How this investor knew to bet early on Airbnb

How to find a unicorn, according to Elad Gil, an early investor in Airbnb, Stripe, and Coinbase

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I’ve posed an open-ended question to many a startup founder and investor in the months since I’ve chatted with investors for Term Sheet’s periodic, open-ended, Friday Q&A: Who is an interesting investor you know?

Invariably, Elad Gil’s name popped up to the point I was conditioned to expect it.

While the name rings loud in venture circles, he has, in many ways, remained low-key—and his website looks straight out of the 2000s. But his tech investments have been remarkably prescient. Gil, who typically makes bets in seed-stage companies, has cut checks to some 25 startups that have since reached the vaunted unicorn status, including Instacart, Stripe, and Coinbase.

And there’s more: Other companies in his portfolio such as PagerDuty, Square, and Pinterest are already trading in public markets, and Airbnb and Wish are expected to IPO this year.

I caught up with Gil to ask what compels him to invest. Here’s part of our conversation, edited for clarity. You can read the full conversation here.

You generally invest at seed stage—when a company’s business plan may still be unclear. So what do you look for in founders?

I think the biggest determinant of success tends to be the market. I’ve seen really, really good teams in terrible markets get completely crushed. I’ve also seen really bad teams in good markets do really well. So first and foremost, I care about if you’re building something interesting in a market that is large enough. 

It’s pretty rare for me to invest in a team without an idea—usually I wait until people are working on something specific so it’s easier to validate whether that market makes sense. Sometimes you see teams that have built the same thing over and over again in their career for different companies, and they decide to build it as a piece of infrastructure, like PagerDuty.

On whether you’re building something interesting in a market large enough, though—that’s really hard to tell a priori because, if a market is big and interesting and obvious, then everyone would already be doing it. So the startups that do best almost by definition have to be in non-obvious markets. People may think the idea is toyish, or dumb, or super low-end—so often things start off looking weird—and you [as an investor] may wonder, “Why would you really want to do that?” And you need a bit of convincing.

So was that the case for your investment in Airbnb? I remember that Andreessen Horowitz’s Managing Partner Jeff Jordan said he thought the idea was crazy when he first heard of it.

I invested in Airbnb, I think, when it was just eight people, and they were still working out of Brian Chesky’s apartment at the time. I knew them previously, and they pinged me while raising their Series A. It actually seemed like a really good concept and idea. 

At the time, I think there were all sorts of signs that something like this should work. One: The product was beginning to work on their side. And before that, when I was in undergrad and grad school, I had travelled through a [travel] service called Servas, which was born out of the Esperanto community in World War II. Their basic belief was that if you could stay with people in a foreign country and learn about them directly and vice versa, we would be more likely to have world peace. So you’d sign up for the service and they’d interview you and make sure you weren’t crazy or anything. Then you’d visit a country and they’d give you a printed booklet with the names of all the people that would host you for free in that country—with rules, of course, around needing to contact them a week or a night ahead. So you could literally show up in Rome with this booklet and just call or email anyone in it to stay with them.

So when I saw Airbnb, I thought: Wow, this is Servas but you can monetize it.

Read the full Q&A here.

DOORDASH IPO: The food delivery service has filed for an IPO. Backed by the likes of Sequoia Capital and the SoftBank Vision Fund, the company posted revenue of $1.9 billion and a loss of $149 million in the past nine months ending September. But losses actually narrowed significantly since the same period a year earlier. While the company posted revenue of $587 million in the same period in 2019, lossed stood at $533 million. Read more.

Lucinda Shen
Twitter: @shenlucinda
Email: lucinda.shen@fortune.com