Exponential Startups = More Castles (Airbnb vs. Hyatt)

Exponential startups can beat big traditional companies — and they do it with fewer employees.

But figuring out how to change the world is intimidating! We see successful companies like Airbnb, Snapchat, Instagram and wonder, “How can we build something that’s even half as awesome?”

We’ve built over 40 companies in the past five years, and in that time we’ve become big fans of Salim Ismael’s Exponential Organizations, which describes how to create lean companies that have an outsized impact on the world.

Why Exponential?

Exponential organizations stay small and scale at least 10x faster than traditional businesses. Smart companies can drop the cost of both supply and demand to almost zero by using the latest digital technologies, leveraging shared assets, and tapping into the power of the crowd.

When WhatsApp was acquired by Facebook for $19 billion they only had 55 employees! A year after the acquisition they had 900 million users — still being supported by a small team of only 50 engineers.

Impressive!

What about Hyatt, which was the leader in hospitality? Over more than 60 years they’ve built up a giant portfolio of 600 locations in 57 countries and 550 cities across the globe. It’s a massive infrastructure based on real assets.

Then Airbnb introduced a disruptive business model based on the fact that they could use bedrooms similar to the ones Hyatt was building—but without owning them. They could tap into the power of the crowd to leverage abundance.

Here’s a video walkthrough of Hyatt vs. Airbnb (linear vs. exponential company).

The genius of Airbnb was to create a platform — not to create more assets, but to connect existing assets and make them accessible to everyone. Airbnb can add new rooms almost for free, whereas Hyatt has to build or buy them.

Airbnb is completely focused on creating value for their customer, not on building hotels. Not on expanding in countries and cities. Just on building a solid platform with a global reach.

The result is that Airbnb is now in more countries and cities than Hyatt, and they have over 3 million listings. They even have 1,400 castles.

But the biggest thing isn’t the massive outcome — it’s that Airbnb achieved all of this with a tiny fraction of the number of employees. Only 2,000 people are creating a company that’s worth more than 30 billion dollars. Compare that to Hyatt’s 100,000 employees and $7B market cap.

That’s truly exponential! And it’s how we think at 10xU.

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