{"text": ": No, for sure not. And I think that the, probably the last thing is kind of in this world of Web3, right? And you've talked about this a lot. Web3 opens up so many possibilities because it's the idea that everything could be rebuilt. And what couldn't be more exciting to a young founder coming into a world that feels like everything's been built, to be told, oh no, everything's going to be rebuilt in this way. The challenge is like, that's a very theoretical concept, right Dalton? Like, how do you dig a little deeper? You wanna put that into practice.\n: And ideally you wanna, ideally you have something deeper than, and so therefore we're gonna add tokens or therefore something, something NFTs. Like the bar is higher. And again, speaking of NFTs, remember OpenSea, I interviewed those guys. I remember doing office hours with them. And what I will tell you is OpenSea was not theoretical. They launched, they had users, they had graphs, they made money. It was actually something that made sense and wasn't all wishful thinking.\n"} {"text": ": You're doing pretty well.\n: Yeah. When Shopify was a brand new thing, like all of these platforms, the people that were the first to recognize that these were, gave them leverage.\n: Yes.\n: Those entrepreneurial minded people did really well.\n"} {"text": ": But what if they say no?\n: talk to them, and they're like, no, I don't think so. What often happens, again, to go deep on this, is that the way they'll pitch the person is they'll pitch them their idea. They'll be like, I'm an idea guy. I've got a great idea. Do you want to be my worker bee to go do all my ideas? And of course, the person that's the best person you've ever worked with does not want to sit in a cage. and do all of the work that you give them. And instead, I'm like, well, have you asked them if they have startup ideas? And then you sell yourself where you can come together, come up with the idea together as co-owners. And it's shocking how often that appears to have never occurred to someone. Like they think the idea of finding a technical co-founder is to find someone who will basically submit to their whims and be their assistant. To find an employee.\n: Yeah, and that's not the move, man. Trying to find a partner. You know, it's funny, because my dad would say this to me about my old co-founder, Justin Kahn. He was like, you know, Michael, Justin's an amazing recruiter. And I always thought, I was like, what's weird is I think if you're recruited by a good recruiter, you don't even realize they're a good recruiter, right? But like in hindsight, I'm like, all right, so we got me, Ahmed, and Kyle. to work for him, well, not work for him, but to be his co-founders in a startup where he was wearing a camera on his head streaming his life 24-7. Named after him.\n: Yes. Named after Justin. Named Justin.TV. Do you want to work at my startup? Yes. It's me. Yes.\n"} {"text": ": Here's one.\n: Let's imagine that you want to work on a new real estate related software company. That's your startup idea. And in category A, let's say that you have 10 years of experience working as one of the founders was a real estate agent. One of the founders worked at a mortgage underwriting company for 10 years and built software around mortgage underwriting. They have a startup idea and they're like, we think that mortgage underwriters want X. What should we do to validate this? It's like well You probably are right or like your your judgment about Knowing what mortgage underwriters want if you've been building software inside of a mortgage underwriting company for 10 years It's probably pretty good. I'm pretty good and you probably know way more than the average Barry about this You've probably tried other products. Yeah, you've probably been disappointed. You know what vendors are available Yeah, why things work and why you know, yeah, and so those kinds of people should probably trust their gut quite a bit Yeah about what mortgage underwriters want.\n"} {"text": ": I think there's another thing going on too, which is fear based. Right. Like, I know that if I choose a bad deal, I'm going to waste a lot of time.\n: Yeah.\n: Shouldn't I do all of this analysis first to make sure I don't choose, to make sure I don't choose a bad idea.\n: Right. Yeah, we see this a lot where there's companies that find real problems and something they're experts in, but they are facing crippling anxiety that it's not venture scale. Yes, they might be right, but they're so obsessed with this way of thinking that, oh, what if this tops out at 50 million ARR? Gee, I'm just not even going to start a company. I'm going to stay doing, I'm gonna stay at my job because the idea I have will top out at 50 million in revenue.\n: Yeah, I think it's tricky because I think that we have to admit in the startup game you're going after like a high risk, low information and high commitment bet and there aren't moves to change those core things. Right like, yeah, you can invest in the margin, but it's still gonna be high risk, high commitment and a long term bat.\n: Yep.\n: And so I think we would argue it's better to kind of focus on areas of your strength, areas that you know well, like that's where you can.\n: Problems that you know a lot about that you personally observed that maybe you've.\n"} {"text": ": So this is a product that's being marketed to people. not companies. Sometimes these products are free and monetized with ads. Social networks are extremely common. Sometimes these products are paid products. The whole gig economy I would describe as a consumer business. But you know it's a consumer business because individual people use it and it's a product that's not primarily marketed to businesses. That's where you know you're in the consumer world.\n: Yeah, and there's some nuance here, folks on the internet, so we don't need to get into a semantic debate. We're just trying to, just go with us on this definition. Just bear with us here, even if there's some nuance to debate about this.\n"} {"text": ": OK, here's another one, right? Well, VCs, they care. We all know that Google engineers can just raise a series A, can raise five to $10 million with almost nothing. This is my path to getting funded.\n: I mean, it depends on, I mean, certainly depending on your resume, it could be helpful. It's a good brand name to have. So I don't think that's... false, but I think at some point, the more time you spend there, what was once a good positive signal could turn into a negative one. Again, I can't speak for all investors, but at some point, you lose the shininess of getting that validation, as well as what team you're on and all this other good stuff. And so, you know, I think there's some truth to that is what I'm saying, but like, if you stay there for eight years, that doesn't apply anymore. You kind of have to get out to get the benefit of it.\n: I also think there's this weird feeling, I think people will read TechCrunch and see, oh, these Google people are getting funded, and then kind of assume VCs are like walking the halls, like being like, engineer, here's term sheet. The flow that you walk through to work to like go to MIT and be a CS major and then get employed at Facebook is nothing like the flow you'd walk through to go from a Facebook engineer to raising money. Like, these are not the same flow, and I think people really mistake those. This is one of my big talking points to founders in the batch, which is,\n: you don't read about the unsuccessful fundraisers. And so if all you read is the successful fundraisers, it looks like everyone is raising and every Google engineer is raising and every, because we just never hear about the ones that didn't happen. And so, don't fall for that. It's not that easy. You can't just wave a magic wand and they're not just handing out, you know, we say this they won't believe this Michael but like I think people actually think they just hand out. party favors or something. Oh, yeah, you work at Google?\n"} {"text": ": All right, this is Michael Seibel with Dalton Caldwell. And today we're going to talk about dealing with setbacks. Needless to say, in both of our startups, we experienced a wide variety of setbacks. And I think working with so many startups over the last 10 years, What's probably become most obvious to us is how I don't think I've ever seen founders who don't get hit with a lot of punches. Like dodging the punches, impossible. Like even, I'll phrase it another way. You might dodge some of the punches, but some of the punches are gonna land. So this is gonna be a bit of a talk about what types of punches land and what you might have to deal with if you're in this game for a long time. What do you think, Dalton? Did y'all have a couple punches land over the years?\n: Yeah. I mean, that was my experience as a founder, was taking punches constantly. And I think what comes up in office hours with me a lot, man, is I think people want to talk to me about one specific thing and asking for advice about that thing. And I'm happy to do it. But a lot of what I want to encourage them to think about is the meta thing, which is that the thing will keep happening over and over again. And so developing a set of skills of identifying a situation of like, oh, this is one of these where like something bad happened and approaching it as part of like the sunrises, the sunsets. Bad things happen. You know, like it's this is this is as much a part of of being a startup founder as literally anything else versus thinking you you're never going to have them or that each each setback is different. They're not. They just come just like every sunrise comes. Right.\n"} {"text": ": So if all of this stuff's great, why are people so pessimistic?\n: hard to have perspective, man. I think when you're really caught up in the moment, everything gets polarized into political stuff or tribal warfare about who's on what team. And so if your team is the thing, pushing for the thing, you celebrate it. But if the other team is, it's bad.\n: So it's very, everything is polarized. Yes. I also think there's this weird expectations game, right? Like, It's magical thinking to think that we get all the things we spent the first chunk of the video talking about and there's nothing bad. That's magical, that's like, that's not being an adult. There's gonna be trade-offs. There's gonna be trade-offs, right? Like, the trade-off on having, you know, 60 second videos that are exactly what I want, that I can swipe anytime I want, is like, you know, maybe two hours of swiping, I should be going to bed, you know? Like, there are a lot of different trade-offs. And like, I just feel like when people, treat themselves like children versus treat themselves like adults. It's like, you know, a child doesn't acknowledge that trade-offs exist, right? A child can think magically.\n: They want only the perfect. You know, it has to all be good with no bad.\n: With no bad, yes.\n: Cut the crust off. Exactly. Cut the crust off, right?\n: And for a while, adults kind of create that world. And then after a while, adults explain to the kids, like, that's, I can't. Cut the crust off the world.\n: Or like, you need to cut your own crust off. I mean, if you want to do that, you can.\n: But I'm not doing that anymore. No. The world has crossed. And technology has crossed. Technology with the good comes some bad. So that's a big one. I also think that there's this weird thing where the pacing is inconsistent. Sometimes you get a lot of innovation in one part of the economy, and then sometimes you get a lot of innovation in another part of the economy. it's not reliable.\n: And so, you know, people- And it's so easy, it's this debate thing where you can say, well, what about X problem? Like, no matter what good thing happens, and they're not wrong, what about X? Like, you're right, X is a problem. Like, that's totally fair. But if you want to tear down anything interesting that happens by saying, well, X over here isn't solved yet, it's easy to just get trapped in the mud.\n: You tear down everything. Yeah. Right. So I'll say this, right? In Reflection, you know, we both have young kids and I am super excited that my kids get to grow up now. I cannot wait for the day where my daughter and son say like, oh, 45 minutes to Tokyo, that's so fucking slow. I can't wait. This isn't so great.\n: What's so great about that, Michael?\n: It's really rocky. It's a bumpy ride. I am so excited about the world that they're gonna join, and I'm confident they're gonna get even more over the next 80 years than we're getting, which is really fun.\n: And think about it, we all, you all, get to create this future. And there's this thing where it's cooler and edgier and more punk rock to be like everything is bullshit. And that's a good high horse to be on if you want to be cool. But if you're actually building things and you want to be a part of creating it, it's much easier and more fruitful to be optimistic and think about all the things you can do and think about what you personally can do and what you can work on versus just being like, burn it all down because of X. Well, you know, I was thinking about it.\n: If you really care about those problems, you have to be optimistic to try to solve them. And some of the people who are the biggest social critics or the biggest revolutionaries or the biggest change agents in our society were default optimistic. Because they believed it could work.\n: They believed the effort wasn't a waste of time.\n: You have to believe enough to invest yourself into something. Exactly. And so I'm willing to bet none of your heroes were the cool snarky folks who never did anything and just bitched about how the world was wrong. None of your heroes were that. And so don't be one of those people. You can choose to not be one of those people. All right, great chat.\n: Great, thanks.\n"} {"text": ": This is Michael Seibel with Dalton Caldwell. And today we're going to talk about how do you give more than you take from your users? Maybe we should start with kind of a business 101, right? Like MBA in 30 seconds. What do you think?\n: Okay, so the basic idea underpinning all technological progress, business, very basic stuff is if you sell someone a tool, And if they can use the tool to make more money than the tool cost them, you're creating value when people like it. And so, you know, some very basic examples, Google, when they first launched Google ads, it was very easy to buy Google ads. you would pay Google per click, and you could sell stuff for way more than you paid Google. So you would just do that all day long and make tons of money, right? Very straightforward. Makes sense. Talk about Excel and Microsoft Office.\n: Microsoft Office is a perfect example. If you think about Word, you think about Excel, these are products that made normal office workers and normal kind of financial workers literally 10 to 100 times more productive. Yeah. And so if you can make an employee 10 times more productive, People probably buy that tool.\n: Buying a computer back in the 80s was expensive, and buying VisiCalc or whatever was expensive, but it was still way positive ROI, like 5 grand, 10 grand, no sweat, because spreadsheets made them better.\n"} {"text": ": Everyone talks about rockets and going to space. When rockets are reliable you can go anywhere in the world in 45 minutes like we could commute to Tokyo. Yep When that happens, it changes the world in so many ways. In the 90s, we were watching space shuttles go up. Half of the shit in that space shuttle basically getting ejected into the freaking ocean. Whenever you did the math, it was like, oh, that cost us more than building a rocket from scratch and blowing it up. That's where we were in the 90s. Now, we actually have a path to I can go anywhere in 45 minutes. It's pretty cool.\n: And again, what this makes me think of, I don't have this graph handy, so I hope I'm not misquoting. But I remember the graph being references of the cost per pound to put something in space. And it looks like Moore's law, where what's happening is that there's this Moore's law looking graph. on how much cheaper it is getting to put something into orbit and how, if you just believe in the Moore's law continuing to happen here, the amount of cool stuff that will happen in space in 5, 10, 20 years, it's just mind-blowing.\n: And we're at that moment where it's getting interesting.\n: It's happening today. Yeah, exactly.\n"} {"text": ": Oh, man. All right. Well, to wrap this up, bad things are going to happen. Your reaction is completely under your control. Use it as an opportunity to get better at taking punches and be the example for the people around you. By up-leveling yourself, you can up-level your team, too. All right, man. Great chat.\n: Sounds good. Thanks, man.\n"} {"text": ": The next one is... Dalton, and this is a little more vague, like it's gonna be easier for me to be successful at my startup. I'm gonna learn important lessons I can apply to my startup if I work for a while at Faang, right? Because the lessons I learned at a big company can directly apply to my early stage startup, right? Isn't that how it works?\n: Look, I think in some situations, folks that are really green can learn a lot about working on a team and having a manager, learning about how corporations work, learning about politics. It's a great way to learn about politics. But you'd be surprised at how many founders that we talk to will tell you that nothing they did in their job translates at all to their startup. Like could not be less relevant versus their college coursework was more relevant. Isn't that weird? Like, and it's because in a lot of things we have so much tooling. Again, I'm talking about programmers here, but you have so much infrastructure inside of Google or Facebook to do your job. And they have their own way of doing code reviews. Like there's just all this stuff. So when you start a startup and you have none of it and you're starting from scratch, you're like, wait, What happened to all those tools I was used to using in Bigtable and BigQuery and whatever you had? And you're dependent on those tools. And so it's a lot more like doing a college project again, where there's no tooling, there's no infrastructure. You have to create everything from scratch. And so again, what's funny is you learn a lot of stuff, but a lot of what you learn is how to use the tools of the thing, which you don't get to use when you don't work there anymore. Get what I'm saying? Again, this is a very programmer-centric point, but like, I've seen founders run into this problem a lot.\n"} {"text": ": Well, I think it starts with, we're all consumers. We are all consumers and we are being marketed products basically our whole lives. And so often when we think about the problems in our lives or we think about the problems that interest us, they tend to be things that we would use or we think we would use or we think our friends would use. That's a big one. What are others?\n: I think that when we know stories about other founders or about startups, most of the stories we know are about consumer founders and consumer startups and consumer successes. So you think about the hero worship of Steve Jobs or Mark Zuckerberg or whatever. And it's hard not to think about these people because they build products we all use every day. Like if you spend your time watching television and looking at apps and looking at your iPhone for most of your waking hours, it's hard not to be thinking about consumer app ideas, right? Like I get it. I get where it's coming from.\n: We rarely meet a founder that's in love with Cisco or Oracle, you know? And that makes sense. Yeah, exactly.\n: And so I think we get told these stories. And so I think by default, if you're thinking about starting a company, you by default come up with consumer ideas because it's what you know. It's what you think every startup is as a consumer, especially if you're not as familiar with how the startup world works.\n"} {"text": ": Now, what about when maybe you shouldn't trust your gut?\n: I think one way to self-diagnose that maybe, yeah, your gut instinct may not be dead on is where you find that you don't have a lot of opinions about what to work on.\n: Yeah.\n: Or that your opinions are very... Mid? No, I'm just kidding. Where your opinions are just very similar to the 50th percentile of other people. Mainstream. Mainstream. And so it'd be like, oh, well, you know, all the jobs you've had are just very high level. You never went deep on any particular topic where you just haven't had that many jobs. Yeah. Is an example.\n: Yeah.\n: And you just don't have a lot of preferences. Or to the extent you have preferences, they're the same as everyone else.\n"} {"text": ": I also think though that there's another way I see a lot of founders attacking this. A lot of founders just think this way from first principles. Good VC's pick good companies and can predict the future. If I can model a good vc in my head, I will pick a good idea and increase the likelihood of winning. And it's interesting to me because I think that like, this is sometimes what I hate about first principles arguments is that like, sure, if you say it that way, it makes sense. Do you think that's what good VC's really do?\n: Yeah, I mean, I think, look, to be really direct on that, what do I think great investors do, especially later stage, than what Y combinator is? They, they find companies that have product market fit that are taking off, that have incredible traction and they try to find them and invest in them. And that's the job. Just like in a lot of these other m and a, all these other types of finance jobs, it's usually you find the thing that's making lots of money, that's doing really well and then you glom onto it and attach yourself to it.\n: And the skill is often getting the thing, taking off to take your money versus someone else's money, not picking amongst things that haven't launched yet, and having theses about why one's going to do better than the other.\n: Exactly.\n: So unfortunately, when people are doing that other type of investing, investing really early. I worry that there isn't a lot founders can learn from investors in that early stage investing.\n: Once you take off, there's less to learn. We're admitting that once you have a hockey stick, tons to learn from that. But if you're like, I don't know what idea to work on.\n: Exactly. Exactly.\n: That's a few steps ahead of where you are.\n"} {"text": ": So, to wrap this up, let's come back to the message kind of in the beginning. How do you have balance in this world? Like how do you, like we say balance, but aren't these, aren't these, my balance is, I think this is a good idea, but it's going to be really hard and clear evidence for this is going to take a while to develop. These are kind of hard to balance, right?\n: Yeah. I mean, I talk about the term cognitive dissonance sometimes, which again, it's another psychology term. Cognitive dissonance is when you have two conflicting ideas that you have to hold onto at the same time. And most human beings don't like cognitive dissonance. It makes them uncomfortable to hold conflicting ideas at the same time. And I think the best founders have techniques and they can do it. And they can be really good at it. something to aspire for as a founder is someone who can know both, oh no, like my star employee just quit and says my startup is horrible and now I don't know what I'm gonna do, but I'm gonna get on this sales call and I'm gonna sell my heart out and like close this customer. And I have to kind of like sit with both of like, I have to be able to do this and not go nutso. And like, it's hard, okay? Like, cause like every day there's gonna be crises of some sort, right? And there's gonna be victories and the people that screw this up, they like, they can't handle that dissonance and they go too far. The way they resolve the dissonance is to go too far one of the directions of either like freaking out of the bad things or losing contact with reality more or less, you know?\n: A lot of founders I know, I wouldn't describe them as totally enjoying that experience, but I would say that they figure out how to thrive in that environment. Like they execute in that environment and the risk and danger in some ways sharpens them. And how many times do we see founders like not bring their true A game until like shit's pretty bad. Yes. Yes. Um, so there you go. So that's the blueprint, right? Be optimistic. Just don't be magically optimistic.\n: Yeah. Be rooted in reality. Squarely rooted in real reality.\n: All right, man. Great talk.\n: Sounds good. Thanks.\n"} {"text": ": Any other things that have made you productive as a manager?\n: The number one thing that I do that I realize that a lot of the other successful founders did too, was I had my analytics dashboard or whatever was important KPIs on the business up on my screen 24-7 and I would stare at it all the time. And I actually can memorize. I even, this is even the case for YC, man. I don't even know if you know this, but like a lot of our internal stats I have memorized.\n: Yes.\n: And it's because I stare at them all the time and no one told me to do that. This is just a me thing. But I'm obsessed with the internal key KPIs for anything I'm working on. I'm just an addict to look at that stuff.\n: I think that that is such, what we see on the other side, and I completely agree with you, that was a huge thing. Especially for my second startup, that was a really huge thing. It's funny when you talk to a founder who knows their stats well, they just talk about their stats so differently. First of all, they don't round off numbers to the nearest zero. But second of all, they know whether they're up or down 10% at any given time. Whereas other founders are just like, yeah, I think it was an up week. And it's like, how do you not know? How do you not know if your revenue went up this week? How do you not know that?\n: What are you doing? Yeah, no, I don't get it. I don't get when someone is operating a business, and it's like, what was our revenue last month?\n"} {"text": ": So I have personal experience with this one. And I think for the longest time I agreed. Like I was like, yes, this needs to exist. And as I got older, I learned something that was slightly depressing, but is proven to be true. The magical place doesn't exist, right? Like there is a finite number of restaurants that are open tonight. That's it. And like you wanting there to be a better option doesn't mean that a better option exists. And I think this is what's so tricky is that like the world seems limitless, but for these physical things, it's actually fairly limited. Every day, people go on Yelp, search the restaurants in their neighborhood. don't like what they find and are frustrated. But that doesn't mean that there are restaurants that they don't know about. That just means that what exists is not sufficient. And ditto for parties, dittos for events and concerts and da, da, da, da. And I think, you know, this is an honest, it's an honest mistake, right? It's a very honest mistake because there is a problem. I don't like the restaurants in my neighborhood or my city, right?\n: I've spent years of my life working on music discovery. And I understand the problems. One of the problems is that we think that the other users are like us and people like to say they want to discover new music. But in practice, people like popular music from a small number of bands. Just like with restaurants. Do you know what? Something we've learned from DoorDash over the years. is most people order like McDonald's and stuff.\n: Like the average user- Or the comparable, or the burger from somewhere else.\n: That's what people like. They're not ordering like really esoteric, strange dishes. And this is one of those things where I'm sure there's people that are gonna see this video and be like, you're wrong. The thing with these ideas is it makes people emotional and it makes them wanna debate or it makes them wanna, like something about it makes you feel like you figured something out and the world is wrong and you have the vision. There's something weird about this. And these discovery startup ideas really bring this out in founders. And again, we've been there. I've worked on this stuff. I get it. And so again, we're saying if you're working on this kind of stuff or interested in it, do a lot of research and understand that the reason those that came before you, it's not that they're stupid. It's not that they've never thought of this before. It's not that they haven't shipped anything before. Like, just realize that's the tar pit talking. It's like, oh, this looks like a nice pool of water. No one's here drinking at it. I'm going to go get a drink of water from this pool, right? Like, no, danger, quicksand. Right?\n: Dalton, I must be the first person who've ever discovered this pond.\n: Michael, I just realized that Gen Z doesn't like Facebook very much. I just invented this idea. No one has ever thought of this before. No one's ever. Yeah, the bar is higher folks.\n"} {"text": ": This is Michael Seibel with Dalton Caldwell. Today we're going to talk about how overthinking is sometimes a founder's biggest mistake. So, Dalton, this video was triggered by this amazing meme that you made on fundraising advice. But before we get to the meme, because I think it's, like, one of the best memes I've ever seen for fundraising advice.\n: For fundraising.\n: Let's start in general. Let's start in general. How can overthinking be bad? And when can overthinking be bad?\n: Yeah, I mean, I think that what people think being a founder is. Is what they saw in, like, watching the Facebook movie or popular television, where, you know, you're, like, coding a lot and, you know, you're making deals and screwing over your friends. Just kidding. But in reality, it's a lot of feeling lost and being not sure what to do and feeling stressed out a lot, and you're worried all the time. And so you tend to overthink everything and every decision. You kind of think in circles over and over and over again because you don't have a boss, you don't have constraints when you're a startup founder, right? There's no one really telling you what to do, so you're on your own. And so when you. The experience of being a startup founder, it's to always be overthinking everything.\n"} {"text": ": So this is Dalton plus Michael, and today we're going to talk about why the best investors secretly love YC. Very secretly. Set this up for us, Dalton.\n: Yeah, so the key word here that Michael is saying is secretly. Because if you talk to a lot of investors, if you read their blog posts and social media, a recurring theme is, you know.\n: YC sucks.\n: Maybe it's, you know, YC OK, if you must. But it's not as good as just going directly to our funds, because we're number one, and you should raise from Koalapop. And so we are very used to seeing this, and we often get questions about this from founders, which is like, hey, I heard from Investor X that they said that doing YC doesn't make sense for me. What's your guys' response to that? Often while passing, by the way. Yeah, no, that's the best part, is of course the investor's not investing in them either. And so they just leave them with a parting gift. And so what we wanted to talk about in the video today is, what's actually going on, and the fact is the top investors invest in YC companies a lot. All the time. All the time. And there's a bit of a gap between what they will say to folks that they are passing on and how they actually behave as investors. So we're going to jump into that.\n"} {"text": ": Well, let's dig into that, right? So in some ways, We're kind of providing a service to VCs, and what do you think the VCs are consuming here? Why do you think they like to invest in YC?\n: The major reason a normal venture capitalist would not invest in a startup is that it's too early. And too early just means there's not enough signal that this is one of these epic standout companies, which is their job to invest in. The average VC only does one deal a year, maybe two deals a year. And the average firm has, what, five to 10 partners? There actually just aren't that many slots of deals to do. And so the feedback is generally, this is too early for us, right? The service that YC provides is it is a very hopeful filter. for what is good and worth paying attention to. By getting the YC stamp on it, we are filtering it, we're doing that job for them.\n: We're taking, what is it, 20,000 applications? Yes. And turning it into 200-something companies.\n: And even then, they can get to know the YC companies and keep filtering even after that. And so having any kind of signal is very helpful. In addition, the fact that we get the company's finance so they don't just run out of money. What often happens when you're going to raise from VCs, they say, this is too early. And the founder's like, well, we're too early for them. And you know, we don't want to do YC. And so then it just shut down. The company doesn't exist. And so to the extent that YC just gives these companies money to have a shot at getting far enough along for VC to invest, that is a helpful service. In addition, the advice and the network we give the companies, helping them with sales, helping them with pitching, helping them pivot. A lot of these companies on our top 100 list are companies that pivoted during YC. And that's a value-added service we're providing to the investor market is giving these companies an avenue to change their idea.\n"} {"text": ": So, Dalton, one of the most perfect examples of this is actually Elon Musk, and why I think it's so perfect is that, depending on how you tell the story, Elon looks like the dummy or the idiot. Right? Like, I'm sorry, the dummy or the genius. Right. Depending on how you sell the story. And it almost doesn't matter. Right, because he's winning. But, you know, to me, the first example that I always loved is that, you know, I read some book about the starting of SpaceX, and it started with Elon going to Russia trying to buy, like, rockets. And, like, the Russian government being like, there's this American billionaire guy who wants to buy rockets and kind of not believing it, but Elon just looking really serious, so they, like, considered it, and, like, they eventually said no. But, like, he got to talk to people about buying rockets from them. He's just a dude with money.\n: He was like, go to Russia, buy rockets. Like, that's the extremes. Is that genius or stupid? I can't tell.\n: I can't tell.\n: And, like, with Tesla itself, like, to me, the midwit is. Is electric cars are good. That's the extreme. Electric cars good or on both? In the middle, it's like, no one has successfully done a startup car company since the fifties. And every. You know, if you look at all prior attempts to build an electric car.\n: Like, there's all these words and the infrastructure. Yeah. Yes. And I think that the one that we find most funny, which we'll see this video. We'll see if we stand the test of time is, is the boring company, right. Drilling holes under the ground so that you can drive places faster is very clearly the idiot one, but, like, it could be the genius one, too.\n: Yeah. It's exact. It's a beginner's mind idea, which is, like, traffic is bad. What if we dug a hole under the ground to get to downtown Las Vegas? And what's funny is you read all the critiques of this. Like, the Midwest stuff's like, whoa, bus systems already exist, and it might be much more efficient to optimize transportation. You know, there's lots of words in the middle of that, but, you know, drill tunnel to avoid traffic is certainly at the extremes.\n: Yeah, yeah.\n: And you kind of see him approach all of his problems this way, where you can imagine it being the same sort of ideas that we like. Mars is cool. Like, yeah, Mars is cool. Like, this is the kind of stuff we come up with, as teenagers, like, a lot of his ideas.\n: Yes. And the hard work is in the implementation, but the idea isn't very complicated. And, like, the v one is kind of simple minded.\n: And if he was an overthinker, he would do. He would rule all the stuff out. All this stuff is, like, obviously a bad idea. And anyone in the Midwest territory would rule out all these ideas.\n: Yes.\n: Right?\n"} {"text": ": And then the last one, we see a lot of people trying to hedge their bets. So many people trying to be like, well, I'm keeping grad school open, I've got a Google job offer, I've got a Jane Street or whatever the new tech finance thing of the minute is, and I'm talking to three friends about doing a startup. And I'm kind of moving all those pieces down the board at the same time. And we get asked questions like, okay, so how do I optimize this? I'm like, I don't think you can be great at those four things at the same time. It's hard enough to be great at one of those things. But once again, why shouldn't I hedge Delta? Isn't the optimal move to hedge? How do I know I'm making the right decision?\n: when you're taking a high risk. life decision, like we said on this video series a number of times, you're going to look stupid and you're going to take risk and there's a chance you're going to be like, that was a huge mistake. And you want to barter with the universe. You want to be like, come on, can't I de-risk this? You want to think that you can be smarter than the system to somehow give up nothing and have no downside and only have upside. And the more you try to barter with the universe to be like, okay, first I'll get a job at Google and I'll save money and then I'll do, you know, I'll invest in crypto and then I'll do like, you want to like barter with the universe to have no risk. And I guess like, I get where people are coming from. I'm not sure that's a real thing. And I think it's being more real with yourself is like, yeah, I'm taking risks. Like, yeah, quitting my job at Google is a risk. And I may regret it, but I may not. But I'm doing this with eyes wide open. And by actually putting my full heart into anything I do, whatever that is, including not quitting my job, That's, how can you have regrets about that? Being proud of the work you do. I mean, this is what I tell a lot of folks. I do a lot of office hours with people that are shutting down. I did one today. You know, it's like their final office hours because they're shutting down their startup. And I tend to tell people similar stuff, which is like, look, if you're proud of the job you did, You know, if you had heart and you gave it your all, and you feel like you learned stuff, then great job. And you should view this as an affirmative experience. And so like, I'm proud of you, I'm proud of the job you did, I know you had your heart into this thing, and like, we'll get the next one.\n: You know? I think that that message has to be told because it is rewarding, but founders have to be kind of reminded that they didn't fail. Like it's not like, Or let's just put it this way. It's not like failing a test, a basic math test that you just didn't study for. It's not like that. You tried to do something that so few people in the world are successful at. Failing is not really failing at all.\n: It's like trying to be a pro athlete. Like when you're really good in college, you try to go pro and you like make a team and then you get cut in the first year. Like that's still pretty awesome. Yeah.\n: You still were maybe one of the best thousand people on earth who could play basketball.\n: Yeah. And so it's like, you know, again, it would be great if you were number one in the world, but like people are going to respect what you did. And if you're proud in your heart of the work you did, then you will view this as a positive thing in your life, you know?\n: Yeah. And I always tell the people who are hedging, I always say this, the other side, you know, in our world, it's really competitive. And what happens if there's a team that's exactly as competent as you and they're not hedging? They're always going to win, you know, they're always going to beat you. So how much better do you have to be than that team if you're splitting your resources two ways, three ways, four ways like. So it's not even a good strategy, even if you were trying to think strategically, unfortunately. So there you go. Those are some of the things that future billionaires do to get shit done, and some of the things that they avoid as well. Great chat.\n: Sounds good. Thanks, man.\n"} {"text": ": So you've got a theory about this whole game. Share the theory.\n: Here's a theory I'd like to share with everybody. Let's think about founders and startups. Let's talk about supply and demand. And the argument is this, there's many startup ideas that have very large supply of founders that would want to work on them. And there's some startup ideas with a very low supply of founders that want, and not just want, have the skillset to work on them. Still with me? So for instance, let's imagine the startup idea is one where as a consequence of being a founder, you party with celebrities and your job is to party with as many celebrities as possible. I think the supply of founders that are excited about that, and again, a lot of this is the music discovery or the concert discovery. If your startup idea is, hey, I want to help people discover new concerts to go to, as a consequence of working on that startup idea, you're going to go to a lot of concerts and you're going to have a lot of fun. Yay. And so there is a huge pool of people out in the universe that would love to work on that startup idea. Okay. On the other side of the spectrum, the supply of founders that would want to build open source developer orchestration tools, Pretty low. And for, and there's some people where that stuff is great. Like, right. It's just, it's not, you have to be technical. You have to be a programmer. Like there's all these like boxes and filters you have to pass through to think to yourself, I'm going to work on developer orchestration. You know, this is my passion. And so that's on the supply side. Some ideas, a lot of people want to work on because it's cool and sexy and fun and you hang out with cool people. Some of them, you know, how many people could start a quantum computing startup? What's the set of people in the universe that could credibly start one of those, Michael? 20 people?\n: Hundreds.\n: Okay. Yeah. No hundreds. Okay. So very small supply. Now let's talk about the demand side. Michael, what is the demand for an unlaunched, undifferentiated social app? Zero. Right? Think about how many apps launch in the app store every day, folks. Hundreds? Thousands? I don't know. Most people don't search in the app store for apps that launch that day to download them and try them out. People are busy, they don't care. And then also on the demand side, what's the demand for high quality software that solves a major business problem so that companies can run more efficiently in some industry? Really high.\n: Again, you have to know what industry you're talking about. Let's take your most expensive workers. Yeah, let's take your most expensive workers and make them 50% more productive. Yeah.\n: It's something like Retool, I guess, would be an example.\n: Yes, that sounds great.\n: It's like, oh, here's a no-code tool to help you let your non-technical people effectively be coders to build all these dashboards. What's the demand for a product like that? Infinite. Yeah. People want that. And so I think what you... Yes. When we're talking about tar pit ideas, what we're describing is ideas that have the largest over supply of founders that want to start them relative to market demand. And I think you can think about this in terms of like being on the job market or something. If you don't really have differentiating skills from other candidates, it's just going to be harder than if you have really differentiated, really special skills that stand out from the crowd.\n: I think what's interesting about this concept is how many founder, how many potential founders are sitting somewhere with expertise and they don't think the startup world is for them. For example, we funded a mining software company from this founder in Australia who used to basically work for a mining company building software to tell the company how to deploy all this really expensive equipment and not lose money. And I think that there are probably hundreds of people like this founder who would never think that the startup world is for them because they would think the startup world's for people making stuff for creators or social networks or da, da, da, da. I think this is almost a plea to people who are experienced and don't think they're startup people. It's like you might be a startup person. Like if you've solved an esoteric problem in a large industry or you have insight on it, you could be a startup person and solve that problem for the world. you might have a more unique perspective than you think.\n: Startups aren't exclusively apps to discover restaurants. Again, like no, there's too many of those.\n"} {"text": ": PG in some ways designed YC a little bit that way, right? I think that's counterintuitive to a lot of founders. One, there aren't that many events. You don't have classes all day at YC. We try to take as little time as possible during your week so you can actually get shit done. Two, there's a hard deadline, demo day. And three, I think people are often surprised. A good portion of what I see is just asking you, what are you gonna accomplish by demo day? And then asking you every week, well, did you do it? And it's you confronting the yes or no of that. It turns out that there's a lot of magic on that and he wanted to build as much maker time as possible in the program. I think in this kind of balance between maker mode and manager mode, what people should be trying to do is maximize their productivity when they're in that mode. How do you maximize productivity? So when I think about manager mode, for me, I always like to think about this like, okay, if I'm gonna be managing my time between my to-do list, which is just another way of saying shit that's actually important to get done, meetings, email, and Slack, I always think that my to-do list comes first. Like whenever I'm being productive, I start at the to-do list. And I do everything there, and then I check those things.\n: Because you control it. Yes. Versus if it's inbox driven, other people are in control of your time, which is, watch out.\n"} {"text": ": Anyways, this was an amazing batch, and I don't want YC to take too much credit here. The founders at the work, like we said, the founders at the work. And, you know, to one of the points you made earlier, being able to see everyone in person, this batch was also just like, amazing. You know, it was one of the things that reminded me about why this is such a fun job is being able to see everyone and interact with them throughout the batch. So this is a good one, right?\n: This is good. We made it.\n: Yeah. We made it. We survived 20. We survived 19. Kind of nuts. Kind of nuts. All right, man, see you later.\n: Sounds good. Talk to you later.\n"} {"text": ": I think the last thing that I see a lot is that when you think like a VC, it is easier to get positive feedback from VC's. You know, when you talk, when you pick an idea because it's the hot thing on Twitter, it's easy to get meetings.\n: Yep.\n: When you talk about companies using VC language, when you show some market slide that says this market is right, like, investors are responding to that. And I think that's confusing. To founders, because, I mean, investors can respond to things that aren't good.\n: Yes.\n: In fact, wouldn't we say that's most of what they're responding? Like, that's our job. It's like most investors bet on things that don't work.\n: Yeah, I mean, that is the job. And again, one way to detect this is that you spend all your time paying attention to fundraising trends, and the way you come up with a startup idea is to read what is raising money and then clone the thing that is raising the most money, and that's the algorithm.\n: And then maybe raise some money. And then what?\n: Yeah, that is an algorithm. We see a lot from this type of thinking, which is all of these companies raise money. I'm going to do it too. And we're just suggesting we've seen that not go well a lot of the time.\n"} {"text": ": Well, I'll tell you, I promise you, it wasn't that the idea was going to work. It was the adventure. Okay. It was the adventure. And I think what's so interesting, when people don't ask their friend, And they assume, oh, but they work at this company. They're never going to do it, da, da, da, da. It's like they don't realize you're offering adventure. You're offering the unknown.\n: And adventure isn't, here's my idea for a social network for dogs. Will you build my website? No.\n"} {"text": ": Yeah, that's why they're interested. They bought a house.\n: And they have some ideas of like, well, we think the real estate industry is broken and it's weird that it works this way. And so we just think we can fix it. And you kind of ask, well, what, you know, how much research have you done or how many people have you talked to in the industry? None. And they don't know anyone. Again, these folks can still be successful. But those folks should probably trust their gut a little bit less that they know precisely what to build to get this off the ground.\n: I think that where we see this goes wrong is when the founder with expertise is fearful and acts like the founder without. And the founder without expertise is too confident and acts like the founder with. And I can't say this enough, like I've seen so often the founder with expertise where I'm like, you know so much about this. Well, be afraid. Maybe the thing I built was only, no one else will want it. Or like, maybe my taste is unique. Or here's one.\n: Have you seen this one where, oh, I know what to build and they want it, but I don't think VCs will fund it.\n: Yeah.\n: Like basically they're like, oh, okay. We actually know exactly what kind of software mortgage underwriters want. But we're building some AI bullshit. Yes. Because we think we need to say it's AI related.\n: Yes, to raise money.\n: Versus the thing that we know is actually the problem. Yes. That does not involve AI at all.\n: Yes. Like we're ignoring all of our expertise.\n: Because it's not AI.\n"} {"text": ": Investors and fundraising. The classic the classic. I went in fundraise with this expectation. I came out with a bloody nose and a black eye.\n: Yeah, I thought I thought they liked me. I thought they were my friends. I thought I was special. I thought everyone else is raising, you know, everyone else is this. Oh, I I got all the right intros. I know they're interested in my thing. I did the networking like it's it's some version of. I. Believed with good reason X was going to happen X did not happen WTF like like how dare they are the universe like you end up like going kind of nuts on feeling wronged by a person or a or a system or Whatever you want to call it like someone did you wrong, right?\n"} {"text": ": This is Michael Seibel with Dalton Caldwell. And today we're going to give advice on pivoting by discussing the startup ideas that founders most often pivot into and away from. We call these ideas tar pit ideas. Dalton, explain the problem here. What's going on?\n: So here's the deal. It's surprisingly, a lot of people's ideas are surprisingly the same across founders. And so when we read the thousands of applications that apply every batch, and we interview the thousands of companies every batch that we do, there's a lot of common ideas And specifically what we're gonna be talking about today is tar pit ideas, and we'll explain what that means in a moment. But these are ideas that lots of people try, and they don't succeed, and they don't pivot back out of them quickly enough. So it's a cause of death for many, many, many, many companies, statistically, are some of these tar pit ideas. So I'll put this back to you, Michael. Michael, explain why we would use the word tar pit. What are we trying to say? What does that mean? I know you did some research here.\n: Yeah, did a little bit of Googling here. So a tar pit is a place where petroleum is kind of coming up and seeping up through the earth. And it tends to be a great place to find fossilized remains, dinosaurs, other forms of life. And the reason why is that apparently tar pit pools resemble freshwater ponds. And so animals will come across them, Think it's fresh water. Step in. Get stuck because the tar is very sticky. Die. Start to decompose. That smell will attract more animals. And then you get this kind of cascading negative effect, which, as I say it out loud, describes the phenomenon in the startup world so perfectly. It's not even funny.\n: Yeah, tar pit ideas. attract founders to them. And they seem like good ideas. They seem like something people want. You know, it's ideas that are like very appealing. And the fact that there isn't already famous companies solving them already attracts more founders. Do you see what I'm saying? Like, it looks like you've come up with this amazing original idea and the death of everyone that attempted it is hard to see. And all you see is like a freshwater pool. You're like, oh, this is a wide open space for us to solve.\n: But right below the surface. Okay.\n: Yeah, it looks good. Right? That's why it's so alluring. And so, and so look, why are we doing this talk? Or why are we telling you this? We would love for this not to happen to you. We would love to not see the tens of thousands of applications of people working on these really rough ideas. And if you can manage to not fall into the tar pit yourself, your overall odds of success in your startup journey are much higher. That's why we're talking about this stuff.\n"} {"text": ": Let's talk about the trap, right? So these are a lot of assumptions that future founders have. Let's talk about the other side. What's the company trying to do, right? And I think this is something that I hear a lot. where the company is trying to retain you. And trying is not the right word. The company has engineered and iterated a system over oftentimes a decade plus to retain you. And when you sign that piece of paper, you have to understand you're going into the same retention flow or retention flow built by a company that often is trying to retain users on its product. It's really good. It's highly gamified.\n: It's highly gamified.\n: Highly gamified.\n: Oh, I can get my next level, Michael. I want to get my next level upgrade. And then I unlock my booster pack, founder, blah, blah, blah, share, reward. And then I get level 14.\n: And one of the things that I see that founders don't realize is how the faangs will do this around equity. So here's a story that founders will tell me, right? I'm gonna get in, some kind of signing bonus, I'm gonna feel good. Some kind of signing, I'm gonna feel good. Some kind of equity package, I'm gonna feel good. I'm well compensated, this is great. And then I'm gonna get, but of course that equity is vesting over four years, right? Like, you know, you earn that equity a little bit of time over four years. So that's the first part of the trap, right? It's like if you leave, you say goodbye to that money. The second part of the trap is that if you're good six months in, you get another chunk of equity, but it's vesting over four years. So think about it. You've been there for six months, but there's disproportionately more money that you have invested yet, which incentivize you to stay a little bit longer. This is a dark pattern.\n: It's a loss aversion, which is people do a rash. If you give someone something and then threaten to take it away, they will irrationally value it to avoid a loss. Versus they never had to begin with, they won't do it. Again, Google this, loss aversion is a thing. So there's a lot of stacked loss aversion around vesting.\n: Especially because founders will think of it as their savings. And this is the second part of the trap, right? You're around a lot of people who want to be employees and managers, not founders. Oftentimes they're upscaling their lifestyle. Nicer apartment, car, nicer vacation, because they want to be in this world. They're not looking to save money to start their company, right? And so the people around you start spending money, especially because they see that vesting equity as almost savings. So bam, you're not saving money because you're going on Instagram vacations. Bam, you continue to get these little equity bonuses that vest over four years. If they can keep you spending your entire salary and if they can keep the money that you have invested yet larger than the amount of money that you have in your savings by like two to three X, you never leave. Like your brain tells, like a rational human says, don't leave. Yeah. And again, where's this coming from?\n: We talk to these people and they're like, yeah, i hate my life but this is the setup like they explain this to us as like the reason they can't do the thing they want to do it's kind of sad to talk to someone who's like They lay all this stuff out for us and they're like and therefore, you know, I can never do a startup And they're like 25 and it's like and this is how the math works I can't I can't I don't I'm not free.\n: I can't do it in many ways this is a defensive tactic to warehouse talent and out of the fear that maybe someone else can use you in a way that can hurt the company. Whereas if they warehouse you on the Android setups team. Yeah, think about it.