Airbnb sold $40 cereal to raise $30k; YC invested.

In 2008, Brian Chesky, Joe Gebbia, and Nathan Blecharczyk's air mattress plus breakfast business faced rejection everywhere: investors could not understand who would let strangers stay in their homes. The company owed about $30,000 in credit card debt, and Chesky was so broke that he lived on dry cereal — the cereal boxes later became the centerpiece of Airbnb's fundraising story, but that is for later.

The election year gave them an idea: make limited-edition breakfast cereal themselves, in two versions, "Obama O's" and "Cap'n McCain's", and sell it as breakfast merchandise for Airbnb guests at $40 a box. The small business was unexpectedly successful: it sold more than 1,000 boxes and brought in about $30,000, just enough to pull the company out of credit card debt.

What was more valuable was attention. Chesky recalled at Stanford Graduate School of Business that when they went to a Y Combinator interview, they brought the cereal boxes into the room; after Paul Graham learned that "we made cereal to raise money for the company," he captured its meaning in one sentence: "If you can get people to pay $40 for $4 cereal, you may be able to persuade strangers to live together." YC therefore gave Airbnb an early investment (recorded by Crunchbase as $20,000 for 6%).

The cereal business itself did not change the world, but it changed investors' judgment of the founding team: three people were willing to make a product themselves, set a high price, and sell it on the street in order to survive. When Chesky retold the story in 2023, Airbnb's market value had reached about $75.1 billion — a $40 box of cereal had become the company's earliest fundraising demonstration.