Stay on Top of Emerging Technology Trends Get updates impacting your industry from our GigaOm Research Community

Before there was Uber, Lyft, or Airbnb, there was Couchsurfing. For a certain sect of millennials — say, those entering college between 2005 and 2011 — Couchsurfing was transformative. Members all over the globe offered up their couches for free to these cash-strapped travelers.

It was the original sharing economy, except there was a lot more “sharing” in Couchsurfing’s version than there was “economy.” And that was the problem.

Without a way to properly support itself, the application staggered under the burden of its popularity. It nearly went out of business because of technical problems, and its community struggled to maintain its values with the flood of new users. Raising venture funding just exacerbated the problem, triggering power struggles between long time volunteers and new leadership.

Couchsurfing learned the hard way that “sharing” doesn’t scale easily. Can an organization founded on cooperation sustain itself in a capitalist world?

The collective of coders

Couchsurfing had conflict between for-profit and not for profit ambitions from its earliest days. Founded in 2004 as the brainchild of a man named Casey Fenton, it ran like a collective for almost ten years, with volunteers pitching in code and working as the ambassadors for each city. It made money here and there through donation requests but by and large it didn’t generate much cash. Fenton’s business partner, Daniel Hoffer, intended to change that from the moment he joined the company. It took a long time for that to happen.

The digital psyche was far different back then, so it’s shocking people took a chance on the service at all. Sharing economy companies had not yet emerged. Smartphones had not proliferated. Facebook was not a thing. When you were meeting strangers off the Internet, they really were strangers.

For many users, Couchsurfing gave them the opportunity to travel when they might not otherwise be able to afford to do so. Experiencing the world at an early age altered the course of some people’s lives. “I discovered that I had a passion for meeting people and traveling through Couchsurfing,” long-time user Jordan Urbanovich told me. He grew up in a cookie cutter American suburb, but after visiting Europe on people’s couches the hobby stuck. Seven years later he’s still using Couchsurfing — he skyped me from Nepal, where the power cut out a few times in his Internet cafe.

Couchsurfing was magical in the early days, but its honeymoon period didn’t last long. As the word started to spread among users and more and more people joined the application, its cooperative ethos backfired. Its collectively-coded website couldn’t handle heavy amounts of traffic. Bugs abounds and crashes were common.

[pullquote person=”” attribution=”” id=”905661″]The organization operated more like Wikipedia than the Encyclopedia. [/pullquote]

In one particularly bad server failure in 2006, key data and software were permanently deleted. Fenton announced he was shutting Couchsurfing down as a result. But the organization operated more like Wikipedia than the Encyclopedia – there were armies of people invested in it who had dedicated personal time to building it. They rallied together to keep it going.

From cool to creepy

The technical issues weren’t the only ones Couchsurfing faced as it scaled. Soon, more worrisome problems started to occur. Newcomers changed the energy.

“It became this weird playground for people who had social anxieties or were socially inept,” former Couchsurfing user Christa Gallo told me. “They’d show up and didn’t know how to hold a conversation.” Many of the newscomers used Couchsurfing meetups as social events, without actually hosting visitors or traveling themselves.

Gallo wasn’t the only one noticing the difference. Urbanovich also felt a change around 2011. “I was hosting in New Orleans and I got a lot of bullshit from new visitors — copy and pasted messages, people who had no desire to hang out with me and only wanted a free place to stay, or people just looking for festival accommodations.”

[pullquote person=”A Couchsurfing user” attribution=”A male Couchsurfer tells other men how to target women for sex on the site” id=”905662″]”The newer profiles are fresh to the whole thing so they haven’t developed a firm mindset on what the site is for.”[/pullquote]

The Couchsurfing community struggled to spread its ethics to newcomers. People started using the service like a dating application with predictably bad results. Rape and assault incidents garnered international attention and female couchsurfers began receiving tons of emails from other overly friendly users. Some men even published guides for how to turn couchsurfing into a “real sex pipeline.” This one has lovely little recommendations, like telling men to target newer female users because “they haven’t [yet] developed a firm mindset on what the site is for.”

One woman, writing for Narratively, detailed her chilling encounter with a host named “Raul,” who posed as a woman on the site to convince her to stay with him. By the time she realized he had lied, she was in his apartment, in a foreign country late at night, with many bags and nowhere to go.

Couchsurfing was experiencing what any company that is truly representative of a “sharing economy” would. When the pool of potential “sharers” is so diverse, unvetted, and uncontrolled, there will inevitably be some bad actors.

Meanwhile, things weren’t going well for the company financially. Couchsurfing’s request for a non-profit status was rejected because the IRS didn’t believe it was charitable in nature. It was saddled with the bills, and if it was going to survive, it needed a savior.

The saving grace

Enter Benchmark. In 2011, the venture capital firm, along with the Omidyar Network, gave $7.6 million in initial funding. A year later, both reupped in a $15 million Series B round along with some new investors, to turn the volunteer-run service into a sustainable enterprise with venture level returns.

Erik Blachford, who is currently Couchsurfing’s Executive Chairman, wasn’t advising the company at the time. But in retrospect, he thinks it was the right move. “At some point if you’re not in the situation to take donations the best path forward is to make a business out of it,” Blachford said to me.

In comparison, Airbnb — Couchsurfing’s far more successful rival in the sharing economy — was designed to make money from the get go. It didn’t go through years of trial and error with its business model, and its outsized profits and rapid growth reflect that. Despite being founded five years after Couchsurfing, it currently has a reported $13 billion valuation and had raised almost $1 billion in venture funding. It’s looking like it will be one of Silicon Valley’s biggest wins from the recent tech rebirth.