\n: It's like speculative science projects that get axed and that never ship. I saw that Facebook built some kind of silicon. They built a chip. And then they were like, no, nevermind. And they never shipped the thing that probably dozens of people spent years of their life on. I saw that PayPal had some kind of research lab. They just laid everyone off this week. Basically, if you're not on the core thing, You have no promises that your work will ever turn anything. And how bad does it feel to spend five or six years and just, oh yeah, we were in the moonshots group. They decided not to do our thing. They shut down our group.\n"} {"text": ": Now, here's another one that's a little controversial. how to play the credential game. This one's tricky because I'd like to say we live in a world where credentials don't matter, but we don't live in that world, right? So how would you tell a high schooler to think about this game?\n: There's the people that like love the system and embrace the system, like the teacher's pets. And then there's the people that see the system for what it is and they want to rage against the machine and destroy the system. And you know, I was a little bit more on that side. God, yes, the Stanford kid.\n: Yeah, exactly.\n: But the key thing is, I'm telling you, I'm talking a high school priest. I'm just trying to say, like, when you see this God in this, you see how the world works. Yes. You're like, man, this is like, not ideal. Yeah, I think there's one way to say yes.\n: I'm a little fucked up.\n: And to the extent you can learn to work to understand the rules of the game and play the game with credentials and realize that leveling up on the credential game will help you with your long-term goals. I think that's much better than like rejecting the system out of hand.\n: It's basically like either extreme is bad. Rejecting the... Fundamentally, you understand the system is somewhat arbitrary, right? If you're smart enough, you understand that, right? So with that understanding, you can reject the system. And then like, because you don't have the right credentials, it'll hold you back. You can somehow not understand the initial point, think the system is the filter for merit completely. and then get very disappointed later in life when you realize that all these credentials don't mean you're the smartest person in the room. Or you can try to get the system to work for you.\n: Yeah, that's a great way to put it. It's a centrist philosophy, which is you acknowledge some of the shit. But also, if you opt out of it completely, you're kind of just hosing yourself.\n"} {"text": ": One, this is the only thing that I would add to that is that you're the example. Like in so many things in startups, the punch in the face is the moment where you can still win points. how you react influences how your co-founders react, how your employees react, influences how they will react when bad things happen to them. And so like the victory you can rescue out of the jaws of defeat for any of these setbacks is reacting in the way that you'd want everyone else around you to act, react. And like in some fun ways, it's like if people see you taking punches, well, they'll learn how to take punches as well. And one day you're going to have a large organization and you're not going to be there to cover everyone. they will have learned from you. They'll learn the good from you or the bad from you. They will learn from you. And I think that's what's fun. You know, sometimes this kind of stuff happens at YC and it's, I actually like, I love it. Like I love when people are freaking out and I'm like, oh, it's going to be fine. Because it's like, it turns out freaking out doesn't help anyone. And it turns out if someone in the room is like, ah, it's going to be fine. Everyone pauses for moments like, well, fuck. Maybe it will be fine.\n: To be really tactical, what I tell people to do is you do an inventory. And you're like, OK, are we running out of money? Do we still have a product? Are we in legal trouble? Are we arrested? Where am I? Am I in jail? Could things have been worse? Is this recoverable? You just do an inventory where you check in, you reboot the whole machine, And you're like, well, how bad is this? Because sometimes it is really bad. I'm not gonna lie to you. Sometimes it's real bad. But a lot of the times, you do this inventory, and you're like, okay, well, we have three years of runway, and you know, we can do this, okay. Oh, this isn't bad.\n"} {"text": ": So let's get to the problem. There are a lot of founders out there that are building products that deliver no or minimum value to the user. Classic fear is always like, well, I need to grow, right? The most important thing is to grow in order to raise money. And so I'm going to build something that kind of sucks. because like, or screw that it sucks, right? Because most MVPs suck. I'm going to build something that doesn't solve anyone's problem and just try to get money for it so that I can go raise money. I think that's a good path.\n: Yeah, it's like, it's make something VCs want. It's the classic perverted thing that we are not fans of where you're like, well, superficially this resembles a software product that superficially people pay for. And therefore we should charge a similar amount of money for it. And like, Boom, boom. The specifics of what it does as details. You know, we've got our top folks on that.\n"} {"text": ": I think there's another one, which is this fear of being a consultant. I think one of the reasons why people build shitty products that don't solve people's problems is that when they start talking to a user and the user starts saying, well, here's my problem, I could really use this, this, and this. The founder starts thinking about that and thinking and fearing, what if this user is different from every other user? What if the problem they have is different? And so what if I have to build something to make them happy? I have to build something that no one else wants. I think this is a core fear that happens, because I think that every founder in the back of their head, thank you, Reid Hoffman, is thinking, when can I get to blitzscale? Like, when can I raise the big round and throw this everywhere and have everyone use my thing? And every founder knows in their heart that if they're not making a simple thing that everyone's gonna use, they can't blitzscale it. So I think this is the core fear. I'm fearing being a consultant. And it's tricky, because this isn't wrong. Yeah, there's a kernel. There is a good idea in there. There is an insight. There is an insight. But I might argue it's exactly wrong when you're early. Maybe we should talk about that. What's the difference between being early and maybe not even understanding the problem well, and being way later on when\n: being a consultant is maybe more of a risk. I think if you're not a deep expert on what the customer's problems are and how they make money and how they work. Most founders. You make assumptions about how their business should work, which could be mistaken. So again, when the founders of Google started Google, I would imagine they were not experts on performance marketing and how basically a lot of the early Google customers, as I recall, were mortgage refinance people, where they would buy people searching for mortgage refinancing, the advertisers would buy those clicks and they were worth a lot of money to them. And the founders of Google did not need to be experts on that. But as they got users and they build the business model, understanding what problems the customers had was super important. Right?\n"} {"text": ": All right, let's talk about fads. There have been a lot of fads.\n: Yeah, well I think it's easy, especially when you're young, to just get caught up in stuff, whatever the thing is. And some of the things were pretty cool. Again, I was really into the internet. Yep, yep, yep. When that was a new thing. I was really, really, really into it. And obviously that stuck around. Certainly there's a lot of young people that got super into crypto. There's young people that got really into stock trading recently with Wall Street Bets and Reddit. You'll see people get really into stuff.\n: Yeah.\n: It's actually great fun. In the Zuckerberg case, building Winamp plugins, that was part of the Napster thing, so they were really into that. But where could it go too far, Michael?\n"} {"text": ": And that inventory, I like to call that the worst case analysis. Like, I actually like to like, okay, this bad thing happens. What are the five things we're most afraid of now? And when we say them out loud, do they just sound less scary? Because they didn't happen? It's like, oh, all of our customers are going to leave. Have they left? Has anyone even emailed you saying they want to leave? No. Learn how to get better at this, because this is the game. Learn how to take a punch. Learn how to get good at doing hard things. That's the message, yeah. And it's weird because it's a superpower, right? Like in some weird way, the coolest thing about a startup is that like, if you, even if the company fails, you can get this superpower.\n: I mean, it's great. Like you, this is a great person to have in your family. This is a great person to have in your friend. Like someone that's a rock. Someone that will listen, like, oh, something's bad. Let me listen. Like, let me assess the situation. Tell me what's going on. Okay. So this, okay. All right, like, I could see why this is a setback, but, you know, seems like everything else is going okay. So, like, that's a valuable person to have around.\n"} {"text": ": When we deal with in the context of YC founders, the best people who don't get in realize this isn't a one-shot game. Yeah, they apply again, they make progress to their company. We send the reject email to every company and the best people will be like, you're making good points, we're gonna improve on those things and we'll apply again. And I think that they realize that that's a plus what, you've earned some respect in that moment. Like, put another way, there's an opportunity to get an advantage even when you feel like you just failed. Whereas almost the worst founders feel like, oh, now the game is off. If I curse, it won't be counted, because the time is over. Nothing's counted after the clock runs to zero. And it's like, the game's not off. What are you talking about?\n: And we see this all the time with series A's, where, man, I talk about this so much. No one puts out a press release when they fail to raise an A. So what's going on is most A's fail. but no one ever tells anyone, but everyone tells everybody when it succeeds. And so it creates this warped reality that everyone thinks everyone is raising A's and everyone has an easy time. Everyone but me is raising a series A. Everyone but me is having an easy time. What's wrong with me? And it's like, no, no, no, no, no, no. Like, I think it's just the virtue by which this information is shared. And so people have this warped view of reality that causes everyone to think that they are personally, you know, everything bad has happened to them and to no one else.\n"} {"text": ": So if you're getting, if you're technical and you feel like you're getting trapped here, Dalton, like how do you know it's time to get out? Like, how do you know, like, okay, like, or even if you see a friend in this situation, how do you know it's time to tell them like, hey, like, hey, think about breaking up.\n: I think for the people that I talk to, which again, it's, it's probably not a representative set of the average. It's probably the people that are more disgruntled, but, um, to the extent that you have conversations where it's like talking to someone that's like an alcoholic and it's like, I got to stop drinking. Like I can't do this anymore. Again, I'm not even trying to be funny, but it's like when someone's just like, I don't know why I'm doing this, but I'm still doing it and I can't stop. I hate my life. Like, like if that sounds like you or your friend talking about your job at Facebook, that's probably a good sign. You maybe shouldn't do it anymore. And And the actual tactical thing you could do is keep your personal burn low so that you can do it and not get hooked on the money with all this gamification we talked about. And realize you can always come back if you're a good programmer. If you're a good programmer and you leave and you leave in a nice way, no matter what happens to you, you can come back. There's actually not that much loss you have to take. And so versus the people that are like, no, this is cool. I like my life. Yeah, stay there, right? This message is not for you. But we all know these people that want to just like, tell you their darkest secret, which is they wake up every day and they, like, dream of quitting. Like, they have fantasies of quitting every day.\n: Those are people that probably should quit. And it's interesting, because we're probably talking to, like, 1% of the developers at faang companies. Like, 1%. For, like, 99% of developers at faang companies, irrelevant. This is not relevant. Yeah, this is not for you. We're not trying to argue with you, right?\n: We're just saying, Though, if you know someone that's deeply unhappy because of decisions they're making, they can just make different decisions.\n"} {"text": ": I think this brings up the next topic perfectly. So, like, all right, what happens when founders think like these and then encounter the real world?\n: Yep.\n: So you did your analysis, you've done your validation. There's a big market opportunity. It's on trend. VC's are going to like it. I'm all lined up, but now I got to get my first customer. Uh oh. What's the VC investor toolbox for getting customer one?\n: This is, it's very humbling. Again, if we were to, if we were to start a startup, we know, like, the first thing I would admit is that no matter what I know from investing in startups, that does not mean getting first customers is going to be easy for me or for Michael or for anyone. It is freaking hard. And this zero to one is always the trap. It's the bear trap that people run into that they're already focused on scaling the company and raising money, and they're kind of like glossing over or being hand wavy on how hard it is to get first customers. Like, yeah, we're gonna build our first version, we're gonna launch it, and then we're gonna be growing, and then, you know, and then they launch it and it doesn't go well. And people are just shocked.\n: It's funny, it's like they measured 60 times cut once. The cut didn't go well, and some people were like, oh, shit, do I measure 60 more?\n: This is one of the reasons we usually advise to launch quickly, is so you get this hard medicine quickly, that your first launch is probably not gonna work and no one's gonna want your thing. Right.\n"} {"text": ": You're walking a good path. You're walking a good path.\n: And if you don't, no sweat. Most folks that we fund, most folks that get into YC don't have a ton of expertise. That is totally fine. Totally fine. It just means you should admit that to yourself. Yes. And start really simple and learn on the fly. Learn within the idea space that you've chosen. Yes. And don't have a lot of prescriptive ideas on what mortgage underwriters want.\n: Yes.\n: Just sort of walk in with, oh, this is kind of what I'm thinking, but I'm open-minded.\n: I need to learn a lot. And maybe it's helpful to choose an area that you're excited to learn about. Yes. Because you have a lot of learning to do. Yep. So maybe it's helpful to not choose an area that you think, well, I hate this area, but I think it's going to raise money. It's like, not the best way. I think that if you can figure out how to leverage this advice, It's really interesting and I want to bring it back to the first point you made. It's really hard to give one size fits all advice. Like these two examples, you come with expertise, you don't.\n: And it's the same idea. I'm arguing this is precisely the same startup just with different people that are the founders.\n: I think this is what's fun about working at YC is how often when in office hours with a founder I'm like, oh, Actually, you should maybe do it differently than what you might hear in the video. That's the kind of cool thing about being able to work with people one-on-one. You can actually customize. Awesome. Thank you very much.\n: Sounds good. Thanks.\n"} {"text": ": So anyways, right, I think that we're trying, you know, I think that there's like... I'll say this, I'm a business guy, right? I think YC has a lot of messaging that's like, yeah, our business guy's important, da-da-da-da, like you don't need them. I agree, you don't need them. But I will say this, there are a lot of very successful non-technical people on our network that do amazing work. And I think one of the things that if you want to learn from them, we're trying to give you one of the most important patterns we see from those folks.\n: Yeah, they're great recruiters and they do this thought experiment of who's the best person in the world and they find a way to get that person to work with them. That's bending the universe to your will is what that is.\n: So you should hold yourself to their standard and maybe you'll get their success. All right, thanks Dalton.\n: Thanks.\n"} {"text": ": This is Dalton plus Michael. And today we're going to talk about why AI is going to create more successful founders in the world. It's interesting, as we've gotten older. Oh, sad. We kind of see a new set of tools come into the market and then an explosion in the number of founders who can now create value. And we've seen this before, right? Like what was the first time you saw this?\n: I certainly noticed when the internet was new, people that knew how to build websites were suddenly able to make lots of money from the skill. And it was like really basic stuff. High school kids were making tons of money. I remember people that could just figure out how to sell stuff on eBay, where you would go buy something cheap, but then list it on eBay and arbitrage. Basically, you would see people that kind of understood the new tooling that came out and would like do a hustle and make ungodly amounts of money. And it was just because they understood the new tools.\n"} {"text": ": The second thing is around meetings. And we talk about this a lot. You're going to have to have some meetings. I've seen a couple tricks, but they can all be reduced down to write shit down. The worst thing is when you have to have another meeting, because people didn't write the shit down from the first meeting. That is like when you know you punched yourself in the face. But like, I'm so shocked.\n: It's like, no, I'm smart. Again, let me push you on that, because you and I agree. But let's make this clearly honest. What are we saying? What we mean is, say you and I are in a meeting and we agree on something. If neither of us writes it down, it's like it never happened. It's like, we were like patting ourselves on the back. What a great meeting, right, Michael? No one writes it down. We're like, what are we talking about?\n"} {"text": ": Well, and this might be torturing the metaphor, but basically what we're saying is instead of moving towards what looks like the easy freshwater pond, but that's a trap, you move towards the mountains, the desert, right? The places that people don't want to go. But when people find gold, they usually don't find it in the middle of downtown Manhattan. They usually have to go far away. And so I think that those companies are really encouraging to work with in YC. Because you think to yourself, if you continue to walk that path away from the tar pit, even if you start with a tar pit idea, great. And honestly, we fund folks with tar pit ideas because we have a thought that maybe they'll pivot out, and many of them do, which is kind of cool to watch.\n: Do your research, know what the bar is, think about the supply and demand thing, and give yourself the best odds for success. This is how you create luck. And so one of the reasons we want to put this out there is we would love to see more founders kind of recognize this dynamic we're describing and make some moves on the supply and demand side, because I think that'll meaningfully increase your odds of success. So just think on that.\n: And take it from us, because we can't tell you what the play to win is, but we think it's our responsibility to tell you the plays that we see losing all the time. And if you can avoid the most common patterns of death, you can perhaps chart a unique path to success. And if any advisor tells you they can do more for you than that, be wary. All right, Dalton, great chat.\n: Thanks.\n"} {"text": ": In this way, there's a bit of advantage to being young, right?\n: Yeah. Like, you and I experienced this ourselves as founders where we were young when we first started. And this is the beauty of not knowing anything. The beauty of not knowing anything is that you think everything is easy. And none of the innumerable reasons why something might be hard or your startup might fail even occurs to you. You're like, oh, yeah, I'm 22. Like, everything's easy. I can figure this out, right?\n: Yeah.\n: And so, again, this is like the midwit meme, right? Where if you don't know anything, your approach looks a lot like the approach of people that are really good founders. And the worst place to be is that you know just enough to know why the things you're trying are hard. And the odds are stacked against you, and that freaks you out. And so you think about it a lot, right?\n"} {"text": ": So let's start with some stats. Right? So, A16Z, Andrew Zinowitz, pretty famous, impressive investor. So, they've done 234 investments into YC companies. Sequoia, another impressive investor, 139 investments into YC companies. Founders Fund, a very controversial, counterintuitive investor, has done 104 investments in YC companies. And I could keep going.\n: Yeah, and so if you look at the YC top companies list, anyone can look at this, this is on the internet, and you actually look at who invested in them. It's all the big investors. It's all the big investors. And so by definition, these investors are voting with their pocketbook to invest lots of money across the board into the YC portfolio because they like money and they're smart.\n"} {"text": ": Okay, next. This is a classic one, especially because you have to deal with so many admissions questions. Applying to YC Dalton. What is. What is the. What is the Jedi founder move to apply to YC versus the midwit founder?\n: Yeah, the. The extremes of this and the midwit meme are. I filled out my application and submitted it. Like. Like, I applied, and the midwit founder is like, gee, I don't know if now is the right time to apply. I don't know if we're ready. Oh, I'm gonna. I'm gonna write a draft of my application and send it to 15 people, and I'm gonna get feedback on my application, and I'm going to, like, you know, oh, I need an introduction to alumni, and I need to talk to alumni, and I need.\n: I need recommendations. Yeah. Recommendations from strangers that don't know me.\n: I'm gonna do a lot of research. Like, you see, you talk to people that, like, put months of effort into their application to YC strategy.\n: Yes.\n: Not correlated with success. And then you talk to people, and they're like, oh, yeah. I just, like, filled it out in 30 minutes and submitted.\n: Yeah. And I spent all that other time working on my company.\n: Let me be clear. We're not saying do a bad job on your application. We're just saying trying to tweak out on this is, like, something that you can spend tons and tons and tons of time on. I'm not sure that's a great allocation of resources.\n"} {"text": ": Yes.\n: And if someone is literally offering to invest, you should take them a lot more seriously. If someone says, I want to invest this amount of money, and you should not even apply to YC and take the money and all that, maybe you want to. That's not crazy.\n: It's not the worst offer.\n: Yeah, that is reasonable. But the weirdest formative advice is someone that is aggressively not investing and coming up with excuses about why you're not ready, or you need to talk to some other people or come back in six months and they're actually giving you advice to not raise money from another investor, including such as YC, because reasons.\n: So, no, I think to wrap this up, I think that I love about what you said is that if you were to look at the best YC companies, all the best VC firms, and all of the best seed funds have invested in them. Yep. And so maybe you should spend a little bit more time looking at what people do rather than what they say or they meme or they tweet.\n: Yep.\n: All right. Great chatting.\n: Thanks.\n"} {"text": ": I think notebooks are great for ideas. I think, like, a well-managed to-do list is a software product that you need to adopt. And there's, like, 80 of them. I actually don't even care which one you adopt. But it's like, when I, like, tell something to founders, and then they write it down in a notebook, I'm like, that's gone forever.\n: But they look cool. They have, like, a fountain pen, and they're, like, taking beautiful notes, Michael.\n: We all know that everything important's in the Moleskine notebook. This is Michael Seibel with Dalton Caldwell. Today we're going to talk about how future billionaires get shit done. So Dalton, you were inspired by a PG boast when thinking of this idea, right?\n: Yeah, Paul Graham wrote this really famous blog post, I believe called Maker Schedule, Manager Schedule, where he said something that all of us have thought before, but he put it very succinctly and in great words. And so if you haven't read it before, anyone out there on the internet, you should read it. Just Google Maker Schedule, Manager Schedule, we can put a link in. And he introduces the idea of the difference between how makers, i.e. programmers in his case, organize their time to be productive, versus folks that are managers, all right? And so it's great terminology. It's good stuff.\n"} {"text": ": What else falls in this category?\n: Too much optimism around thinking that because you raise some amount of money, whatever that is, is going to save you from things not working or that your investors are magical and will save you. Like somehow they have magical powers. And so because I, you know, because we raised from XYZ, And again, in this market, this is more, maybe people will believe us more. No one believed this a year ago. No one did. But just because you raise a bunch of money from important, famous people does not mean all problems no longer exist. And so you see people being too optimistic where they just turned off their brain once they raised money that they would ever, they were just like, Hey, I'm on easy street, man. Like we got it. We nailed it. Like we did it.\n"} {"text": ": I think that more business people need to embrace the idea that great software companies are built by great software engineers. A common retort out here is like, Dalton, we're not building a software business. Software is in there, but it's not that important. It's a tech-enabled. Yeah. We're just building a simple marketplace, right? Like, we can just use da-da-da-da marketplace software. It's just a copy of DoorDash with a little twist. Why do we need a great software engineer? What's your response?\n: you know, it's hard to win that debate in theory. Like it's hard to convince someone just in the debate. They'll be like, well, we're just going to agree to disagree. But I think if you just look at the facts of the companies we funded, like literally DoorDash or literally Airbnb or any of these folks, they lived and died by their speed of shipping software. And if what they did was buy white label software or have some dev shop in a foreign country making edits to the website, there's a 0% chance those companies would have worked. And so again, who am I to say there won't be some future company that maybe uses one of these things? But the more that we're exposed to seeing what these companies look like at the earliest stages, even if they don't look like strictly tech businesses, man, there's no way these things would have gotten off the ground without having a really great person who cared as much as a co-founder cares. Building this thing day in and day out versus someone ripping you off, charging you $500 an hour to change some words on the website.\n: And you don't even know. You're not even like ball game. Like it's not even. Well, what pisses me off is that like, I think in other areas, that are equally as hard as being a successful tech founder, let's say athletics, I think more people are realistic about it, strangely. Like, the equivalent is, you know, a five-foot-four person who doesn't jump, run. I can't shoot, I can't run, but I got a lot of heart mangles. Yeah, there are not that many of those people who are saying to the world, I want to be in the NBA, right? Whereas we see the equivalent of that in startups all the time. And it's one thing if you're 6'6 and you're a great high school basketball player, you probably won't make the NBA, but all right, at least you're in the stadium. You're amongst the million people who could. And I think that people are not honest with themselves. And I think what we're trying to do is give you this secret, which is that you can almost get a ticket to being in the game, and it requires recruiting one person. How cool is that? This shouldn't be seen as a negative, it should be seen as an extreme positive. It's like a golden, what is it, Willy Wonka ticket.\n: And even if you are technical yourself, or sometimes people are medium technical, so I was a technical CEO, but I still tremendously benefited by having an additional technical co-founder. And so this is also a thing where you're not like, okay, well, I can kind of, that doesn't count. There's actually tremendous benefits from having someone, again, who cares as much as a founder, who's committed as much as a founder, and who's at the top of the game, like a 10X engineer on a founder level, you're unstoppable.\n: And what's weird is sometimes we had competitors in my startups whose teams were constructed this way, horrible tech talent. It was funny in hindsight because we never had to be worried. They could raise more money. They could have nicer office. They could have more employees. They could have cooler people using their apartment. It did it. matter. Like having better engineering is the gift that gives you more shots every day.\n: Even if you need to pivot, no matter what happens, good or bad, you're in a better position to react to these changes.\n: And I think the even scarier thing about this is that when you start with a team of business people assessing engineers, and they are naturally going to start by hiring worse engineers, all of your future engineers are hired by those people. It's compound negative effects. Yes. Exactly. It compounds. It's so bad.\n: It's so bad.\n"} {"text": ": I often find myself saying in this situation, make something that would impress you. Make something that you would be proud of. And then you can sell that to other people like you. And so I think that's kind of a really cool superpower when you can be like, oh, yeah, I can tell whether this is good because it's solving a problem I have or a problem I've solved before. Yeah, I can tell whether this is good.\n: If you wanted to build a new compiler, if you wanted to build something that's really arcane but that you know a lot about and you have a lot of taste, you get a lot of opinions about, a lot of expertise on, often you should listen to that expertise.\n"} {"text": ": So why do founders do this? What's going on in a founder's head that gets them to think, this is how I should assess an opportunity, this is how I should figure out whether I work on this idea or not, is using these tools what's changed? Why is this far more common now?\n: Well, something I noticed when we were founders is there wasn't access into the mind of investors very much.\n: No. A lot of their appeal was how elusive they were behind closed doors. You had to be special to even get access to them.\n: And so a funny thing that has happened is there's now so much content marketing from investors. Again, not necessarily bad. And again, we are acknowledging this is a form of marketing course, of course. But you now hear a lot more about market analysis and market opportunities. In addition, there's all of these things for college students and post college of programs\n: startup classes\n: Startup classes. And they tend to be taught by non founders, they tend to be taught by investors. And a lot of what you learn is about how to pitch, how to do market analysis, how to identify ideas via market trends\n: What's a good idea?\n: Right. And so if you go to classes at your university or, you know, wherever you're encountering this stuff, if the folks, you should ask yourself if the folks teaching this have not had much actual startup experience where they were the founder who had to do the zero to one. Yeah, you might, you know, most likely this is coming, this is a VC mentality. Bit of advice, right.\n"} {"text": ": Right? And I think that story isn't told, right? I think the story is always this kind of depressing story of like, oh, maybe you won't need it. You won't be needed anymore as opposed to here's a set of tools you could do things that people couldn't think of doing affordably before. Like you could be your own boss. You don't even need to be inside of a company to create value.\n: Yeah.\n: So anyways, hopefully that's inspiring. Good chat.\n: Thanks.\n"} {"text": ": So I think there's two challenges here. I think the first challenge is people often don't understand how high the bar is. the consumer products that they use, they don't realize how actually good they are and how many others existed and failed. So that's the first thing. And then the second thing, and we should get into this a little bit more, is that I think that timing tends to be very important in consumer. So I think sometimes people don't realize when timing is helping them in a consumer business and when timing is actually harming them and existing incumbents can be have an almost unfair advantage.\n: Yeah, I think from our perspective, or from my perspective reading applications, let's start with this calibration of what good looks like. Because again, imagine the person applying with an idea for a consumer social network, it's unlaunched. They found, you know, they believe what they're doing is like brand new and they don't really know what the bar is.\n"} {"text": ": So here's the first one we hear a lot. Before I start a company, I want to get experience working on the hardest technical problems at the largest scale. And Faang is the only place in the world to do this. What do you think, Dalton?\n: That is, that's just quoting the recruiter. You're like, you're like reading the, you're reading what the recruiter's line is. I mean, look, most people that get most jobs at Faangs, when you talk to them after they have the job, if they're, you know, get a couple of beers in them, They're working on some bullshit ad server. They're working on one pixel on one corner of one thing. They're working on some project that's going to get killed. Again, if you're someone that's a good enough programmer to get hired to work on some deep technical infrastructure at Google, then this line is true. But most folks that I talk to, at least, kind of have what is like a shitty job, but that's been presented and branded to them is a very cool thing. And again, this is marketing, like they want you to take the job, they want you to keep the job, and someone's got to do all the crappy ad server work, right? Someone's got to. And so if you actually look at the numbers, way more folks that you meet that work at a faang job have the equivalent of some shitty ad server buttons or translating it to foreign languages or something, just like the worst job. Then the people that are working on the core search infrastructure at Google, which again, that actually sounds really cool. And that is working on hard technical problems at the largest scale. So I think you just want to be honest about what the job actually is and not just\n: Quote the recruiter. And let's be clear, the way that you actually learn what the job is, is you talk to someone doing it, you don't talk to the recruiter. I think maybe people don't quite understand how the entire job of the recruiter and the number one way they get paid, promoted, everything is convincing you to sign up. Yeah, they get comped per person.\n: It's like a car salesman. They don't make money if they don't sell a car. If you don't sign on the dotted line, they're not getting paid.\n"} {"text": ": Well, the movie analogy is so perfect because when you think about the launches that most people experience, I think one of the most famous types of launch that you would see in the world is a movie launch, right? It's a movie premiere. That gives you the exact opposite of impression of how a startup is, right? It's like whole bunch of press, whole bunch of hoopla, a whole bunch of people watching that movie quickly and then it fading to nothing over the course of like a month or two. Whereas a startup is the exact opposite of that. It's like a whole bunch of nobody gives a shit for a really long time. And then some point 10 years from now, everyone really cares. but I don't know that people experience those.\n: Can you imagine actual time lapse of the Facebook story? Like if there was a camera mounted on Mark Zuckerberg's head for like the first 10 years, what that would actually be versus what people think it was from watching the freaking movie. Like, again, like it was a lot of someone sitting at a keyboard writing code and like staring at graphs a lot. And it wasn't that interesting. Like it was not entertaining.\n: Not entertaining. Well, and especially in the early days where it was exciting to move to another school, like getting another population of 5000 users was like, Excite was a big moment inside of the company.\n: Yeah. Well, and again, if the actual movie would be them sitting at their desk in the house, being like typing some stuff into a terminal, being like, okay, we just launched a new school and they're like, yeah, you know what I'm saying? Like there's no music, there's no backing track. They're just kind of sitting there staring at a screen and being like, okay,\n: Oh, wait, something just broke. Fuck.\n: Oh, hold on. Sight's down. OK. Sight's down.\n: All right.\n: All right. Well, it looks good. Sight's back up. All right, cool. I'll be back. And so I think movies hurt us here. I guess they're good because they inspire us. But I think movies mess people up a lot of what they think normal is.\n"} {"text": ": So let's start with some of the assumptions that we hear from these potential slash future founders about why working at Faang right out of college or soon thereafter makes sense, why it's, And it's never presented us to us as like, it's a pretty good opportunity. It's always presented to me at least as like, oh, of course it's essential. It's an essential part of this.\n: Yeah, they state a fact. They're stating facts.\n"} {"text": ": There was no growth hacking.\n: There was no growth hacking. They just had a website. And they got millions and millions and millions of people to go out of their way every day to open a web browser and go there. And they have tens if not hundreds of millions of daily active users now. They make something like half a billion dollars a day on the ads on their website. And again, like if you think about them when they were started, let's zoom into that, they spent no money on user acquisition, they did no branding, they did no marketing, they just built a really good product that people really wanted.\n: Not only did the people want it, like the people evangelized it. Like my roommate in college saw me not using Google and like scolded me and said, you're using a bad search engine, you gotta use Google. Like that's way past like liking something, right? It was obviously bad.\n: And famously, The product was so good, the founders didn't really wanna run a startup. They tried to sell the technology. They tried to get Yahoo to buy it. The founders were disinterested in running a startup, but people wanted their products so badly that they got pulled into it. Isn't that weird? And again, this is the sign. This is the bar for a lot of these consumer ideas, is you make something that people are so obsessed with and is so high quality, You don't have a choice, basically. You as a founder get pulled this direction that you weren't even sure you wanted to take. That's a sign of a pretty good consumer idea. That's a pretty good bar if we look at Google in historical context.\n"} {"text": ": You had some thoughts on when a launch goes bad.\n: Yeah, I mean, I think a lot of folks think that launches will be like the movie. Again, I think we can't help but be influenced by television and movie and books. Actual an actual realistic movie that showed a startup Would just be like people sitting at their keyboard typing all day and not talking probably would be with like lots of that Punctuated by pretty boring conversations, but that's not that's not good in a movie And so so anyway, I think this translates to how people thinks a launch will go where they think they're gonna launch and everyone's gonna care and like things will happen to them and like you know like they have a movie in their head of all these like amazing things happening and all these users signing up and the reason it's really good to launch fast is to get that shit out of your head as fast as you can and realize you put it out and no one cares whatever you thought like you this movie that you had is not realistic and what actually happens is like no one cares and sometimes they care a little and sometimes they care but in a bad way, and they're like, you're bad, and this idea is bad. And you're like, but I launched, and everyone's like, this is bad, and you should feel bad.\n: And you're like, this isn't the movie. I was promised a movie here. I love that, because it's like two levels worse than you can imagine. Bad is no one cares. Worse is everyone hates you.\n: People on Hacker News are like, you should be ashamed of yourself. and you're bad and all of your ideas are bad and...\n: I could have built this in three days.\n: Startups are dumb and you're wasting your time. It's not great. And so again, the good thing about launching is you flush this out of your system. You're like, yeah, okay, cool. This isn't like the movie. This is real life. And here in real life, you put out a launch and most people don't care most of the time. And you just have to keep launching over and over and over again. And that's the work. Right?\n"} {"text": ": Whole new industry, basically. No, I think that what's cool is that We're also talking about every scale, right? We're talking about things that can be venture backed, maybe billion dollar companies one day. But we're also talking about things that can just set you up so that you can pay your rent and live a good life. The opportunities are across the entire spectrum. And I think that's what's really cool about new technology. When there's a real technology shift, it affects businesses across the board. We're not just talking about Companies, why is it even fun? I think that the last point I'd want to make on this front is that you don't get this opportunity if you're just thinking, you got to actually do.\n: Well, and they won't teach you this in schools. Schools teach you stuff for 10 or 20 years ago. So the other thing that I've noticed in these trends is that when you are part of the history being made and you're this early on the cutting edge of a new tech coming out, You can't expect your university, or your teachers, or people in your community, or your peers to teach you about it. It's only basically weirdos on the internet. The only way to find these opportunities, learn about them, is to find weirdos on the internet that are also into this thing. And they're figuring it out too, and you can kind of compare notes. And this is how new industries are created. Literally.\n: By weirdos on the internet, like literally. Yeah, literally.\n: There's like some subreddit with a bunch of weirdos. And like, some day from now, you know, 10 years from now, there'll be an entire industry of people that learned about this thing in some subreddit somewhere.\n"} {"text": ": All right. So let's say you're in that first category. Let's say that you have expertise. You're solving your own problem. You've done something that's created value, either for a lot of people or maybe even just a few. How should you think about the challenge of bringing a product to market slightly differently?\n: Yeah, I think we would argue that if you were inside of a company, you built a tool, everyone at the company uses the tool, it's still being used even though you don't work there anymore, you probably know more than you think. And that it's probably okay to trust your gut more than you think that you do understand a problem or that you have a unique insight. You've developed some taste. Yeah, and to the extent in other aspects of your life, say you built consumer products, say you built an iPhone app that was pretty popular, and you've gone through that whole thing, and you have an idea for a new iPhone app, well, I think you might, you understand what it takes to build and launch one of these things, and so you might have, it might be a better idea to follow those instincts a little bit more than thinking you have no, having no confidence in your instincts at all. And so the more, you've developed this expertise, the more you can self discern that other people validate that things you've done in the past are good. It's not just in your own mind you're an expert.\n"} {"text": ": Well, and I would argue it is so distinguishing that you're given amazing opportunities. But what's tricky is not only do people not see this or do people try and not get a technical founder.\n: Or they just dismiss it out of hand. It's too hard. They'll just kind of shut this line of thinking down.\n: That's what's even more common. It's just they're like, well, I can't find this person, so I'm just going to move along. I don't know anyone.\n: Yeah, I don't know anyone. OK.\n: And this is the crazy thing, because a lot of people will pitch this to me. It's like, but this is the true spirit of an entrepreneurialism. No barrier can prevent me from getting my product to market. I couldn't find a technical founder, so I just moved to the next challenge. I hired some engineers, or I got a dev shop. And nothing will keep me. will hold me back. And what's so sad about that way of thinking about it is that like, one, the percentage chances of death just went through the roof, right? Like you've just completely reduced your chances of success. But two, I bet if you would put the same amount of effort you put into getting a product to market without a great technical founder into finding a great technical founder, at least half the people would be able to do it.\n: Yeah.\n: And so it's just like, it's a shame because it's so much wasted talent.\n: Yeah. I like to think about it this way. Again, what we're talking about implicitly, let's make it explicit. We're talking about a company that uses software as a deep part of it. So if we're talking about a software startup, and you somehow don't have a technical co-founder, this would be like, I'm going to build a rocket to the moon, but no one here knows anything about physics. I have such a big heart, we can just be like, I have such hustle. I'm Johnny Hustle. I'm going to the moon, Michael. Like, do you see how absurd that is? And the asterisk is, okay, if you want to start a new clothing brand or a liquor brand, okay, you don't need a tech co-founder.\n: This doesn't apply to you.\n: But if you're saying, yeah, I'm going to build a software company and you don't have a software co-founder, you're not even in the ballgame.\n: You're not even in the stadium. One, what's so sad for me is when I say that to people, sometimes they think I'm trying to discourage them.\n: But if you go back to that, they're like, I'm going to prove you wrong, Michael.\n"} {"text": ": So everyone listening has got to ask, well, aren't we VC's? Right? Like, isn't this how a YC partner would think when reading applications, collecting interviews?\n: I think that's an excellent point. Here's the facts. When we are reading applications and doing interviews, we are investing very, very, very early. And we have been trained on what matters and what doesn't matter. And so let's be real. What matters is, does your idea make any sense?\n: Yeah, any sense.\n: Do you know anything about it?\n: Yes.\n: Do you have the tech skills to build the thing or anything? Anything, basically. And can you get any customers? Yes, it's almost, it's so basic, it shocks people. What we are looking for is very basic stuff.\n: Well, and I think what's interesting is that when we try to be smarter, we make mistakes. Correct. When we try to be smart about markets or when we try to be smart about comps, we make mistakes because one, we haven't studied those markets closely, and two, because startups change, they pivot, they find new opportunities, technology changes, time changes.\n: Well, think about it. When we make an investment, often it does not become a big company for at least ten years. And so if you're trying to do market analysis and market trends for an investment that won't become big for a decade later, it's kind of flawed analysis versus if you're doing analysis of new ipos coming, you're much closer to that coming to market. And so I'm just arguing this is completely valid analysis, but that is not useful when applied to a startup with no customers, with no product, that's not even sure what they should be working on. These frameworks are not necessarily helpful.\n"} {"text": ": I love optimism also comes in the form of hiring. We have this really big, hairy, kind of awkward problem we don't understand well, but if we just hire a marketing person, a salesperson, a this person, they will come in and solve the biggest problem inside of the company, especially pre-product market fit. Like they will figure out what the product should do or how people should find out about it. And what's weird is that like, it's not like, oh, they'll help you or together you'll figure it out even. It's that no, they'll do it. That's why you hire people. That's the way too optimistic. And it's too optimistic on multiple fronts. One, the idea that your employees just hand you that. And two, the idea that even if there existed people out there who could, you could hire them in your pre-MVP startup or pre-product-market-fit startup. Why would the number one marketing person in the world work for you? At this stage, they probably would. And the last one that I come up with on the too optimistic front that I see a lot is this is obviously going to work because it's the cool thing. because it's the trending thing, because the thing investors are talking about on Twitter, I should obviously work in this category because it's the hot category. And probably one classic example, how many remote startups and video conferencing startups did we see the second that COVID hit? And the thing that was so sad was having to explain to people Zoom was working for years before this moment, so they could take advantage of this moment. They have years head start, technology start, all these advantages. Not that they expected COVID would come, but they were in a prime position for it. You starting from scratch after COVID comes, you're optimizing for something that probably happens post COVID, not something that's going to happen in the next three to six, nine, 12 months. And I think that oftentimes founders, you know, there are a lot of fads that way where a founder basically or people get in at the end and think that there's a lot to get when like the reality is that You wanna get in before everyone thinks it's cool, not at the peak of everyone thinking it's cool. The peak of everyone thinking it's cool is usually right before everything goes to shit.\n: We sure see this a lot at YC, where you can tell when something has jumped the shark, when it is one of the more common ideas people apply with. Like, remember chatbots? Everyone was building a chatbot for a couple of years there. And that's when you knew it was over, basically.\n"} {"text": ": Yes.\n: That's what the midwit meme is. And a beginner's mind is like, I guess I'm gonna build a product and I'm gonna give it to people. I guess I'm gonna deliver burritos, you know? Yeah, that's a beginner's mind approach.\n: Yeah, that's the game. And so you might find yourself, after watching this video, asking yourself, what do I need to unlearn?\n: Yeah, how can I have a beginner's mind? Because, again, this is the beauty of the midwit meme, is the genius and the idiot come to the same conclusion. So what is the idiot approach? Like? That's actually how you can divine the genius approach is you're like, what would an idiot do?\n: Everyone can reach for the idiot approach. Everyone has the intellectual capacity to reach for the idiot approach.\n: If I didn't know anything.\n: So with all that being said, have fun and don't overthink it too much. Don't overthink it too much and make sure that you have a little bit of something in your head that's asking yourself, is this the thing that's really important? If not, I can move on. If not, I can move on. All right. Thanks so much, Dalton.\n: Thanks.\n"} {"text": ": All right, next. And here's kind of a classic one. Is product market fit. Dalton, do I have product market fit and how. What's the midwit approach to product?\n: Yeah, the midwit approach for this one is to be not sure if you have it and create 15 different metrics and, like, a complicated series of thoughts that maybe you have it or you have early product market fit versus the extremes on this meme. Early project silence got early.\n: Yeah.\n: The extremes of this are like, am I overwhelmed with demand? Like, you know it when you see it. Like, you don't have to think very hard when you have it. It sort of, like, hits you over the head when you have product market fit.\n: Dalton? I think the extremes in the meme is like, did I sleep last night? It's like, I didn't sleep last night.\n: Do I have time to wonder if I have product market fit?\n: That's.\n: Yes, if you have time to wonder about it. If you're like, gee, do I have product market fit? Let me. Let's pontificate on this. That probably means you don't.\n"} {"text": ": One of the questions that I love getting from a founder is, before we launch your mvp, how do we know we're going to be able to survive the onslaught of traffic and users that will come on our launch day? What's midwit? What's the midwit play? What's the midwit meme for your mvp?\n: I mean, yeah, the. The two extremes, the midwit meme, are launch something fast, build something fast, and put it out. And the midwit one is like, well, I don't want to get a bad reputation that my thing was buggy, and we only have one shot to launch. And, you know, like, you.\n: What about the press? We got to do a press launch. It doesn't have to be an event.\n: Yeah, I don't want people to see my idea and copy it. So it's got to be perfect.\n: Yes.\n: That's why.\n: And then do we. Do we do, like, a Techcrunch post, or is it better to try to get the New York Times? Or, like, what about hacker news? Yeah, we need to get all three. So how do we coordinate them together?\n: We want it. We want to be featured in the New York Times, and so how do we optimize for that? Or, oh, what should we name the company? How about, I don't.\n: Yes. We have to rebrand because there's a name that's kind of similar to ours. We don't want people to be confused. How about co founders? I hear this a lot. Like, I am a business person and I'm good at sales. I need to find a marketing co founder and an engineer, like a CTO who's already managed 50 people, because we're going to grow fast. How does co founders.\n: It's like, yeah, Dalton, I'm open to the idea of a co founder. I just haven't found the right person. And what I really am looking for is someone with at least five to seven years of experience at Google who made it to at least a level seven. And so, you know, I haven't found the right person yet, but we're looking for it.\n: Yes. When we find them. I'm totally open to bring out a co founder when I find that one.\n: But first, we're going to raise money, and then I think that'll attract a better co founder.\n: Yeah. Yeah.\n: So, again, the point we're kind of making is not that any one of these ideas is the one people say. It's that it's thinking in circles and having a thousand different reasons that it's that the person that should be your co founder is no one that you currently know.\n: Yes. Yes. And let's talk about the other sides of the equation. Right? On the dumb side, the founder's like, it's fun to work with my friends, so I'm just gonna start on the smart side.\n: Justin Kahn likes to put a camera on his head, you know? Let's go, let's go. This is our guy.\n: Like, we were drinking buddies.\n: Why did they pick you? Is your. Is their co founder? Wasn't it?\n: Like, well, because I helped them find an apartment and open.\n: There you go. This guy helped us find an apartment. All right. He's the co founder of twitch. Done.\n"} {"text": ": So if we think about this conflict, right, why do they love YC? Because we can kind of package companies for them in a much better way. And because YC companies tend to be further along than the average company walks in the door, and more technical than the average company walks in the door. Why is that love secret? Because all things Amiko, of course they'd rather be the first check. Yep. And they know if a company does YC, they won't be the first check. So it's kind of a really tricky game. What about seed funds? How does seed funds kind of play in this dynamic?