much they gave up, but Y Combinator's typical deals involve a 2% to 10% stake.
Today, AirBnB has listings in more than 2,680 cities and 116 countries. Including its three founders, the site has nine employees and is "aggressively hiring," Chesky says.
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