Airbnb’s success does not preclude Couchsurfing from thriving. Although they may compete in small ways, the two services are so different in experience — and cost — that they serve different markets. For all its achievements, Airbnb is ultimately a glorified hospitality service, not a cultural idea exchange. As Fred Wilson put it, it’s part of the “rental economy,” not the “sharing economy.”

As sharing grows, caring goes

Before and after its venture funding, Couchsurfing cycled through CEOs, acquiring and discarding them like ill-fitting t-shirts. Each one tried hammering the organization into some semblance of professionalism, efficiency, and money-making and each encountered intense push back from the community. Couchsurfing was founded on the ethos of cooperation, not capitalism, and its most involved users were intensely suspicious of the ulterior motives of the service’s overlords.

“Imagine if you’ve been contributing to Wikipedia for years and one day the founders say they are selling it for a large personal profit but you’re still free to use it. Yup, it’s like that,” one former Couchsurfing ambassador explained on Medium in 2013.

Users made meme videos poking fun at the corruption of the organization’s leaders and published cartoons to represent them. The community that had once volunteered hours to run Couchsurfing could not bring itself to trust leaders overseen by a venture capital firm.

Couchsurfing’s corporate team inflamed these problems with drastic product changes. It started making parts of its website public so Google could index them, but in doing so it published personal, sensitive member information, like phone numbers and names. It cut “city groups,” which were hubs of information for Couchsurfing communities, enraging volunteers who had dedicated time to maintaining those forums. Users fought back with online protests, but to no avail.

Couchsurfing also tamped down on free speech on the application. It deleted profiles of some long time city ambassadors who were critical of the company. Many Couchsurfing diehards started calling for defection, telling other users to join the alternative: An open source, non-profit site called BeWelcome. Long time Couchsurfers believed, perhaps rightly so, that the company had started to focus on growth at the expense of community and it was time to abandon ship.

BeWelcome delegate and author of a recent book on traveling cheaply, Anja Kühner, explained how it differs from Couchsurfing. “In terms of the amount of members, BeWelcome will maybe never reach the numbers of Couchsurfing,” Kühner told me. “But sheer quantity is not our goal. It is the quality of encounters that counts for us.”

A reset and changing of the guard

It came to a head in October 2013. The latest CEO, Tony Espinoza, stepped down after less than two years at the helm, citing a need for Couchsurfing to “crystalize and strengthen [its] core values.” Couchsurfing’s then-head of member experience, Jen Billock, replaced him. She wasted no time in wiping the slate clean.

She laid off 40 percent of the staff, a dramatic restructuring. She believes the layoffs were necessary, although hard, in order to build the foundation for the company’s future.

Couchsurfing entered a long period of hibernation. Although people could still use it and it continued to grow, the company ceased most publicity, media interviews and marketing. Billock buckled down with her remaining team, putting into place a more competitive, hard-working staff culture.

“The thing I like to play with as a leader is, ‘How can we have emotionally intelligent work place that is also a super high performance work place?’” Billock told me. “Let’s set an aggressive deadline and run towards it.”

Since the Couchsurfing application was first built in 2003 and had been amended and rejiggered over the years, the technology was a mess. It certainly wasn’t capable of adapting to the mobile era that dominates today. Eventually Billock resigned herself to the fact that the entire thing would need to be rebuilt … from scratch. The databases of customer information would need to be migrated, the design redone, and the backend code rewritten, in a more modern code language.

For the last year and a few months, that’s exactly what Couchsurfing’s staff did. Hustling away in their San Francisco office, as the likes of Airbnb and other “sharing economy” companies grew bigger and bigger and Couchsurfing’s name faded away. But not for good.

In November 2014, the company unveiled its big new relaunch and set its sights on the future. It will try to answer the question: Can the “sharing economy” survive when it focuses on the sharing and not the economy?

It’s not just a down-market Airbnb

Although its technical problems are behind it, Couchsurfing’s most difficult challenges are ahead. It’s been three years since it took venture funding, and before the decade is out it will need to start making money.

One problem: Couchsurfing’s free cost is, in essence, its core product. That’s what fosters connection between visitors and hosts, encouraging them to spend time together. If you were paying for the couch, well, then it would be just another place to sleep at night….like a down-market Airbnb.

“There’s lots of different services where you can find a place to stay,” investor Blachford told me. “What makes [Couchsurfing] special is you’re going to stay with someone. We want to be very careful to preserve that.”

Couchsurfing’s leaders are going to try to make money the freemium route, with features like profile verification and host-visitor gift exchanges.

That may wind up backfiring too though. The service attracts people with a certain mindset. Urbanovich, who has paid the verification donation in the past, told me if payment was required he wouldn’t bother verifying his profile. “Like anything in life it just builds resistance if someone’s telling you what to do,” Urbanovich said.

There’s a lot at stake, and not just for the company and its investors. There’s nothing else in the world quite like Couchsurfing. It opens up travel opportunities for those who might not otherwise be able to afford it and connects cultural strangers as a result. It’s the largest such network with the biggest brand awareness. For better or worse, Couchsurfing is the strangers-helping-strangers travel organization that stuck. It has survived in spite of itself.

Billock is optimistic. She said, “The market has evolved beautifully for Couchsurfing and now Couchsurfing is evolving to take its position.”

This post has been updated to reflect that it was Benchmark, not Greylock, that invested in Couchsurfing. It has also been updated to show that founder Casey Fenton’s business partner, Daniel Hoffer, had always had for-profit intentions for the company.