\n: Yeah, I mean, again, they want to be first checks. They have various ways where they want to meet with as many companies as possible. Maybe some of them have a thesis, but essentially they want to buy ten to 20% of a lot of the companies, which is completely not compatible with a company doing YC. And so it's much more of a zero sum situation where any kind of content marketing or viral memes you could put out about YC are essential if you're doing a seed fund, because your job is to be, is to get a big ownership in the company and then try to get the VC's to fund them the next round.\n: Yeah, I would say that seed funds are also more limited than traditional VC funds because if a VC fund misses your a, they can still do your b or your c, whereas your seed fund kind of knows their primary opportunity to invest in you is at the first round or.\n: Yeah, they can't catch you in the next round.\n: And they also know that from that round forward they're probably diluted. And that's why they try to get as big of a chunk at as low as a price. I think seed funds, we could have given numbers for seed funds. They write thousands, tens of thousands of checks in YC companies. But the reality is that when they write those checks in YC companies, they're at higher prices. You can't blame seed funds for saying we don't want you to do YC. When, if they find you outside of YC, they pay five to $10 million price free evaluation, and when they find you after demo day, they pay a $15 to $25 million price. You can't blame them. But I think as a founder, you need to understand these dynamics. Right? Like the people who are marketing to you are running their businesses, and those businesses have dynamics. You understand those dynamics. We're running a business too.\n: Right.\n"} {"text": ": So let's start with the maker mode. You were a developer in your startup. I was a business guy in my startup. I think, in many ways, this stuff came a little bit more natively to you. And I had to learn this stuff by basically destroying the productivity of my co-founders. So how did you think about maker's mode as a founder?\n: Most companies are set up around a manager schedule where you have a day packed with meeting after meeting. And so if you're a programmer at a big company, you would have to you'd have like an hour to program here, an hour to program there, and this is bad. This was not conducive to building things. And so to just walk through my perspective as someone that was programming back in the day when I was a startup founder, when you're programming, the more of the program you can keep in your head at any one time, the easier it is for you to know what's going on and have the context up here to make changes and fix bugs. And it takes like an hour or two, cold, of looking at a program and figuring stuff out for it to get loaded into RAM, so to speak. And so if you're interrupted, Like if you have to program in hour increments, man are you gonna suck. Like you constantly have to restart your state every time you program. And so a great maker's schedule is something like an eight hour uninterrupted block of time. And his argument, I think he was also talking about this from the perspective of an artist or a musician. Like if you wanted to record an album or write music or if you wanted to write a book, same deal. If you had to write a book in 20 minute increments, I think a lot of writers wouldn't love that.\n"} {"text": ": Well, and this touches on the next subject, which is co-founders. Because, you know, this is something that I definitely experienced, you know, my co-founders are reading TechCrunch, watching idiots raise tens of millions of dollars every day, and then looking at me as the fundraiser being like, hey, Mike, what's going on? Like, there's a couple of idiots with no products just raised 10 million from, you know, dot, dot, famous fund. Why is our series A taking this long? And man, co-founder fights suck. You know, co-founder disputes, they are the, in some ways I think it rocks you to your core more than investor issues because that's your home. When your home feels broken, it feels bad. At YC, we encourage people to do startups with their friends. And I think that a lot of people think about that and they say, well, that seems so risky. If my startup doesn't work, won't my friendship break? And we always talk about the other side of that, which is like, if you don't have a strong relationship with this person, when things go bad, it's guaranteed to break. At least if you have a friendship, there's a fighting chance.\n: Every co-founder relationship is always tested, right? And so you wanna have enough connective tissue that you can survive the inevitable friction. And to think that there will never be friction, that's not, again, not realistic. And so you actually wanna have enough of a relationship so when the inevitable friction happens, there's still a relationship and it's not just like, boom.\n"} {"text": ": So I think that is the first thing is this bar. Let's talk about timing a little bit here. Cause I think that you and I were fortunate enough to do startups during kind of two big, let's say, kind of explosions of consumer products, right? Web 3. I'm sorry, Web 2. That was a Freudian slip. Web 2 and mobile. And so, Why was it easier to make a consumer company in 2005, 2006, 2007, or a mobile company in 2010, 2011, 12, 13, 14? What was happening?\n: In the 2000s, a lot of people had gotten broadband and they had gotten computers and they were bored. If back in that era, you just launched something cool, people were bored and you were basically competing with television or something. And so again, when you think about when Facebook came out, they weren't competing with attention from a bunch of other social networks. They were competing with nothing. And so these college kids on the campuses back then, it was like crack how addicted people got to this thing. And they would have people using them multiple hours a day, looking at everyone's photos, leaving comments, poking and liking. It was like so addictive because there was nothing remotely competing with those hours for the day.\n"} {"text": ": And so the counterintuitive advice we're giving is basically, forget your fear about it being consultant early. Dig in with some customers. Actually solve their problem. And in the process, maybe you're building some stuff that's one-off, but you're going to learn a ton about the actual problem. And then you'll have some insights on, okay, what's more generalizable? What can I do that I can give to everyone?\n: And ideally understand the levers in their business. that derives economic value. Like basically like don't make assumptions that you think you know how they make money or should make money. Yes. Kind of test those assumptions. And once you have a better mental model that it's much, it's much more clear how you drive economic value.\n"} {"text": ": Let's put this in historical context though, because this giving before you receive is not new.\n: Yeah, this is a whole broad topic, but just quick crash course. The history of computers involves giving away a lot of value for free. Specifically, the original business models of computer companies were to sell hardware, and software was like a thing you had to give the customer to run the hardware to get value from it. And so historically, software was just free and not really proprietary. And this is beyond the scope of this talk here, but if you research the history of Microsoft, people in the audience, Bill Gates kind of pioneered the guilt trip to get people to pay for things. I don't know, go read his letter. I'm not going to do it justice. But the idea of proprietary software and charging for it was like, It came out in the 80s. It was an innovation in the 1980s, maybe the late 70s. And before that, there was the free software movement, which equated software and code to freedom. Many of the tools that power everything to this day were created by hippies, created by people with big ideals, created by people that wanted to give more value than they receive. So if you look at the history of GCC, of all the compilers, if you look at Linux, the Linux kernel, if anyone runs an Android phone, That's all free software. There'd be no Google, there'd be no YouTube without Linux powering all this stuff. The same would get like every web browser, Gecko, KHTML, you can research these things. Also, SQlite is this free database that's in everything. Like I'll bet to just watch this video stream, SQlite is involved like 50 different ways. How many free products do you actually need? And so, This is part of the history of software and computing and technology is to give out all this value and realize the value that it's created can create enough economic value for the creators, for the people that make this stuff, and also just unlock more value in the world than what they charge. And this is why the graph of how technological progress is accelerating so fast is this factor of giving more than you receive.\n: And if you take some of their inspiration when you're building your products, maybe you can have some wild success.\n: I think that's the game. If you leave a lot of the value on the table for your customers, instead of trying to take it all, then you're in the game.\n: And the key, let's be clear, is your product actually has to solve the customer's problem. It all comes back to all those free products, all the products people pay for, they actually solve the customer's problem. And so if you can do that in the early stage, instead of being afraid of consulting or afraid of fundraising, bam, you have an advantage. All right, man.\n: Great.\n"} {"text": ": So the other thing that comes up a lot is this concept of the magical deal. And I always love the magical deal because like the magical deal can punch you in the face when it doesn't happen. And the magical deal can punch you in the face when it does happen. Because it turns out it's not as magical as you thought. Our first six figure advertising contract with Microsoft. which we were like, oh man, this is it. This breaks open our entry into the monetization game, which required us to redesign our entire site. go to L.A. and produce a live television show, lose way more than $100,000 of money, the show wasn't very good, and complete waste of time and effort, like literally three months of our lives down the drain. And if we think about the burn we had during that period of time, let alone we didn't make money on the advertising, the burn in the wasted opportunity. And to me, it's like, wow, but at the moment, we were like, these are the deals that will save the company. Like, this is the most important thing happening. You see that a lot, right? The founder is like, this is the magical, here's the potion. This is what's going to fix it.\n: Yeah, I think it's that you reduce your entire startup to you just need one thing to happen and then you're on easy street. I always picture, you know, at the end of the movie when they roll credits, you know, like something happens and then like the music plays and they, you know, roll credits, like we won. Like I think people think that's how life actually is. Yeah. And they're like, yeah, well, once I get this deal, roll credits. And what's funny working with a lot of startups and when I was a founder is sometimes you'd get the deal and the credits don't roll. You're like, oh, now what? I'm still here.\n: I thought the movie was over.\n: And then you're like, shit, I guess, I guess we actually have to like run a startup still. We got into YC, Michael, like, where are we rich? Like, are we, we won, right? We're successful. We have to, we have to break this news to people all the time. They get into YC that like, it's still hard.\n: I love that too, because I think founders, have this thought in their head that that moment is gonna be in the first two and a half years. The play the credits off, it's all inevitable from here, will be in the first two and a half years. And we talked to so many alums who are like eight to 10 years to their ridiculously successful companies. No music, no credits. Public companies, no credits. The whole- They're still doing it, and it's still the same problem.\n: They have setbacks. Yes. Like, it's no fun. Like, these people have a hard time. Like, they have constant setbacks.\n"} {"text": ": This is Michael Seibel with Dalton Caldwell, and today we're talking about how to break out of fame. I think almost inadvertently, because we talked to so many young technical people, young technical founders and potential founders, we've become experts at career advice, and specifically big tech career advice, which I don't know about you, Dalton, but it's not an expertise I ever wanted to develop at all.\n: Yeah, I mean, I've never worked at a Faang. Like this is probably the last thing I'd be interested in talking about with people. But man, we get exposed to lots of this stuff.\n: And I think what's interesting is that technical founders often misunderstand the value they can get out of Feng. And misunderstand is an understatement. They grossly misunderstand what value they can extract from a Feng job and what value they can't extract. I think mostly because a lot of founders are mixed in with other people with different motivations, right? Most people want to be managers or employees. I think a lot of founders have friends who want to be managers, employees, and they kind of like see those people attracted to Faang and they assume all those things apply to them as well. Whereas, you know, as we both know, the founder path is quite different than the employee path. Yeah, it's funny.\n: I remember when I was an undergrad. A lot of the recruiters, the people that had the most recruiters and the best recruiters, tried to create cachet. I remember when I was in school, it was all around management consulting, was the high status, cool jobs to get. It was a certain kind of person that would fall for that, that working at McKinsey or Accenture or something was the cool thing to do. And what's funny is, at the time, Google was an 80-person startup, and they were trying to recruit on campus. But it was like, do you want to be different? It was exactly the opposite brand of what Google is now, because it was just kind of a grubby little startup. But the point is, it's easy. It's easy to look at folks that employ the most recruiters, and use that as your basis. Like whoever has the best booth at the career fair, whoever gives out the coolest stuff, and make your selection that way, right? If that's the criteria you use to select what college to go to, which is like, oh, whatever has the best rankings, you look at the best career rankings for where to work after college, and that's gonna drive you towards You know, Google, Facebook, whatever, right? It's not crazy.\n: I get why this happens. And if you want to be an employee or a manager in a large tech company, that's great. Like, that's correct. In fact, I'd argue all those guides are written for you. And it makes sense to write guides for you because you're the vast majority of people. The problem is, what should the founders do? What should the potential founders do? What should the future founders do? How should they be different?\n: Yeah, people that are curious, founder curious people.\n"} {"text": ": Facebook is extremely similar. I believe the stat was within 48 hours of Facebook being released at Harvard, 75% of the campus was using it. And when I think Peter Thiel and Reid Hoffman invested, the average time on site per user was two hours a day. And so it's like, holy crap.\n: And did they spend money on marketing?\n: No, no. And I think that's what's crazy is that oftentimes people don't communicate the truth about how these products actually started. Most people don't realize, they weren't there in the early days, they don't realize. And you might hear some later stories about Facebook growth hacking and the Facebook growth team and all this other shit. That's not how Facebook started. People pulled the product. They were pissed when Facebook wasn't at their university.\n: And again, I think this is a lesson on what the bar is for a consumer. This is why we're telling you these stories, is that the really iconic consumer companies, they tend to have in common really excited users that use their product a lot. And the founders of these companies weren't like begging people to use them per se. They weren't paying a bunch of money in ads. They weren't, like all those kinds of tactics weren't what they did. They just actually made products that people became obsessed with very early on, frankly.\n"} {"text": ": All right, this is Dalton was Michael. And today we're going to talk about why founders shouldn't think like VC's. Shocking. I would have never imagined we had this opinion. So maybe we should start what is thinking like a VC? How does a VC, how are they trained to think?\n: So, let's break this down. And I think, to start with, when we say VC, we don't literally just mean venture capitalist.\n: Sure.\n: This should include management consultants.\n: Yes.\n: Banker, investment banking, people that work in hedge funds, people that work in private equity. There's a whole host of jobs. And the people in these jobs, they train you to do a lot of market sizing, to build a bunch of PowerPoints.\n: Yes.\n: Right. I mean, that's a job.\n: Yes.\n: To analyze fundraising trends, to do market analysis, to read surveys about the market.\n: Yes.\n: Again, lots of experts.\n: You guys talk to experts. Yes.\n: You pay a lot of attention to the stock market market multiples, other things happening in the m and a market. It's an entire framework of thinking of small companies as if they were big companies and using these large company metrics and analysis to apply to them. And to be clear for this video, if you're in those industries, this is a great way to think. We in no way. Suggestions? Yeah, these are great tools. If your job is to be an investment banker, you should think like an investment banker.\n: Yeah.\n: Right.\n: Public market investor should think like a public market.\n: Right on.\n: Yes.\n: However, what we have noticed is that this type of thinking, either because these founders have worked in these industries or have been exposed to these thoughts.\n: Yes.\n: Bring this framework to getting their first startup idea and trying to get a first customer. Right.\n: Yes. And this is a problem, I think, that we see over and over again where it's almost like, to us, twisted. Like, you start having conversation with the founder and you'll actually feel like you're talking to an investor, to a VC, and you're like, but what about your passion? Like, what's your opinion? Like, what do you care about? And it's all kind of like contrived almost. You could have extracted it from Twitter.\n: Yeah.\n: And it's confusing. It's like, I didn't hear any of your opinions, I don't think. And we've just been talking for 20 minutes.\n: Now an example that I noticed a lot in a YC interview is they want to present a PowerPoint deck or a slide deck, and the way they describe the company is the way you would describe a very large company. But then when you're like, well, do you have any customers? No. And so they have 15 slides or they want to spend a lot of time talking about the market opportunities, but there's actually nothing whatsoever in terms of traction.\n"} {"text": ": This is Dalton Plus Michael, and today we're going to talk about commit or validate. When to trust your gut as a startup founder. So I'll set this one up. I find myself encountering two situations at YC. Situation one is a founder who used to work at a company, built something extremely valuable at that company. It was deployed. The company loved that thing. And that founder thought to themselves, hmm, maybe other companies would want it. And so they left, started YC to try to productize the thing they built. Example two. Two kids, maybe worked a year out of college, and they wanna start a startup. They're trying to figure out what to work on. They're both technical, they're smart, they're bright, they wanna get rich. Don't know what to do yet. We see these two patterns constantly. And I find it interesting on how we give advice. I'm like, hey, which one of these people, which one of these examples should trust their gut?\n: Yeah, basically we're saying that general advice doesn't apply well to these two cases. We are admitting that you actually need bespoke advice, depending on which category you're in, that's a little bit different. And so, again, to make the extreme version of trusting your gut, this is when founders think they're Steve Jobs. They're like, well, Steve Jobs never talked to customers. Steve Jobs, and he would never give people what they asked for. No one asked for the iPhone. He had to like envision it. He didn't even use a phone. Yeah, and so the extreme comic book version of trusting your gut is you talk to no one, you somehow from having great taste or a great internal idea of what people want, you just manifest it and it's totally unique and different. And the opposite extreme is the comic book version of, you know, the mom test. I don't know anything. I have no ideas at all. I'm going to only talk to people and have them tell me the ideas and have no opinion. I'm going to assume that I know nothing and all my instincts are wrong.\n: In my mind, the perfect version of not trusting God is like the typical investor. Like, I'm just going to hedge. I'm going to invest in a lot of different things and see what works. I can't even commit to one thing.\n: Because yeah, sometimes we talk to founders that are like, yeah, we don't know what to work on. So our plan is to talk to people and they'll tell us what to work on. And we're like, great. How's that going? Right? So it's 0% trusting your gut.\n"} {"text": ": Welcome to Dalton Plus Michael. Today, we're going to talk about why business folks need great technical co-founders. So who's this video for? Let's talk about the business folks we're talking to.\n: Yeah, I think to set this up, Michael and I both talk to a lot of aspiring founders in any number of different venues, on the street, at conferences, in interviews, wherever.\n: They find us. They find us.\n: And one of the more common opening lines is something like, well, I'm a really good business person. I have the best ideas. Do I need a technical co-founder or how do I find a technical co-founder? Or I can't find any good technical co-founders. Like this is one of the number one opening questions we get when we meet people in the real world. And so this video is aimed at all of those people that ask all of these questions that we have met and all the people that haven't met us that might be thinking these questions.\n: And what we want to do is give you the key secret to actually being the best business co-founder. And we're not going to hide it. We're going to put it right up front. The best business founders recruit amazing technical co-founders. And that is how they distinguish themselves. That is the number one distinction. So it's not what's on your resume, where you worked, the fact that you were some fancy executive, that you're tall, people like to go and have drinks with you, you've got amazing ideas. Unfortunately, there are a lot of folks like that.\n: Yeah.\n"} {"text": ": I'm going to try out a really, really crazy kind of analogy on you. I think these best VC firms are like really high-end restaurants. And I think that they like to give the impression that they go out to farms and they hand-select live chickens and live cows. They're farming themselves. So the chef is... Exactly. It's farming themselves. Exactly. Yeah. But when you actually look at most of the products on their menu, they come from purveyors who do that work for them, who identify the best ingredients, who prepare the ingredients, deliver the ingredients in a nice box and a nice package. And I think that it makes sense if you're one of those firms and they had so much demand that you'd prefer things in a nice package pre-selected. So that's the service that YC provides VCs. But it's tricky because these VCs also all say, we want to be your first check. So what's the difference between them saying that and why it's hard for them to actually be the first check in most companies?\n: I think in practice, it's scary when your customers first talk to someone else before you because you can get disintermediated in the future. And one of the things that YC does that investors don't love is we encourage you to talk to many investors instead of talking to just one investor. And so again, you could imagine that is not their favorite thing, that we encourage founders to speak to many investors in parallel instead of one. And so that is a bit frightening. And so when push comes to shove, they want to be the first people to talk to you, to get the first check, so it's a non-competitive conversation. But look, they just are not in a position to do that many deals because of how the firms are set up. They also have to worry about conflicts, where if they invest in the wrong company earlier, they're not going to be in a position to invest in one of their competitors in the future if they're taking board seats.\n: They invest in an Uber competitor super early, and then Uber comes. Makes it harder. They can't write a check.\n: In addition, they're just, they don't have enough data. Like, they need data to invest in things at a higher valuation at a later stage. And so what they want, the perfect situation for VC is to see everything, to meet with every company that they can, have the founder love them, and \u0192think that everyone else that is not them is bad, like it's a luxury good, like you're trying to create brand equity with the founders, fair enough, and then When every six months, the founder should come back and pitch them again with a smile on their face. So they're never in a position that someone else funded them. And so what can often be tricky with YC companies is once a company does YC, they are less likely to do all those things. And they're much more likely to be desired by a number of other investors, which is again, competition is often bad for And so, you know, again, you can see the dynamic here. But at the end of the day, if one of these investors, we just, you know, Michael just listed them. If there's a really great company they have to invest. They're not going to say, no, we don't want to invest in this company if they did YC, because they're smart.\n"} {"text": ": Let's go through some examples of the midwit meme. And you have to start with the meme that you made for YC founders. So just to provide context, we're in the part of the batch where YC founders start getting nervous about fundraising. And whenever a founder gets nervous, they start overthinking. And whenever they start overthinking, they assault us with office hours on topics. And Dalton created this meme so that we could fight back. What does the meme say?\n: Yeah, the meme is simple. The. The naive founder is like, oh, I'm gonna raise the amount of money I need to succeed. I need, I need. Here's the amount of money I need to raise for my series a. I ran a model, and it's, you know, $800,000, so that's what I'm gonna raise. That is the, like, naive approach. The really smart three. Three time founder, someone that's done this before, is like, I need to raise $800,000, so I'm going to do it. And then the midwit is the one who wants to ask 15 questions and try to construct the perfect round and be afraid that someone, they may not have enough allocation for value add investors, and they want to not have it. Signaling risk. They talk a lot about signaling risk, and there's, like, all these factors where I'll be talking to someone and we'll be like, 15 levels deep in a hypothetical for an offer that they don't have. Right? And that's. That's the midway, man. Is that, like, you're screwing yourself by overthinking all this stuff, instead of just being like, hey, I need x dollars. I'm going to raise it, and I'm going to get back to work.\n"} {"text": ": So anyways, what would be your last parting piece of advice for someone who suspects they're in this world?\n: Look, technical people know your worth. And if you're a really nice person, those are the people that tend to get ripped off the most. Follow our handy checklist and find a place where you're appreciated and valued the way you should be because you have this amazing rare skill.\n: And for those business people listening to this, don't exploit folks. Be honest, be upfront, right? Like make decisions that they're gonna that your people you work with are going to be excited about today, but also tomorrow. Because like, if that amazing tech person leaves your company, you're fucked. All right, Dalton, great chat.\n: Thanks.\n"} {"text": ": Yeah.\n: What do you think?\n: I think it's tricky because all too often this group of folks are giving founders the advice of hiring executives before product market fit. It's like you need to build up the company. It's like marketing doesn't work. We need a marketing executive. Like the engineering team isn't productive enough, we need a vp of engineering. And more often than not, in this pre product market fit phase, the mistake is that there's the wrong person in the company, not there aren't enough people. The mistake is like, you've got an engineer that no one wants to work with or no one's measuring any of the marketing results. Right. It's like those are the mistakes. Not like you don't have a department for it or an executive to run it. Whereas we go right back to the first one. Right, when a company is scaling and growing post product market fit, like hiring more people is essential. So once again, we get this weird dichotomy.\n: It's like zero to one, think about the first five employees of Facebook and the first five employees of Instagram when it was a startup before they got acquired, the first five employees of YouTube when it was a startup before it got acquired, versus the really awesome people post acquisition who had to step in and scale that thing. Those people are awesome. Hallelujah. They're super valuable. And if they weren't around in the zero to one stage, watch out. You get what I'm saying? It's a very different muscle to build scaling Instagram post acquisition if you were on that team than getting the first hundred users when you were the founder of Instagram. Right?\n: Very.\n: And there's a whole lot more actually supply and demand. There's so many more people that helped scale Instagram than there are people that founded Instagram.\n: Yep.\n: Right. There's just lots. So there's lots of folks that have lots of experience scaling products and you just don't meet as many that did the zero to one.\n"} {"text": ": What I love about this story is that while they were in the YC batch and they were asking people, do you need this? They were finding people who were getting screwed, right? It was like, oh, you're under 25. Yes. You can't get a credit. Sorry. No can do. Yeah. There's no like fill out extra forms. It's like. completely getting screwed. Oh, you're not from America. That's a no. Sorry, you don't have a credit. You can't go. And so like, what I loved about it was that their product didn't even have to be amazing to start because the alternative was nothing. Yeah, when you're competing with literally nothing, oh. And it's like, it's like the perfect example of the big company not caring. It's like, I don't care so much that you just can't use my product at all. And like, all they had to do was care more than that, right? More than no, like we'll figure out how to make it work for you. And I think that it always just comes back to this, like those founders in the badge loved those guys.\n: Yeah. Their customers were their friends. There were people they knew and they could relate to them. They could talk to them. They would go out to dinner with them and they genuinely knew the stories of their customers and cared.\n"} {"text": ": What other trends are you seeing for the summer 22 batch?\n: Yeah, I mean, let's see, to go through some of the stuff I've noticed. So for one, more applications. I think that's, I think that's always a trend, but there's definitely more applications and, you know, I think the new YCDL doesn't hurt on that one. And so yeah, more applications, more applications to read and the energy is feeling good, man. How about you?\n"} {"text": ": Now, let's be clear, all these businesses worked.\n: Yeah.\n: So let's talk about it.\n: Right?\n: Like, for Google, this was great advice. Right. For Google, hiring as many really smart people was essential because they were trying to do something really hard.\n: Yeah. I think that the conventional wisdom pre Google was that search was a commodity and that Yahoo was good enough and that incremental engineering breakthroughs in search wouldn't matter. And Google disproved that where it was actually a hard technical problem, and they were able to put those engineers to work. Also, historically, this was right after the dot com bubble crashed, so they were able to hire some great talent that was available because the dot com bubble just crashed. And so if you really look at the decisions they made in context of history, made a ton of sense.\n: Made a perfect sense.\n: But how many people did we know that blindly copied the Google Playbook? And they did not replicate Google's success, did they?\n: No, no. They weren't even trying to do anything near as hard. I think in Facebook's case, another perfect example of, like, not charging users was really smart. Right? They understood they could build an amazing ad business. They understood that scale was the only path to it. And, like, Facebook is an amazing ads business. Right? Like, that was really smart for them. Not clear that every business should be an ads business.\n: Yeah. And when you think about it, how many facebooks are there and how many people that were blindly copying the Facebook cargo? You know, how many people that were cargo culting Facebook succeeded?\n: Yes.\n: Not many. Again, maybe it's more than zero, but, wow, that was more of like a one shot epic company than something that people could just blindly copy and be just as successful as Facebook.\n: Right. The second Facebook style profile you had was delivering infinitely less value. Yeah. Than the first one you had. I would also argue that people, you know, Facebook and this whole going viral, it's a lot easy to try to make your product go viral if users spend 2 hours a day using it, right? Yes. Day one, Facebook people were spending 2 hours a day using it. If people use your product five minutes a month, it's a lot harder to go viral.\n: You need some different tactics. You can't just copy Facebook blindly and hope it works.\n: So it's like, going viral was a great strategy for Facebook. Is it a great strategy for you? And then last with Uber. I think the hilarious thing about Uber is that most of the common beliefs about Uber just weren't true. People who were investing in Uber were looking at markets where Uber was doing very well in unit economics and purposely funding them to expand quickly. It wasn't people looking at Uber serving no markets well, burning money left and right and saying, oh, let's just throw more of our money on the fire. And it was weird to watch founders just be like, well, we should expand our business to 17 cities when it's not working in one. When, like, you remember the first time you took Uber? I do. It was a huge moment in my, like, it literally was so valuable. Like, it was immediately successful in San Francisco. And so this idea that, like, oh, Uber, just, like, nobody liked it, and, like, they just burned a bunch of money and somehow got successful, it's like, that doesn't make any sense.\n: The idea that superficially copying Uber and copying the things that they said in interviews, pretending that you're Travis, whatever, doesn't work, it's just like, wearing a black turtleneck does not make you Steve Jobs.\n: Yeah.\n: That does not make you apple. That is cargo culting.\n: Yes. Whereas, like, if you built a thing that people would use multiple times a week to get to the most important things in their life, like work or their loved ones.\n: That's pretty good.\n: That's valuable.\n: So hard to replicate this stuff, right? Man, it is.\n"} {"text": ": All right, here's the next one. That was written in by a YC founder. They wrote, we copied another successful business model from an overseas market and wrongly assumed that product market fit was a given. If the product works in country x, it's gonna work in country y. We scaled up hiring quickly and burnt a lot of money before we realized that the users we were selling to did not want our product. This is something that happens so commonly. And what's tricky is that investors often, like funding these ideas. Cause they're so simple, right? This is a very simple thesis. If blank works here, it should work there. So oftentimes these companies, like, get money, but then fail after getting money. How have you seen this?\n: I think, I think what we want to believe as founders, and this applied to me too, is that by getting validation from investors, or the press, or my friends, or employees, or winning a startup competition, whatever that meant, it was good. And that that was the validation, you know, hey, I've got, I've got validation. And it's pretty frightening to realize that you can get validation from all those things and it could still not work, you know, and that getting the stamp of approval, like ultimately you're responsible for if the thing works or not. And no one, it's like no one else's problem to make it work other than the founder you're kind of, you're kind of on your own on this one. And so it's almost like, it's like thinking that if you can pass the driver's license test to get a driver's license, it means you're a good driver. Like, I think all of us that have a driver's license know, you can still be a pretty bad. You know, there's a lot of variation in the quality of driving, and lots of people can get into trouble with their driving habits. Even though you have a driving license, there's no. And there's no mechanism, you know, unless you get pulled over. Like, things have to go bad or you get unlucky for an authority figure to get involved, but for the most part, you can get into all sorts of trouble even though you have a driver's license. That's how I view this, is that, you know, you could have your startup license. Hey, I have a website. I got, you know, I got an article. I raised some money. But, man, you can really do poorly, and no one's going to stop you.\n"} {"text": ": So let's go back to the dark ages. You and I went to school in the early and mid 2000s. And when we were in school, what's so funny is that like, it's probably hard for us to explain to a current college kid how uncool tech was. And then like, think of however uncool tech was, startups were 10X less cool than even that. But, but maybe the way that I would explain it with a number, you know, I was a Yale 05 graduate and in my graduating year, Yale graduated 10 CS majors in a class of 1200 kids. So like, just to give you some perspective at that time, what was your experience like at Stanford during these times?\n: were startups around, but this was just after the dot-com boom had crashed. This was in like an 02 and 03. And so you'd have to be a real idiot to intentionally get into the wreckage of the dot-com crash. Like it was pretty much people that just liked computers, would be my assessment. Had nothing to do with financial Seeking financial gains. Cause again, if you do that, you do management consulting, you do, there was a bunch of other options. And so it was kind of nerds is how I would describe it.\n"} {"text": ": I think the last example in light of Cruz, Cruz this week allowed any \u2013 started to allow the general public to drive in a driver-free, safety driver-free driverless car. I remember when Cruz was in YC and the V1 of the car, the V1 of the driverless car, Kyle and his tiny team built in three months. They retrofitted an Audi. To call it driverless would be an overstatement. There were a couple of things I remember. One, there was a big red button on the floor in the driver's seat. And Kyle never explained what that button did. But it was clearly important and very easy for him to reach. Number two, it only works on the highway. Number three, it was basically adaptive cruise control. Like it was basically cruise control that stayed in your lane. It wasn't more fancy than that. And then number four, the moment I remember on my first test ride on a cruise that I'll never forget is we're driving down 101 and Kyle says, oh, a shadow. Let's see how the car handles that. And I was like, oh, shit, Kyle. Out of everything I was looking out for, like curves, other drivers, signs, I didn't know that I should be afraid of the shadow. And that was V1. That was V1. And Google had cars on the road retrofitted with all kinds of fancy equipment at that time. And Kyle had his Audi that couldn't deal with shadows. That's how it starts. So why don't you talk a little bit more viscerally, Dalton? We've given some examples, but give us more on what do you think the life and the job of a CEO in these stages, in these do things that don't scale pre-product market fit stages?\n: Yeah, I think in the do things that don't scale philosophy, the job of the CEO and the job of the co-founders is to do the shittiest, worst, low status work you can think of. It's the opposite of whatever your mental model, when someone says the word CEO and you're like, oh wow, CEO, visionary, you know, powerful. It's like, no, like you're like doing the shit work. And you've got to learn to love and embrace the shit work. That is your job at a pre-product market fit startup is, to actually make everything happen and to be personally accountable for making the entire system run end to end. And we just see so many founders that think it's their job to be like at the late stage, you know, they're emulating what they think Elon Musk is like, or, you know, Mark Zuckerberg or something. But when you're a really small startup, it's the exact opposite in every way.\n"} {"text": ": Let's talk about real health care. Let's talk about mental health care for a second. This is becoming less of a controversial issue, but I still think that it's something that needs to be normed more, right?\n: Yeah, I mean, therapy is good. medication is good if you're prescribed it and it's not from your friend. I'm just kidding. You know, this stuff is de-stigmatized and it's important. And like a lot of founders struggle, I think it's the ups and the downs exacerbate this stuff. And again, the stuff I said earlier, sleep disruption, stress, all these other things exacerbate it. So, you know, sometimes that is the appropriate thing to do here. So you should, do it and not think you're too tough or whatever, whatever reason it would be that you wouldn't use these things as a, as a crutch. I just, I've noticed that people that aren't, the people that aren't willing to use this stuff, they find other crutches that again, I would not recommend.\n"} {"text": ": All right. So the next one is Elon. You're familiar with this story.\n: Yeah. So I actually heard the story from Elon verbatim. I met him before. And so I'll tell you what he told me about his life story. And again, perhaps he is an unreliable narrator about his own life. Certainly possible based on my interactions with him. But what he told me is the reason he started what was it called, Zip2 and PayPal, was he wanted to make a lot of money. He said, what I wanted to do with my life is go to space. And I knew to go to space, I needed a lot of money. The actual line he told me, I swear this is a direct quote, is he said, my plan is to die on Mars, hopefully not on impact. And I could tell he uses that line a lot. It's a laugh line. I think you said this in other interviews, but that's the line he told me. And he was like, look, when I came to the US, I came to Silicon Valley, it was a dot-com boom, and I just knew I needed money, and so I just was like, how can I get money fast? Again, this is very honest, the way he told this to me. And that's why he did tech startups. And like all the ideas that he came up with were just about trying to build the most successful company using, I don't know, the conventional stuff. Like his ideas were pretty conventional. It wasn't hard tech. It wasn't deep tech. It was- It wasn't I need $100 million to start. It was, I mean, he did raise a lot of money for x.com, but basically it was pretty standard startup stuff. And then he leveraged his success at these companies and the network that he got and the money that he made to start SpaceX, which is super cool, way to go, and then became an investor in Tesla. And many times, if you know the history of Tesla, he had to personally dip into his own checking account and bail the company out. And if he were not an extremely wealthy person, there's no way Tesla could have existed. And so it's very hard for us to have this knowledge and for me to have this knowledge of talking to Elon and see people trying to emulate in-state Elon. But they're trying to live their life as per Elon's words when it's like, man, Elon didn't live his life to Elon's words.\n: But I'll say this, I think what's interesting is it's impressive to have this two-step plan and do it. Right? I might even argue that what Elon did was more impressive. I agree. Right? Like start two businesses, sell two businesses, be rich enough to like start self-driving car company. And we like, hell, if you've got the balls to do that.\n: That's a great plan. Yeah. But again, the key thing is to realize you have to do step one. Most mere mortals out in the world need to do step one and can't skip to step two, even though step two sounds cooler.\n"} {"text": ": I'll go a step further. I think the whole argument is fake news. I don't think This is a real argument, right? I don't think that anyone thinks it's more moral or good or right to start a VC-backed company or a non-VC-backed company. I don't think this is an actual debate. Yeah, I think that like starting a VC-backed company, really hard. Not the best way to get rich. Not the best way. And relatively small number. The numbers are not huge. Not a good path. I always like to equate it to athletics. It's like getting into the NBA is really hard. Not the best path to have a good career. is to be like, oh, I'll just, I don't know, I'll just make the NBA. Yeah, that's simple, right? Yeah, it's like, 450 guys, I'll just be one of those guys, and then game on, right? Right, they recruit from all around the world, I live in the world. Yeah, very straightforward, but I like that play. Yeah, no. So this is not the only way to get rich. Let's take a further step. Most people who are rich did not raise venture capital dollars. That's right. Did not start companies.\n: Real estate investing, stock market investing, being lawyers, being doctors. Again, go look up the numbers.\n"} {"text": ": So one of the things that I've thought about a lot is what are the other things you can be passionate about? in the context of startups that can motivate you to grind it out for years. Because that's the bar, right? What are you going to work on when everyone thinks it sucks for years?\n: To dispute what we ourselves are saying, or to have a debate with ourselves, look, the problem with being like 19 or 20 is a lot of people aren't passionate about many things, and they all tend to have the same startup ideas. And so let me give you a great example. find a way to plan to do activities in the real world with my friends. It's too hard to coordinate and plan activities with them. And so I'm really passionate about this, Michael. This is my... One of my biggest problems in life. This is my, we thought about it, solving this, finding a way to coordinate, going out with my friends is like the biggest problem we know about, we care about, we're experts. So, you know, we're going to do it. What these people don't know is this is literally the most common college kid idea that's been tried for at least 20 years, right? Nope.\n: Well, they would know if they did any Google searching. But they're experts, so they don't have to do any Google searching.\n: Well, you know, Michael, no one just implemented it correctly. See, we have a better UI dynamic. So all the thousands of companies that tried this, they were all wrong, and we're right. It should have been by voice. That was the problem. So where I'm going with this is, To the extent that the stuff that you care about the most is the same as everyone else, or you don't actually have unique passions, you might want to zoom out a little bit and not have passion be your primary mode of making a decision.\n"} {"text": ": All right, next communications. I don't know about you, but we started with one phone line in the house. Yep. And that's it. That was communication.\n: And people are like, whoa, but it must have been so great. There were no phones, and it was so much easier to be a teenager and all that. I mean, maybe.\n: Maybe. No, it wasn't great. You couldn't be on the internet and on the phone at the same time. I don't know if anyone's ever taken that for granted. So now when people like, you know, I open up the messaging app folder on my phone and there's like 17 apps with video, audio, text, I can text people all over the world for free. I can call people anywhere in the world for free.\n: It's better, it's like a lot better.\n: It used to cost money, we were living in New Jersey, it used to cost money to call New York. It's like right next door. You got to talk fast. That was long distance.\n: So yeah, so communications, a little better.\n"} {"text": ": So there's another concept in this default alive, default dead article that was linked to. It was another PG essay called the Fatal Pinch. I think it's so interesting because we see this in office hours so frequently. Like, it is so common that we will talk to a founder who's in the fatal pinch and doesn't realize it. And it's funny because at the end of the batch, you tell everything, everybody. A very simple concept. It's basically stay lean until you have something and then spend money on growing it. Yet founders inevitably get frustrated, get tired, get distracted, and somehow always come to the conclusion that spending more money allows product market fit to happen faster. And what's sad is that, like, probably, at least for me, more than 50% of the time, I don't get the office hour before the founders decide to ratchet up the spend.\n: Right? It's always when it's too late. They're like, yes. I always get the office hour when they're down to low Runway, and they're like, we're dead. We're bleeding out. You know? Please help.\n: And it's like, if you had talked to me six months earlier, we could have tied a tourniquet around your gaping leg wound, and you'd be alive. Hell, we could have saved the leg. What's tricky is that if you find yourself even suspecting, you could be in this situation. Like, you need to do this math as soon as humanly possible, right? Like, you're probably too late to do this math in all cases, and no.\n: One wants to do it because it's too late, because it's a buzz kill, man. No one. Like, who wants to be that guy? Everyone's gonna be mad at you. Your investors are gonna be like, oh, why are you bringing this stuff up. You need to focus on growth. Like I didn't, you know, like, people will give you a hard time to bring this stuff up until it's too late. And then everyone's like, why didn't you bring this up earlier?\n: To play devil's advocate, though. Well, we have a bunch of great engineers, Dalton. We can always get Accu hired, right?\n: Yeah. So we have the data here at YC, and I will not tell you that no acquisitions ever happen. But similar what I was saying earlier, where if you only read TechCrunch about the successful fundraisers, it gives you a warped perspective on how common they are successful, and that most series a fundraiser fail. Well, guess what? No one gets acquired effectively. Like, there's an asterisk next to no one.\n: But.\n: The companies that attempt, when they're low on Runway, they flew the plane into the side of the mountain. There's no acquisition coming, man. I'm sorry. Maybe you could get lucky. Maybe you built a great team. Everyone says that. But again, to keep picking on the fast thing, I think a firm paid them $0, I believe, to get all of their engineering talent. What would the incentive have been for a firm to pay any money for a company that's rapidly dying? There's no market for a company that's out of money, right? Anyone that's smart on the buy side knows that a company that is hemorrhaging cash will soon be bankrupt. Why would you want to buy that problem? You're almost worth less than nothing because you often have legal liability, and so no one wants to buy problems.\n"} {"text": ": Now, what about the early employee?\n: Well, the early employee notoriously kind of gets hosed on this stuff, especially if they're providing the work of an equal technical co-founder, yet they get 1% or less of the company. Again, this is very common where you'll have two business founders, three business founders, you know, and then they'll have someone that's, you know, lead engineer that is effectively technical co-founder, and they get like 1%. Not great.\n"} {"text": ": So let's talk about equity. What are the questions people should ask themselves about whether they have enough equity, equity at all? This comes up a lot.\n: I know you are a big proponent of this, Michael, but in general, something like equal equity is pretty common for startups that apply to YC and is something we recommend. And sort of the anti-pattern we might see is say there's two founders and the non-technical business founder has 90% and the technical person has 10% or less, And the explanation is basically just that the business founder... had sharper elbows and was a better negotiator. There's actually no justification for this.\n: It was my idea.\n: Yeah, okay. Right? And so there's really no good reason. It's just that the business guy gets more for whatever case. And usually in those situations, you wind up with something much closer to even. Again, you give this advice. How do you explain this when this happens?\n: I always just think that the vast majority of the journey is ahead of you, not behind you. And you want your co-founders to feel like owners and partners. And I always think about, in the early days of our company, on Sunday night when the website went down, I couldn't fix it. And so we're going to live in one of two worlds, the world where I get text and I have to like cajole people to fix it, or the world where everyone feels like an owner. and they get text and they wake up and they fix it, right? And I think a lot of people just don't understand that if you can make people inherently motivated, they'll do far better work than if you fucking yell at them. So that's the founder. Do you have close to equal equity?\n: Yeah, what does your equity look like? And does it make sense? Is the justification for whatever your equity is, does it make sense to you based on what you bring to the table and based on your actual responsibilities?\n"} {"text": ": And I think that, like, the other thing that's really tricky, and we were talking about this earlier, is that unfortunately, founders get caught up with this math around default, dead, default, alive, because the math they use to pitch their company to investors is only a subset of the math they need to run their business. And I think this point is really tricky. Like, when you're going in and pitching for a series a or a series b, so often, especially in a good economy, you're talking about top line revenue, you're talking about new accounts that you've opened, you're talking about your month over month growth, and oftentimes you're talking about your headcount, your hiring plan, slash the execs you've brought on, so on and so forth. Like, that's the math that you're putting front and center. That's the math that investors, especially in good times over, focus on. Whereas I'd argue when you're running your company, those numbers are important. But there's also your burn rate, your retention, how much your existing customer accounts are expanding, your revenue expansion over time. Those metrics are the ones that can better help you when you're trying to figure out how to make sure my company stays alive. And I think this is where things are tricky, is that in many ways, investors are setting the agenda on what metrics are important for a company, and the investors are a little biased. They have a point of view that might be not oriented around keeping the company alive. And PG talked about this. What was PG's line on this stuff?\n: Yeah, he calls this in a blog post, killer Cure, where he just points out that a founder and investor have completely opposite incentives, where as an investor with a portfolio of companies, if you push them all to grow fast, and some of them successfully grow really fast with a high burn and thread the needle and become uber or whatever, and some of them completely explode, like fly the plane into the side of the mountain, like, fast. And there's lots more fasts out there. It actually makes sense from a portfolio theory to advise people to do this, because either way, either it works great or it dies and goes away and you get to spend your time on something else. But, like, either way, it's explosive, right? It's explosive good, explosive bad.\n: Well, and for a good fund, that time is the limiting factor, right? Not money.\n: Yeah. And board seats. You're limited as a VC on how many boards you can sit on and so you don't want to sit. So. So basically, if you're a VC and you sit on a board of a company that takes forever to get big with, like, low burn, that's kind of boring and kind of bad for your career, and look, you look bad to your colleagues. Like, there's all these dynamics that founders are not aware of. That's not a good move to be on the several boards of companies doing just okay. Versus if you're a founder and you're choosing between, do you want a zero, literally zero, or do you want to keep going and give yourself more time to figure out product market fit and maybe you can figure out an exit and make life changing money.\n: Yep.\n: Then that to a VC, doesn't matter at all. Like, man, that sure sounds like misline incentives, right, Michael?\n: Like, massively so. Sometimes the investor in this equation is kind of is perceived by founders who haven't raised money yet as, like, demanding that the company grows or demanding that the company burns a lot of money as if they were the boss. And I think this is a very bad misconception. Like, I don't. I think that's extremely rare for an investor to be demanding you to, like, burn like crazy. I think that the horrible truth is that founders don't need much of a push.\n: Oh, it's like, it's like how, Michael, I hear you're demanding people to raise at high valuations.\n: That's the rumor I heard, yes, exactly.\n: Aren't you demanding YC founders? I am.\n: I'm twisting their arms to dilute less. It's, I'm so powerful. I think this is the tricky bit is that, like, deep down inside, every founder wants permission to blitzscale.\n: And if they're special and they're going to build the next big one. And so if you talk to, you know, half a dozen people, and one of them's like, yeah, I don't know, maybe you should grow faster. I don't know. Maybe burn's not our biggest concern. Like, that's actually the fly on the wall recording. I wish you could have a fly on the wall. It's like, yeah, you know, these numbers, I think you want to get these up. But I don't know if Burn's my biggest concern. And then the founder hears that and they're like, we're going.\n: It's time. I knew it.\n: What did fast do? They raised 100 million and they burned it in ten months. They got into a 10 million a month burn. That's incredible. I'm actually super impressed you have to really try.\n: You'd have to be working pretty hard on it. We certainly need a lot of recruiters. You gotta hire a lot of people.\n: Yeah. Cause, like, what else are they spending money on?\n: There's no inventory. Like, if it was a hardware company, I'd understand, but there's no inventory. Like. And it's. I assume they weren't getting offices. It was during COVID Right. So it's like, jeez.\n: I have no idea. I just. It's. That takes effort is my point. You don't just wake up one day with a 10 million a month burn and be like, oh, you know, we're cutting free snacks. You know, this spinning is out of control in these stacks. We need to be able. We need to tighten our belts, friends.\n"} {"text": ": Dude, do you remember just having to buy maps? Physical maps to drive around a city? And your dad would have a bunch of maps in the car for all the places you might want to drive to in the future. So Translation's gotten a little better. Yeah. A little better.\n: What else has got better health care? I mean people are living longer. They're living better lives. Yes standard of care infant mortality Yes, life expectancy around the world. Yes people making more money being raised out of the poverty line I mean just look at all the stats you can look it up. Yes, actually Like, zoom all the way out and look at this stuff for yourself.\n: Yes. It's pretty cool. The number of people living in extreme poverty is less. The number of kids living longer. Once again, we're not talking about the difference between, like, the Civil War era and today.\n: This was, like, 20, 30 years ago.\n"} {"text": ": Oh, yeah.\n: I would argue is not venture capital backable. You know, a lot of the stuff that I see on the television show, you would never in a million years be able to raise VC from it. And so I think you watch Shark Tank, and you think that that is reality.\n: No, it's not this industry. So I think that, um, That's the first thing, is that if you're starting a business that can appear on Shark Tank for the most part, you probably shouldn't raise venture capital. But I think there's actually a deeper thing here, which is that let's say you want to start a startup business. You don't have to raise venture capital either. Correct. And I'll say the same thing. I don't believe venture capitalists want to invest in all software businesses. And I don't believe all software founders should raise venture capital. Yep.\n: Yeah, let's talk about them. I think what's really going on is, I think if you looked at how many businesses are started every year, what percentage of those are venture funded? But I would guess definitely single digits, if not less than 1%. And so if you just look at businesses that are starting in the world, it is like a weird outlier freak occurrence that is a VC funded business. But I think if you're just consuming content, you're watching media, you're watching YouTube, you don't realize that. Venture capital as a product is specifically for investing in something where their investment could be worth at least a hundred times more, if not a thousand times more. And so trying to put that jet fuel into something that isn't going to grow to be big, everyone is going to be sad and lose. And so you shouldn't do it.\n: No one wins. And so again, I don't think that there's this\n: push that I can see from investors to try to convince people to raise VC money for something that has no chance of growing like that. It just doesn't make sense for anybody.\n"} {"text": ": Hey, this is Michael Seibel with Dalton Caldwell. Welcome to Rookie Mistakes. We asked YC founders for their rookie mistakes so we could share them with you and help you avoid them. Here's the first mistake that was written in. In the beginning, when you're still figuring out your idea or product, get in as many user or potential user calls as possible, at least one per day and ideally multiple. It seems obvious, but it's something that we personally failed at in the beginning. Don't brainstorm ideas in a silo. You don't know what people want.\n: We have all these ideas in our heads as founders about what people want that the moment they are subjected to reality are embarrassingly wrong. Like there's nothing more humbling. There's nothing that makes you feel shittier than seeing real people using this thing that you built that you spent a bunch of time on and just like ripping it to shreds and not understanding it or like using none of the features or clicking on the wrong thing. It's horrible. So talking to users is like the inoculation against this spending inordinate amounts of time doing something that is completely irrelevant to your end users, okay?\n: So you're suggesting then that I take surveys, right? I mean, what's the most efficient way to learn what my customers want? I should survey them, right?\n: So this may be offensive to some folks listening to this video, but I don't, think that user surveys are that valuable when choosing a startup idea. Surveys are a useful way to get certain kinds of feedback. I would think of it as sort of micro-optimizations or trying to choose directions. Or say you have four names for a company, you want to choose which name was the best of the four choices. Yeah, great, run a survey. But when you're looking for fundamental truths or you're trying to find your first customer or market validation, you want to be harsher or harder. Well, what does that mean?\n"} {"text": ": So, let's actually go through the kind of the histories here. So, you know, if we start with Sam, Sam's first startup wasn't OpenAI. Nope. It was a company named Loot. He did it when he left Stanford. Yeah, he was a college dropout. He went to Stanford. And then he went to YC. And then he was able to raise money for Loopt, and Loopt was like a mobile social product to see where your friends were in the city, released before the iPhone. And raised a relatively small amount of money, had a relatively small team, iterated, and honestly like used the YC network and then the network he built on top of the YC network to build a successful career. Yeah. Interestingly enough, like that worked really well for him.\n: Yeah. And people don't think about looped. We don't talk about looped. I don't even know, probably people seeing this video, you know, Google it. This is a real thing. There's a lot, there's lots out there, but this was a really important part of how someone like this was created or how they, how they, got enough of a network to make change in the world, was doing what was a pretty garden variety path, similar to you and I's path and many of our colleagues' path, of just doing a pretty normal startup at a pretty normal age with a pretty normal outcome, like pretty standard.\n: Yeah, and it's weird, right? Like go to a good school, do YC, start a startup. That is what led to eventually OpenAI.\n: You know? Right. And so we're just flagging this so people remember. That's what happened. Is that the beginning states before OpenAI was fairly standard stuff. And so if you actually wanted to emulate Sam, you would not immediately go try to start a lab and raise $100 million or whatever. Yeah. Because that's not at all what he did.\n: And by the way, nor could you. I think that's a really important point. For literally 99.9999% of founders, you couldn't copy Sam's play starting at OpenAI. Sam couldn't copy Sam's play starting at OpenAI. And by the way, I think this is an important point to make. I sometimes do meet people who can do things Better or have inherited advantages and the advice they give them is very different. Yeah, you know and so, you know If you can do this, maybe you're a considerate. Yeah, but if you can't why are we debating whether it's the right move or not?\n: Yeah, a lot of the people that were most influenced by his advice of like maybe I should be raising a hundred million Are people that are not gonna raise a hundred? No, so why so it's kind of like a disservice to these people. Yeah, right And so if you're one of the people out there that can raise $100 million.\n: Or they won't do a startup, because they're like, if I can raise $100 million, it's not worth it.\n: Why even bother? Yeah.\n"} {"text": ": So the next one on the list is it's okay to take a day off. It's okay to go home. I think that you know There was one moment in my career where We were gonna get bought social cam was gonna get bought and we were two months into the diligence process and We got a call that said the deal was off. And it was the only moment in my career where I was like, I'm not going to react to this well in front of my co-founders. I just need to go home. At least home I can react. in a way that won't be a bad example to them, you know, like, because they're going to look in my reaction, they're going to be like, are we fucked? And if I'm looking like we're fucked, like, that's not helping. You know, when the generals like pulling their hair, being like, this looks horrible, we're going to die. It's not good. And man, like going home, Hanging out with, you know, at the time was my girlfriend, but then, you know, later became my wife, like, taking that day, the next day, I could kind of bring a better Michael to the table. Yeah, right. You know, that was, that was a big thing. That was a big thing. I was thinking about this in the context of like, when things go bad, there's a current set of people you should probably be hanging out with, and a certain set of people you probably shouldn't be hanging out with, right? Like, how do you think about that?\n: Yeah, I mean, I have my personal experience, and I have all the data points we have across YC Founders, and you just sometimes see people... that are taking punches and having a hard time. And there's some really amazing people that you can hang out with that support you and tell you you're okay and validate your experience and like. let you take space for yourself and like all this good stuff. And like these are these are great people to have in your life. And then we see other sorts of folks that are like, you know, oh, you should do tons of drugs or, hey, like, let's go not sleep for a really long amount of time or let's hang out with celebrities or like, you know, like there's all these different crowds you can get into. And. It's Depressing how predictive that is for how people will deal with like setbacks, you know, even and these are adults We're not even talking about these are these are adults. These are our own people our age people Still struggle with this particular one And so I think you just want to think about Yeah, who you're spending time with when you're when you're taking punches and what kind of habits that you're taking from the peer group?\n"} {"text": ": What was the DoorDash story, Dalton?\n: Well, look, when you think about something like food delivery, you imagine a scaling, you want to be doing hundreds of orders a day. And so the way the founders got started, was they just did all the deliveries themselves. They didn't have to hire anyone or build a driver app or recruit drivers. If someone made an order via DoorDash, if some miracle happened and someone made an order, the founders would drop everything and go deliver the food.\n: That was actually how they got started. Go ahead. What's so cool about that is that one of the other topics in this essay is delight your users. Well, the easiest way to delight your user when you're doing food delivery is you do the delivery yourself, right? You race to the freaking restaurant, you make sure you get the right thing, you throw in an extra, you deliver it yourself, you say thank you. They didn't have to deal with managing a driver, network, motivating, it's like they just did it themselves.\n: And think about all the other ancillary benefits where they got to see why it was hard to do the deliveries. They got to talk to the restaurant owners personally and develop a relationship with them. They got to talk to their users. They'd be like, hey, here's your burrito. I'm the founder of this company. Do you like it? Would you order again? Isn't that funny? Like, could you imagine a more lower status thing than, of course not, but that's why it was awesome. It was not scalable. It is, in present day, if you order from DoorDash, Tony is not gonna deliver your burrito, or he might statistically. He still does this sometimes. I'm sure everyone saw the news. He still does this. To this day, the founders still do deliveries. But like, that was not a scalable strategy, but man, that's how they got off the ground.\n"} {"text": ": I remember, you know, when Gusto went through YC because they were actually in my second batch in winter. Twelve. And another example of, if you look at Gusto today, you would say, oh, you can do payroll, you could do benefits, you can see your chart, you can do 401k. It's like this tool chest full of amazing HR tools. When Gusto started, it was a company named Zen Payroll. It did exactly one thing, your payroll. Back then, if you didn't use Zen payroll, you'd have to call up ADP, and ADP would bring someone to your office for you to sign stuff so that you could run payroll and then every month you had to call someone on the phone and say, yes, I do want to run payroll this month. Like, that was state of the art. And then Gusto said, we can just do that online. And that's all it's going to do. And you're going to love it, and you're going to sign up and you're going to forget about it, because that's what good payroll is, right? You forget about it. And so to work like.\n: Yeah imagine a Version of Gusto or Zen payroll that had a lot of features but constantly didn't pay your employees. Like, like a broken version. A product that doesn't work with lots of features is infinitely worse than a product with one feature that works. And again, like.\n: Let's play that out. Let's play that out, right? Imagine if it's like they were like, you get healthcare and you get benefits and you get 401K and payroll, and none of those features work.\n: And sometimes we lose the money.\n: Yes. Like, you would hate them. You would hate them.\n: That sounds like Verizon or something, you know?\n: Exactly.\n: That's a great way to a hated company is to have a lot of features that don't reliably work.\n"} {"text": ": Then maybe the last one, even more modern. Uber. Yeah, this was the fun one. I think it started with spend as much money as possible, which I love because Uber was a successful company.\n: It's great.\n: And the idea that we could boil down a key strategy to spend as much money as possible, but that was the takeaway.\n: They wrote a book about it. It was called blitzscaling.\n: Spend all the money as fast as it comes in. What's funny about maybe these Uber ones that are slightly different from the Facebook and Google ones is like, I don't think Uber even did these things.\n: Yeah.\n: Like cargo culting kind of took on its mind of its own.\n: Exactly. And again, to be really clear on the point, Uber did a great job of what they did.\n: They broke and roll.\n: It's the folks that were like, well, Uber did x, so we should do this.\n: Yes.\n: Without really understanding why Uber did the things they did. They would superficially scale the way they scaled, burn the way they burned, ignore laws the way they ignore laws, ignore.\n: Unit economics, go to as many cities as possible as possible.\n: It was the superficial wannabe Ubers that did the silliest stuff versus Uber itself, where that worked pretty well. Right.\n"} {"text": ": And you know, at my school too, I think there was a whole set of kids. Um, and I think this makes sense who are like, you know, I'm going to do really good in high school and get into a really good school. Okay. I'm at that school. What's the next. status seeking thing that a gunner should want to go after. Right. And, and to your point, finance, consulting, law, medicine, those were the like easy ones. And they had a lot of the characteristics of school. Like there was a clear application process. There was a clear steps. These steps were kind of imposed upon you. Like it was, it was a very comforting structure.\n: Yeah, there was a lot of recruiters, there was stuff on campus. And also you could brag to people that you, what offers you got, right? Like a lot of these places, you would interview at all the management consulting places and then talk to, you'd brag to people about all the, you know, who you got offers from.\n"} {"text": ": It's always much more enjoyable work with strong technical teams. But, you know, over the last, you know, let's say three, four months, what are you seeing overall in our world?\n: I think that people that want to do a startup because they're excited about building something and solving stuff for users, those people are still applying. If anything, those folks that aren't making fear-based decisions are more excited to apply to YC and do this, almost because it's more rebellious or anti-something to do a startup when it's less cool to do it. And this makes sense, again, if you actually look at the YC data, Some of the best companies we've ever funded happened when either there was a full downturn or at least a blip, I think we can call it a blip, like some of what happened in 2018. But look at when Stripe was founded, look at when Airbnb was founded, look at when Dropbox was founded, right?\n: Yeah, it's a weird trend because I agree with you, it's both a little bit like, I want to go against the flow, there's that set of founders, but there's also the set of founders who are just strategic. who are just like, hey, look, in the middle of the hype cycle, hiring is harder, getting access to customers is harder, like 17 of your competitors are gonna all get funded. It's weird because on the surface, the hype cycle looks good, but when you actually get into the dirt, the hype cycle hurts just as much as it helps. And so I'm starting talking to founders in this batch who are like, yeah, no, this is actually like, They're not wishing for a downturn, but they're like, this is the time when it's strategic to get in the game.\n: Yeah. Make hay while the sun shines, right? This is where, oh, cool. The price of Facebook ads is dropping. Oh, cool. All these factors are changing. And so if you're well-positioned, this is when you go on offense. You're not like defensively, oh, I'm going to hide. There's a lot of folks that we talk to that are like extremely ready to go on offense. Yes.\n"} {"text": ": Talking before, you were saying that the Brex folks have figured this out a little bit too. Tell their story.\n: We've spoken about the Brex pivot in various other contexts. And so folks know they started with an idea that was like, hey, VR is the future. I guess let's make some VR headsets. Hype-y, scene-ster idea of the moment. Yes. And it makes sense. They had the sense that that was what a startup should be, is whatever the current zeitgeist of what's popular. Fair. And the issue was, you know, I don't know where to begin. They didn't know a ton about that. They were programmers, but they had only worked on fintech stuff before. They didn't really understand the use cases. They weren't really sure why the other products weren't good enough. Like it was just basically DOA. It was a complete mess. It was a mess, yes. And then they tried a couple of ideas, again you know the story. But at the end of the day, they really understood other founders, other people in the YC batch. And once they got the idea for Brex, it was very clear what to do next, which was to talk to the people all around them in YC, literally in this building we're in right now. and ask them stuff like, oh, do you have a credit card? Oh, you don't. Cool. Do you want to use our thing? OK. And then they were able to spend so much time with these customers, understanding the complexities of what they're trying to do, they could very quickly ship the product. And again, let me give you another example for them is a lot of folks that have companies in different countries or employees in different countries, there's all this complexity that you get if you're not American and your company's not American and your employees aren't in the United States.\n: Yes.\n: Right?\n"} {"text": ": So the next category is the successful entrepreneur in a non tech industry. And this is really common. This is really common internationally in like, new founder ecosystems where, like, the people funding them maybe didn't make their money in tech. What's the common kind of advice given here?\n: Yeah, this one's tricky where if someone made all their money investing in real estate or in strip malls or franchise McDonald's franchises or something like just something that is not remotely a tech startup, they will often ask for crazy terms that would make sense if they were investing in, like, a franchise store. They may ask for more control and they may be really stressed out all the time that you're going to lose their money. And so a lot of the trickiest investors is a nice way to say it that I've seen the YC founders are like, oh, why did I take their money? It'll just be someone who's totally well meaning, but they treat this like an investment in a subway franchise and that you're the manager of the subway franchise and they're going to call you and yell at you that you're gonna lose their money as opposed to letting you do your tech startup.\n: And that's really just like, they really, these folks are like, you can't be mad at them. They're just taking the principles that they learned to make their money and applying them to a different industry. Right. And it's like\n: Totally.\n"} {"text": ": So let's do the takeaway here. You know, you set this up with play stupid games, win stupid prizes. Let's talk about some of the stupid prizes that we see companies win. Where do you want to start here?\n: Yeah, well, the thing is, if you set that goal, if you start playing a silly game, you can win at the game. We see lots of people win at the game. And so one of the stupid games sometimes people play is just how much money can I raise? The more money I raise, the better. My goal is most dollars raised. And the bigger that number is, the better I am. So you're playing the game. You won the game. Congratulations. What's the prize you win, Michael? What's the stupid prize if you play the raise as much as you can game?\n: Often you lose control of your company. So like when you confront the challenges, suddenly, you know, your board can fire you. Often you find yourself burning tons of money because all the people who gave you money expect you to spend it. Oftentimes you have the wrong people on your team. You have a bunch of people who think you've made it, who think that this is the next Google, when in reality, it's not. And then last, you might have to change what you're working on or change the problem or pivot in some significant way, but now there are all of these people and all this money and all this momentum going down a direction that's driving your company off the cliff. And that pivot becomes 10 times harder or damn near impossible oftentimes. But you did win the fundraising game.\n: Congratulations Here's your prize you have a messed up a company that shouldn't have raised all the money and you've got to dig yourself out of a disaster and Everyone's mad at you. Here you go. You won the prize. Have fun.\n"} {"text": ": All right, so I suspect I'm in a bad situation. What do I do to fix it?\n: If you think you might be in a bad situation, I would look at what are the other opportunities that you're taking an opportunity cost from doing? So for instance, if you're at the big tech company and other people are getting tons of promotions because of your work, you probably are pretty well undervalued and you could be learning more. And so I would explore starting your own company or going to working somewhere else. If you really want that seat at the table, my guess is you could find a job where you have way more a seat at the table when you're doing decision-making.\n: Well, I'll say a step you could do even before that. You can ask for a seat at the table. That's true. I remember there was this great employee at Justin TV, this guy named Tim, and he was disgruntled because the company wasn't doing well. And as disgruntled as he was, he actually would do the work to come up with ideas and to point out things that were wrong and to create fixes. And like, He took ownership. And what was interesting is that as he took ownership, he was given ownership. So it wasn't this weird, it wasn't like, oh, like you're not at the table, it's like. come up with the smart ideas. Maybe you are at the table, and you're just not fucking participating or taking responsibility.\n: That's a great point. And we see this with equity splits. Because often, sometimes it'll just be, hey, have you all thought about maybe, or how did you come up with the equity splits? Like, well, it's 90-10. Well, why? Well, it's my idea. Well, most of the work is ahead of you, not behind you. What if you went equal? People are like, OK.\n: Yeah, fine.\n: It's actually not that hard to fix this stuff sometimes, shockingly.\n"} {"text": ": So I would say the last story on this was a story I experienced at Justin.TV and Twitch. And I would say, to be honest, Ray, we experienced both sides of this. In the early part of the story, we had a very troubled relationship with our users. On one hand, they were streaming content on our site. We had a lot of traffic. We were able to monetize traffic a little bit. But on the other hand, they were streaming content they didn't have the rights to. They didn't have the rights to. It was like soccer. Soccer, sports, movies, TV. Boxing. Boxing was big. UFC. Hi, guys. They liked us. It's very popular. Very popular. And they were creating problems for us. Like we could get sued. We were getting sued. Like all kinds of issues. We had a really complicated relationship with our customers. And even just the UGC content, right? Or people in chat saying bad things, right? It was like for a lot of the time. They only said nice things, I think. No, no, no. Sometimes you say bad things in chat. And so for a lot of the time, we had this really complicated relationship with our users. And then I think that really changed when Emmett and Kevin started talking to streamers, right? The way the story goes is that, you know, some people started streaming StarCraft II, Emmett was a big StarCraft fan, and he just loved watching this stuff. And he started talking to the streamers, and like, not sending a mass email to all streamers, saying, do you like streaming? Yeah, do you streamer 257? Like, you know? You know, like weird, but yeah, he literally reached out one by one with Kevin. And if you're a streamer, just to this point, just a TV is like five years old. And you're on a phone call with like the CEO and the COO. That's pretty cool.\n: Right?\n: And you care about your like StarCraft channel?\n: Yes. Your StarCraft. What did they play? Were they like, they were StarCraft guys?\n: Is he a Protoss guy? Emmett could kill me with every race in Starcraft. Okay. So I don't even know his... We should ask him. Yes. I was like a zergling rush guy. Okay. Emmett figured out in four seconds and then just had infinite ways. I would play Terran back in the day. Really? Yeah. Siege tank. I don't know.\n: Anyway, carry on with this.\n: Sorry. Sorry. Yes. Yes. So Emmett and Kevin get on the phone with these streamers and basically just asking them what do they need. And I think that what was funny is that the streamers tested them a little bit. The first things they said were things like, well, can you let me stream in higher resolution, right? And, you know, it was funny because talking to Emmett and Kevin afterwards was like, yes. In fact, that's one of the easiest things. Yeah. Like, let me break this down.\n: They thought that people would be asking for all this really hard stuff. And what they asked for was embarrassing because it was so obvious and easy to implement. And it's just that they never bothered to ask.\n: Never bothered to ask. And actually, it was even more insidious than that. For these users that we had a complicated relationship with, increasing the bitrate of their streams increased our costs. that was kind of a negative feedback loop. And, but for these folks, like there was no issue with their content. It was, it was perfectly fine. There were no rights issues and so on and so forth. And hilariously, because we had a really strong technical team and technical founders, we built our own video system. Changing the bit rate was like a number.\n: Like, yeah, it was probably a settings file.\n: It was like the easiest thing in the world. And so, bam, we had that feedback loop of like, they asked for something, we call them two days later, we built it. Oh, mind blown. And then after a couple other conversations, they started teasing this idea. It's like, can you help us make money? And once again, Kevin and I were like, not a lot of money. Like, we are barely alive. Like, how much money do you want to make? And they're like, any money. And once again, I mean, I was like, really? Any money? And they would do the math on some channel and be like, well, if we split the ad revenue with you on this channel, we could send you a check for $20 a month. And the people, the streamers were like, that's amazing. And I was like, really? That's amazing. OK, well. You know, and I remember back in the day, like Kevin would handwrite and mail the checks. And so to me, it was just like the third example of putting yourself out there five years in, not in the beginning, five years in, caring about that customer, asking what they want. And then you start learning, oh crap. The core learning of Twitch was if you could help these streamers make money, and they could quit their job and stream the content that they love, they will make stuff that millions of people want to watch, right? That was the core learning. And the only reason we accomplished it was because Emmett and Kevin called them and gave a shit. Yeah, because think about it.\n: That story could have been, they asked the PM, to go do a report, go do a survey from your data science team, or you asked your investors to go do a report, go do some data science. Like think about the million different ways they could have not personally cared enough to get on the call. Yes.\n"} {"text": ": So the next category investor we see a lot is the influencer, famous person. When I think about this kind of person, this is the person that would come to a YC demo day and everyone would freak out to get them on their cap table.\n: Yes.\n: They just get infinite access. How do you think that they try to help founders who are struggling?\n: Yeah, I think that you really understand distribution if you're an influencer, because that's your game is building up your distribution network, which you can monetize a bunch of different ways, right? If you have a million, you know, Instagram followers or a million tik-tok followers, you can make money off that and you get it, you're savvy. So I think these people are very savvy and realize they can kind of treat startups like other ad deals of being like, give me some stuff and I'll promote you. And so a lot of times these folks will like ask for advisor shares or they'll ask those ask for things, and again they would, that's how they got big. They're good, you know, they know, they know what they're doing and it can be so tempting to do it. To think that like celebrities tweeting about your thing is gonna fix all your distribution problems. And like maybe in some cases they do. But most of my experience, both personally and with founders in YC, is the founders kind of feel like they got a raw deal on these and that the clicks they get from the, from the posts or whatever were not as helpful as they had hoped. That is a nice way to say it.\n"} {"text": ": I think that you've just hit on this like secret hint to founders. Who you're comparing yourself to matters. Like if you're trying to hit a Grand Slam home run with your startup, compare yourself to the people who have hit Grand Slam home runs. Instead of comparing yourself with like a local peer group or the company that just raised at a unicorn valuation.\n: Other people in your pitch competition.\n: Yeah, like at a minimum, if you're looking for like heroes to emulate, can you copy companies that have at least 100 million in revenue and like preferably a billion? There's like so much more you can learn from their stories, even if they might be old. I guess, you know, Facebook's an old company now, but even if they might be older, Man, like you can learn a lot more and like that's what you're trying to emulate. You're not trying to emulate the unicorn valuation. You're trying to emulate the successful multi-billion revenue company.\n: Yeah, that's really well said, Michael. Choosing your peers and choosing who you want to be like is one of the most powerful things you can do if you're an ambitious person that wants to do things in the world, is you get to choose who you want to be like.\n"} {"text": ": This is Michael Seibel with Dalton Caldwell. Today, we actually have some news to announce. For the first time since winter 2020, this new batch, the Summer 22 batch, will be in person. And we are all excited. Dalton, we're gonna get to see founders in person again. What do you think?\n: It's a breath of fresh air. I've been spending a lot of time in this little room, much as probably you have too. So yeah, this is, it's really fun. I'm excited.\n: Me too, me too. So let's talk about what this means. So the founders of this batch are going to have an in-person retreat in Sonoma to kick the batch off. They're going to be able to go to weekly meetups in San Francisco. We're actually going to help organize weekly meetups in other cities around the world. We built some software that are going to help founders meet each other and have one-on-one coffees, founders in the same city. And then we're going to have a huge end of batch celebration after demo day in San Francisco with all the batch and the alumni. Needless to say, the program is still going to be friendly to founders participating remotely. So the batch talks, office hours, things like that will still be online. And we still have founders from all over the world participating. But I have to say, you know, founders I've talked to in every country have been excited to come here to meet us, to meet their batch mates, to get out in front of Zoom and get off these cameras for a little while. I'm really, really excited.\n: Yeah, we kind of had a dry run a little bit last batch where there were a lot of these in-person meetups. And I went to a few, I know you did too. And the energy was great. And so, yeah, now is the time to make this move, you know?\n"} {"text": ": This is Michael Seibel with Dalton Caldwell. Today, we are talking about conformists versus non-conformists in the tech and startup world. So Dalton, set this topic up for us.\n: Sure thing. So something I think about a lot is the history of technology, the history of Silicon Valley, the history of startups. It's just a topic that I've always. was cool. And something that I think a lot about in my job at YC is the change between Stardust being something entirely done by non-conformists and the domain of non-conformists and to kind of becoming like a mainstream thing that I would consider conformist thinking is cool. Like your parents thinking it's cool, your authority figures thinking it's cool, the kind of people that would have gone into very Blue-chip kind of jobs are entering tech and startups that would not be caught dead doing in the past So anyway, that's the setup is it's been weird to witness What was previously a very weird place to go populated by weird people become almost the opposite of that.\n"} {"text": ": So we talked about this classic cargo culting, and at least with the classic, you're copying successful companies. What concerns me more and more nowadays with the explosion evaluations is that we see a lot of founders copying companies that haven't succeeded yet. And this is what's really scary to me, is that, like, some founder will be like, well, we have to do it this way because so and so coming to this, and I'm like, oh, why are they good? It's like, well, they're a billion dollar company.\n: They just raised a series b. They just did this. They read some fundraising announcement.\n: And then I asked them, well, how much revenue are they making? And the most common answer is, I have no idea. And it's like, so you're basing a huge chunk of your company's strategy.\n: Yeah, your strategy. You are the CEO of a company. Let me get this straight. You're the CEO of the company.\n: Yes.\n: You're telling me the strategy, you're betting the pharma.\n: Yes.\n: Is based on, you read a fundraising announcement and you have no other context but, like, a podcast or interview with a founder.\n: And it has a lot of GitHub stars. It's one thing to try to copy something that's working. Like, you might get lucky in winning. Right? Like, if you copy something that's not working, I don't even know what are we doing here? And I think that unfortunately, these valuations have gotten people all messed up in the head. Like, they think that if investor thinks it's worth a billion dollars, it's working.\n: Well, again, just to be super concrete, how many people do we see that were influenced by WeWork and building WeWork for X? And their entire strategy was based on WeWork? Yeah, we saw the same thing. Zoom pizza, like robotic pizza making. And so you'd see these things where it eventually turns into, like, you know, sadly a flame out for the founders. But there are a lot of people that were copying these companies blindly because.\n: They raised a bunch of money.\n: Yeah.\n"} {"text": ": I think this also comes from historical context. By that, I mean, I still think that most founders are kind of looking back to what's worked in their past and almost everything that's happened in their past, almost everything they've learned, they didn't have to learn from first principles. They didn't have to observe personally. Right. You learn physics from a physics teacher. And so I think what's so tricky is what we're basically saying is that, like, all of the ways that you learned in the past don't work here. You actually have to go observe the problem, talk to the people who have the problem, try to figure out what's going on, and iterate, whereas, like, no one learns things that way in school. Like, no one's like, hey, like, we're gonna drop a rock off of a building, see it fall, and then figure out what happened, right? You never learn physics that way. And so I think that what happens is that when these founders go into startups, they're looking for the teacher is the teacher is the cheat, right? Like, how much harder would it be to learn physics without the teacher, right?\n: It's funny, I'm sure, like, you know, people, people email you and me sometimes after these videos, they watch these videos, and our whole point is, go talk to customers, go figure it out. And they email us, and they're like, can you give me advice? Like, they kind of aren't getting the video.\n"} {"text": ": You know, I think this is like such a common thing that comes up when we give startup advice, you know, we'll get a founder that's like, oh, how do I test my product before I launch to make sure it's gonna work? And I always come back and tell the founders the same thing. If you have a house and it's got full of pipes and you know some of the pipes are broken and they're gonna leak, you can spend a lot of time trying to check every pipe, guess whether it's broken or not and repair it, or you can turn the water on. And like, you'll know, you'll know exactly the work to be done when you turn the water on. And I think people are always surprised that that's basically all startups do, is just turn the water on, fix what's broken, rinse and repeat. And like, that's how big companies get built. It's never taught that way though, right? It's always taught in like, oh, somebody had a plan and they wrote it all down. It's like, never, never.\n: And you earn the privilege to work on scalable things by making something people want first. And you know what I think about sometimes with Apple is picture like Wozniak hand soldering the original Apple computer and like those techniques compared to like whoever it is that works on Apple that designed AirPods. Like it's the same company, but like Wozniak hand soldering is not scalable, but You know, because that worked, they earned the privilege to be able to make AirPods now. And because Google search was so good, they earned the privilege to be able to create super scalable stuff like MapReduce and all these other awesome internal tools they built, right? But if they wouldn't have built that stuff first, it wouldn't be Google, man.\n"} {"text": ": So number three is Peter Thiel, and probably one of the things that most young people know about him the most is his critique on college, and like, do we need to go to college? And I think that... Totally fair critique, totally valid critique. Yes. But... He went to college. And not only, like, did he go to college, he went to college, he went to law school. He did undergrad. And he got a law degree from Stanford. Yeah. He worked at a famous law firm and a famous bank. And one might argue he's basically telling you to avoid all that stuff. That stuff brought him pain. But I think one of the things I've learned in advising startups is that if you don't let the startup experience any pain, It's a lot harder for them to learn. And maybe experiencing that pain is what broke them into this.\n: Yeah, and we don't have an A-B test. Again, you could probably hate that we're saying this, but we had an A-B test. And he was exactly the person he was now by just omitting college completely, then fair enough. He wins the argument. But my sense is there was some aspect of those experiences that had a profound impact on his later success.\n: Well, even if we separate out psychoanalysing, you should know that he didn't walk that path. That's true. And then use those facts as you will. Why? Why do people give startups advice that they didn't take?\n: I think you should always assume positive intent in people. That's something I really try to do.\n: And especially these three people.\n: Yeah, these are great. They're trying to help people. And so I think this is well-meaning. And I think what's going on is they're so used to their backstory, they almost become blind to it, just like any human can forget their backstory. And what they're really focusing on is what they would do now based on the information they have now. Yes.\n"} {"text": ": And the best example I saw of this was early days Airbnb. Airbnb did this fun thing to get users in the very early days where they offered people who were putting their homes online for rental on other platforms, free digital photos, high res digital photos, back when like digital cameras weren't a thing yet. in order to list on Airbnb. And then instead of hiring a photographer, they went out, they got digital cameras, they went out and they took the photos. And to this day, I still remember that there was one guy who they met, they took photos of his house. He loved the photos. He asked him, hey, do you want to sit down for coffee or tea or whatever? They started talking and then he said, you know, I've been renting out my house on all of the platforms on the internet for a decade. and I have a notebook of all of my notes on all the things they do bad and all the things they do well for the last decade, do you wanna see it? And it's like, so in the Dalton scenario A, he would have received an email survey, like how, he would have signed up for Airbnb, not had a listing, not used it, and would have sent an email survey, like how do you like Airbnb? Suggest things to improve, right? In the real world example, they got a book of all the things they needed to do.\n: And again, like, think about this. Imagine, you know, these guys, the founders of Airbnb back in the day, the way they validated the idea was to ask people on a survey, or they did some user research, they did interview, they did a user interview, would you like to rent your home? Do you see how what they could have learned from that is is like this versus actually trying to get strangers to rent their home out to other strangers and all the like things that popped up trying to actually make the damn business work. Do you see how like they learned this much from that versus this much from writing a survey?\n: Well, Dalton, it's not even this much. We're not, we're not, we're not, it could be negative. Right? Like it could be negative.\n: You're right. Well, I would never want to use that because it's dangerous. So you need to, you know, like... Done. Right? You don't make Airbnb?\n"} {"text": ": And so, and I think what's cool is that... that wasn't a particularly special period of time. I think they're on the cusp of a bunch of new interesting stuff, right? You know, hilariously, like I remember when Starlink was like an idea.\n: Yeah.\n: And it was kind of like a funny idea.\n: Can you imagine an internet access anywhere going to satellites?\n"} {"text": ": So let's talk about that. Let's talk about the moves. What are some of the tough decisions that you might have to make if you find yourself, default, dead. And you want to change that? Let's go through the list of pain. What's number one?\n: Well, for most folks, it's literally headcount. It's not office snacks. I'm sorry. That's probably not the thing. That's, you know, perks are not bankrupting the company. It's that you hire too many folks. People are expensive, and this is 80%. Like, I've just seen so many people's like, burn spreadsheets. You know, you have to, that's always the thing. They want to be like, whoa, but we're very cheap, or we're, you know, they want to tell a story, but it's, it's, people over hiring is the thing.\n: And I think it's sad because no one likes letting people go. No one looks like, like, let's go. Letting good people go. Right. It's, it's horrible. The best founders, if they have to do this, will make sure that they get other jobs, will make sure that they, they're well.\n: And the best thing is to never over hire to begin with. Like, like, honestly.\n: Yeah.\n: Actual hack is to not over hire.\n: Yes.\n: Once we start having that, we over hire. Now what do we do? Conversation. Let's not have that conversation. Like, like, that's, like, too far. So the actual advice is don't make it a problem, and then you don't have to worry about how to fix it.\n"} {"text": ": Yes.\n: So here's the issue. If you need to manufacture a lot of a product, it's much cheaper to do a big order in quantity, right? Follow me. Like, say we want to, let's talk about t shirts. Let's say we want to create Dalton and Michael T shirts. It's much cheaper to do an order for 10,000 than it is to do one at a time, right.\n: Of the same t shirt. 10,000 of them, same t shirt.\n: Yeah. Makes sense, right? And so crowdfunding and Kickstarter made sense because you could raise, you could sell the t shirts at once. We actually had a YC committee. It's called Teespring. Didn't work out, but it was like a way to order a bunch of t shirts in a quantity. And then you get a big pile of money, and then everything goes perfectly and you engineer it and you manufacture the product, and all the backers of your Kickstarter get the product and everyone's happy and you write, you know, you ride off into the sunset. Right? That's how it works. Right, Michael?\n: Like, that's exactly. And then you, then your apple.\n: Again I don't think people are going to get the irony. We're being, I'm being facetious. For my foreign friends that don't get the irony. So in practice, Michael, what actually happens? What do we see with all these companies that do crowdfunding?\n: No idea how to build it. No idea how much, how much building it would cost, no idea how much the thing should cost. So they're charging users for a product that they don't even know what the right price is. The people who buy it have no idea how long it's going to take to build, which is only matched by the people who are building it, having no idea how much it takes to build. And we haven't even gotten to the best part. No idea whether the thing actually solves the problem for the person. But a lot of money upfront and God, like, a lot of expectations, a lot of untested plans, you know?\n: Well, that's, that's what's funny is like, when you think about it, it seems like the greatest thing in the world to be able to raise money from a crowd fund for your hardware company. But in fact, there's no sure way to make strangers on the Internet hate you. Like, it's a really great way to become like, infamous on the Internet is to be like, here's a cooler with a blender on it, and it's like $200 and back my Kickstarter. And then you don't ship it and you send out updates. The dog ate your homework and, oh, it's chinese new year. Like, I don't know, like, shit happens. And like, man, people don't, people really hate you. You're like a villain for like, and thousands of people spend a lot of time trying to like, track you down and get the refunds and calling you a scammer. Like, it kind of, we've seen this ruin people we know's lives doing this kind of thing.\n: I think that more and more, there are other areas of the startup world that are starting to resemble this kind of model. And I think that it's hard, man. It's so hard because I remember the run up to hardware. If you were a hardware company, everyone else was doing this. You look like an idiot if you weren't crowdfunding. And so like, it goes back to the, hey, man, sometimes when everyone's doing something, it doesn't mean that's gonna work. Crowdfunding was what, a six, seven year cycle?\n: It still could be cool. Like, there's situations where it's a, it's a tool. I just think, I think our startups seven, eight years ago thought it was a panacea. They thought it was the solution.\n: Yes.\n: Like, if you were a hardware company, the only way to do it was to do a crowdfunding, always, right? And now it's just, it's a tool that you could bring to market. But honestly, you know, what the real story here is, is usually do it after you've shipped and manufactured a couple of versions already.\n"} {"text": ": All right. This is Dalton plus Michael. And today we're going to talk about how to not get screwed as a software engineer. Interesting topic. Yeah, we're going to give some tips.\n: We've noticed that a lot of technical folks sometimes get exploited. They kind of get ripped off by other folks. Evil business people. Yeah, it's kind of a bad pattern. And so we're going to talk about it. So who is this aimed at, Michael?\n: Who is this video for? The folks we're talking to. So we're talking to maybe your technical co-founder at a startup right now. Maybe you are a great engineer. at a scaling up company. the guy that everyone comes to, the person who always gets fixed, the woman who's always up late getting those text messages and having to.\n: Yeah. Or you're at a really early stage startup, but you're not a founder or a co-founder. You're like a lead engineer or head of engineering or there's some title and the whole company is like three people, but you're not a founder.\n: You're not a founder. Okay. There is the college student who all the MBAs go to to build their prototype. And then there's the Googler, right? How did you describe it?\n: It's the person that does the work that other people take credit for to get promoted in bonuses. It's the person that does the, you know, actually producing the products that a lot of people stake their career on.\n: Yes, yes, yes, yes.\n: So that's who we're talking.\n: Yeah. So I think the thing that we're trying to really help you with. Yeah, we feel bad for you.\n: So this comes up a lot for us at YC where we read a lot of applications and we interview a lot of companies and we see folks where it's pretty clear what's going on. We can see it a mile away in the application that someone is getting exploited or ripped off and it's usually the technical person, right? And it feels bad to see just all of these applications come in and it's crystal clear what's going on.\n"} {"text": ": You know, there is one better strategy. Do a software company a lot easier. A lot easier.\n: Yeah. And then along these lines, you know, clearly there's a lot of stuff happening in crypto, and this relevant to this, but just be aware, if you take money from people at scale on the Internet, they rightfully will hold you accountable. And I just don't know if people. It looks like people are handing out free money on the Internet, and I get why people want that. Just understand that there's a cost, and if people think that you rugged them, if you rugged the people with your thing, you know it's gonna be bad for your life. Right? Like, there's a cost. Like, there's no. There is no free lunch, I think, in this sense. And so, you know, just be aware of that. I don't. Again, I know people that have been on the other side of this. It's not great if they start trying to track you down.\n"} {"text": ": The number two is ad spend. And, man, we see this all the time. It's, well, we have this top line goal.\n: We need to hit 80K Mrr. Right, Michael? We need to hit 80K Mrr.\n: We gotta hit it. And so we gotta spend this much money on ads. In fact, we have to spend more money on ads every month because we're growing to hit our growth. Yeah. And unfortunately, the result of that is also that, like, our payback period for every customer that we're acquiring is either super long or long and growing. So our ad dollars are getting more ineffective as we are scaling them up.\n: And we have to show growth, because if we, if we stop increasing our ad spend, basically, if we stop steering the plane into the mountain and putting the gas or, like, putting throttle in, if we don't do that, we won't raise. And so you'll talk to founders where they know the problem. They're like, yeah, yeah, we're in trouble. We need a raise. And we're like, well, maybe don't, like, don't crash the plane to the mountain. And they're like, yeah, yeah, but you don't get it. If we don't put the throttle into the side of the mountain, we won't be able to raise. And it's like, these are the most frightening conversations so bad. And I think what they, and what they don't want to do is take the l. Like, they don't want to, they don't want to take the growth hit because they, the idea that maybe someone would fund them or maybe they could sell their company in some long shot scenario prevents them from not steering the company into the mouth. Right.\n: And I think this isn't talked about enough. Like many successful companies have had to take L's along the way.\n: Oh, yeah.\n: Like, learning how to take a punch is not a bad thing. Losing face.\n: No one cares. No one cares. Oh, you reduced your ad spend, your growth evaporated, but you're around to live to fight for another day. That's fine.\n"} {"text": ": All right, what else? So we got entertainment.\n: Yeah, I mean, think about, there's like an infinite supply of things to look at all day. Infinite. Infinite. Any movie you want to see, any television show ever created, any book ever created. If you want to pirate things, like if we include piracy in here, it's literally the sum of all human creative contents. in the history of time is available at your fingertips for free. Yes. And the only thing limiting it is your willingness to go find it. Yes. Like, it's your appetite is the limiting factor, not scarcity. You might have to watch some ads. Yeah. You might have to watch a couple ads. But it's post-scarcity on this stuff. The only limiting is your imagination of what you want to watch.\n"} {"text": ": And so when I talk to founders about this, I say, hey, look, you got a team of two, three, four people. Maybe you're going to have one or two who are passionate about the problem because they've experienced it or because it's a life work or so on and so forth. But the other things that you can be passionate if you're on the team on is one, your co-founders, right? Working with friends is so much fun. Compared to a job at Google, working with your friends feels like winning. Not having a boss feels like winning, like being able to choose what you get to do every day feels like winning. I think there's a certain set of somewhat broken people, and I would put us in that group, where having consequences feels like winning. If I'm playing in a sandbox and everything is controlled and I can't do anything wrong, it doesn't feel like winning. If I can lose, games have losers and winners, right? If I can lose, it's much more likely I'll feel like winning. Those are the things that you can kind of tie yourself to, at least for a little while, before you've got clear evidence that your customers, you're solving a real problem for your customers.\n: So. And it's a riff on this, man. I actually think what you're talking about and what I always suggest founders do is intentionally set up motivators, like psychological motivators around you to intentionally game yourself, like very intentionally, the same way you would be, you know, training a pet or something, you train yourself, right. And when you set yourself up with a startup idea, with no opinions, with no customers, with no revenue, searching for amorphous goals that are ill-defined. Working with strangers. Working with strangers. You could not create a shittier environment to ever do anything good. Because there's no rule. You just wake up every day and you do things and maybe something happens, maybe it doesn't. But like, you're hoping that you'll be discovered someday. I don't even know what you're hoping for. You're hoping magical things will happen to you, okay? Versus when you set it up so that you're like, okay, our job is to get revenue. But so many founders are like, well, I don't want revenue. I think that'll slow our growth. You know, they have theoretical reasons. But what's good about having revenue is it's a number. And you can look at the number every day. And if the number goes up, your brain will feel good. Your brain will release chemicals when you make money that is fun.\n"} {"text": ": This is Dalton Plus Michael and today we're going to talk about should you bootstrap or should you start a VC backed company? This is like a confusingly controversial topic.\n: Yeah.\n: I'm not really sure why it's controversial.\n: Well, it's one of those sort of one sided things where a lot of people don't care to topic versus people that care a lot? Yeah. Does that make sense?\n: Yeah.\n: And so I think there's a lot of people that strongly identify and are really excited about bootstrapping. Yeah. That are very like fired up about this. Yeah. And there's a lot of people that this just isn't a topic that comes up much.\n"} {"text": ": So how do we avoid this at YC? Because we all do startups. We have our own scars. Exactly. We are self-aware. And we actually try. Someone can make a video about us about the same topic.\n: And so one of the things that we try to do with companies in the batch, at the beginning of the batch, is we all tell our own stories about our whole back story, what we did before we started our companies. Everything we screwed up. Everything we screwed up. I think the government had advantage because we were ruining their internet.\n: Justin says, I'm going to strap a camera over my head and broadcast my life 24-7 on the internet. And Paul Rand says, I will give you $50,000 just to see what happens. So we do whatever he says he wants to do with us, and we email MIT.\n: We're really honest, and I actually think it helps people get to know us, to contextualize us as humans, to know our whole story. Yeah, I think it really helps a lot.\n: And to know how many mistakes you can make and still do something interesting.\n: Yeah, and so I think it's good to actually hear before you Cherry-pick bits and pieces of people's advice. It's good to kind of like a fuller. Yeah. Yes Perspective on their whole thing. Yes. I think it's helpful Yes, and even even us like I think if people knew more about us, but they were watching these videos Yeah, it probably would add some nuance to what we say in these in these videos 100% right 100% I think the second thing is I\n: and you made this point, I think we think a lot about what would we tell people we are really close to? What would we tell our kids? What would we tell our friends' kids? Like when it becomes, like when you can personalize it and make it real in your life, suddenly you're a little bit more maybe conservative or you're a little bit more real. And you can be a little bit more experimental. You know, it's like, I'm thinking I'm gonna tell my kids to go to college.\n: Yeah, exactly.\n: And I didn't really like college. And I actually wasn't terribly impressed with my school. I went to Yale. I wasn't terribly impressed. But if you look at the facts, it's where I met my co-founders. Without them, I wouldn't be here right now. So if that's the only thing Yale did for me. Worth it.\n: It changed your life.\n: Yeah.\n: The only thing it did for me was changing my life. Yeah.\n: Well, you know.\n: What have you done for me lately, though? But yeah, imagine we had an AB test where you didn't go to college. Hey, man, I don't think you'd be here. No, I would not be here.\n: Absolutely not. Yeah. So I'm probably going to tell them to go to college.\n: Risk it. Yeah. And again, I feel the same way. I got kids, too. And I actually really try to give them, I try to give founders or the people in these videos, I try to say the same stuff I would just say to my kids. Yes. Like, and not have a, oh, let's throw in a troll opinion here, Michael, just for the hell of it.\n"} {"text": ": Hey, this is Michael Seibel with Dalton Caldwell. And today we're going to talk about what does it really mean to do things that don't scale? This term was massively popularized in a PGSA from 2013, but it was advice that he'd been giving YC founders for a really long time. But Dalton, it seems like a lot of founders get this confused.\n: Doing things that don't scale is doing something that's provocatively manual on your part, where you, the founder, does a thing personally, and that isn't counting on a lot of code that you're writing or scalable processes to run how you think late stage companies are run.\n: Might help for us to give some examples. Let's give examples. Reddit. So day one, Reddit exists, site, no links. No users. No users. Blank page. But like, click a button to submit a link. What do you do if you're Steve and Alexis?\n: So the scalable solution is you first launch subreddits, then you run ads to recruit people to come sign up for Reddit on different topics. And then hold on, then you would hire an influencer. You have an influencer strategy to get influencers on various topics to come moderate the subreddits, okay? And so that the day you launch, you have this big splashy launch with hundreds of thousands of signups, right? That scales. That scales.\n"} {"text": ": No.\n: And doesn't that suck?\n: Yeah, that sucks.\n: It's like, Sorry, I wish I could tell you that I had all the facts.\n: I feel like we can't make it not suck. But isn't it nice that we're just being honest with you and be like, this is exactly how much it's going to suck? You know, it's not, it's not easy. What I find distressing, though, is how investors often get this wrong. Investors often believe that founders don't need this ground truth. Or you can just take solution from a and put it in place b and work. Give companies money. Those companies start doing company building, hiring the execs, hiring the team. And this happens to YC companies all the time. You talk to them two years later and you're like, they come to you and they're like, it's not working. And this happens to YC companies a lot. They'll go raise a lot of money, ignore us for two years, come back when it's not working. But they have a team of 50 and be like Michael Dalton. Like, what happened? It's like, well, did anyone like your product, like, did you solve any problem for anyone? Or like, let's look at a core stat. Like you charge people, what's your revenue look like?\n: Well, we're not really focused on revenue right now. We want to grow.\n: We want to grow. We have to increase the, we know this company personally. I won't say it is, we have to increase the number of customers who could buy us before we increase the customers who do buy us. It's like, well.\n: It's great logic.\n"} {"text": ": And I think this is part of this kind of weirdly bigger trend of like, people doing the modern cargo culting among startups where they're like, oh, if my startup looks is gonna, is gonna be real, it has to look like other startups.\n: Yeah. It's like the superficial, they're really focused on how people will perceive the startup superficially.\n: Yes.\n: Like the logos thing we were talking about.\n: Yes, yes.\n: Like, what are some examples of the superficial things that you want to do to pretend to be a startup?\n: I have to raise money. Right? I have to have good advisors. Maybe someone, God forbid, told me I should have a patent. Right. I have to have an amazing pitch deck. I gotta be able to pitch my company anywhere. Maybe a couple conferences, I get invited to some press. And these are things that founders do to impress themselves, to impress other founders.\n: Yep.\n: The user is not essential.\n: Essential has nothing with the product or solving problems for users. It's all the superficial.\n: Yes.\n: Facade of this looks like a startup that looks like other startups that raise money.\n"} {"text": ": All right, here's the next investor type. The junior investor, the person who just got started looking to make a name for themselves still early in their career, oftentimes having to really have a win pretty quickly to cement themselves in this career. What's the most common type of advice these people give?\n: Yeah, I think this one is tricky. I think a good mental model is to put yourself in their shoes. I think when you're a new investor or you're newly hired at your job, you're not in a position of power inside of the place that you work or you're not in a position of power with your investors because they want to raise money from someone else. And so to show weakness or to like screw up their first few investments is very bad for their career. And we know lots of people that basically don't last in the industry because their first investments were bad. Like it's kind of career suicide to become an investor, not have any other track record, and then make some bad investments. Like you're not going to make it. Okay. And so basically these folks are very optimistic that it's going to work, that you're going to make it work, that you should totally go raise more money because their KPI is that if you raise money and they can mark up their investment, it makes them look good. So they can go tell their colleagues or their investors, hey, I invested in this company and it went on to raise more money at a better valuation than I invested at.\n: I'm really working. Right.\n: And so the thing to understand is that's their KPI. And so in your interactions with them, they will often just really encourage you to fundraise and keep doing that a lot and that everything's working great and you do have product market fit and you should scale faster. Right.\n: Yeah. And it's interesting because another example of that, like they're not trying to hurt your company.\n: they're nice people.\n: Like, in many ways, yeah, in many ways they're like some amongst the biggest cheerleaders for your company. It's just that like your company at this stage probably has some really broken shit that has to be dealt with. And so unfortunately, it's harder for them to kind of go and spend the time in the dirt with you on that stuff because it's going to kind of break their illusion. And hey, it is what it is.\n: It's rough. Like if you are a company where it doesn't make sense to raise for a very long amount of time, it may be the right thing that you want to do, but may not be great for them if their whole thing is to prove that they're great investors really fast so that they can keep their jobs.\n"} {"text": ": Money's tangential. In fact, if you think about doing these things with a lot of money, that's how you get to the, let's hire a\n: Let's have many people between me and the customer.\n: The more layers there are between, the better we'll do, the smarter, the more we'll learn, the more people we can talk to. All right, so the final takeaway here is that if you really want to accelerate your learning, care about your customers, go talk to them, go spend time with them one-on-one, and you'd be surprised at one, how special they'll feel, and two, when they feel special, how much they can help you learn about their problems and how to solve them. Dalton, great to see you, man.\n: Thanks.\n"} {"text": ": And I think the last one that I would say is like, And this is a slightly dangerous one, but when people are honest with you and it turns out to be that way, when people are like, this is gonna be the hardest job you've ever done, and then it turns out that you're working like crazy, when the team you're coming into is extremely upfront with you about how it's going to be, and it turns out that way and it's not good, it's not necessarily you're being exploited. You made that choice.\n: You chose that.\n: That's a really great point, man.\n: Think about expectation setting when you take any job, or when you go to school, the people, the great professors, or teachers, or bosses, it's not that they tell you it's gonna be easy, it's that they tell you what's gonna happen, and they're right. And you're like, wow, I really respect that you set my expectations well, and I knew what I was walking into. And so again, if someone did an A plus job of expectation setting, you can't really hold, you can't argue that they're exploiting you or that this is like not what you signed up for, right? No.\n"} {"text": ": The next fun one is I want to feel like someone running a big company. I want to have 50 employees. I want to have 100 employees. I want to have 500 employees. I want to be a boss of a lot of people.\n: My metric is number of employees. I want a real big team. I want to move real fast. That's my game. Yeah.\n: It's always about moving fast. That's the lie. It's like if we had this, we could finally move as fast as like, you know, we could finally build all the things that I want us to build. So what's the stupid prize on that one, Dalton?\n: Now you wake up one day and you look at the spreadsheet of your burn and you look at all the people that work at your company and you're like, oh no. And guess what? It's now your problem because now you might have to do a layoff. You might have to let people go. You might mess up people's lives that believed in you. You might mess up that or have moral issues there. It's like the worst thing ever to over hire and have to deal with it. And if you talk to someone that's had to deal with this, this is usually one of the more, the biggest failures if you look at your life. I know that's how I feel like personally is the biggest failures I've ever had were definitely having to let people go that I shouldn't have hired. So congratulations, you win the prize. You hired a bunch of people. You're a big, important person. Now you're responsible for all of this.\n"} {"text": ": And I think what was interesting was that when Joe tells this story, he talks about one host who, after they took all the photos and they arranged the lights the right way, and they showed him photos, like, oh, the place looks great. The host was like, hey, do you want to sit down for coffee? And it was so funny, because that was the moment in the story where I was like, a lot of founders would have said no. Yeah. A lot of founders would have been like, I have someone else on the list. I'm just doing this to try to make my website better. I don't really like you. I'm actually kind of pissed that you have shitty photos of my site. So I got what I need. I'm getting out of here. And Joe actually cared about his users. And Joe was like, sure. And as he tells that story, he learned that that host had been renting out his apartment for, I think, 10 years. And throughout the process of learning how to do it, he had taken notes in this notebook. And at some point during this coffee session, the guy was like, hey, oh, you want my notes? Do you want my notes on being a host for the last 10 years? It's like, would you like a goldmine? Yeah, for all of my thoughts, all of my everything. And Joe's Loon. Yeah. And what was so funny was that That whole process, that whole thing of learning what he probably couldn't have learned if he had talked to a hundred hosts casually, he got by caring about one host. Those moments never happen. That learning never happens if you don't care.\n: Yeah, we always, we talk about these guys a lot, but you know something that you can't fake that they always do is they remember the names and the life stories of their first customers. Like when they talk about the original Airbnb, they weren't like, yeah, we, We hid behind our keyboards and we bought some Facebook ads. We put out a landing page and we spammed some people and they signed up and, you know, we scraped VR. No. Yeah. When they tell the story, it's a story about people. Yes. And they know all their names. And they keep in touch with all of their original hosts and the people that stayed with them to this day. And they just cared more. Yeah. And you can't fake that in many ways.\n"} {"text": ": Long time, actually. And I resisted it. I resisted it. Our CEO, Kevin was like, this is important for you to learn. And I'm like, you know what's important for us to learn? How not to lose money every month before we die. And the balance sheet is not really telling us that. It's that we make no money and we spend money. So that's what the problem is.\n: For these folks I get it. Right. You spend time in spreadsheets, especially if you're doing stock market investing or private equity investing. It makes sense that your weapon is money, and you move money around to. That's your leverage point. That's your point of leverage. What's the downside of internalizing that too much, man?\n: I mean, we see this all the time, which is like scaling negative unit economics or spending a ton of money on advertising with ever, ever worse payback periods or no payback period ever. It's really like getting people to work on things that are not making their product good.\n: Yeah. And I think what's, remember Patrick Collison was talking about this when he came to speak at a batch recently where he's like, listen, let me be blunt. Too many founders treat product as an afterthought. They're basically trying to do financial engineering, and the product is like, delegated.\n"} {"text": ": Hey, this is Michael Seibel with Dalton Caldwell and welcome to Rookie Mistakes. We've asked YC founders for their rookie mistakes so we can share them with you and help you avoid them. Okay, so here's the next note that a YC founder wrote in. The easiest way to fundraise is to indeed have a good metric that's growing. When I ran a startup that wasn't growing, I spoke to 140 investors and only got two angel checks. Now I'm working on a startup that is growing, and almost every well-known VC is trying to figure out how to talk to us. It took us one week to raise our seed round.\n: I don't know, Michael, I've heard rumors from around the world that the best time to fundraise is before you have any metrics at all, right? Because once you have any revenue, you will be judged on the revenue.\n"} {"text": ": So, number two, of course, Facebook, even closer to kind of our generation, they were the ones that brought you the going viral.\n: Oh, yeah.\n: How is your thing gonna go viral, Dalton? How's it gonna go viral? They're the ones who brought you the. Where's the share button? Yeah, you have to have a share button on everything. What else did. What else was the Uber? I'm not the Facebook classics, I think.\n: Just trying to not make any money directly from users and build up as big of a user base you can and then build an ads business. Obviously everyone was trying to do this, but Facebook, really, we were constantly told by everyone we knew, and again, we believed it, that following the Facebook playbook was what was right for every business. No matter what type of business, no.\n: Matter what, charging users was against the rules.\n: Yeah. Cause you wanted to get the most user data possible. You wanted to get the biggest database of users, all that good stuff.\n: And then the nobody cares about privacy. What was that? There was a zuck quote where it was like, privacy is.\n: Doesn't matter.\n: I forget.\n: They were like. Anyway, everyone that was blindly following what they did was trained to ignore all of those yes. Matters.\n"} {"text": ": Let's talk about some other examples, though. You were mentioning that OpenSea is a good example of something that started super simple.\n: Yeah, I mean, look, Opensea is a company in the zeitgeist it's really famous. It feels like it came out of nowhere. If you're like a, like a normal person, you're like, wow, Opensea, what a huge deal. Well, OpenSea was in YC in 2018 and, you know, it was a rough start. They changed their idea. They were working on something else to begin with and they pivoted into OpenSea and they actually spent something like a year to two years grinding it out with this really simple website that just let you buy and sell nfts and like barely worked. And they shipped tons of features. They shipped like once a day or once a week constantly. They didn't build their own wallet. Like, if you use Opensea, you'll notice this, you have to use a third party wallet. There's all these other things they didn't build. And by grinding away and being super focused on the simple use case, they got something that people wanted, they got network effects, and then boom, we all woke up one day and this is one of the hottest companies in the world, and everyone wants to invest and they're worth billions of dollars. Well, don't forget the two or three years they were grinding away in obscurity, just trying to make the dang thing work. Doing the simplest thing that had basically no features. The feature was a website to buy an NFT and transfer it to someone else. You know what I'm saying? And it still has a lot of work to do on the basics before they add really complex features. There's a lot more basic work to do on that thing. And so again, the story here is the reason that thing worked is they started simple and they made the simple thing work and now they're adding more complexity to it. And so if someone wanted to like compete with them or make an NFT startup, they should be doing the simple fundamentals first and not try to get feature parity with all these other companies first, you know.\n"} {"text": ": I think there was also a bit of like, the folks in this world weren't lazy. I actually think the other kind of aspect here that was interesting was that It was a lot of people who didn't want to wait in line. Like they didn't want to be told like, Oh no, no, no. Like you still have 10, 15, 20 years to go to school or to work your way up through the system before you get to do stuff. You know, they were like, I want to do stuff now. And what was funny was that, you know, tech was the place back then where you could do stuff now, like there would be no waiting. Um, and certainly tech startups back then. But now things have changed, you know, fast forward, um, a little less than 20 years and tech is now attracting conformists. And I think that, you know, you and I have talked about this a lot, but I think at first that was a confusing concept to us, you know, just, just because of our different lived experience when we were in school.\n: Also in hiring, I mean, we'll probably talk about this a minute, but like the people who we were able to hire at our startups, like who would want to be an early employee at iMeme and Justin TV? Non-conformists, like they would never be, you know, a conformist would not be caught dead working at an early stage startup.\n: Well, you know, and to, to extend that point, what was so cool about San Francisco was it was the first place I went that just felt like. I could be in a room full of weirdos. I could meet weirdos on the street. Like, you know, weirdos were all around, you know, it was the first place. Oh, wow. There are all these people who think they can make companies and they're just kind of all around doing it. That's different. Like that's the opposite of where I came from. But, you know, today I might argue that. Big tech has become put itself solidly in that list, right? It is amongst the finance and consulting and legal and medicine. Um, you know, college kids today obsess with getting jobs at Facebook and Google. They study how they interview just as much as people study how to interview, how to get into Goldman Sachs, right?\n: Yeah. And they, you know, you brag to everyone. I got this offer. I get this bonus. I got this level. Like it's a whole, like I've seen some of these Reddit threads, man, this stuff's wild.\n"} {"text": ": Now, we're also seeing a lot more interest in San Francisco and like, I don't know, like that's a dirty word. I'm not sure if I'm allowed to say the term San Francisco because we all know the tech world doesn't exist here anymore, right? Yeah. Well, it's funny.\n: There was so much content marketing trying to FOMO everyone. that everyone was moving into whatever, insert city name, whatever the city was, this is the next capital. Then there was a lot less content marketing of all the people that moved back. I don't know who you're talking to, but a lot of the folks I've talked to that were loudly talking about moving away to whatever city name, they're much more quiet on the move back. Yeah, I'm not seeing as many, I'm not seeing as much of that. But yeah, I think a lot of folks are moving back right now. New York too. It just seems like people are going back to the big centers because they're getting bored and lonely and feel kind of over it. Again, this is what I'm learning in Office Hours, man, is that people are, they want to be where the action is.\n: You know, I think you're saying it the right way. I think the founders I talked to, they don't want to build a startup ecosystem. They want to be a part of a startup ecosystem. And it's been interesting because we saw it, you know, first in the end of batch survey when we asked people about, oh, as we add more in-person components, and it was like almost unanimous. The founders in the previous batch were like, if you had told us something was happening in the Bay Area, we would have moved, you know, and like that was a response. we didn't necessarily expect.\n: It's almost like you and I were convinced that that wouldn't be the case. I don't know how to explain it. The content marketing worked on me too a little bit. Yeah, yeah. But it's not being borne out in the data that we have about, you get what I'm saying? I kind of bought into the content marketing too, but we'll see. I don't know.\n"} {"text": ": And then I think the last one is learn to love long games. And this is kind of the theme that I brought up in the beginning. These games are long. And I remember when I started my startup, I was 23 years old and I'd never done anything that took very long. When you really think about it, like what do you do in school? What's the longest project you have in school? Like maybe a senior thesis in college, maybe. And so I remember talking to our lawyer at the time and he said, oh, and he was 30, which in my mind was like impossibly old. I was like, well, obviously nothing you know is relevant to modern times. And he said, you know, the average startup takes seven to 10 years to exit or IPO or sell. And I just thought that couldn't be the case. Like, and what's funny is like he worked at a law firm, like he worked at a law firm that represented like maybe a quarter of all tech companies. He had the data, like this wasn't like an off-the-top-of-his-head thing. And I just remember thinking, this guy doesn't know what he's talking about. And I remember when our company sold, took him out to dinner, it was seven years later. I was his age when he told me that. I was 30, he was 37, impossibly old. And I just remember thinking, fuck, the guy was right. Like, this is a long game.\n: And I think having ambition in your life involves playing the long game. Because to actually do something great, it doesn't happen overnight. And I don't know what your experience is, but we know a lot of people when they were very young. it's okay to have ambition, it's good to have ambition, and true ambition means being patient over many, many, many years. And so to give you a completely non-startup example, my high school girlfriend, her thing was poetry, and she really liked poetry. Again, this is like high school. And so she'd write all this poetry, that was like her thing, and I kind of fell out of touch with her, but she's the New York Times poetry critic now. Holy shit. And that was my high school girlfriend who loved poetry. So she played the long game. And this is my point. It's that like, you know, probably not everyone that likes poetry when they're like a 16 year old is probably not gonna go there. But if you actually put in your whole life towards something and you have a dream and you're not ashamed of the dream and you keep the dream going into your third, like a lot of people have dreams when they're young and they lose their dreams in their 20s. They let the dreams go. But if you keep your dream and put in the years of work, those are the people sitting at the top of the system. Yes. Like the people that make it are people just like you and me. Yes. That had a dream and they put in 17 years, 20 years of real hard work.\n"} {"text": ": What about your friends? who are making fun of you. Because you're doing this shit work. You tell your friends what you're doing. They work at Google. They get free food and free laundry and Google bus. And they're like, what are you, you're hand delivering food? You're hand adding links to your own link sharing website? How do you get over the know what I was telling you? You are an idiot. That's not how it works. I know how it works. I work at Google.\n: Well, you are an idiot because you started a company. No, just kidding. This is what comes with the territory, friends. If it were easy to start a company and anyone could quit their job at Google and just magically have product market fit and be successful, way more people would do it. How many Googles are there in the world? Not many. And it's because there's this Um, this stage screens out most people because it sucks, right? It sucks hard. And so most people look at this and they're like, I have to do what? And then most likely I'll fail and I'll go broke. Whereas I could keep my high status job. This screens everybody out. This is why are there not more successful founder? Like the reason why there's not more startups in the world is not because there's lack of good ideas or innovation, or I would argue even funding. It's basically there aren't enough people that really want to do this stage of the startup and are good at it.\n"} {"text": ": I think I first met him 15 years ago.\n: Yeah, you're right. I met him. Anyway, we've known him a long time. And he recently made some comments about, hey, I don't know about some of the advice I gave when I was working at YC. Maybe there's just a better way to do startups of going really big and being ambitious. And fair enough. So a lot of folks have raised a lot of money, hire a team, build a lab that takes years. Super cool. I think it's worked well for him. Yes. And so a lot of people are asking about us and you know, I think he makes fair points But we should talk about story is important, which we'll get to in a minute.\n: Yes. So maybe the next one is Elon, you know some version of Oh, it's been more exciting to work in the world of Atoms or YRP.\n: People aren't doing ambitious enough startups. Founders need to be fixing the world, saving the world, going to space. Which, by the way, I don't disagree with that message.\n: I would like founders to do that. But that's not, once again, that might not have been his history on the news. And we'll go into that.\n: And the last one, of course.\n: Is Thiel, he's given a lot of advice about a lot of things, which is great. The one that we are flagging here is the whole, don't go to college, college is bullshit type of thing. Which again, all right, there's some fair points to make there. But not his path.\n"} {"text": ": So what's the cure, Dalton? I am a founder. I admit I'm thinking like a vc, and I don't want to. What is the cure?\n: I think to start with, this is a case of being good at learning certain things that may not serve you at a certain time. Again, let me give you an example. Let's say that someone worked at a big company for a while and learned a lot about corporate politics. Okay. File that away in the memory bank. Maybe someday that will be helpful. Yeah, but, like, forget it. Like, whatever part of your brain was saving that, turn off those neurons. If you're trying to do a very early stage startup.\n: Yep.\n: I would argue this is a similar thing, which is all the Excel spreadsheet modeling you learned as an investment banker. That's great. Just turn that off, though, like, unlearn that doesn't serve you now, and embrace the beginner's mind to get your startup off the ground. And then if you're very successful, you'll use these skills again. They just aren't.\n: You'll earn them. Well, you'll earn the right to use them.\n: Exactly.\n"} {"text": ": So I think the other thing is that no one is trying to say in our industry that if you make a great software product that allows you to make enough money to live a good life, and it's not PC-backed, that you haven't won. You won. Yep. Like, I had a friend who made one of these companies. He might have used this product. His product generated about $30,000 to $50,000 a month and took about 7 to 10 hours a month of maintenance the entire time I was working on my startup. he was living life. Like I would watch his life on Facebook and be like, this is amazing. He traveled the world. He got married. He had kids. I'm like, he won. Like, that's like, like good for him.\n: Like there's no, like, again, this is the one-sided thing is that we're like, great. Like we're like high-fiving that dream versus,\n: that there's this two-sided battle. 97% of the time I was watching that Facebook, I was like, am I the idiot? And like, the evidence was like... Quite possibly, Michael. Quite possibly. Yes. And he's still doing great, right? And so, like, this is really clear. It's like building a great small business, software, small software.\n: Even the term small bothers people.\n"} {"text": ": I always like to think about this a little bit like science. Like imagine that you're a founder, oh sorry, if you're a founder, imagine you're a scientist, right? And you could design one of two experiments. One experiment that actually tests your hypothesis and will give you actual information about whether your hypothesis is right or wrong. And another experiment that doesn't test the important variable at all. How many founders do we know who are never testing the important key hypothesis of their company? For the exact reason you talked about, because if I know that I'm wrong, my ego shatters, or my investors will hate me, or my co-founders will leave, or some other reason I've told myself for not just figuring out, is the thing I think true or not? And what I find so surprising is that Some founders just, it doesn't occur to them to think this way. You know, we had the Stripe founders come in and talk last batch. And we always get founders asking us about pricing. I gotta discount my product, gotta make it free early, and da-da-da-da-da. And the Stripe founders said, we thought that startups had a problem accepting credit cards. We thought that all of the existing products out there back in the day were too hard to use and too much of a pain in the ass. See, now we tested our hypothesis. We built something for developers that was a lot easier for startups to use, and then we charged more than the competition for it. Now, any scientist would say, okay, well, if we're trying to test this variable, charging more to figure out whether startups would use this thing, it seems like a great just logical test. But for a startup founder, that seems like a crippling decision. And what I loved about the Stripe founders here is that they just went with the logical test. They kind of put their ego to the side and they said, hey, what's the fastest, most logical test that we can run to see if this thing is something that people want? Anyways, so we've talked about this problem, this mistake of are my users willing to spend some capital, any kind of capital on using my product. Here's the last one that I love. The last one is kind of sometimes what I call the terrorist user or like the user that you love more than they love you. So here's the quote from the YC founder. When the customer you're pitching says, we really love your tech, but we can't pick it up today because X, but we wanna use it in our next project and we'll be in touch soon. This is a rejection. They don't want your tech. They just want you out of their office. This is a don't call me, I'll call you. So how does a founder interpret whether they're talking to a real customer or someone who's just trying to be polite or just trying to move on or doesn't have the need? How do you figure out? We told them to talk to their users. How do I figure out whether they're talking to a live one?\n: I think if we talk about being scientists again like we did a moment ago, a scientist would be dispassionate and would say, okay, no, and they wouldn't think about it anymore and they would go on to the next thing.\n"} {"text": ": You know, we talked about the surface issues. Let's go deeper. How are you actually supposed to figure out what to work on? Like that's the real thing. Okay, so let's say you find yourself attracted to stuff and you're like, all right, I believe you. I believe you, Dalton. I'm not gonna do a blank startup because it's the coolest technology right now. How do I figure out what to work on?\n: You know, I think a lot of people get told to follow your passion. You know, I'm looking for a project, a project, again, that's a good tell. If you call it a project. That's a bad sign. We're looking for a project we are very passionate about. And so you sort of go through this like spirit journey of what all the problems are that face humanity or something. And so you're like, okay, Michael, we figured out our passion is the environment. Yep. That's our startup. And so again, I think when people give the advice of follow your passion, they're trying to be helpful. What do you think that actually means in a way that is actionable when someone is saying that? What does it mean to follow your passion when you're finding a startup?\n: I want to break this down into two parts. Part one, there are people out there that have real problems, that encounter real problems on a daily basis. They are passionate about solving those real problems and they can actually see even in their MVPs the problems being solved. I think for those people, I want to push them to solve the real problems in their lives. I think there's a whole set of other people who don't have very many problems in their life. And I think those people kind of reach for like the UN problems or the global \u2013 the problems that like they are told they should care about but they don't really encounter on a day-to-day and they can't really tell whether they're improving them or not. So I think you and I always kind of get into a debate on this. You know, for that person who grew up, I mean, we have funded people who like in their country, when you try to swipe a bank card, the transaction doesn't go through like two out of five times. And it's, you know, and we funded them and they've actually fixed that. And that wasn't a theoretical problem, but that turned into actually improving banking in their country, right? Then we funded other people who absolutely didn't have that. So to me, I'm happy to talk about the other things that you can trigger on if you don't have that real problem in your life, but what do you think about the people who do have the real problem in their lives and they're going after it?\n: I think in terms of this passion thing, let's dig way back into history. Yes. What was the genesis of the companies Microsoft and Apple? I mean, Microsoft, you know, flashback to the seventies, my recollection of the story is it was some folks that really liked computers when they were a new thing. And someone needs to port basic, which was a programming language onto some weird hardware sold out of a strip mall in Albuquerque, you know? And so these were just folks that were really into this weird niche thing, but no one told them to go work on microcomputers. They weren't following, their professors weren't telling them that it was a great market. I don't think anyone would have. But there wasn't that stuff. They probably wouldn't have been working on that stuff even if there was no money in it, right? That's how I define passion is, would you be doing this stuff even if you didn't make any money doing it? And I think with Apple, same deal. you know, they were working on stuff they thought was cool, like Homebrew Computer Club and welding, excuse me, soldering stuff in your garage and trying to make software run on it. That was, I think, how they were passionate about the ideas.\n"} {"text": ": So why is a situation where it takes a long time to make money and a lot of startups are dying all around us every day? Why are we optimistic?\n: I think it's this. I think if you zoom all the way out, it's weird to talk to young people. and have them be pessimistic about the future. It's weird. And so part of the reason we wanna do this video is to give you some reasons to be optimistic yourself. And I think it comes down to perspective, Michael. I think it's all about perspective where if all you do is read the news every day, you get bombarded with negativity, especially around technology. The biggest technology stories right now are some version of like, this is bad, these people are bad. People are being exploited. Bad, bad, bad, bad. And so it's not hard if you're just consuming the news and not zooming out to be like, yeah, you know, things were better back 50 years ago or a hundred years ago. Don't point to me, I wasn't around. And again, I'm not sure that's true. I think it's a perspective thing. So again, so walk with us here. Let's talk about perspective. Let's talk about the things that have improved since the 90s when we were like teenagers. Let's go through the list. We thought through some of these. Go ahead.\n"} {"text": ": You know, to close out, this reminds me of this like scene in the West Wing where One of the characters has a drug problem that's pretty bad. Another character is going through PTSD and is really struggling, but doesn't want anyone to know. And this character is like a drug addict that like cleaned up and so on and so forth, and is noticing the first character is struggling. You know, the way the kind of story goes is that other people who don't understand how much pain the person's in, will like say, oh, you should go see a psychiatrist or you should go get a prescription. Like they'll do these superficial things, but this character knows. And so like, he actually, you know, the analogy is like, he jumps down to the bottom of the well with them. It's like, I'm at the bottom of the well struggling and then my friend jumps down with me. And you know, the thing that they say at the end is that like, well, I'm jumping down with you because I've climbed out of this well before and I know the way out. And I think so much about being a YC partner is exactly that. I've made all these mistakes before. And I'll probably make them again.\n: And I'll probably make them again.\n: And the only thing that I could say is, I know the way out. As opposed to like, oh, we play error-free ball, which is obviously. All right, man. Great chat.\n: Thanks.\n"} {"text": ": And then I guess last but not least is the college student, who in most cases isn't even offered equity. They're just the typer. You're the intern. You're our technical intern.\n: Just do all of the work. We're just the idea guys. Yes.\n: So equity is one set of topics you can ask yourself in these roles. Another one, and one that you brought up, was kind of decision-making process. Like, OK, we've established that you are doing a lot of the work.\n: Yeah, it's basically, do you have a seat at the table? And so again, if you're trying to self-diagnose, am I being exploited as an engineer, as a technical person, is the whole point that the business people have a lot of meetings that you're not invited to, and all decisions about everything are made by the business people, and you are basically used as a robot to write code. probably not a great sign, probably a sign that you might be being exploited, right? You're being used as like a machine to write code and not a person with a brain.\n"} {"text": ": Well, and Dalton, we talk so much in the batch about leverage when it comes to fundraising. And when I think about being default alive, there's multiple levels of leverage. One is confidence. Right. If you don't need a deal, man, you're going to pitch better. Like, that's the way life works. Like, when you don't need something, you're way more convincing than when you're begging for something. And then two, leverage being the investor knows you don't need them. So not only is your pitch better, the investor knows your business is stronger and knows there's going to be more competition to invest in your business and therefore is going to be more likely to want to invest in your business. So you get double leverage. Whereas on the flip side, if you run your business, default dead, you take two leverage hits. Like, when you really think deep down, especially like you said, when you're on low Runway, you're like, shit, if I don't thread this needle on this fundraise, we're dead. A good investor can always tell whether the company's pitching them is going to die.\n: And even if you want to invest, you offer worse terms or you put in sneaky. You know, there's all sorts of sneaky things that investors can do. Yeah, yeah. Not good.\n: And by the way, like, I would argue that that's an investor being a good business person. If they have more leverage, they should get more positive terms. If you have more leverage, you should get more positive terms.\n: So, Michael, why is this the thing that so many investors don't like us as YC partners telling YC founders? Why do they hate when we say this stuff out loud so much? They're allergic to this advice.\n: You know, I think that in general, investors are allergic. When we tell founders that there might be situations where their incentives and the founders incentives are not aligned, perhaps perfectly.\n: It's. Yeah, it's like a magic trick. We're like telling people how the magic trick is performed. It's like a faux pas. They don't like it. Why do they always tell us to shut up when we tell people this?\n: They always tell. And there's like, and I think it's also funny because they also always tell us, like, hey, like, we're funding your companies. Like, you shouldn't be like, you know.\n: Like telling the founders not to have high burn.\n"} {"text": ": And what's interesting is that another YC co founder, Trevor Blackwell, basically made a calculator that allows you to calculate this. Because, you know, I would argue it's easy to calculate, but it's just nice to have a tool there where you could just input some numbers and we'll make sure that's linked to as well. So I think that with this concept of default dead or default alive, what's so weird is how obvious it is. Like it's weirdly the kind of concept that, like, the entrepreneur who runs a barber shop will understand before a startup founder will. Right. It's like, it's so logical. What do you think are some of the reasons why founders have a hard time understanding this is important math to do. Like, what's distracting them from this truth?\n: I think the context is that if you've raised some money, say you're a YC company, raise money at Demo Day the belief that you'll be able to raise more money. It's hard to not take that for granted. And you're like, yeah, yeah, yeah. But really, once you started raising money, you get hooked on it, you know? Like, you get hooked on the juice. Okay. And so the idea that maybe you won't be able to raise the next round or that'll go harder than you want to say that out loud is almost a showing. Like, it's like you're not confident enough. Like, I think you. I think it's awkward to speak of these things with your co founders, with whoever, because it's almost like, well, of course you can raise the next round. Like, of course, like, we're gonna make it. And so I think it's that, man. I think. I think, again, we've both been founders. I don't think you want to say this stuff out loud too much. It makes it sound like you're worried or scared, and you certainly would not want to admit this to your investors.\n: Well, I think that. Here's the tricky bit in my mind. Not only is it that this idea of, like, well, if we question our ability to raise the next round, are we not confident, or are we going to psych some people out in our team and make them not want to work here. It's that plus raising the next rounds harder. So you kind of get screwed both ways. Like, I think oftentimes founders believe that raising the next round is going to be like the last round, even though they kind of understand that the next round, there's a smaller pool of people who can do it, they're investing more money. So logically, it should be harder, right? Like, mathematically, there are fewer series a's than seed rounds and fewer series b's than series a's, right? And so. But I don't think they internalize that. And one of the things you talk about a lot in the YC batch is this idea that startups are a series of mini games, and the minigames change and get harder. I think people weirdly think that this fundraising minigame doesn't change when. Of course it does. Of course.\n: And sometimes it's easier when you have a great product and great design. Sometimes your next round is far easier. To be clear.\n: Yes.\n: We're not saying it's always harder, but, and here's the big but, it's a moving target. And there's this thing called the economy, this thing called like investors who are people that are not within your control, we don't know interest rates. And so what you'll see is whenever there's like choppy waters, the default dead people that were banking on the next round being easy, die. Simple as that. And it's in the companies that are default alive. When there's choppy waters, they live.\n: And I think it's funny because I like your phrasing. We can't tell you whether it's going to be harder or easier to raise your next round. We can just tell you it's probably going to be different than the last one. So you should be planning for a wider range of possibilities than same as last time.\n: And I think about this in terms of margin of error. Like last thing on this point. Yeah. The margin of error when you're defaulted live is huge. You can go out and try to raise around and fail and be fine. There's huge margin for error. And what's funny, I always talk about this. Imagine if TechCrunch wrote an article about every failed fundraise. It'd be, we're only reading about the successful one. There's lots of failed fundraisers. France. Lots and lots and lots and lots of fundraisers.\n: The majority. The vast majority.\n: And so I think folks that are just reading TechCrunch think that most fundraisers succeed. So you're getting a really warped view. And so, again, like, bear with me. So most of them fail. Well, guess what? If your default's alive, all right, like, that's not good news that your fundraise failed, but you can live to fight another day. But if you're running your business tight, where you have like three months of Runway and you're banking that it's going to work and it's, you're running this thing super tight, what happens if your fundraise doesn't work is you die. I think about defaults alive default dead is if you actually control, if you're actually in control of your company and not outside parties, that is, investors actually hold the key to your company. You're kind of working for your investors. They're actually your boss. When your default's alive, you're in control of everything, right? It's kind of awesome. It's a question of agency over the outcome, you know?\n"} {"text": ": All right, that next group, the Googler. I think this one's actually much more interesting because I would argue that if you're the Googler, you're getting a bad deal if you're doing like 100 hour weeks and grinding and like your boss or your boss's boss is getting like mega vacations and $10 million a year packages and like promotions and da da da da. I would say on the flip side, though, if you've got good work-life balance. Yeah, I think it's risk-reward.\n: This is a subtle point that Michael's making. I think it's for the opportunity cost that you're taking to not do something else, are you getting a square deal versus, again, if you're working really, really, really hard, perhaps another thing would be better. But if you're very happy with the trade you're making on work-life balance and compensation, hey man, maybe it could be great for you.\n"} {"text": ": In fact, I might argue many times the first conversations we have are wrong. I think the only thing that we do well is we continuously ask ourselves, are we lying to ourselves? Or is there like, what did you say? What's the deeper question? What's the question behind the question? What's the question behind the question? I think we are good at asking that. And sometimes we assume that the initial salvo of questions are complete bullshit ourselves, within YC itself.\n: And I think that's life, man. I guess what I'm trying to say is no one's perfect. Don't put anyone on a pedestal. It doesn't matter who they are. They have their own shit. And that should be freeing and empowering and make you feel optimistic and not bad. Right? Isn't that the right takeaway here?\n"} {"text": ": I remember in the mid-90s getting this CD-ROM called Encarta. And I remember my uncle, who's 20 years older than me, being like, oh my God, the encyclopedia's in your house versus having to go to the fucking library? This is incredible. And you could just search it. It was on one disc. Exactly. It was easy to search. And now, God knows how much more information than that is for free on the internet.\n: Literally everything that's textual information is a search away. Yes, and video. Freaking YouTube itself. Crazy. There's a website where anyone can record any video of like any length. Yes. On any topic for free. Yes. And you can watch it for free. Forever. That is like mind blowing to me. Yes. How incredible this is. Again, if you zoom out, if you think like you're an alien and you just have no context on this stuff. Yes. This is incredible. Incredible.\n"} {"text": ": The best explanation that I've come up with is that there's a bit of a school metaphor here. I think that people are trained in school for so long that they try to see startups like school. And in school, you're not really rewarded for having opinions on things. You're rewarded for accomplishing specific tasks. And so, you're also rewarded when you're doing things that your smart friends are also doing. And so I think when they apply that model to their startups, they think, okay, someone invested in me. That's an obvious, that's like getting an A on a paper, right? I'm doing an idea that my friends think is really cool. That's like getting into a college my friends think is really cool, right? It's just kind of this rinse and repeat of the strategy that's worked for them in the past.\n: Well, and you see the superficial similarity between what you're doing and things that appear to be working And you try to hide from the fact that you have no idea what you're doing or you don't believe it. You have no particular opinions of what it is. And so you, so what's, what's brutal about this is you have to really look in the mirror and understand the difference between superficial similarity of what you're doing and kind of going through the motions versus the damn thing actually working.\n"} {"text": ": You know, Dalton, I think a lot of the reason why founders get caught in this trap is because they were never taught what sales really is. Like they were taught sales in the context of, I would almost argue, argument. I think what a lot of founders think sales is is more like what lawyers have to do to convince a jury. A jury has to be there and they're going to make a decision and as a lawyer, your job is to convince them one way or the other. I would argue that the best salespeople Convincing is really low on the list of what they're doing. I might say convincing isn't on the list of what they're doing. I would argue that the best salespeople are spending a lot of their time doing two things, learning and filtering. Learning and filtering. It's a successful conversation with the customer if they say no quickly and they teach you about other kinds of customers who also are going to say no quickly. That's a success. And like filtering out the customers who will never get to a yes as soon as possible is a success. And I think that a lot of founders who've never done sales are like, oh no, if they say no, that just means that they don't understand how good my thing is and I have to explain it better. As opposed to like, Know that no is a gift. Figure out what you could have asked them so they would have said no in the first three minutes of the conversation. So at YC, we kind of talk about this as customer validation. Every sales call should start with three questions that allow the customer to disqualify themselves from your product. A lot of your calls should be ending in the first five to 10 minutes. You know, I don't think we're right for you now. We're happy to call you back when we can do this thing or that thing, but I don't think we're right for you now. And if enough founders, and it's funny, because the themes are all the same, being willing to say no, being willing to test the core hypothesis, or sorry, being willing to accept a no, being willing to test the core hypothesis, not feeling bad when someone doesn't want your thing. Having a strong opinion.\n: Yeah, not falling into a spiral of self-recrimination and self-doubt. You know, like you can get really dark and it's like someone just doesn't want to buy your thing. Like, who cares?\n"} {"text": ": I'll get another truth. Empirically, none of the trillion dollar software companies are bootstrapped with no VC dollars ever. Yeah. So if someone's telling you you can make a trillion dollar company, maybe you can. Just no one's ever done it. I'll say fact-based.\n: And again, to look at the numbers, even if you look at software companies, even if you look at iPhone apps, if you actually did an audit of the app store and you said what percentage of the apps in the app store are VC-backed, it is tiny. But if you said what percentage of dollars that are spent in mobile apps, going to ZC backed companies. I think that's fair, right? Because dollars are going into Amazon and eBay and like all that kind of stuff, right?\n"} {"text": ": I also think spending time with your users is a cure for this. Because your users don't care about macro at all.\n: No. If you're solving a problem for some industry, they probably don't care about the fundraising announcements in AI land. Again, let me, let me give a concrete example. There's lots of people applying to YC with Copilot for X ideas. We're gonna copilot for trucking.\n: Yeah.\n: And then they'll be like, we did market analysis. AI is really big and it's growing really fast. Oh, gee. And trucking is really big and growing fast. And so what we're gonna do is build AI for trucking, fund us.\n: And.\n: Then it's like, okay, well, what exactly, what is that? Be specific. What exactly are you going to build for AI? For trucking?\n: Yeah, well, we'll talk about that.\n: Let me get back to you today.\n: We'll talk to the trucking companies and figure out what they need.\n: Yeah. It's like asking the founder of the precise exact thing they're going to build. They hadn't thought that far ahead. It's combining AI and trucking seems like something that will raise money and seems like a big idea and seems on trend. And the details feel like irrelevant details. And sometimes people get frustrated when we ask these questions.\n: They feel irrelevant, like, why are you.\n: Asking these stupid questions, Dalton, what precisely does our AI trucking startup do? Exactly? Yeah.\n: Shouldn't we go back to competitive analysis? It's a land graft.\n: But basically, if you spend time, a ton of time with trucking companies, you are likely to have a whole different perspective here on how AI could solve problems in trucking. But you have to go really deep and spend time with them versus sitting in your apartment reading market analysis.\n: This is something I see with YC founders. I just talked to a former YC founder literally yesterday who he admitted his first two or three companies were kind of this, things he thought were good ideas. And during that whole time, one of the things he did was he owned a used auto dealer. And his latest idea has to do with giving people auto loans at used car lots. And hearing him talk about it, I'm like, you know this almost as well as if you've owned a used car lot for the last 15 years. And he could go point by point on why the people before didn't work, what the motivations. It turns out, like, for a lot of these financing companies, the car lot makes more money selling, getting a referral fee on financing. And so like a lot of the companies that direct to consumer, oh, I come in with my loan pre approved. The guy in the car lot is trying to convince you to take a different.\n: Yeah, that's, that doesn't help.\n"} {"text": ": Yep. So what are we talking about here?\n: Yeah, I think there's three examples that we could think of that are folks that we, some of them we know decently well. So Sam Altman is one, our colleague of many years. Another one is Elon Musk. I think people have heard of him. Pretty famous guy. And then of course, Peter Thiel. And so those are the examples that we're going to kind of talk about today.\n"} {"text": ": That's not fun. I love that. I love that because sometimes founders want to put other people on the front lines and it's like, Like, no. Like, you are the front lines. But it's more scalable.\n: Again, and again, we're not trying to be facetious. It is more scalable if the founders could spend their time on other tasks, right? That's more scalable. But if you're doing things that don't scale, you embrace the suck, right? You give it a hug. You're like, yes, I love doing this horrible work.\n"} {"text": ": So, to wrap up, if you're a high schooler and you're thinking about this startup game, one, that's awesome, right? Like, we love that you're thinking about it.\n: Hey, don't let it, never let anyone put you down. Like, have a dream. We're telling you, be cool, be yourself. Like, if that's your dream, we love it.\n: Yes.\n: Live your dream.\n: Live your dream. The game will be here when you're ready to play. And, you know, we'll be here to help. All right, man. Great chat.\n: Thanks.\n"} {"text": ": I think the other thing that I'm seeing, and it's interesting because I've got a brother who's this age, a recent college grad, I think what's so hard for a lot of people to see is that if you're a recent college grad, you don't wanna stay in the city you went to school in. You might be living with your parents. And like in comparison, moving to the Bay Area is way better of an option than kind of your current setup over the last couple of years. And so I think that a lot of that content marketing is unfortunately written by like, People our age, people with kids, people living in San Francisco for like the last two years who were generally pissy about COVID. And it was like less responding to someone who might have spent a year and a half remote doing college or living in some small college town locked down. and is like, I wanna get out of this. That kind of person is, San Francisco looks like a beacon.\n: I think you wanna be where the action is, is I think how my summary is. Versus feeling like you're in a, not where the action is.\n"} {"text": ": I also think there's a little bit of, I'll invent a term, Google Itis, like people looking at companies that they use today and not understanding what they looked like at the beginning.\n: Yeah, they're a copying current product. You're like, oh, we're the next Amazon. So we're going to build everything Amazon has. And not hey, when Amazon started, it was like a really simple website that just sold books. It didn't do anything else. Like, I think it didn't even do that.\n: That well.\n: Fair.\n"} {"text": ": But let's just go with classic. In the classic variety, what goes wrong in cargo culting is because you don't understand, really deeply understand the product that you're copying. You miss some, like, obvious things.\n: Yeah.\n: And I like your, like, you know, airport example, right, where it's kind of like, yeah, if you make a landing strip in the middle of the jungle, airplanes won't land there. You're missing the. There's a part of the kind of.\n: Something larger going on soul system.\n: And I think founders did this. I think we have definitely of this. And so let's talk about kind of the companies that were classically cargo culting in our era.\n: Well, the first and most obvious one was Google.\n: Yes.\n: Everyone in the two thousands was obsessed with Google. It was the best startup.\n: Yes.\n: And so everyone you talked to was like, well, Google did this, or are you the next Google or. Well, this is how Google did it.\n: Yes.\n: And so all these ideas that may or may not have been good ideas, we were kind of trained.\n: We're obviously the right things to copy.\n: So the most obvious one is just like the office culture of having an open office and like, bright colors and like, free snacks and like, all this, like super googly stuff.\n: Yep.\n: That was considered like you, if you wanted to do a real startup, you had to be like Google. Right. Man.\n: Not only that, that's what made Google great, was the lack of offices.\n: Yeah, you're right. No cube farms. That's why it was. Changed their culture. Like this is actually, there was arguments that copying down to the t, every aspect of the Google office culture was key to building a successful startup.\n: Exactly, exactly. I think the other thing was this kind of flat org, managers don't need management and da da da da. Another classic one that I love was just, they like, hire as many smart engineers as possible. If you ever come across a smart engineer, no matter what, give them a job offer, you'll find a way to use them. I think it's funny because this is what we came up like. Yeah. Like, this was conventional wisdom.\n: There was other examples more silly than that. It was like the name of your startup needed to be cute.\n: Yes.\n: Or like drop vowels. Remember Flickr started this where there was no e in it, and so it would be. You need a Google like logo.\n: Yes.\n: That looked like primary colors and had like a shiny. Remember what was the term? Like, you would put like a lens flare on your logo. Everyone did this. Go look at logos back in like, 2006. And that was because Google and these other startups had lens flare on their logos and they had cute names.\n: Yes.\n: So you had to do it well.\n"} {"text": ": And they want the structure, they want the leveling, they want the status, they want the money that used to be associated with these finance or professional jobs. Bam, they're all now associated with big tech. And so what's interesting is that at first you see the explosion of CS majors in school. And I think you would think to yourself, oh man, that means that there are a lot more people who are interested in building. But that's not actually the case. Like it's, it's, it's, uh, it's deceiving. The numbers are deceiving. I remember going to a class and talking to a bunch of kids who were kind of interested in tech and startups and so forth. And I remember saying to them, Hey, like how many of y'all are studying CS and write code? And 90% of the people raised their hands. And then I remember asking, Oh, that's amazing. Like what percentage of you would want to be writing code as part of your job in a startup or at a company? And like 90% of those hands went down. And, and, and it was so clear that like that CS job was like a, a label or a status thing to get the career they wanted. It wasn't, writing code wasn't something they enjoyed doing at all.\n: I remember going to the MIT career fair, this was like years ago. And most of the people that talked to me wanted to ask me how to get a job in VC and what tips I had. than how to start a startup. Like, that's what, like, that's actually, again, I know it's, well, that's why they were talking to me, but it was just, it was fascinating that they're like, yeah, yeah, yeah, you know, why comment, yeah, cool, whatever. But like, how do I become an investor? And these were, this was MIT, man.\n: Well, I think that you're setting up the next topic, right? Which is that, like, these conformists are also now invading the startup world. And I agree with you, right? The highest status job in the early stage startup world is investor, right? It's the one everyone wants to meet, everyone wants to talk to, everyone seeks approval to. And so for sure, it makes sense, right? That, that, you know, the logic follows. But we also see a lot of these folks who are conformists who want to do startups, but they start almost, it feels like their motivation or starting point is very different than what we would expect. You know, one of the things that we say sometimes at YC is that don't make the investor your customer. Um, but a lot of these conformists who are getting into startups, that's what they do. Like they want an idea an investor is going to like, they want to act the way an investor is going to like, they want to have their resume investors going to like.\n: And their questions are usually something along the lines of they want us to tell them the secret to get investors to like them. Like that's actually, that's what they, that's what they hope that we will tell them is the secret, the secret words to whisper to an investor to get approval.\n"} {"text": ": All right, here's the second type that's common in the investing world. The big company exec, the person who's seen companies at 1000 plus people and have a lot of experience and have done great work in those companies and now become investors.\n: Folks with big tech experience are really great at taking a successful product and scaling it further or refining a product. Okay. It just is pretty different when you were employee number, you know, 100 or 200 at Airbnb or Google or Facebook than employee number five. And as we spoke about in a prior video, our friend and colleague Paul Buhit, you know, number 18 at Google was like the king of dirty hacks. And in a lot of ways, you know, when we would interview former googlers and he was in the room, he would, he wasn't on. He didn't love some of the instincts of folks that it was the same company that they worked at, but the, the tactics that they brought to bear when you were employee number 1000 to scale up one of these core products was pretty different than the folks in the first 20 employees. And so generally with these folks, it looks more like scaling up process, it looks more like scaling up hiring, and kind of sometimes taking for granted that getting any users at all is really hard. Like, I talk to folks a lot about this in the batch, man.\n"} {"text": ": And then at that point, you have to learn. And one of the things that we've seen, and we'll give some examples today, is that The fastest way to learn what you need to know, both about the problem and how to solve it, is to care about your customers, right? If you care about your customers and then as a result you spend time with your customers, you can really learn what their problems are and how to solve them so much faster. You know, one example, and we talk about Airbnb a lot, but one example that came up when they most recently spoke to The Bash that really clicked in my mind was they retold a story about how they were emailing their hosts, and they saw their hosts had horrible photographs on Airbnb. And they knew their hosts were listing their properties on other sites, and they had horrible photos there too. And they said, OK, we're just going to help them get better photos. We're just going to help them get better photos. We're going to email them. We're going to go to their homes. We're going to give them better photos. And I think what's interesting about that was that they knew that those hosts were going to use those photos in other places. They sure did. They knew that maybe their company was going to be dead in three months. And they knew they were kind of losing money on the deal. Because they flew in. Yeah, yeah, exactly. They 100% losing money on the deal. Didn't pencil out. Yeah, didn't pencil out. But they did it anyways. And they had empathy for the users. And they're like, you know, those photos suck. This is something we can solve for them. And it's kind of human nature that if you do something nice for someone, they'll appreciate it. They remember it. They'll try to help you.\n: They'll give you trust. Like you establish some trust when you break down the barriers between yourself and the folks you're trying to serve. do something nice for them. Who knew? Something valuable. Who knew? And they weren't like, here's your invoice. Yeah, no, no. No, no.\n"} {"text": ": This is Michael Seibel with Dalton Caldwell. And today we're going to talk about why investors, including YC, can't fix your company.\n: For some folks, it's like telling them that Santa Claus isn't real. You know, like, they're like, hey, we finally get some time with you. You know, no one wants our product. What should we do? Here's some. Here's our designs. Can you help me design this? So growth takes off, and I have to tell them the unfortunate news, which is, I have no idea. And, like, I went through this through, too, when I was a founder, that I really believed that once I raised from the top investors, they would tell me whatever secrets they were holding out on the world.\n: What's unfortunate is that there are a lot of investors out there who aren't former founders, right? Who haven't really lived these mistakes themselves.\n: If you haven't been humbled by having a crappy startup like we did, that failed a lot like we did. It's easy to sort of, like, think you're hot shit.\n: It's easy to think that your advice can make companies work that, like, you are the magician. And what's interesting is that over the years, a lot of YC founders will kind of start following the advice of these people, and they'll make very, very common errors. And you can almost track it back to, like, oh, I kind of understand the type of person who is giving you this advice, because I see what you're doing now, and, like, this matches one to one. So one of the most common types of investors is the investor with a finance background, someone who's like, never run a company, never operate in a company. And pure finance.\n: When all you have is a hammer, everything's a nail. And so if what you know is money, the solutions usually involve money. So raising more money, spending more money, throwing money at the problem. Right.\n: Hey, Dalton, you're a pre product market fit. Do you have five year financial projections?\n: That's a great example of that. Financial projections may be a good idea later stage, but to even ask me if I had financial projections, I was like, what's a financial projection like?\n"} {"text": ": Not the best play. You know, the other common failure path that we see is People putting the investor as the kind of center of this game, as opposed to the customer. People thinking the investor is almost the teacher and their job through a pitch or a deck is to get an A from the teacher. And the A is money.\n: I think that looking for validation from authority figures is a lot of how we are constructed to look at the world. And if you've been an employee or you've gone to school your whole lives, a lot of the way you get ahead in life is to figure out who the authority figure is that you need to please. And if you please that authority figure, it's the path to greatness. And so again, like if you're like a level, whatever, level three engineer at some big company and you're like, the way you get ahead is to impress the bosses. Why not kind of pattern match that onto startups?\n: Not true. If I could redirect that energy towards pleasing people's customers.\n: Yeah. People call this customer obsession. Like it's a buzzword. We are customer obsessed, but take, Let's take that literally. What does it literally mean to be customer obsessed? What it literally means is most of your waking hours, who are you thinking about pleasing? It's your customers and you're trying to solve problems for them.\n"} {"text": ": What I love is that when the Stripe founders came to speak at YC, the other detail they added was it was the most expensive product in the market. Like to make sure people really wanted it, they didn't give it away for free, they didn't price it comparably, they made it more expensive and people were still desperate to use it. Like that's how you know you have an insight. Like when you're the most expensive thing, speaking of Apple, and people still are desperate for it. Now the shit takes, right? The shit takes were pretty clear. One, what are two teenagers doing in the banking space, the government regulation, it's the most regulated space in the fucking world, right?\n: Isn't this like a suicide mission? You're like, hi, we're 19. We wanna start basically a bank. Give us all your money. We're gonna handle hundreds of millions of dollars of everyone's money. So yeah, that's our plan. And there will be no fraud.\n: We're good. I think the second one is that even subtracting regulation, they needed a bank deal. They needed Wells Fargo to let them start using their rails. As an early stage startup, they need to get that, which at the time seemed impossible. And then, of course, I think the last one is that PayPal existed. There was a really popular company where it felt like PayPal was a quarter step away from this, right? And it was like, oh, even if you start doing well, PayPal can go here instantly. They have all these users. They're the hot company.\n: Yeah, it was seen as a crowded market with huge companies with hundreds of employees, thousands of employees. And it's the classic thing, again, the knock against YC companies at the time is YC would just fund crappy versions of existing company. Like the third rate knockoff version of something actually good was what YC companies were. Isn't that hilarious? I don't know if people remember that, but that was the reputation of YC companies is like, oh yeah, they'll take an existing idea that's good and they'll make like a less popular version of it.\n"} {"text": ": The next one that I see that I love is, um, everyone has high expectations for what they're going to accomplish when they get into YC. And then inevitably and initially they don't meet those expectations. And it's so fun to work with the founders who are excited by that, who are like, I'm excited that this is harder than I thought it would be. Like I knew it was going to be hard. It's proving to be harder than I thought. This is going to make me better. Like this is forcing me to raise my bar. I wanted to test how good I was. And like, this is bringing the best out of me.\n: And you're, it's different. Cause you don't get to level up and get a gold star and oh, good job. You're, you're now founder. We're up, we're getting a promotion. You are now founder level three. You know, congratulations. You know, like when people are cool with it, it's not that way. Cause I think sometimes people really want it to be that way. And they're really freaked out that it's not. Some people love it. They're like, yeah, this is great. Like there's no structure. Like the only way that you can keep score is like revenue for my startup. And if it gets big, there's no other way to keep score than that. Some people love that.\n: And then you should set up this last one because I always love this one.\n: I think a good way to say it is folks that have a very high opinion of themselves. And when they see peers They're like, yeah, I'm gonna try way harder and be way smarter and learn way faster than them. Basically, the non-conformists are willing to kind of like, they wanna be above the peer group, not in the peer group. Versus if you're a conformist, you kinda wanna be in the pack with everybody. A lot of the folks, the really hardcore non-conformists I've funded that have done great, they'll be like, yeah, you know, I don't get what all these other people are doing, but like, This is what I'm doing. And like, it's going great. You know what I'm trying to say? So it's like a combination of optimism and confidence.\n"} {"text": ": You often talk about this and it's something that I think is becoming part of the culture of YC where we want to talk up to our founders versus down to our founders. We want to talk to the smartest kid in the class, not the dumbest kid in the class. And I think sometimes in the general public, that's not well understood. But I think within the YC community, it really is. The feedback that we got from alums was universally, this caused me to take a sober look at my situation. And if my situation was good, I'm staying on plan. If my situation wasn't, I'm making changes. And just to your point, it wasn't, I'm freaking out. it was like, okay, I'm gonna take a second and do a sober analysis of my company. And I think what's unfortunate is that they had just gone through this two year cycle where investors were basically screaming at them to burn and raise, because investors were getting markups and they were raising new funds. And so I think that in many ways, this letter gave them a lot of people the opportunity to say, okay, wait a second, like, is that strategy actually good for my business? And it's obviously good for my investor's business. Getting markups is obviously part of their business model, but is that strategy good for my business? So that's been really fun to see. It's been fun to see the founders taking it in the right way. Probably one of the last big trends is this new standard deal, right? That was big news over the past four months. And it's interesting, because I think that in some ways, it was conceived of competitively. People were looking at the YC Standard Deal being like, oh, like YC is to compete. There's so many new seed funds out there. And I think what's interesting is if you would kind of take it inside baseball for a second, that's really not the reason we did it at all. Like take us inside baseball a little bit, Dalton. Like what was the strategy behind it? Yeah, I mean, the strategy was\n: It's good for companies to get fully funded the moment we accept them. And frankly, we saw some stuff that looked a little toppy, to use the Wall Street Bets terminology.\n: Dalton, you're speaking in code. Be literal here. What did we see? It looks like\n: We're not sure that things were sustainable that everything would keep going up forever. How about that? Stocks may not only go up. And so it seemed prudent to give the companies more money so that in the event of a market change, we were confident that everyone would be fully funded. Again for context, I think people forget this because of all the crazy seed round warped perceptions. How much money did like Airbnb and Dropbox and all those folks raised back in the day. How much money did Airbnb raise again?\n: Under a million. Under a million. These seed rounds are under a million. And diluting over 20%, over 25%.\n: So we actually know that half a million dollars is slash was enough money to build one of the most successful companies ever. And it made a ton of sense to have this budget, to raise this money. We could fund a lot of companies. It's all raised. We have it, dry powder. So that no matter what happens, if you get into YC, you're good.\n: There's this saying that I love, the best time to fix the roof is when the sun is shining. And, you know, I look at our opportunity to create this new standard deal for YC founders, and the fact that we have budget to fund over 1400 companies with this standard deal. And I think to myself, like, you know, I'm so happy we did that when we could, because now we're going to be able to help so many teams that otherwise might not be able to do startups might not be able to raise money.\n: And not be sure, oh, I don't know if I want to apply to YC, I don't know if I want to start a company because I'm afraid. I've read TechCrunch articles, the funding environment is rough. There's all these fears out there. Well, it's like, well, yeah, if you get into YC, you get half a million dollars. And the day we fund you, it's funny, sometimes people don't believe us. They're like, wait, this is contingent on something, right? It's like, no, we can't do that.\n"} {"text": ": Let's talk about honesty. This is a big one. This is a big one that I think people, in fact, you know, we talk about a lot of people who maybe didn't learn this lesson, that honesty is important, and for a while, they do okay with it, but inevitably, they get caught. How do you think about learning to be honest if you're a high schooler?\n: The best skill is to learn to be honest to yourself. Like, if your own relationship with yourself is, you can't be honest about things. What do you really feel? What do you really think? Who are you really? Yeah. It's going to be rough. Yeah. And then at your core, if you're not honest with yourself, your relationship with your parents, your relationship with your friends, with institutions, it's going to be tricky. We run across folks that seem like they've deferred a lot of this honesty.\n: Yeah. I think that the thing you should understand about the startup world is that A lot of it works because of honesty. A lot of the reasons why early adopting customers will use you is because they think you're going to be honest. A lot of reasons why investors might give you money, why your co-founders might work with you, an employee might work with you. A lot of reasons why people make things happen in the startup world is because we're in a high trust environment.\n: Yeah. And this is one of those like negative things that people say about nerds is, oh, this person has no manners. They just say whatever they think. Like, again, in polite society. Yeah. You're supposed to lie all the time. Something a nerd would do is be like, hey, That product sucks. Why are we shipping this product that no one wants? It's like, hey, shut up, man. That's what a nerd would do. You're bad for telling the truth about something because it's impolite and you're hurting people's feelings. And so there is part of the nerd culture in this that I think is good, which is essential. The person who would stand up and raise their hand and point out that the emperor is wearing no clothes.\n"} {"text": ": Now let's talk about this kind of \u2013 we keep on bringing Google. Let's go with this phenomenon. I see so many young founders basically saying like before I start a startup, I need to work at a big company. That's what I'm going to learn how to do it, do you think Google's gonna help? Or how do you think it helps and how do you think it hurts? Because I think it's more nuanced than just one or the other.\n: To set the scene, if you've ever interviewed for like a programming position at Google or Facebook or Amazon, a lot of what they have you do is design algorithms that ideally are scalable algorithms, right? Like ideally you're not bubble sorting on the whiteboard during your interview at Google, right? And so it gets ground into you during the selection process that your job is to design solutions that scale. And when you're inside of a big tech company, you're rolling things out to millions or tens of millions of people. And so you're beat into your head that you only scalable solutions are good solutions, right? Like if Facebook had some new feature, but it required them to buy a hundred times more servers, which would bankrupt the company, guess what would happen to your bright idea? Can't do it. It's got to be more scalable, right? So every single product idea or feature that you build inside these companies is viewed through the lens of scalability, and rightfully so. You still with me? Yes. Yes. Now, this is what's funny if you think of these jobs as training for startups, is that now you've had deeply ingrained into your brain what I would argue is not helpful at the earliest stages. This is helpful when you make it to late stage, hallelujah, right? But the earliest stages, you just got immersed in a culture that is not helpful. Versus if you never worked at one of these companies and you just graduated college, no one ever told you to worry about scalability. You're like, yeah, cool, whatever. I wrote the algorithm with a bubble sword, that's okay, right? You've never been yelled at by your boss because you came up with unscalable ideas.\n: you want to be trained at doing just enough as opposed to doing perfect job. And like the startup needs to do just enough and Google needs to do way better than just enough. And I think that like what's hard for me is that sometimes you see those founders and they can't launch. They're like, oh, something's broken, or oh, a customer didn't like this, and they just cannot bring themselves to launch because it's not perfect. Well, think about it.\n: If you're at Google and you launch a new feature, or if you're at Facebook and you launch a new feature and it doesn't scale, like if it doesn't work, that's the fail. Like, congratulations, you suck, and your team sucks, right? And again, they're not wrong, but all the incentive structure is set up to not launch a feature that is not scalable. This is where that scalable word comes in, right?\n"} {"text": ": Yes.\n: And remember, this is something that sometimes founders do is they're like, they'll put a slide in their slide deck of exit strategy. Like, basically, when they're trying to choose what idea to work on, they want.\n: To include what we know is going.\n: To buy us, that they're going to sell the company and for how much into who, and of course, delete that slide. Like, oh, my God, are you kidding me?\n: Yes.\n: And the point I'm trying to make here is if you think like an investment banker, you do need to think about an exit strategy. If you're a private equity company, you're buying a mattress company for hundreds of million dollars. You definitely want to have an exit strategy slide.\n: Yes.\n: And to me, the evergreen lesson here is that you don't need all of the full plan today. And a lot of founders are worried. Well, what if I do? This idea, I'm really confident people want it, but I'm going to top out at $20 million of annual revenue. It's a bad idea then, right? And it's so rare. You can attest to this, Michael. It's so rare in this job where we see a company that gets to 20 million, 30 million, 40 million in annual revenue, and the founder has no idea on how to grow it.\n: Yeah, there's no, there's no move.\n: They're out of ideas.\n: Yeah, this is.\n: I'm not going to say that never happens, but it's extremely rare.\n: I think it's a problem you want to have amongst all the problems, if you could choose one.\n: And so if you're filtering out ideas that you. That seem great and you have expertise in it, but you're worried it'll only get to 50 million or whatever. Yeah. You don't need the full plan today. It's okay to not worry about some of these problems until your later stage.\n: You know, personally linked in on this front. I remember I got the course book for university, and I remember reading it and thinking, okay, I know the 36 classes I'm gonna take, like, before going to school, I was like, well, I mean, the book's here. You read it, you pick the classes. And I remember, you know, halfway through the first semester being like, well, that was a bunch of wasted work.\n: Yeah.\n: And I wish sometimes founders would embrace, it's gonna be a bit of an adventure.\n: Yeah.\n: It's gonna be a bit of an adventure. Anyways, good chat, Dalton.\n: Sounds good. Thanks.\n"} {"text": ": So yeah, maybe that's the message that we want to leave, is that unfortunately, amongst these 1,400, they're not going to make it. Unfortunately, this unicorn label does not mean you're going to get in the money. Yep. And you've got to think critically. And isn't that life?\n: Yeah, and a lot of life is you could be disappointed because other authority figures told you something is true. The authority figure said, this company raised a lot of money. It's a very good bet. It's the next whatever. But ultimately, those authority figures aren't going to be around if it doesn't work out. It's on you.\n: And if those authority figures are investors, they're hedged.\n: Yeah.\n: They're hedged. So maybe do the math yourself.\n: What's good is every YC unicorn is going to make it. Every one.\n: Every single one. You heard it here. every single one. Dalton's personal guarantee. All right. Great chatting.\n: Thanks.\n"} {"text": ": I think the other thing that's kind of maybe a dirty kind of underbelly here is who is spurning this argument? Like who is incentivized for this to be a big issue?\n: Yeah, I think that this has been just like a topic that gets a lot of engagement online. And so, you know, if you wanna get people agitated about something, this is a pretty good topic. And then you can use it to promote Stuff and so yeah, I'm not gonna name any names, but I can think of folks over the years. Yeah that are like kind of built a Following around encouraging people to do this and to the extent it is helpful and more people are Improving their lives doing it. That's great. Yes, but there's a little bit of like creating a fake controversy. And then monetizing it. A little bit.\n"} {"text": ": A YC founder wrote in, a potential customer's opinion is not valuable unless they're willing to pay you. or use the product regularly, or share the product with their friends. They call this financial capital, pay you, time capital, usage, or social capital, give it to their friends.\n: I think people really struggle with this because I think it's getting at the core of like a human condition thing, which is we want to be loved and we don't want to be rejected. And so, you know, getting through all these layers of defense that you've created for yourself to protect yourself from rejection is really hard. And it's like, Yeah, man, it's personal work. Like it's work you're doing in your head. It's not work you're doing in the external world. And so I just noticed a lot of these teams, the really core thing going on is ego protection and nothing else. And like, you can come up with all these intellectual arguments on why actually, you know, but when you really talk to someone and you get down to the core, it's being okay with getting rejection.\n"} {"text": ": Hello, this is Dalton plus Michael. And today we're going to talk about why are we optimistic about the future? So to be clear, at YC, we fund a lot of startups. And even though we try to do a very good job, most startups fail.\n: Yeah, if you look at the numbers, We know a lot more about failing and failed startups than successful ones. That's just how the numbers work, right? And so we see failed startups every day. We live it, we breathe it. This is the job that we have. We're experts on failure.\n"} {"text": ": I think the next thing you should be thinking about is kind of effort level. You know, are you working these crazy hours but everyone's on vacation in Aruba half the time, right? Are your counterparts who are doing fundraising and sales and HR and all the other tasks within the company, are they grinding or are they not?\n: Yep, like this is a self-diagnosis thing, but it's really sad when you see someone in the role of technical co-founder, and they really have to work their butt off, and they're really showing up every day, and the idea guy or the salesperson or the business expert, the fundraising expert, actually isn't doing much.\n: Sometimes they're part-time.\n: Sometimes they're part-time. And man, that is such a vector for being exploited. And so you should really feel, from a self-diagnosis perspective, that yeah, your counterparts are just as into it and there's just as much heart that they're bringing to the table as you are. And if so, again, maybe it's a great deal for you.\n"} {"text": ": Hello, this is Michael Seibel with Dalton Caldwell, and today we're going to talk about whether your startup is default alive or default debt. So this was a concept that was actually invented by one of the co founders of YC, Paul Graham. Dalton, do you just want to start by explaining what this means?\n: Yeah, I mean, so to start with, you should read his blog post. It is excellent, it is short, it is easy to read, and so you should read it. But let me try to give you my crash course in it. Here's what he means by default alive, default dead. As founders, we like to ignore the truth a lot of the time. And one of those truths are, is my startup going to go out of business? Right. It's kind of an awkward thing to talk about. You know, you don't want to bring that up in polite company. And so the point of default alive, default dead is it forces you to be honest with yourself. If I don't raise any more money, am I going to die, am I out of business or am I going to make it? And default alive is different than profitable. Profitable means today I make enough money that I am profitable. My bank account grows every month. You still with me? Default alive means I may be burning money today, but my growth rate is high enough on revenue that I will become profitable before my bank account goes to zero. Does that make sense? And so if not a single other dollar of investor money comes into the business, my growth rate is high enough such that I don't have to lose sleep, that I'm going to have to raise around before I die. And his point is, this is a binary. Either you are default alive or you are not default alive. Thus defaulted. There's no third option here, friends. It forces you to pin yourself down in your own mind, right? Does that sound right to you, Michael? Did I get that right?\n"} {"text": ": I think that the last two are kind of connected. This kind of like, is it working slash opportunity cost, right? One would argue that you, because you're doing all this work, have an amazing ability to judge whether the company's working. Yep. you should maybe trust your instincts there. And you know, is it working, right? Like you might be exploited if you're being asked to do all this stuff and like the evidence is painfully obvious it's not working.\n: Well, and you're the technical person, so you notice the first. The funniest thing is this one of the technical person who does all the work is the one actually reading the analytics and like, hey, like this, our launch bombed. What's the plan in the business? Don't worry about it. This is like, you need to be quiet. This is my department. You know, stop asking questions. And so if it just seems like you're bringing your A-game effort and doing all of the work, and it's definitely not working, probably it might be a sign you're being exploited.\n: Well, and this is even more of the case that the opportunity cost might not be worth it. Or you might be not leaving because you're afraid, but you know intellectually this thing isn't working.\n: All right, so, and like, don't let them finesse you. Again, this is the same person that convinced you that you getting, you know, one 10th of their equity is a great deal for you is the ones like, hey, I know it looks like we're not growing and we have no revenue and we're about to run out of money. Don't let that same suave person keep doing the same move on you over and over again.\n: It's weird because I never use the term gaslighting, but it's actually gaslighting. It's actually that. I don't want to paint too bad of a picture because on the flip side, we see situations that are Great. Yeah, more often than not. Of the folks we fund. In YC, yeah. Yeah, the folks we fund.\n: It's mostly a really awesome trade.\n"} {"text": ": Hey, this is Michael Seibel with Dalton Caldwell and welcome to Rookie Mistakes. We asked YC Founders for their rookie mistakes so we can share them with you and help you avoid them. YC Founder wrote in and said, we chose to create a company around a hot technology. We were really excited about the tech. We eventually raised funds because there were enough investors who were excited about it too. But now, looking back, I think we had it backwards. We were the classic Silicon Valley startup in search of a problem.\n: Michael, let's start with the definition of solution in search of a problem. What do we mean by that? Solution in search of a problem is where you build a thing and you're like, we have this thing. We just need to find someone who wants it. We need to find a use for it. We have the solution and let's go out and find a problem for it. And, you know, as long as technology has existed, this has been an issue. Remember reading about the patent system? You know how there's millions of patents for, products like better mouse traps or whatever that there's actually no market for whatsoever. And so this is, you know, as long as humans have been banging rocks together, there have been rocks that were not, that were solutions, but they weren't useful for anybody. And so look, this happens a lot with technologists, that happens a lot with Silicon Valley, where they start with the technology thing is cool, and they try to find a market for it second. Now, the core thing that I want to talk about here that you sort of zeroed on is founders with no particular opinions about what the market should be and no ideas on who the customers are or anything. They're just sort of floating in space.\n"} {"text": ": So when we were pivoting from Justin.TV and Twitch, Emmett Shear and Kevin Lin were kind of leading the Twitch team. And they took this to heart. We had not done talk and news for years. They took this to heart and they basically just started interviewing video game streamers and asking what they wanted. And the funniest thing is that at this point we had built every feature a live video social media site could have. We had chat, we had messaging, we had feed, we had social media stuff, we had embedding, we had every kind of sharing, we were on multiple platforms. And so they were really surprised when the first thing people said was, can I stream in higher quality? And we were like, really? That's like, you don't want like some big, we'll build you anything. Like, yeah, can I, you know what they said? They're like, well, you know, my computer costs like four grand and I paid for like the best internet connection in my neighborhood and I'm streaming this HD game and it looks like crap. And we were like, huh? Well, because we built our own media server and we were controlling our old streaming, that was like an integer. That was the easiest change you could ever make. And it would cost us incrementally more, but from a building product perspective, it was very anticlimactic. And so I think three days later, we introduced you know, higher HD or something. And these people went crazy. They were like, I've never, first of all, they were like, I never imagined you could do this. Like I thought it was some massive technical issue that was like, where you were screwing us for like a year just because it was too hard. And like suddenly you fix it. And then two, I've never used the website where I talked to someone about it and then it got better. And so this started a series of, in hindsight, what looked like extremely obvious things to build. One was, I want my stream to look better. Very quickly, two was, I'd like to make money, please. Can you help me make money? Don't you want a social network? Dude, don't you want to customize your page more with different colors and themes? It's like, no, but like I'll run ads on my own stuff. He's like, what do you mean? It's like, oh, if you give me a button where I'll just run a video ad on my own users and I can make money, I'll click it. I'm like, but wouldn't that, what? And then once again, we already had video ads. Like once again, it's like, fuck, like that's not even hard to build. Like the hardest thing was like, what should the button look like?\n: And again, dude, you were experts. You were running just, how many years in were you at Just Indeed?\n: This was five years in. We were experts.\n: So you were five years into your startup. You knew everything about everything, but then you were like, oh yeah, I guess we should talk to some of our users. And they said a bunch of stuff that blew your minds, that none of you would have thought.\n"} {"text": ": So I think that there are some businesses where you actually need money up front. Yes. And if you need money up front and you're building a software business, the venture capital industry can help you get money up front. If you don't need it. Don't take it. Yes. I think that what's so interesting about this is that there aren't many other good mechanisms. If you need millions of dollars or $10 million to get your company to break even, there aren't other mechanisms in our economy to give that to you.\n: Unless you use an example of Google, I don't know, just because it's famous, one of the most viable companies in the world. I don't know how you could have bootstrapped that. And so again, maybe the audience is saying, well, I don't want to build Google. Great. No one is saying you have to build Google. But if Google wants to build Google, but if the founders of Google wanted to build Google, it doesn't seem mathematically possible. There's no route they could have done it without the crazy money. There's no loans they could have gotten to buy the servers and do the things they did.\n"} {"text": ": So, anyways, I think that if you can resist this thinking, like a VC, I think what I've realized is you kind of have superpowers. I think this virus has invaded a fairly large percentage of founders.\n: Yes.\n: And so you actually get to do things other founders would think would be silly.\n: Yeah. It's like everyone has a filter for what seems like a good idea or not. And if your filter is exactly the same as everyone else's, you're all going to be screening out the same ideas. Right?\n: Yeah.\n: But if your filter is calibrated differently, you will see things that other people have decided is bad. Right.\n: Well, I think that's what's so funny is because that's the every successful YC story. That's the story in hindsight, right. It's like everyone thought the idea sucked. It was off trend because it was off trend.\n: It was a bad model, it was a bad space. The market wasn't big enough.\n"} {"text": ": Now, let me play devil's advocate a little bit. Dalton, I have an expert advisor. I have an angel investor. I have a seed investor. I've got a series A investor. They're the experienced ones and they believe they're working with me. Like, isn't that validation enough? Don't they \u2013 didn't they do this research?\n: Kind of. I mean, let's go to this two ways. One, it's best to do your own work on this because ultimately you're responsible for your company and it working or not. And this is what I tell people in the batch, you know, I'm like, well, just make sure You have to live your life. So if your startup doesn't work, it's not really my problem. I'll be OK. And so feel like you've done all of the diligence and research, and you know the risks of what you're doing. But to the extent I have relevant advice, it could be helpful. I think the other thing is sometimes experts can be too biased positively or negatively based on a small data set. So if you're working on a startup idea that someone had either personally worked on before or lost lots of money investing in before, they're going to have opinions. In my case, you know, media and entertainment startups are really hard. So I, you know, I know a lot about them. I can advise people on them, but I'm not usually the most optimistic on that startup idea. Um, and then, and so when you're talking to experts, just make sure you get a wide variety of them. I think would be my, my. reaction to your pushback and synthesize them. Just in the same way I said earlier, it's good to listen to lots of different kinds of music to synthesize together. I would just be synthesizing a lot of different opinions or a lot of different pieces of history as you're forming an opinion. In the Brex example, they went and spoke to every person that ever tried to start a challenger bank before. And guess what they all told them? They told them two things. One, useful information that they wrote down in their notes, the founders of Brex did. And two, they told them, don't do this. Are you crazy? So the break funders ignored that part, but this is similar. When you speak to experts, you just need to know what bits and pieces to draw from what they have to say, then to blindly accept what they say as facts. And that includes us, totally.\n: Right? You know, I think you brought up something so counterintuitive about investors. Like I get so many emails from people saying like, I'm doing social this or live video that, Can you help me?\" And I'm one of those people who's like, wow, I took a lot of hits during my social media live video days. I think sometimes counterintuitively, investors who know slightly less about your space can be a little bit more grasses greener, like optimistic than folks who know more about your space. I think that's not something that I realize. I don't think that's something that's obvious to founders. I think that like people assume expertise equals optimism. Yeah, right? Haven't we observed the opposite of that?\n: Yeah. I mean, yeah, there's something nice about not knowing much about something. It's much easier to see it as a simple question or a simple problem. Like imagine asking the founders of DoorDash about food delivery and what they would have to say about it versus me. Versus a customer.\n"} {"text": ": All right, this is Dalton Plus Michael, and today we're going to talk about why it's so hard to copy your heroes. Cut this off for us, Dalton.\n: Yeah, there's a common dynamic that we see in our industry where a prominent person will give advice that sounds reasonable, you know, like they're just saying, they're just giving people advice. But it is not at all what they did to become successful. It's the classic, do as I say, not as I do, or in this case, past tense, do as I say, not as I did. And it always gets a little bit tricky for us when we witness this.\n: Well, it's super weird because we're just getting old enough where for a lot of these people, we saw what they did. Yeah, we know their story. Yeah, we know their story. And so we're just like, that's weird. You didn't do that.\n: Yeah, that wasn't at all your path. And so you're telling everyone to do something that wasn't the thing you did.\n"} {"text": ": You're not helping the company. So one thing I think is helpful is like, how do we help founders prepare their minds for this zone? And we're telling you it's going to suck. We're telling you to do things that people are gonna make fun of you. We're telling you that you might have to live in this spot for a while before things start looking better. I think that the big challenge the founders make is screwed up expectations. Like the big challenge is that founders think I launch it and then it's gonna work. And I really wish founders went in with the mindset like, I don't care if it takes two years to work. Like how do you set your mind up so that you're immediately not disappointed? Because I think that it's like, you know, we talk about this at YC all the time, maintaining motivation is like three quarters of this game.\n: I think this is a great question. And it's funny how much the questions Like if someone got to spend time with us, Michael, say someone went to dinner with us, what they want to ask us about is like fundraising, networking. I know exactly what people would want to talk to us about, but usually what you should be asking us to talk about is like, emotional well-being and maintaining motivation and dealing with high stress situations and dealing with criticism, like a lot of people aren't prepared for people on the internet criticizing them. It's hard, right? And so it's funny how much what people think expertise, like what they think they want help with and what they actually need help with are not the same thing.\n: Yes.\n: And think about how many startups that we fund die basically as the founders run out of gas and get sad and want to go back to their jobs at Google because this was not what this was not what they thought it was. Man motivation.\n: I don't think motivation is about how shitty something is. Right. Like I think it's about how shitty did you think it was going to be when you started. I think that's what screws your motivation. It's like, how shitty did you think it was gonna be when it was started? That's why, I mean, honestly, when I do talks to college kids now, I'm just like, this life sucks. Like, this is the first thing out of my mind. It's like, this life sucks. It's like getting punched in the face every day. And like, real face punch. Like, not like fake. It's like, you're gonna get punched in the face. You remember that shit for like the rest of your life.\n: I mean, to this day, I'm sure you do too. Man, I have like bad dreams about my startups. I still have like, it's not like we're insulated from this. This was hard. This was like the hardest shit we ever did. Yes, by far.\n"} {"text": ": Next one, how to be excited about technology. We came up in this weird era, I guess, I didn't think it was weird, but looking back, I guess it was weird, where everyone thought technology was cool and making the world a better place.\n: Yeah. A lot of the way we understand the world is framed via journalism. Yes. And one thing, again, for young people, they don't have context on this, but it used to be journalists were all emphatically excited with no, downsides no reservations no reservations the internet is great yes it's and they would debate how great it was yeah the debate was like yeah yeah we know it's great but just how great yeah and who's making it the best who's making it the better the fastest you know and so it was this it was hard to like see any problems with it yes and um in this current universe we live in it's the opposite\n: Yeah, it's, this is bad. A lot of these people are bad. Every new technology, how is it going to try to screw us, exploit us? Yeah. You know, yada, yada, yada. And let's be clear, both extremes are incorrect.\n: That's correct, yeah, there's fair points. It's 100% there are fair points. But sometimes when I talk to young folks, they internalize too much of the current thing. And I think, I don't see how that helps you when you're young. Like your job is to be an optimist. Your job is to believe amazing things about what can you do with your life and what can you do in the world when you're young.\n"} {"text": ": So another thing that happened recently is we sent a letter to YC founders about the economic downturn, which was, happened to maybe get a little bit of exposure to the general public. I'm not sure how that happened. But it was interesting because I've been really impressed with how the YC founders have responded. What have you seen? I think that if you're smart,\n: You know how to look at things like that, as well as just general press or advice, and apply it to your specific situation correctly. Like, if you're a two-person startup with no burn, what's happening in the late-stage fundraising environment in IPOs? Like, if that's what you're worried about, man, you've got bigger problems, okay? And so I think if you were able to say, well, what is my actual situation? Am I default alive? How much cash do I have? What's my runway? And then make the right moves. Because again, for some folks, the actual move is to go on offense. Like we said a moment ago, where they're like, okay, I see. So this is the score, got it. Time to go hard against my competitors who have higher burn. This is a great time if you're the underdog and your large competitor is in trouble. And so I think that smart founders know what applies to them and what doesn't versus overly freaking out about things that have nothing to do with them. What do you think?\n"} {"text": ": I think that the, the challenge nowadays is where will non-conformists go to find their home? You know, it, it used to be as easy as going to tech and, and now, um, it's not as easy to go to tech. And, you know, you brought this up when we were discussing this before, but, you know, PG originally started YC to be a home for this type of people, right? To be a home for people who wanted. to build, who didn't want to wait in line, who really didn't care about status in and of itself. They just wanted to go out there and like challenge themselves. And it's interesting because when we're talking to founders now. um, who are in YC, there are all these things that we hear or conversations that we have that do motivate us, that do make us feel like, oh my God, like you, you actually want to be a builder. And I think it'd be helpful to kind of talk about some of those things, because they might be different than people would think. The first one that immediately comes to mind for me is, you know, now that YC gives $500,000, I'll have conversations with founders all the time where they come to me and they, they're like quiet. They think I'm going to disapprove. Right. They're like, Michael, like, I know I'm not supposed to say this, but I think 500,000 might be all the money we need to like, I don't know, like hit 50K in MRR to like get profitable or like hit this mega milestone. Like, is it okay if we don't raise a bunch of money? You know, I think the other hint and you brought this up, you better describe it in more detail is. They have no idea who the like tech Twitter celeb of the moment is, or the tech Twitter debate of the moment is, right? Like this is not, they don't live in that world. How have you seen that? It's just a sign of what you're focused on.\n: And so when folks are really involved in the scene, in the drama, in the characters, um, and are obsessed with the startup scene, as opposed to their own thing and solving customer problems. Yeah. That's usually a sign of like conformity.\n"} {"text": ": Hey, this is Michael Seibel with Dalton Caldwell. And welcome to Rookie mistakes. We asked YC founders for their rookie mistakes so we could share them with you and help you avoid them. Here's the first mistake that was written in. In my company, we tried to accommodate more than one use case in our product before nailing a single use case and proving out that there even exists a business serving that customer.\n: Yeah, this is super common. It's definitely a problem. We call this boiling the ocean. It's, you're trying to do something that's basically impossible or intractable, and all of your instincts are to build a complete, fully formed product without getting a single user. In your mind, you have this elaborate plan, and so your plan to start the elaborate plan is to build it all at once before getting a single user.\n"} {"text": ": This is Michael Seibel with Dalton Caldwell. And today we're going to talk about cargo culting. We encounter this way too much in our life. So there's classic variety and then there's new age, modern cargo culting. Let's start with classic. What's classic cargo cult?\n: Well, let's start with what is cargo culting? What do we even. What are these guys talking about?\n: What are we talking about?\n: All right, so the history of the term, as I understand it, is when you superficially copy something without understanding why you're copying it.\n: Yes.\n: That is cargo culting. I think the history, if someone looks this up and Wikipedia is like, folks would create a fake airfield so that the planes came back. And so it was something that looks like a landing strip because they wanted the airplanes to come back. They didn't really understand why the planes were coming. So like, oh, if we make a fake landing strip, then the airplanes will come back. And so in this classic cargo culting mentality, it's just, I'm gonna copy something. I don't know why, I'm gonna copy It, and then I will be as successful as the thing I'm copying. Right?\n: Yes.\n: Anything to add there?\n: Well, I think in the classic variety, what's essential is the thing that you're copying is good. Yeah. No one would debate whether it's good or not. Right. And so we're just debating how you copy it.\n: Yeah.\n: I think what's funny about this modern new age that we'll get to later is that, like, we could even just debate whether the thing you're copying is worth copying at all.\n: Fair.\n"} {"text": ": And that's probably the overarching theme. They had to be contrarian to walk down this path because if they had asked 10 startup experts, 10 investors, 10 fellow founders, eight of them would have told them that they were stupid.\n: And they had to build good products. Like you can't take for granted, you can't, we can't, you know, talk on a whiteboard and plan our strategy and win. All of these founders had to actually do it. And the doing it part was the hard part. Yes.\n: Right.\n: Like all, all these people had to execute and build a product that people loved and actually worked. And all these people built products that handled hundreds of millions of dollars and they couldn't lose the money. Right. So the actual execution bits, talk is cheap, execution's hard. Execution's expensive, and they had all these folks how to execute.\n"} {"text": ": Hello, this is Michael Seibel with Dalton Caldwell. And today we want to talk about our secret for learning as much as possible from your early stage customers. One of the things that we have to fight a lot for these founders, early stage founders, we had to fight is this idea that when we started the company, We understand the problem really well that we're trying to solve. We understand the customer really well. We understand the solution really well.\n: Yeah, we have it all figured out, right? Day one, we nailed it. We have our next 10-year plan all lined up. And why would you start a company if you didn't have the plan, like if you didn't know, right? It's true. Overconfident foolishness. is a key part of doing anything ambitious in life. So I do, you're right, you gotta love that. You gotta start there and then immediately switch.\n: Wait, maybe we don't know anything. Is that possible? But you only switch after you burn the bridge behind you.\n: Yeah, but you can't quit. You have to be apart enough long, quitting's not an option before you realize you don't actually know too much.\n"} {"text": ": I think this is a neat trick for an early stage founder. Audit the amount of time you spent last week talking to your customers and building product. Right. If that amount of time in your waking day is like 80 to 90 percent, you're probably doing it right. If that amount of time in your waking hours in the last week is more like 20%, you're probably doing something very, very wrong. All right, so here's the next note that a YC founder wrote in. You know, a lot of founders think money is like oxygen and you need it to survive. One of the things that Brian Chesky at Airbnb told The Batch recently is maybe money is more like food. You definitely need food to survive, but in a lot of places in the world, including America, people are dying from too much food as opposed to too little food.\n: If you're afraid that bad things are going to happen, the idea of stockpiling as much of whatever resources you can as much as possible is totally sane and reasonable. The issue is really successful companies, the oxygen they have is revenue from their customers and they're being pulled ahead by customer demand for their product. And that is providing the oxygen of growth is like the pull of customers.\n"} {"text": ": So the next one is Coinbase. So set the scene for Coinbase. What do you think Brian saw when he was getting rolling?\n: Yeah, so I was around back then and I was trying to buy Bitcoin back then too. And I remember the Coinbase YC application really well in the whole historical context. So to set this up for people, circa 2011, 2012, it was really hard to buy Bitcoin. Really hard. I remember looking into it around 2011, and there was a step of sending money orders, like going to Western Union and sending a money order to some foreign country. And that's when I hopped out of it. I wish I would have done it, would have made a lot of money. But I didn't, because it just seemed too much like a total scam. Like if you're ever sending money orders to foreign countries, something is going wrong in your life, right? But anyway, I also was familiar with Mt. Gox. And Mt. Gox was the biggest and largest Bitcoin exchange back in the day. It went down a lot and got hacked and everyone lost all their money. I actually lost some money in Mt. Gox personally. I think I had about one Bitcoin in Mt. Gox.\n: I'm not too worried about it. I feel like the reputation for Mt. Gox was like, you can get money in, but you can't ever get any money back out. That was the environment where Kugo Coinbase was coming in.\n: What it's grown out of is that Mt. Gox was an acronym that was Magic the Gathering Online Exchange. It was originally a website to trade magic cards that they pivoted into Bitcoin. And so anyway, the historical insight was buying Bitcoin was something people wanted to do. but all of the options were pretty bad. That's the historical context and Brian wanted to fix that.\n"} {"text": ": So, you know, I think it makes sense to split this up into mistakes that people make setting goals and then mistakes people make trying to accomplish these goals. So I would say like the first one, and maybe I'll start with the simplest, is when people set goals that are so aggressive, they aren't motivational. And they're basically missing the understanding of what the purpose of setting a goal is, right? Like you want to motivate yourself to act smarter, faster, more intelligently than you would otherwise. And oftentimes people are setting goals that are too aggressive because they're motivated by fear. You know, in YC we see this all the time.\n: And what's an example of a too aggressive goal? Like, what do you think? I can give you an example. What do you think?\n: Yeah, you know, I'll see a YC founder who comes in to YC just starting to build their product. And they tell me, by demo day, we want to have, you know, 30k in MRR. And we want to do that because some alum told us that like, that's how much MRR you need in order to raise money on demo day. And it's just like, How many errors can be said in three sentences, you know, is my thought. What's an example that comes to your mind?\n: My most common example is someone that believes once they launch a product, it will immediately succeed and take off. And so it's like, we're going to spend three months building this app. We're going to put it in the app store. We're going to launch. and then we're going to get 100,000 DAU. Yeah, yeah.\n: Like two weeks later.\n: Yeah, it's always the plan is they're going to put it out and then it's going to immediately take off. Those are always the goals that are rough. And what's funny is we're always like, why don't you launch sooner so you have more time to make it grow after it launches? I'm like, no, no, no, no. We're going to spend all the time making it good And so then when it goes, it's gonna immediately take off top of the app store, 100%.\n: Dalton, why would we launch something bad?\n: Then it won't take off, Dalton, Jesus. Yeah, we're gonna talk to some influencers. We're gonna do a social media launch. We've got it all lined up. We have a wait list. So yeah, top of the charts, definitely.\n"} {"text": ": Caring about your customer is a superpower. And I think what's funny, and you made this point, right, is that it's really, really hard to beat a competitor who cares about the customer more than you do. Yes. It's really hard. The customer knows in their bones that you don't give a shit.\n: Yes.\n: And I think that if we bring this back down to startups, one of the things that's tricky is that, you know, you get into a startup for a lot of different reasons, right? And like, hey, Dalton, I'm building a B2B SaaS company for accountants. Like, I think it's really good. I have some experience doing accounting stuff at my previous company, but I don't love accountants.\n: Yeah, I'm just kind of like going through the motions. I don't know. I'm looking forward, let me tell you about my next startup idea after this. Like, you know it's not great when they want to pitch you their next startup.\n"} {"text": ": And I think the smartest founders look past that. They look past all these like stupid debates. And one of the things I think they see about the Bay Area is the network effect. So why don't you go like what's going on here? Like why are billion dollar companies just seem to keep popping up after decade after decade here?\n: Well, I think, look, network effects are powerful. We know this. This is the thing that makes things like Airbnb work, Uber work, all the startups. Network effects are really powerful. That's why Facebook has any value at all is network effects. And basically, what's weird about network effects is if you're not benefiting from them, you don't know what you are missing. And a lot of the times when people want to talk about, well, I don't need to live there, blah, blah, blah. OK, that's fair. you won't know what you're missing. It's all the things that won't happen. It's all the people that you won't meet, all the chance encounters you won't have, all the employees you won't have. Like all these surface area for luck. I like to talk about how to maximize luck. Think about how many people, again, let's talk about non-tech. If you wanna make it as an actor, think about how many people their story of their big break is that something happened in like Los Angeles or New York or a band. that moved to Los Angeles or New York. When the actual moment happens, when someone spots them or finds them or like that.\n: A lucky moment.\n: Whatever that is, the work that they did before that was to put themselves in that position. And so no one is going to take someone that's outside of this area and tell you, this is what you're missing out on.\n: Can I say something that's even more? I think that people here sometimes don't understand the network effects they're consuming. You and I both saw a lot of people leave the Bay Area during COVID. All of them came back. And they all said this. They don't say that as publicly. They don't say that as publicly. They all came back, yeah. And all of them said the same thing, which was basically like, I missed the community. But I never really understood that I was consuming the community. I thought I was working all the time and da-da-da-da. But I actually was consuming a community of people who are really into startups. And when I moved to Seattle, or Austin, or New York, or da, da, da, da, that community wasn't as strong, and I missed it. But isn't it weird?\n: And there is tech there.\n: Yeah, but there's tech there.\n: And there is good lifestyle there, but that's not startups.\n"} {"text": ": Well, PB is the inventor of Gmail. And as kind of a side project at Google, he invented something that 1.5 billion people on earth actively use. And he literally did it doing things that don't scale. So I'll start the story and then please take it over. So as I remember it, PB was pissed about the Gmail product, the Google product he was, sorry, the email product he was using. And so Google had this newsletter product. The first version of Gmail, he basically figured out how to put his email into this Google Groups UI. And as he tells the story, his eureka moment was when he could start reading his own email in this UI. And then from that point on, he stopped using his old email client. And what I loved about this is that as he tells the story, every email feature that any human would want to use he just started building from that point. And so, you know, he would talk to the YC batch and he's like, and then I wanted to write an email. And so I built writing emails. And if you know PB, like he could have got a couple of days reading emails without replying at all. So he didn't need writing emails to start. I remember him telling the first time he got his like coworker, like literally like his deskmate or something to try to use it. And his destiny was like, this thing's pretty good. It loads really fast. It's really great. The only problem is, PB, it has your email in it. And I want it to have my email. And he was like, oh, shit. OK, well, I've got to build that. I'm like, I've got to build that. Perfect night-to-night solution. And so then it started spreading throughout Google. And do you remember when it broke? No, what happened? Oh, so he told this story where like one day PB came in late to work, which is, you know, knowing PB every day, you know, and everyone was looking at him a really weird. And they were all like a little pissed. And he got to his desk and someone came over to him and was like, don't you realize that Gmail's been down like all morning? And Peter was like, no, I just got to work. I didn't know. And so he's like trying to fix it, trying to fix it. And then his coworkers see him like grab a screwdriver and go to the server room. And it was like, they were like, Oh God, why do we trust PB with our email? Like we're totally screwed. And I think he figured out like there was a corrupted hard drive. And I remember that point of story. He was like, he says, and that day I learned that people really think email is important and it's got to always work.\n: And like, I think the reason, I think the reason he did it, man, is because he liked to run Linux on the desktop. And he didn't want to run Outlook. The Google suits were trying to get him to run Outlook on Windows. And he was like, I don't really want to run Windows. But yeah, it was the dirtiest hack. And as I recall in this final part of the story, it was hard for him to get Google to release it because they were afraid it was going to take up too much hardware. And so there was all these issues where there was a decent chance I think it never would have been released.\n: Well, this part was that everyone thought Gmail's invite system was like some cool like growth hack. Like virality hack. It's like, oh, you got access to Gmail. You got, I think, four invites to give someone else. And these are like precious commodities. And it was another product. It was just another version of things that don't scale. They didn't have enough server space for everyone.\n: They physically did not have enough servers. So they had to build an invite system. Yes. There was not an option to not, but basically there was no option other than building an invite system. It was not like genius PM growth hacking. It was like, yeah, well, we saturated the hard drives are full, so I guess we can't invite anyone else to Gmail today.\n"} {"text": ": Here was the next comment that was written. YC founder wrote, we did not do enough research before deciding what to work on. We now realize the more research you do in your space before you write a line of code, the better.\n: It seems like people go to the effort of starting a company, of trying to raise money for a company, of applying to YC with a company, of making it to YC interviews with a company, and we can tell you haven't Googled it. You haven't typed in like the idea that you're working on into Google or read any articles about folks that have tried it before. And this is such a self-owned. It's free to do research on those that came before you and failed. Cost you nothing. Doesn't take very much time. And to spend years of your life or months of your life or any amount of your life on an idea that you've not done just basic cursory research on is really dumb. Do you understand? Maybe you'll do it better or different, but to not even understand what came before you is kind of a willful ignorance. And I don't get that, right? It's almost like, Michael, do you think it's that they don't want to know or that they just don't think it applies to them or, oh, this time it's different? Why would you obstinately refuse to research related companies in the past?\n"} {"text": ": So I think that so much of this kind of pop entrepreneur Shark tanky advice, right? I actually think comes from a different place. I think it actually comes from like weird branding. And I think that in the branding world, being different, being unique, that is a very, very important thing. And a lot of the examples in the branding world are people who did things radically different and then became successful. What I find funny is that a lot of the examples in the technology world are people who did things 80% the same. and 20% different. At least 80%. 80% was the minimum that they copied. And so I think one of the things that founders screw up is when they take advice that might work in fashion and apply it to software, it might not work.\n: Yeah, this reminds me of usability. If people can't use your thing, like I remember back in the day, people would try to innovate on the website design and how the cursor worked and how you would even click buttons, and that was an example of probably not helpful innovation. No. And so watch out for unintentionally creating risk that you don't need to create.\n: Yeah, and I think that if you put your customer first, second, and third. You might look at some of these other things and say, do I really need to do them? Or better yet, let me do it on my second startup. Let's get one successful startup out of the way. And then I can make programming languages. I can hire people all around the world. I can do all kinds of crazy things. I can build rockets. I can do all kinds of cool things. Startup number two. All right, Dalton, good chat.\n: Thanks.\n"} {"text": ": What we also need to attack is this idea that because smart investor invested, my company is doing well. Like I just don't, I think that when you're the press or when you're on the outside having to judge, you have to use these kind of weird secondary, non-primary sources.\n: Yeah, it's not revenue focused. Your only signal as an outsider is fundraising rounds. Yeah. And there can be companies that are still struggling and aren't going to make it. They're still somehow raising money. One trick, by the way, friends out there, that's very common, is a fundraising round may have happened a year ago, but they're choosing to announce it now. Yes. And it looks like they just raised, and that is not true. So watch out for using the announcements of fundraising as a very reliable signal.\n"} {"text": ": So, let's talk about the fatal punches, right? At YC, we deal with a lot of failure. We deal with a lot of companies who fail. And you and I have to have a lot of conversations with founders who their company has failed, and their first thought is, I'm a failure. They personalize that failure. What are some of the things you tell those people when they're dealing with that fatal punch?\n: Yeah, I think as per what we talked about here, a lot of the things that people think are game over aren't. And so our advice is don't give up. You actually have a bunch of customers, you have a bunch of money in the bank, let's look at the facts, you're good. And so a lot of our office hours are let's examine the facts. Fact, fact, fact, fact, great, you're fine. However, sometimes we look at the facts and you're not fine. And it doesn't help you, like you don't need a pep talk to keep going. And it actually is probably the right thing for you to not keep going. Because at the end of the day, this is your life, you only have one of them. And messing up your life in a permanent way, your savings, your family, your friends, whatever it is, you know, don't do that. And again, I know it can be confusing out there, because we get bombarded with messages. Oh, but you say you never give up, or you say, you know, like, yeah, it's confusing.\n: It's not that easy. Yeah, it's complicated.\n: It's complicated. So I think you need to actually, with as clear objective ways as you can, be able to know when it's not working, and that it was a fatal punch, and that, yeah, you should not do this anymore. Like sometimes you see people get into like, debt where they owe a bunch of people a lot of money and then they shut down and they ripped off all their suppliers again you know you know i'm trying to say like like you're good you fail in such a way that you hurt a bunch of people not just yourself not good don't do that what i think that this is what's tricky is that i think someone needs to be out there saying that these aren't the things you have to put on the table to win\n: Yes, when you're working hard, you're gonna probably have to spend less time with your family or friends. But you don't have to put those relationships, you don't have to sacrifice those relationships to win. In fact, they're a source of strength. You're working hard, you're probably not saving as much money as you would be if you're working another job, but you don't have to sacrifice all your savings. You don't have to go into extreme debt. Like, if you're working hard, like, you might not be able to get the salary that allows you to live in the apartment of your dreams. But like if you have to crash on friends' couches, these things don't tend to have to be sacrificed to win. And so if you're taking these kind of one-way hard life hits, maybe the facts are set up.\n: Yeah. And again, what's tough is when you're one of those folks, sometimes you can even be victimized by people that'll like keep bleeding you because that's their racket. And we see this a lot with struggling startups. All sorts of people will come out of the woodwork to sell you services or promise they'll connect you with the investors or they'll help you fundraise or you name it. And it's like, it's kind of like moving to Hollywood to become an actor and it's not going well. All these people will, like there's a whole underbelly of folks who exist to kind of rip off the people who aren't doing well.\n: You know, to me, where I see this happen that's most tragic is with non-technical founders. Because it'll be some dev shop or some, you know, if you give me your last dollar, I promise that I'll solve your problem. Yeah.\n: And you see people writing checks for 20, 30, 40, whatever, 50 grand out of their personal checking account, their life savings to some dev shop. Yes. That's like their whole business model is to rip. I shouldn't say rip off, but like, they're like, yeah, cool. Like whatever. Like just as long as the check clears, we'll do it. You know? Yeah. It's pretty depressing.\n: It's really depressing. And, and I think that like those founders, when we have this conversation, the like, Hey, your startup failed, that doesn't mean you failed. Sometimes they just need to hear someone say that. So often we'll talk about, look at this person, their startup failed and they have another one that does well. Look at this person, their startup failed and they're not working as an executive at this really cool company. These experiences you have, are valuable to you, even if your company didn't work. You learned 10x more than you would have learned otherwise, even if your company didn't work. And sometimes when we explain that silver lining, people are like, oh, you're right. That's actually a fun part of the job. So there you go. Step one, how to try to avoid the punches. And step two, when they come, how to recover as fast as possible. Great chat today, Dalton.\n: Thanks man.\n"} {"text": ": And I think the last point we'll give is that I think that until these big companies solve AGI, it's going to be their first, second, and third goal. And so using the existing tools to make people's lives better, their businesses better, it's not on their list. Like getting AGI, one, two, and three most important goals. So that's a huge opportunity for everyone.\n: So look, in conclusion, unless you actually believe in the short term, AGI will be created by OpenAI that will do all the things that's possible for us to predict. Yes. OpenAI is not going to kill all the startups. No. And there's plenty of room to innovate.\n: And maybe we would say that the tools that exist now and the LLMs that are being made available, this could be a explosion of new amazing startups. This could be the moment that we've been waiting for since mobile. Yep. Where people can actually do cool new things and there aren't just cog-a-cog culting. So, this should be a moment where everyone's excited. Except for the people on Twitter. They're never excited. Alright, thanks much Dalton.\n: Thanks.\n"} {"text": ": Explosion.\n: You've seen this, man.\n: What's going on here? Well, first things first, right? This is why we like teams who know each other for at least a little bit and have some kind of work or personal relationship. Because I always say that when you have some kind of non, if you have some kind of base relationship that you might want to maintain, even if this startup doesn't work, you won't say that thing. Or you'll think really hard before saying that thing that will like shatter the relationship. But when you're like, oh, the only reason why I'm even talking to you is because of this startup and now I'm convinced that our startup's fucked, which by the way, you will be convinced your startup's fucked just continuously. That's like a normal feeling. And then you're like, well, fuck it. Man, you can't, you know, there are things you can't unsay. And, um, Wow, sometimes the original sin was like, you shouldn't have started the company with this person. But like, let's say you are doing a company with your co-founder and it's just really frustrating. What's the advice to give the founders on how to kind of process them?\n: I think it's like, you have to learn how to fight, and maybe fight's the wrong word, how to disagree. It's like, You have to learn how to pull your punches and have a disagreement that's a real disagreement and actually release the pressure of the disagreement in a way that doesn't cross the line so that the relationship is irreparably harmed. And it's a skill you have to learn. And if you've never been through a major disagreement with someone or had the skills for both of you to have a fundamental disagreement and talk it through yet not blow the relationship up.\n: Yeah.\n: And again, this is a skill like any other skill, man.\n: It's a skill. You know, it's funny because the analogy that I'm thinking in my head is that like, you know, it's a pressure release valve and you don't want to just rip it open.\n: Yeah.\n: But if you don't release any pressure, you also have a problem.\n: It builds up and blows up. Either way it blows up.\n: Either way it blows up.\n: If you let the pressure just build, build, build by only having superficial conversations for years, one day someone will snap.\n: Boom.\n: And on the flip side, if you just leave it open all the time and you fight constantly, that ain't gonna work either. It's sort of like the happy medium thing.\n"} {"text": ": All right, here's the last comment that a YC founder wrote in. I chose a co-founder with whom I could not share my honest disagreement. We didn't know how to fight well or come out of those fights better and wiser. Some part of that was conflict avoidance on my part, and some part of that was him fighting dirty.\n: It's crazy when you speak to founders where they'll spend eight hours a day with someone, 12 hours a day with someone, and they'll be like, I haven't spoken to them in a week. And I'm like, what are you guys doing all day? You haven't talked to them in a week, or haven't talked to them in a month, or I haven't had a real conversation with them in a year.\n: And I think when things get that bad, I would argue there's a point where breaking up becomes inevitable. And the CEO's job is now not how to repair the relationship. It's basically how to separate in like the most effective and least destructive way.\n: When you talk to folks about this, they know in their hearts that that's what needs to happen, but they just can't bring themselves to actually do it because it feels bad. And so that's what's, again, when you talk to these folks, they know, they know that it makes, the right thing for the company is to go their separate ways. But they, for whatever reason, They're willing to go through years of pain or actually reduce the chance the startup's going to work than to face that head on. It's really rough.\n"} {"text": ": All right, let's move on to the next one. So the YC founder wrote in, take arguments with your co-founders seriously. it's more likely to kill you than anything else.\n: What I see with a lot of co-founder disputes is that the relationship has never been pressure tested. They've just been friends. They've been like, oh yeah, we chat all the time. And then the first time there's a disagreement, it's just a blow up and the relationship is broken and you'll never be able to put the pieces back together again. Versus if it's someone you've known a while, maybe it doesn't seem as shiny, but you've already had some disagreements. You've already had the relationship ebb and flow over years, right?\n"} {"text": ": I think what's tricky, though, is that there are people who don't think that this is a good time. The people who aren't really into CS aren't really excited by the power of LLMs. And people who don't have experience with ML at all And those are the people who just want to make money. And I think what's interesting is in the last couple of cycles, those people have been very attracted to the startup world. How do I make money fast? Those people are not being attracted to this. I think that's what makes our job so much fun, because working with people who want to make money fast in startups, it's not a great group of folks. Those are harder office hours. Harder, harder. When we're like, yeah, it'll just take a decade. They're like, no, no. Why don't I do my ICO or something? Whereas this group of people, it reminds me when people were nerding out about Ruby back in the day. Like, oh, wow, I'm just excited about what I can build.\n: And when you think about it, a perfect time where if you're a creative person and you're an ambitious person, you can do really cool stuff. And we saw this with the iPhone. Yes.\n: You can blow people's minds.\n: Well, again, Uber would not have made sense without the iPhone. And so to me, it's less obvious that everyone's going to build open AI competitors. I am worried that all the low-hanging fruit ideas, open AI will just be able to do well enough. Yes. But if you go deeper to second-level insights, a la Uber after a consequence of the iPhone, Second order effects like this from LLMs are going to be amazing. You get what I mean? It's like, it wasn't the obvious shit. I want to try an analogy on you, right? Like fart apps. Remember when I was making fart apps? That wasn't the big business.\n: I would argue, maybe the analogy here was that it was obvious that maps were going to come to the phone. Yeah. It wasn't obvious that Uber was going to come.\n: I agree.\n: I never would have imagined. And so I definitely think that if you can think second order, and I'll even be charitable. I think sometimes to think second order, you think first order. It's okay if your thing starts as a toy. Like when people are like, oh, this is a thin wrapper on open AI. I always laugh because I'm like, okay, is that the destination or the starting point? Yeah, it was a starting point. I remember as we had the old Dropbox as a thin wrapper on top of AWS, on top of S3, right?\n: Oh, I can build this in a weekend.\n: I can build this in a weekend is a sure sign that the person doesn't know what the fuck they're talking about. So I will say that if you are absorbing, if your thing is a thin wrapper on OpenAI to start, and you're absorbing hate, ignore those fuckers. That's silly. Understand that many good things started like toys and make something that customers really love.\n: Yeah. This is a time to be optimistic. This is a time to build cool stuff. And this is not a time to cargo colt, as I said earlier. So superficially copying AI stuff just because it's hot or raising money. Don't do that. But if you can really solve customer problems in an amazing way, this is the time.\n"} {"text": ": So next, what about employees?\n: What do you think there? I think it's the same sort of situation. Again, the dynamic might be a little bit different, but if you're only ever having easy superficial conversations with people, It's cool until it's not. And sometimes the best way to work with folks at your company, whether colleagues, employees, whatever we want to call them, is to find the right way to have some of these hard conversations. And you know what they are. You're probably, I'm sure someone watching this is like, yeah, I can think of a few hard, I can think of some things I would say if I weren't. afraid of the consequences. You know, like there's a right way and a wrong way to do it. We're not saying go blow people up, but if you're just avoiding hard conversations, no one wins. No.\n"} {"text": ": and getting fired when it doesn't work out, right? Because it's their fault, it wasn't your fault.\n: You have company all hands where you can, you know, like you have all these layers where you're, this is all the stuff that's filtered out from you, man. Like this is not your problem when you have a job. When you're a founder, there is no filter. And I think people freak out because they treat being a founder is on the same, like the same sort of thing as being an employee. They're like, oh, either I'm gonna work at Google or I'm gonna start a startup. It's like, well, No, this is different, right? In one of those things, you're like a worker bee and you can just work on your thing and it's really low stress and you have to worry about your manager liking you and stuff like that. There's no managers, there's no filter. You're just out there dangling in the wind and every breeze that comes your way, you're gonna feel. The inputs that you experience as a founder are like completely unfiltered. And you have to be the person that tells the people working with you that it's all gonna be okay. You're now in the role of the filter. Like you are the filter, not the person being filtered to. Yikes. I think a lot of folks aren't mentally prepared for this. Reality is tricky when it's not filtered.\n"} {"text": ": So Michael, in terms of market timing, one thing that might be interesting to think about if you're currently working at a unicorn, a very late stage company, is now might be a good time to consider going to an earlier stage company as an employee because it's less likely their equity is super overvalued and there's lots of room for advancement. So how would you think about this if you were an employee of one of these companies?\n: Well, one, I think that you've gathered a lot of experience, and so you might have an opportunity to have more responsibility to an early-stage company, which would also probably get you more equity. I would say, too, you could use many of the hints that we gave you to judge that early-stage company. And you can actually do a bit of a comparison to get a vibe for like, oh, this early-stage company seems like it's doing better than my late-stage company. And then the third thing is that, What's funny is I think it's a little counterintuitive, right? It's the moment where your friends are gonna be like, that's stupid. Yeah, why would you go to a smaller company that's not a unicorn? Exactly, right? And it's so weird in my life how many times the dumb move at the moment was the smart move later and vice versa. It is just over and over again.\n: Yeah, and so the dream setup is you go to an earlier stage company that has the same revenue as the unicorn you are leaving, and one-tenth the valuation, thus your option strike price is much better. And you have more responsibility. You have more responsibility. That's a pretty good trade.\n"} {"text": ": I think the other thing that comes up a lot around innovation is business model and pricing. I think this, once again, is not putting the customer first. You know, hey, let's say you're selling cloud compute, right? Your customers have probably bought AWS before. Maybe you should charge like AWS does, right? Because maybe your customers will recognize that and that will give them comfort. Yep. No, that's wrong. We hate AWS. We can't do anything like AWS, including pricing. So now your customer looks at this pricing thing, and they're like, well, I really like your product, but I don't understand.\n: Your pricing page doesn't make sense. It's not even that they don't want to pay. It's that they're like, I don't understand what you're saying or how this works. I have to buy floozles, and then I get credits for floozles, and then I transfer them into the, like super real.\n: And by the time I'm at that page, I just want to know what it costs. And if I can't figure out what it costs, how do I? I'm walking, you've invited me in your home, and then you've shot me in the leg.\n: No, you've invited me in your home, and I can't open the front door. Like the door handle. I don't know how to use your door handle. And I really wanted to come in. I did. I was game. I had my money.\n"} {"text": ": This is Michael Seibel with Dalton Caldwell. In our last video, we talked about the setbacks that make founders feel like shit when running their startups. And this time we're going to talk about how to prevent these punches to the face, and how to take a punch and recover if you absolutely must. So Dalton, I think the cool way to think about this is a little bit like healthcare. There's preventative healthcare and then there's treatment. So let's start with the preventative and let's set the framework here. A lot of times founders get punched in the face as almost unforced errors. It's like a result of magical thinking or like other parts of their lives not being set up. And so here are things you can do to either reduce the number of punches that come or at least reduce their intensity because you have your other shit locked up. Does that make sense?\n: Yeah, exactly. It's like, as we spoke to last time, you can't think that you're not going to have any setbacks and you're not going to, again, take some punches. It's going to happen to you 100%. The highs are high and the lows are low. And so rather than assuming you can be so smart that you will never have low lows, Instead, plan ahead. Put the infrastructure in place so that when you do have these big challenges or these low moments, you have the infrastructure set up that, you know, you plan ahead for it. I think that's a very good idea.\n: So we were joking when we were talking about what to talk about in this video. A lot of these things could be put in the category of adulting. And it might turn out that if you want to be a founder of a very successful company, you might have to adult harder than the people around you. In fact, it almost assuredly requires adulting harder than the people around you. Sometimes I think founders look at us and they're kind of like, well, you know, my roommates don't do this, so why do I have to? And it's like, well, your roommates aren't trying to build a billion-dollar company, then they don't have to. Maybe you need to be better than the people around you to do something extraordinary.\n: It's yet another thing that distances you from your peers. And if your whole thing in life is I'm the same as my peers and I'm the same as my roommates that have jobs at like big tech companies. This is yet another way that you're going to be isolated and different and have to learn to love that. and not feel sad that when they're like, hey, we're gonna go pull another all-nighter, we're gonna go party Thursday, Friday, Saturday. You have to be cool with opting out of that, right? But if you think you can have it all, you can't. We're here to ruin that have it all dream.\n"} {"text": ": I'm going to try to come up with a bad analogy on the spot. Let's say that changing the world is like uprooting a tree, like a big, old, tall tree. Imagine there were two founders. One founder knew that trees have roots. and the other founder had no idea, right? Like the trees with RootsPerson, they have an advantage. They have a very large advantage. The tree without RootsPerson, they're gonna have a lot of very horrible, how do I phrase this? On-the-job learnings. Yeah, it's not moving. Like we don't get it. Like we...\n: We're pushing it, and it won't fall over.\n: Yeah, we've done all the math. If the tree ends right where the ground begins, pushing like this, it should work.\n: That's a great way to say it. There's so much under the surface. There's so much under the surface to understand with a lot of these ideas. And if you don't understand it, yeah, you're going to learn. You'll get some on-the-job training.\n"} {"text": ": And I think that what's not spoken about enough, and it's a point you make a lot, is that there are certain cities that are just better, and there are certain regions that are just better. And we can talk about all the reasons why, but if you want to be the best in finance, you're probably going to find yourself in New York. If you want to be in the best.\n: Or maybe London.\n: Or maybe London. Yeah. If you want to be the best, no, no, no.\n: OK, anymore.\n: We're not since Brexit. Yeah. Brexit kind of fucked that up. If you want to be the best, in entertainment, you're probably going to find yourself in LA. And the reason why is because when you want to be top 0.001%, you want to be around other people who are trying to be top 0.001%. And I think both of us wanted to be top 0.001% in startups. Yeah. You're from Texas. I'm from fucking Jersey. We didn't grow up here.\n: Yeah, that's true.\n: We made our way here. And when you're here, you get to consume all the other people like us who were looking to be the best and willing to get in the car and make our way here to do it. So I think that's a huge, huge factor.\n: Yeah, and I just think a lot of the folks that I talk to, they have the opinion from reading Twitter and reading all this stuff. that they all need to agree with you on this point. And that like, if moving to San Francisco means... You have to live downtown, in the Tenderloin. It means you have to make some really serious... You have to protest on the weekends. Yeah, but again, I talk to people when I fund people for YC, and I think they have a lot. A lot of people have like a lot of anxiety about these issues. And again, what they don't realize is Do you know how many people live in East Bay and they live in the peninsula and they like it's a huge area. It's a huge area. Yeah. But we all get to work together. Yes. But we get to make our own decisions. Yes. We get the benefits of living in the Bay Area and having the network effects of the city. Yes. Without all living in like the like our lives are not the Twitter thread.\n: No.\n: Showing photos of what's going on in downtown San Francisco.\n"} {"text": ": So you had another story about Facebook early days that is similar in this light.\n: So let me paint the picture. Back when you started a startup a long time ago, you had to buy servers and put them in a data center, which is a special room that's air conditioned that just has other servers in it. And you plug them in and they have fast internet access. And so being a startup founder until AWS took off, part of the job was to drive to the suburbs or whatever, drive to some data center, which is an anonymous warehouse building somewhere, go in there and like, plug things in. And what was funny is when your site crashed, it wasn't just depressing that your site crashed, it actually entailed getting in your car. Like part of being a startup founder was waking up at 2 a.m. and getting in your car and driving to like Santa Clara because your code wedged, you had to physically reboot the server. And your site was down until you physically rebuilt the server. So anyway, I'm just trying to set the stage for people. So this was what our life was like, okay? And so my company, iMeem, We had a data center in Santa Clara, and there was a bunch of other startups there as well. And so something that I liked to do was to look at who my neighbors were, so to speak. There was never people there, it was just their servers, and there'd be a label at the top of the rack, and you could see their servers, and you could see the lights blinking on the switch, okay? So this is what I was like. And so our company was in the data center, in this data center in Santa Clara, And then one day there's a new tenant and oh, new neighbors. So I look at it and the label at the top of the cage next to ours, you know, three feet away, the label said thefacebook.com. And I remember being like, oh yeah, I've heard of this. Like, cool. Like, sounds good. And they had these super janky servers. I think there was maybe eight of them when they first moved in. And they were like super cheap. They were like super micro servers. You know, like the wires were hanging out, like, you know, I'm like, cool, but the lights were blinking really fast. Okay. And so what I remember. was that there was labels on every server, and the labels were the name of a university. And so at the time, one of them, one of the servers was named Stanford, one of them was named Harvard, you know, like, and it made sense because I was familiar with a Facebook product at the time, which was like a college social network that was at like eight colleges, okay? So then I watched, every time we would go back to the data center, they would have more servers in the rack with more colleges. And it became increasingly obvious to me that the way they scaled Facebook was to have a completely separate PHP instance running for every school that they copy and pasted the code to. They would have a separate MySQL server for every school. And they would have like a memcache instance for every school. And so you'd see like the University of Oklahoma, you know, you'd see the three servers next to each other. And the way that they managed to scale Facebook was to just keep buying these crappy servers. They would launch each school and it would only talk to a single school database. And they never had to worry about scaling a database across all the schools at once. Because again, at the time, hardware was bad. MySQL was bad. The technology was not great. If they had to scale a single database, a single users table to hundreds of millions of people, it would have been impossible. And so their hack was the 9-10 solution like PB used for Gmail, which is like, just don't do it. And so at the time, if you were like a Harvard student and you wanted to log in It was hard-coded to the URL was harvard.thefacebook.com, right, man? And so if you try to go to stanford.thefacebook.com, it'd be like, you know, error. That was just a separate database. And so then they wrote code so you could bounce between schools. And it actually took them years to build a global users table, as I recall, and avoid this hack. And so anyway, the thing they did that didn't scale is to copy and paste their code a lot and have completely separate database instances that didn't talk to each other. And I'm sure people that work at Facebook today, I bet a lot of people don't even know this story. But like, that's what it took. That's the real story behind how you start something big like that versus what it looks like today.\n"} {"text": ": Well, and it's so funny, because I love your point around maybe you don't like coffee shops. Everyone can like people. Everyone can like helping another person. That's just a quality of humans, right? You like helping someone else.\n: Yeah, it feels good to provide service. And it feels good to give someone something that, sure, you're making money from it because you're charging for it. But you know that the value that the thing is delivering is big. Way more. You're getting a great deal. And you know in your heart they're getting a great deal. And not just like, hey, they bought the software. We know it doesn't work. We know they don't use it. But I hope they keep paying. They signed the LOI, so I was able to fundraise, but we know the software sucks.\n: That makes you feel bad. That makes you feel bad, yes. So if we're going to wrap this up, we've given a lot of advice on how to do all kinds of things around early stage startups. But one of the things that we probably should have emphasized more is it really helps to care about your customers. And if you can use that as a tool, you'll learn more. you'll make more sales, you'll have more fun.\n: And people can tell if you care. They'll want to tell you more about their problems. They'll give you the benefit of the doubt. They'll cut you slack. If they can tell that you care and that, you know, you want to actually solve the problems and not just get money, raise VC dollars.\n: With that, thank you very much. See you later, Dalton.\n: Great. Thanks.\n"} {"text": ": The next one that comes up a lot is fake metrics. And we've talked about this a little bit, but for companies who charge their customers money, somehow creating a goal incremented in something that's not money. Hey, my product costs $10 a month, but I'm measuring registered users. I want to hit 1,000 registered users. That's weird. Like, hell, if users is going to be the metric, like, why wouldn't it be active users, right? Like, just like if we're going to be in that world. Well, that's too hard, Michael. That's why. Well, fair. But if we're charging them, why wouldn't it be the amount of money we make? Like, that seems even simpler. But I think you've seen a wide variety of fake metrics that goes way further than users, right?\n: Yeah. Okay. Counting hits on your website. That's an oldie but a goodie. Yeah. Counting downloads but not registrations is a good one. Yeah. Counting users as people that started the registration process and didn't finish it. Counting users as people that downloaded your product, opened it, closed it after five seconds and never opened it again as users. Yes. Yes. We've heard that one. Just basically like a thousand and one different ways to avoid the actual meaning of the metric, which is to capture if it's working or not. It's like every which way. People are so creative in finding ways to like not actually measure the thing that they know they're supposed to be measuring. And I can never tell if they're doing it to fool themselves or to fool investors or authority. You know what I'm saying? It's hard for me to tell when someone is practicing self-deception that number of downloads is the right metric or if they think that no one else realizes that that's obviously... No one else can tell what they're trying to do.\n"} {"text": ": I think what's really interesting about this is we come back towards he wasn't the first mover, was not the first mover, but the product that existed was so bad that a 10x better product was actually within reach, like it was actually possible. I think the other fun insight here is that like portable online gold, is valuable, like it is 10x better than gold. And so as something you might want to have, if you think gold is something that you might want to own and seems like the market does like owning gold, portable online gold, strictly better. So I think Out of maybe all three of these founders, Brian was exposed to the most shit takes, the most people saying this was not gonna work. So break that down for us. Explain all the reasons why Coinbase is not supposed to work and Brian should not be a successful founder today.\n: Well, at the time, people saw Bitcoin as a tiny market, that it was going to crash, that it was a bubble. Investors didn't like it. It was synonymous with a lot of actual fraud. It didn't have a great reputation. Also, getting a bank deal was impossible. It's not like other founders didn't want to start something like Coinbase. U.S.-based exchanges were incredibly hard to start. And this is the reason why all the exchanges at the time were offshore. was the regulatory environments were different in different places, right? Another thing I want to note is even Brian in his YC application didn't really believe in his own idea because what he basically applied to YC with was the P2P transfer parts. It wasn't buying Bitcoin and holding it. It was the idea that he could build something like PayPal to do P2P transfers. And that the buying Bitcoin part, that was just part of it. And so isn't it funny that even he kind of undercounted the simple promise of buying Bitcoin in a non-sketchy way with a debit card in the U.S. and not getting hacked and losing all your money, that was enough of an insight to be the basis for like a $100 billion company. He didn't need to do all this other stuff.\n: He didn't know that. No one knew that. And following the pattern, a valuable insight that he learns after starting the company, right? Like, you don't have to have all the valuable insights before you start.\n: Well, you remember what the Coinbase product was back in the day, right? It was a website, you logged in, you put in how much Bitcoin you wanted to buy, and you push the button and you buy it. And that was, you could sell it too. There was no social network, there was no comment feed, you know. It's probably the simplest product. There were no graphs. It was one of the simplest products I've ever seen. But it doesn't solve the right single problem at the time.\n"} {"text": ": And the last one on our list, playing the game of using your position as a startup founder to become an amazing investor. And I think this one's like really tricky because for one thing, you definitely see a lot of famous startup founders have written kind of angel and checks into companies that that tend to do well. And so I think sometimes people confuse that for, oh, I should be spending a significant amount of my time looking around and trying to be an angel investor instead of making my company work. And I think that what, if I can try to explain to you what's actually happening, when you're a good founder, oftentimes you know other good people and the opportunity you have to give them money requires almost no time or effort. And so you just, and like, if you're a good founder, oftentimes people are offering you deals, and so you're spending five minutes saying, yes, this is an obviously good thing, I use it, or this is my friend, I wanna support them, and the amount of time and effort you're spending writing these angel checks is basically nil. I remember when I was starting SocialCam, I emailed Brian Chesky saying, do you wanna angel invest? He was like, sure. That's it. That was the entire time that he spent, probably less than 15 seconds. I think people don't see this so they think, oh, I need to copy what I see investors on Twitter doing. I need to go network. I need to go meet founders and advise them and do office hours and like all these things. And it's like, ah, like classic example of cargo culting, right? Like not really understanding what's going on.\n: The stupid game you're playing is a status game. Like if you play status games where what you want to do is level up, you want to, put angel investor in your Twitter bio or something. Okay. You're playing a status game. Fair enough. The prizes that you win playing the game is congratulations. Now a bunch of your money is tied up in illiquid investments that may or may not show up. So now maybe you're like financially strapped. Maybe you're worried about other stuff. You're worried about your startup. So maybe you're performing worse because your money's tied up somewhere. you have spent a bunch of time and stuff, you've totally pissed off your employees, whether or not they would say it to your face, that is not a great way to win awards with your team.\n: Yeah, you're a scenester. Congratulations. Yeah. So I think to wrap this up, right, Sometimes founders don't think enough about the bad consequences of the games they're playing. And once they really do the whole logic tree down to the end, they'll realize that maybe it's not worth playing those games and you might as well just build a good business. And even if that's a tricky message for you to internalize, Think about what you're teaching your team if you're making these mistakes. They will copy what you're doing because you define success in your company. And so even if you're like, oh, for me, this is cool. A perfect example, if becoming a status-seeking angel investor is what seems cool in your company, people in your company can start trying to do it instead of doing their work. And so make sure... yeah, people in their company start doing it. It's kind of like a little bit, we're both parents, it's kind of like, hey, if you don't want your kid to be a screw up, you don't do screw up shit in front of them. It's like a pretty simple one to one here. And on the flip side, to kind of end with a positive note, some of our best companies get so good at goal setting and accomplishing goals that they They move faster than we would ever imagine possible. They are just machines at doing this well. And I would argue that most people don't start doing this well. Most people who focus on setting goals and accomplishing them get better at it over time. But man, the rate of improvement is sometimes shocking. Sometimes there are founders who are kind of fooling themselves, who are thinking like, hey, I'm smart, so I can coast on this stuff. Man, outliers are smart and great executors and great trainers, right? Like they have multiple things they're great at. They don't sandbag themselves. Any other thoughts here, Dalton?\n: I think we're good. I think it's well said. Thanks, man.\n"} {"text": ": I think another really interesting thing about Stripe was that it was a problem that they saw their peers in YC have. So literally, they were seeing all of their friends in YC going through all of the pain of Authorize.net, and they were hearing this story over and over again. And that's a good hint for people out there looking for ideas. If all of your smart technical friends are complaining about the same thing, maybe it's a real problem. Now, last insight that I think that they had, talk to me about their go-to-market and specifically about understanding that their customers were developers and not business guys. Because I think that was revolutionary at the time.\n: Yeah. The really clever brand promise or marketing stance or whatever you want to call it they had was to try to make the most beautiful website they could with the most beautiful documentation that was every programmer's dream. They constantly asked themselves and pushed themselves to say, what would I want? Or what would a programmer want? And this is so different than every other processing company, because it was built for basically business people. The programmer who had to implement Authorize.net was not the customer. It was someone getting paid $20 an hour or something to implement the code. Whereas this was like, they went nuts at making something that developers would just freak out about. And everyone copied it, by the way. Every developer would copy the Stripe documentation, copy the Stripe website. It was like the Apple. It was like if Steve Jobs had to design a payments company, it would be Stripe. And they totally did this on purpose. But what this created is a lot of buzzed on Hacker News and around nerds, basically, that, hey, have you seen this Stripe thing? Oh, are you in the beta? Also, they did a beta invite program. And so it was a hot commodity to be able to get into Stripe and be able to use it. You were seen as well-connected if you got the pleasure of getting to use Stripe. It was like a favor they were doing you to let you use their product. That's what a great job they did in making the website and documentation excellent.\n"} {"text": ": This is Michael Saibel with Dalton Caldwell. Today, we're going to talk about setting goals. More specifically, all of the pitfalls involved in setting or trying to accomplish goals that startup founders we work with tend to fall for. Dalton, why don't you set this one up?\n: Yeah, you know, when we were talking about it this morning, the phrase or the meme that came to mind was the one, play stupid games, win stupid prizes. And again, what I think it means in this context is if you set goals or if you start playing one specific game that is silly to begin with or that's clearly a bad call, yeah, the prizes, the implications of that, the things that you win are going to be equally silly or nonsensical or nonproductive. And so we see a lot of people who set goals to in effect play kind of stupid games.\n"} {"text": ": So what's the grand takeaway here, Dalton?\n: I think the grand takeaway is the following, which is just to remind people that it's okay slash good to be a nonconformist. If you're not currently a founder, one tip is to join an early stage startup instead of a big company, because it's more likely you'll find like-minded people. Being the first 10 employees somewhere is going to be weird, and the people that tend to like working at the first 10 employees tend to be nonconformist. Right? Cause there's no structure. It's like chaos. So that's like a really good move versus going into like the, the big tech treadmill. And I think the other big takeaway is just to remind people like, you know, don't play status games or, or maybe you can, but maybe some, you know, do it inside of a big tech company instead of trying to play status games and startups.\n: Yeah, my final thought is I come back to what I say to every founder when they come in, which is, you know, congratulations for being in YC. The average YC company dies. Like you, you literally have accomplished in the scale of making any impact on the world, getting into YC means you've accomplished nothing. I think there's a lot of people who think that they're nonconformist, but they are actually secretly following some thesis of tech Twitter or yadda, yadda, yadda, you know, and like, they tell their sums like they're, they're nonconformist, but they really are just trying to fit in with a pack. And I would just say like. for the real non-conformists out there, just find your people. Like you're going to be so much happier when you're surrounding yourself with other people like you. And, you know, we think YC can be a place like that, but like, even if you don't think YC can be a place like that, you'll be more productive when you surround yourself with a group of people like that. And I can say personally going through YC, that's why we got better was because we were surrounding ourselves with these non-conformists who all thought that they were amazing. And we all were like, well, I guess we got to level up. We think we're better than them. So how do we, what are we going to do? You know? So for the nonconformists, good luck. Great talking to you, Dalton.\n: Sounds good. Talk to you later, man. Bye.\n"} {"text": ": No, I'd like that. I would love to say, I'd be Facebook's biggest fuck. I'd be like, I don't know what you think about Facebook.\n: You would want to tell people, hey, I actually met Mark Zuckerberg and he came to my house and I guess they really like, it would be a story. It'd be a story. I was a early customer of Stripe at my startup. And it was invite only and very few people were using it. And my customer experience was Patrick, the founder of Stripe. I had a chat with him, like in Google talk. That's a long time ago. And he would message me all the time. And they had a big mistake where they overcharged a bunch of my customers. And it was a problem on their end. And so what happened is Patrick DMed me, told me that it happened, said that they fixed it, and apologized. Do you think that I like Stripe more or less after that experience, even though they messed up? Exactly, exactly.\n: Isn't that wild? It's wild. And what's funny is that sometimes big companies can pull this off too. I remember early days at AWS, we were blowing up. We actually, like, there wasn't enough time to buy and rack servers. So, like, we literally needed, to use EC2 and it was in beta, like you just couldn't sign up for it. And we randomly tweeted, can anyone help us get on EC2? Just like into the world. And like this guy, Jeff Barr, tweeted us back, he was like, yes. And it was like Amazon had a face and a human and a hero, and he hooked us up and saved our company. And that's Amazon. They did it. And you remember that. You're telling the story now. I'm still telling the story. It planted in your head. So if you can create that experience for customers. Oof.\n: Yeah. If you can blow people away. by how much you go the extra mile to care and solve their problems and not emulate the big company stuff. You're giving away your power if you don't do that. You got to use that move. Got to do that.\n"} {"text": ": Historically, seed funding could dilute companies 25, 30, even 35%. I would say in more recent years, that number was around 15 to 20%. But we really saw a lot of founders able to get the money they need, raise their seed round with 10%, some even a little less, dilution. which was like huge. I mean, we all know those earlier rounds are where most of the dilution of the company happens. So that was awesome to see. The other thing, and I know you saw this in your group too, it's just founders going into fundraising with confidence. You know, we talk about this all the time. We tell the founders be confident, but it's hard to be confident when you only have six months or three months of runway when you go into fundraising. It's a lot easier to be confident when you come in with half a million bucks. What did you see in your group?\n: Yeah, I think the best founders were just very logical and non-emotional in the way they handle this. It's business, right? Like the best way, imagine any financial transaction, you want to buy a house, you want to buy a car, you name it, the more that you can be just not manipulated into being emotional or to be FOMO, like there's all these things. If you could just be like, hey, I wanna buy a car, this is my budget, this is what I wanna buy, okay, let's work it out. All right, I bought the car. That's how you wanna approach any kind of financial business relationship, right? Is just to be non-emotional. And so that's having this extra money helps people not be quite as susceptible to being told to be afraid basically, right?\n"} {"text": ": Hey, this is Michael Seibel with Dalton Caldwell. Today, we're gonna talk about what does it mean to do things that don't scale, the software edition. In this episode, we're gonna go through a number of great software and product hacks that software companies used to figure out how to make their product work when perhaps they didn't have time to really build the right thing. Now, Dalton, probably the master of this is a person we work with, a guy named Paul Buchheit, who in front of this term, the 90-10 solution.\n: He always says something like, how can you get 90% of the benefit for 10% of the work? Always. This is what he always puts on to people when they tell him it's really hard to build something or it takes long to code it. He'll just always push on this point. And, you know, founders don't love it. Right, would you say that's a fair assessment, Michael?\n"} {"text": ": What I will say, though, to kind of finish this point, is I think one of the slightly dangerous things that kind of sneaks into this startup game that also causes people to not want to come here is that people don't realize that they need to be aiming for greatness. I always like to equate this back to sports where it's like, there are so few spots in the NBA, let alone on the all-star team, let alone the hall of fame. The bar is so high to get into the NBA that anytime you're a basketball player anywhere, you want to be the best basketball player. on your high school team, on your AAU team, on the invitational invite, you want to be the best basketball player anywhere because you know that the average NBA player was the best basketball player anywhere. And I think that sometimes startup founders miss this point. And they're kind of like, I want to be in the game versus I want to win the game. And I think that like, it's really easy to say, well, you know, I can be in the game in Austin. I can be in the game in Seattle. There are investors there. There are people there. I can be in the game in New York. And I wish that we were more honest that like, yeah, you can play basketball for your high school team, but that's not, that's necessary, but not sufficient to make the NBA. If you want to be a great founder who really impacts the world and helps lots and lots of users, you have to aim for great.\n: You can't just aim for being in the game. And I actually just bring it back to statistics and odds. So let me be really precise, because I can imagine how some people will respond to some of these you're saying here, and they're going to throw anecdotes at us. They're going to say, there's this, and there's this. Shopify is in Canada. Yeah. And it's true. It is. I have nothing to take away from those things.\n: MongoDB is in New York, and I've been told that by every fucking New York founder for a decade. MongoDB? Yeah, great.\n: And again, good for them, like rock and roll. They're doing well. The point is we're actually trying to impart advice to increase your odds of success. Because just like with people that want to become Hollywood celebrities or rock stars, there's certainly anecdotes of people that were discovered and everything slipped into place for them. But if you actually just look at the numbers of how you increase the odds of success, moving to an area, moving to the big leagues was a key part of it. And so I would just encourage folks that are unsure about this debate or they don't have their mind made up to realize that the anecdotes are true. that you can do a startup outside the Bay Area. And maybe there's a really good reason you want to do that. I don't know. Sure. Maybe there's health reasons or family. Great. But if all you want to do is play to the odds and optimize for success, I can't really understand why you wouldn't want to be here. And that's not anecdotes. That's numbers. That's just numbers.\n"} {"text": ": Maybe the other message is if you've got a friend who's doing the positive some game, give them a pat on the back. Give her a pat on the back. Like they're probably taking it on the chin right now, but like, man, at least they're trying to play the game the right way.\n: Yeah. I think what you want to do in every situation you're in, whether it is, okay, let's extrapolate this. Whether it's a startup, whether it's a job, even if it's a relationship, Like, we can frame a lot of things with this. Is this a zero-sum situation or positive-sum situation? Like, in a relationship, imagine if you make each other better, one plus one equals three. Like, with great friendships or romantic relationships, you make each other better. That's positive-sum, right? And so I think this is just like a helpful framework to look at everything through of zero-sum versus positive-sum. And, you know, life's short, man. Try to put your energy into interacting with positive sum situations as much as you can. And it'll pay back in ways you can't even possibly imagine. And the externalities of it are much better. Like the impact you're gonna have on other people is gonna be better if you always choose to play the positive sum games, you know?\n: And even if you say, screw that, be careful with the zero sum games because today you're taking money from a dummy and tomorrow, You might be the dummy.\n: Yeah.\n: All right, man. Great chatting, Dalton.\n: Sounds good. Thanks.\n"} {"text": ": I think the second thing that people do is they ask their friends here. This is a situation where like Googling is probably a hundred times better than asking your friends because like if you're a young person whose internet history is like four years old, your friends are probably in the similar position. And then I think the last thing is a bit of a psychological thing. I think that's what you were getting to, which is, if I'm so excited to do this, why would I want to learn something that would defeat it before it started? Can I live in the illusion and the dream for a little longer? And again, let me be direct on this one.\n: During the dot-com bubble in the 90s, a lot of people started companies, and a lot of them tried pretty much every idea you can imagine. Every idea that you see today has some analog from the 90s. So dig in, look into it, see if people have tried this before. Same deal, in the 2000s, people pretty much tried every idea. And again, maybe in the example of something like Instacart, people had tried Instacart before and it didn't work, but the founder of Instacart knew that and they intentionally designed it to be better. You understand what I'm saying? Like they stood on the shoulders of those that came before them. Smart. Versus if you're the founder of Instacart and you didn't realize that Webvan existed, How does that help? You're not helping yourself to not know about it. Same in the 2010s. Think about how many startups we funded that have tried stuff before. And so from our perspective, we see patterns in the ideas people start constantly. We get it, you're better, smarter, faster. You have a better programming language or whatever it is. You're better. We get better.\n: Better UI, Dalton. I got better UI.\n: Oh, mobile. I remember in our era when we were young founders, it was like, oh, we're an app. We're an iPhone app. iPhone changes everything, which is both true, but doesn't mean we should have discounted history.\n"} {"text": ": A WeWork is a classic example of this.\n: So you should actually be looking at senior management and the founders and make a judgment if you think they seem like they're Competent. Yeah. And again, this is different. Sometimes the press lionizes people that aren't super competent The press shouldn't be involved in this decision.\n: So you should make your own decision Yeah, it should be like is the message in the all hands line up with the facts that you see.\n: Yeah, does it seem credible? Yeah, I also would look at what the rest of the people that work at the company seem like? And do they all seem busy? And do they have enough work to do? And do you just feel like your colleagues are good? Because one signal of a company that's not going well is that Everyone good is kind of left and the people that are left are just doing make work to try to not get laid off. It's kind of a malaise. Yeah. And often the founders of these companies won't want to, you know, do layoffs or whatever to keep the fiction going that the company's going well. Yeah. And so, again, I think you can make judgment. you know, hopefully you're correct, but of just how good do your colleagues seem and how much do they have really important work to do that's serving customers versus going through the motions making pitch decks or slide decks or whatever it is that people do at companies that aren't quite well, right? And so I think these are really, you have the information if you're inside of the company.\n: You have all the information.\n: Way better than anyone else does. Yes. And again, if this could all check out, and you're like, you know what? This is going great, and I really like my colleagues, and I'm learning a lot, and I'm doing well. And I should double down. You should double, yeah.\n: I should work harder. I should try to get more equity.\n: Yes.\n"} {"text": ": You want to talk about this kind of social media piece because I think that a lot of people don't understand how toxic social media is.\n: Yeah, I think you just want to look at your information diet. The metaphor I think about this stuff with is the same way we have a food diet. And like, of course, what we eat and drink affects our moods and how we feel. I actually think the information we consume affects us. And if you think about, again, like myself, all of us, you know, when it's a really heavy time in history, when there's a lot going on, when I'm doom scrolling all the time, reading about pandemic news or war news or whatever, Of course that affects my state of mind, okay? And so to some extent, you can't completely stick your head in the ground about what's going on in the world. No one's saying to do that. But to the extent your social media habits make you feel bad or compare yourselves to people, or say you follow a lot of like investors and everything they're talking about is the investment market and who's raising and all of that. And this is just every day you're bombarding your brain with stuff about investor shit. Why? Why is that good? How is that helping you actually run your startup? Reading what a bunch of investors say about the market all the time.\n: And I think people are surprised that successful founders explicitly block social media. They do crazy things like they grayscale their phones so it looks less interesting. They turn off notifications. They're aggressive users of screen time tracking. They actually pretty aggressively audit this stuff.\n: So that illiquidity saves you all. And so again, so if you're consuming media every day and you're reassessing the value, like if you're too paying attention to this stuff, it doesn't make you make better financial decisions, does it? No.\n"} {"text": ": So yeah, so just understand that game and I have to be honest like I like games like this like I don't like games where you have to like convince people to like you or to align with your views. Those are games that are way harder to play. I like games where it's like, hey, if I want to serve this customer and you can be a good legal partner to me, and I give you money and you give me legal services, you can be a good funding partner for me. I give you a check at my company, you give me cash, right? If you can be a good partner to me, a simple to understand partner to me so that I can spend my time working with my customer, That's what I want. The customer's complicated enough. I like the idea that the money people are like, so if I give you this money, maybe give me a lot of money back? Yes? Yes? Okay. Okay, we're good. End of conversation. I give you money, you don't give me any money back? No. No good. Come back when this is out of my way. Hopefully, This helps clear up the debate, but I secretly hope this like, I don't know, like doesn't at all. Cause this is like so silly. I hope we get somehow flame award for this. Anyways.\n: Great.\n: Good chat.\n: Love it. Okay. Sounds good. Thanks.\n"} {"text": ": I also think there's this element of like, You're not exploited if you're part of the problem.\n: Yes.\n: Again, this is a subtle point.\n: Let's see if we can explain it. It's basically. If it's not working and you have a seat at the table, it's on you, man. You can't just blame, hey, business guy, you're not pulling your weight because no one wants our thing. But if you have a seat at the table, you're equally culpable. If you have equal equity with someone and you have a seat at the table in decision making, just because it's not working doesn't mean you get the right to blame other people. That's not cool.\n"} {"text": ": All right, so here's another one that comes up a lot. Dalton, I'd like to spend two hours really going deep on this problem. But our office hours don't go that long. How do you how do you deal with me? I want to do a deep dive.\n: Yes, this is another one of those question behind the questions. And again, it can be different things depending on the people. I think sometimes what's going on is you're an idiot and I don't have confidence you can give me advice unless I spend two hours showing you a slide deck so I can explain everything to you. Sometimes it's, it's not really about the meeting. I just want a lot of face time so we can build a relationship or whatever. And so this is, yes. Yeah. Okay. That's fine. But you see what I'm saying? There's usually when someone asks that there's something else going on. And again, it's usually the first one for me where they think we don't understand. Yeah, maybe we don't, I don't know. But like, instead of them directly saying, I am concerned that you do not sufficiently understand our business. And so I wanna make sure you do X, Y, and Z. Okay, that's a hard conversation. But then I'm like, okay, I know where you're coming from. All right, I hear you. Yes. But some weird like, can we meet for three hours? Yeah. I'm always like, why?\n: I want to know the question behind the question, you know? Yes. Well, and what's so funny is if they just said, I don't think you're smart about this particular thing, we would get to the, we would get to the meeting, right? We would get to the meeting. Now, I think there's a couple others that I see. One is this assumption that we are like godlike advisors with complete understandings of every user base and every problem in the world. And like, they can kind of like shortcut talking to users if they just spend enough time talking to us. And so that one is just like, folks, like, so often in this one, I'm just like, you're having a conversation with me that you should have with your customers. Like, talk to them. Like, I don't use your product. Talk to the people who do. I think the other one which I really try to push back on is I'm lazy and I didn't come up with the agenda. I wanna like roam my random thoughts. And over the course of two hours, we will have 20 minutes of productivity, but I don't wanna organize my thoughts. And I want you to accommodate that. And for that one, I'm always just like, that's like, you're not training yourself for success here. Like you expect more from yourself, like, If your competitors can get 20 minutes of input, 20 minutes of output, they will do way better than two hours of input, 20 minutes of output. And just, you know, that seems to kick people into gear. What's another one that you're excited by?\n: I think we can shift gears to a couple other contexts for hard conversations.\n"} {"text": ": Well, and I think that this is a big, there's a big difference. And we've now seen both, right? I think that we've seen the kind of fintech boom and the crypto boom, where the people attracted to them were slightly different. And as tools, they just weren't as useful. Whereas giving everyone a neobank for every single flavor. Whereas we also saw, literally during our lifetimes, launching a website with closed source expensive tools would cost $5 million. And then with the similar tools that were better and open source would cost like $50,000.\n: We built our companies on MySQL.\n: Both of us did. Yes. Postgres.\n: You did Postgres?\n: We did Postgres, yeah. regardless like that shift happened and then I remember when like You had to buy servers and then wait for them to come and then configure them and then have to get more space in the cola like the speed of actually building software was Incredible.\n: Some people were like, we're going to keep buying server. Like some people rejected that. Yeah. And so there was a moment in time where it did make sense to jump on the bandwagon and start using it. We were on the bandwagon. But it was actually smart.\n: It wasn't just bullshit hype. It wasn't bullshit hype. It was real. And so I think it's obvious that now AI is clearly going to be a tool as impactful as mobile or open source backends or cloud computing. And then we'll see from there. Like LMs are clearly that useful. And so it's stupid to not think about how you can make your users more happy, more productive.\n: And again, I think what's funny about this is you and I were in the room. when OpenAI was created, because we were working at YC with Sam, and we had YC Research, and it was a non-profit. It was meant to be an enabling technology. The vision here, you were in the room, it was to be a non-profit so that all these startup flowers could bloom, and all these people could be enabled to create value. And so again, I think sometimes people are afraid of a narrative that OpenAI, maybe that will happen, But the vision was about creating the technology that would be harnessed by other people, and by ideally creating AGI, which is kind of what his goal was, as opposed to, I want to create AI-powered CRMs, and I'm going to destroy every startup that's going to create AI-powered CRMs. That was not what we understood. No.\n"} {"text": ": Hey, this is Michael Seibel and Dalton Caldwell and welcome to Rookie Mistakes. We've asked YC Founders for their Rookie Mistakes so we can share them with you and help you avoid these common errors. Let's start with our first anonymous story from YC Founders on Mistakes to Avoid. At the beginning, when everything's going well, you don't know how you're going to handle disagreements or bad actions by the other person. It's extremely hard to deal with a bad situation after the fact if you don't have anything written down.\n: It's awkward to talk about things like who gets what percentage of the company or do you have founder vesting and you know how human beings are. We don't always remember things quite the way they went down, right?\n: And so write it down. I think the biggest error that I see is founders looking for someone with a skill match versus someone that they actually maybe have had a fight with before, like a friend. A lot of founders assume that whatever skills their co-founder has at the moment they join the company are the only skills they'll ever have. And in my experience, almost everything you learn, you learn on the job. So you rather work with someone you really like and learn together than work with someone you don't know at all and get into fights and then break up.\n: I mean, to put some facts on that, how many founder breakups have we seen? where the founder says, my co-founder is excellent A+, they just don't have the skills that we need versus my co-founder is a living nightmare and I can't take it anymore. Right? Like how many people are like, what a great person that I like a lot, they just didn't end up, I shouldn't have made them my co-founder because they just didn't have the right skills, Michael. Do you ever hear that?\n"} {"text": ": All right, let's stick with hard ones. We're talking to an early stage company, and it's becoming obvious that they're not going to be able to raise the amount of money that they want to raise, and they're not going to be able to execute this magical explosion of spending that they want to execute, that they've convinced themselves is what's required to get product market fit. What do you do in those situations?\n: You know, that's a, that's a really tough one because you want people to be optimistic as we've spoken about before. And it's hard to, you never want to be short on someone's startup. And so what I would usually say on this one is think about what a great life philosophy it is to set your expectations low. and prepare for the worst, and then if you get surprised, you get surprised on the upside, not the downside. And so the key in this hard conversation is not to debate someone that their plan is bad. Keep the optimism, you know? But isn't it better to sort of have a plan for the worst and not be surprised on the downside? And if you're surprised on the upside, fantastic. Right, man? And again, people don't want to hear this. This is a hard conversation to have. It's like going up in the airplane. Do you want to bring the parachute with you or not? Like, I'm not trying to be grim by saying bring a parachute, but wouldn't you want to bring the parachute? Yeah, if you had the choice. What's the downside of bringing the parachute?\n"} {"text": ": I think what's interesting as well, when you think about this game, is that there are very, very, very well-paid people. And you were pointing this out. Very well-paid people who are leaving their jobs and who are starting startups right now, because they believe that LLMs are a powerful tool.\n: Yeah, the way I think about this is opportunity, cost, and life. There's people that I've been funding, and they have a great job, and they actually like their job, and they're choosing to leave because they know at this moment in history, because they become domain experts at AI, that this is the moment to do a startup. Like this is that, imagine if you worked on, I don't know, cloud computing for years, and then all of a sudden Amazon Web Services comes out. You'd be like, oh, this is my, they're calling me in, this is my moment in time. And so it's really cool to see these people with all this vast domain expertise that they did before this stuff was cool, realize that this is the moment in time to work on this stuff.\n: Well, and I think that we see a second group of people, too. And I feel like those are the people who got the first iPhone when the App Store came out and said, I'm going to build an app. And it was weird because at that moment, everyone had zero years of experience building apps.\n: That's exactly right. Well, remember the Brex founders, what they did when they were like 15 was jailbreak iPhones. Remember all the kids that were doing jailbreaking? Like this was like a rite of passage to be into this stuff and learn about it because no one knew anything about it.\n"} {"text": ": So let's talk about situations where things are going well, right? Signs that this is great.\n: I think one sign is from an opportunity cost perspective, you realize that you're at the best possible place in the world for the risk-reward ratio. And however you're being comped, you're like, wow, I'm getting a smoking deal. And I know there's no better deal I could be doing. And I'm proud, I feel privileged to be working on this team I am because they care just as much. Like if everyone feels like they're getting a great deal, that's a sign of a good culture.\n: Yeah, I also think if you feel like you're being given a lot of responsibility, you have a lot of opportunity to learn. I think most people don't realize that like, You can learn at a startup pace, or you can learn at a Google pace. And a startup is an amazing option to learn. So if you're getting better faster than your peers who are in big tech. you might be getting a really good deal. Especially, we see this a lot with people who learn a ton and then they go start their own company. And it's like, well, that startup was incredible for you. Even if it didn't work, you didn't get rich from it.\n: That was like the best education you could have ever gotten.\n"} {"text": ": And the other thing is you have to remember, if you want to raise a lot of money, but you can't explain to the investor why you might IPO and give them a lot of money back, then you can't raise VC. We want to be explicit. It is a business transaction. It's not a faith transaction. Correct. It is, I give you money now, you give me a lot more money later, or at least you try really hard to. And if you can try really hard, but the result can't be a lot of money, I shouldn't logically give you money now. Not because I don't like you or because you're not a great person or these users you're trying to serve aren't great. It's just because it's not a good business transaction. It's literally nothing personal. And I think sometimes founders kind of are very confused when VCs say no.\n: Well, it's because, again, if we're trying to stoke outrage. Let's stoke some outrage. You point at something silly that raised a lot of money. Yes. The most extreme silly thing in the world.\n: No, no, no, no.\n: You always point to Juicero. That'd be one. Right? Or we were, whatever. You point to something that is like on face silly. Yes. And then you say, well, If they funded that, why won't they fund my social network for dogs? And so it causes a lot of emotions. And I understand, I relate, but it's don't fall for the rage pill. Don't let yourself get enraged by obvious engagement bait, which is to cherry pick the craziest, silliest thing and use that to get all worked up and take that personally, like that somehow hurt you.\n: Like you were hurt by that thing over there happening. Well, and what's so funny is like you are actually included on the real truth, which is that they screwed up. Like you're right, they shouldn't have gotten that money. Like you nailed it. That person who funded that company is an idiot. And you're exactly right. But like, hey, that doesn't mean We should better. Oh, yeah, it's like, okay this dumb thing happened.\n: Therefore up is down black like like forget everything we know. Yes Those are those that doesn't follow that logic doesn't make sense.\n"} {"text": ": So where I like to start is audit how you live. Like, think about where you're waking up in the morning. Did you get enough sleep? Are you in a place that's a home? Are you living in a place that makes you more powerful or less powerful? Are you sacrificing, like, are you losing hit points at home? And if that's happening, man, that's unforced error, right? So that's who you're living with, what you're eating, do you have easy access to exercise, are you living in a place with a bunch of alcohol and drugs everywhere? I'm not helping you. At the minimum, your home should be neutral, but I think for the most successful people, the home's actually a plus. The home is like... where they're making points, where they're winning points. And I think that a lot of founders in their early days don't understand how much they could be losing based on just how they're living.\n: Yeah, I think almost from a clinician's perspective, when someone is having issues, the first thing you look at is sleep disruption, diet, and exercise, right? If you go look at research depression or anxiety and things, that's usually where the 80-20 solution is for a lot of folks that are struggling, is you look at their sleep patterns. Are they sleeping okay? Are they eating okay? Are they getting exercise? Are they getting sun? All these sorts of things. And so if you don't have your house in order on those fronts, you are not even if you don't currently have depression, you are not well-situated to deal with really hard things that might happen to you, right?\n: But Dalton, I went to an Ivy League school, and it was really hard. And I went to a really challenging high school. And I didn't have to change these things to get good grades or to get the good internship. I was able to work hard and play hard. Why do I have to change now? It's working. It's working for me, this lifestyle.\n: I think it can work for people. You and I know people that certainly don't follow this advice and they still did okay. I just think you and I also know the same people. where eventually you've got to pay the piper. Like at some point, no matter, it's almost like you're going into debt, like personal health debt or whatever you want to call it. And man, you can go pretty far into debt. You can go five years into debt. You can go 10 years into debt. I don't know. But at some point the debt comes due. where you can't hold it all in anymore. You can't hold the whole world on your shoulders. And I think what we're just trying to say is if you start off with good habits early, you're not gonna incur this massive debt that one day causes you to have like a breakdown or a meltdown or again, whatever you wanna call it.\n: Well, and to double down on that, I might argue that like, you probably can sacrifice these things for five years, like maybe even seven years. The tricky thing is that like the best companies last multiple decades. The tricky thing is the shit that you can get away with in your 20s, you can't get away with in your 30s. And company running just gets harder. And so I think sometimes people are like, oh, this is gonna be a relative sprint. But it's like, what I like to talk to you about with YC founders a lot is like, what happens if this works? Like, are you set up for this to not work? Or are you set up for this to work? Because if this works, like, Woo, you're gonna be in it. You're gonna be in it for a while. And I think sometimes people set their lives up for it to not work and then wow, self-fulfilling prophecy.\n: And when you think about it, this isn't an age thing. This is a lifestyle thing. Because you'll see 19-year-olds with all the good habits and you'll see folks that aren't 19 that still live like 19-year-olds. And so this isn't an age thing at all. This is a habits thing, man.\n"} {"text": ": So I think what I would say is this is that, you know, this is tricky, right? I think that when we made the video about Fang, fortunately or unfortunately, I think that, you know, Google is going to look very similar five years from now as it looks now. And I think that for those of you who are at unicorns, it can really go either way. So you have to be careful, right? You could leave a unicorn and that company could do great.\" And you could look back five years from now and say, like, I made the exact wrong decision. On the flip side, you could be the person, you know, shutting the lights off and five years from now being like, I'm not making the right decision. Make sure that you're actually doing your own analysis here, I think is the point I want to make. Make sure you're doing first principles analysis, you're looking at data, you're not believing any hype.\n: I think another point to make is the concept of job hopping. Job hopping is not good either. So sometimes you'll see people that swap. They go to a new unicorn every 12 months or 18 months. It is very hard to ever build a good career or to build expertise. Or even make a lot of money. Or make a lot of money doing that kind of stuff. So again, I don't want folks to interpret what we're saying as, hey, you should be a job offer and just switch jobs. To the extent you are working at a place where, as far as you can tell, the metrics are excellent, the founders are extremely focused, your colleagues are very smart, and you are very impressed continuing to work with them. You should probably stay a really long time. Yeah.\n: I mean, that's kind of what Google looked like, what Facebook looked like.\n: And so again, let me just go through things I would look at if I were someone in one of these companies trying to decide if my company was doing well. All the stuff Michael said.\n"} {"text": ": You know, Dalton, as you were saying this, something occurred to me. The platforms change faster than the human problems. So like you and I have lived through Web 1.0, Web 2.0, mobile, and whatever the hell you call it.\n: The Facebook platform.\n"} {"text": ": And I think that what's so tricky is that it's so obvious the society we live in today was built by people who were playing positive sum games. So what it really is, is those people created a little bit of excess capital that the zero-sum game people are like harvesting. They're kind of like slowly degrading society and as long as like the positive-sum game folks stay ahead, society progresses. But in times where the zero-sum game folks kind of get too far ahead, I mean, we lived through one of those financial crisis, the last financial crisis, maybe the current one. The second the zero-sum folks get ahead, the world literally goes to shit. It's quite funny how the world starts looking really bad when the zero-sum games take over. It's interesting because this is something you brought up, the idea that people are getting rich out there and I'm missing out. Like, I think that we've been in the last four or five years in a zone where like, people are kind of seeing people out there getting rich with games that seem too easy. If stocks only go up, it is easy. It is, yeah, you know? And you might as well buy a margin because it'll only go up faster, right? I think that if I can predict the future a little bit, when everything's going up, it's easy to think you're the smart person. When things start going down, you start realizing who the real smart people are. And it tends to be a way, way smaller group than you might think. And it turns out that they're taking money, like, they're playing the zero-sum game 10x better than you are, and they start taking money from you. And then you start losing faith in the system. Because you ask yourself, well, why did the system not protect me? Like, I didn't do anything wrong. Why am I punished? And it's like this negative feedback cycle that only exists on the zero-sum side. Because our friends who tried and failed to do positive sum games, they almost always learned something or advanced in some way. They almost always took something from that game with them that made them better off, even if they didn't win. Whereas the folks who are playing the zero-sum games, if you don't cash out, that was the only thing you could take out. That was the only win, is getting out of the game. They never get the lessons in little dabs along the way. As kids, we're used to getting these little lessons along the way. For these zero-sum games, often the lesson just comes fast and hard at the end. It's like, boom.\n: And then you're blowing up. I mean, you do these office hours with companies where it's just game over. Like, it's like, it's good, it's good, it's good. Okay, we're dead. There's no warning, especially when you deal with debt and leverage, which is, again, related to this stuff. When you are gambling with money that's not yours, and you're heavily levered, it's rough. So, so let's make, let's take this positive. So again, like we're seeing all the, what is the advice? Like, how can you make sure what you're doing is positive some, and like, how can you build enduring value and not accidentally.\n: You know, what's the move? You know what, Dalton? I don't think people are confused whether they're gambling or building houses. I think that they know whether they're gambling or building houses. But they're so good at fooling themselves, do they? I think they know. I think that the thing they have to resist is the FOMO. I think the more deep question is how do you build houses when you see a lot of people getting rich gambling all around you? How do you kind of stay strong and build a house? when you see people getting rich getting around you. And, you know, it's funny because I had a friend who was a sports gambler and I think I learned this lesson through him. He would always tell me when he won that weekend and he'd always bring in like stacks of cash and it was like, I'm way up. And then the weekends he didn't win, he was just silent. And I think I always assumed that like, oh, like he must not have gambled that week. What do I know? I'm not paying attention. And I think that like for those people who are looking at the folks who look like they're winning in those zero-sum games, I think if they looked a little closer, and they ask themselves, like, are those people actually cashing out? Are those people actually doing something sustainable? Like, are those people drinking the Kool-Aid so hard that when the turn comes, they won't be ready for it? I think we'll start realizing that they should feel less FOMO. That's how I feel. Like, how do you feel about it?\n: Yeah, I think, look, I think People can convince themselves of anything. In fact, this is definitely something I've learned over the years is like, no matter how crooked someone is being, they have a story that they cling to, and they refuse to see it any other way than that. I think you kind of want to look for external validation that you're building something of value that's enduring for people and be able to articulate that in a very simple way, what that is. What is the leave behind value that is being created as a consequence of my work? Am I winning because someone else is losing or is something real? I mean, we're seeing this right now with a bunch of our startups. A lot of folks, okay, you know, it's hard out there. We can't raise whatever, but our startup is still running. Like they're still growing. They're still like, like the company is just doing the same thing. And the stuff happening in the external world is noise. Those people are doing a real thing. That's a positive. Some people were there like, well, we're done. You know, like the people were immediately the music stopped that. That's rough. Like if you're that sensitive to like market conditions that literally you don't have a company anymore the minute the markets drop.\n"} {"text": ": So I mean, to kind of wrap this up, right? Like this idea of do things that don't scale. One, it's gonna be counterintuitive. Two, expect people around you to not understand. And to actively think you're stupid.\n: Not just not understand, but actively tell you, you are being an idiot. Why are you delivering burritos? What on earth are you thinking? They'll stage an intervention for you. You're screwing up. Your friends will come together. They'll set you down and be like, what are you doing, man? This is a mistake. This is not what you should be doing.\n: Expect it to look way different than what your larger competitors are doing now. Expect it to look way different. And expect yourself to be the primary actor. You're not acting through others. You are the doer. Anything else to add though to wrap this up?\n: I think if you look at other companies that raise a lot of money, you're inclined to copy that strategy. of what they're doing. So again, if you see someone, all these companies are doing, I don't know, 10 minute delivery, right? Like that's the hot new thing. And so they're like, oh, this company raised 50 million. I better raise 50. Do things that don't scale is cool. Yeah, not for you. Go do one delivery. Like when I see people fail a lot, it's that they want to get a thousand customers and they can't get one. Just being able to say one, we've delivered one burrito separates you from the pack. And so again, maybe this is an inspiring thing. Actually doing something is much better than average. Congratulations, you're in the top half of startup founders if you can get out of your own way enough to do one thing.\n"} {"text": ": So to wrap it up, we have a strong disagreement. I think the suburbs are horrible. You clearly like them. By the end of the day, there's room for both of us.\n: Yeah, we're both in the same ecosystem, right? Who knew? We're both working together. Who knew? Yeah.\n: And we're recording this video in the frickin' suburbs, too, which is hilarious.\n: We are. You're right. We came to my zone to do this video. We came to your place to do the video.\n: Oh, man.\n: All right.\n: Great chat, Dalton.\n: Thanks.\n"} {"text": ": So what's the takeaway for founders?\n: Well, the takeaway is you look at these big companies, and you can easily decide to emulate this stuff. Again, if all I'm doing is from first principles trying to look, how does the world work? Why does the world work the way it does? It's easy to look at these very successful, very valuable companies, know the story of Facebook, and actually attempt to emulate the end state of these companies, which they're so big. The people that work there are very isolated from their customers. The customers are sort of like, only a small percentage of those companies employ people whose job it is to talk to their customers? Yes. And most people, if you work at those companies, you would never talk to the customers.\n"} {"text": ": Like I thought, like, isn't that weird, man? Like why? We have a grand, nefarious strategy of giving founders what we wish we had when we were founders. I mean, isn't that like so funny? Because it's kind of one of the core guiding principles of YC when we think of what we're going to do. Yeah. It's like, what would I have wanted? Yeah. Like, that's certainly how I think about this. Yes. And the opposite, too. Like, what would I have thought of as bullshit? Like, how do we not do the stuff that I would have just like been like, that's bullshit. Who cares?\n: I mean, it's hard to do in practice. It's just, at the end of the day, more leverage for YC Founders, good. More options for YC Founders, good. That's the game.\n: Obviously so.\n: Anything more on the standard deal?\n"} {"text": ": And I think that the way that this is kind of embodied was that, fully embodied how bad of an idea people thought this was, is that he had an impossible time raising money on Demo Day. And so if he had taken the Demo Day signal, the investor's signal of, oh, we don't want to give you money, and quit, we wouldn't have Coinbase. Correct. All right, last one, Stripe. So you had dabbled with payments pre-Stripe. How easy was it to accept credit cards online pre-Stripe? Share the story with everyone.\n: I have set up, before Stripe existed, I set up accepting credit cards for my companies twice. Once in 2002 or so, believe it or not, when I was very young, and then once again in 2007. And to get a merchant credit card account was like applying for a mortgage. You had to fill out lots of paper. You had to fax in stuff. You had to personally guarantee things. They had to do fraud checks on you. It was rough. It was expensive. There was minimums. And so it was a possible thing to do. But I would call it gnarly and the opposite of easy in every way. And I also remember when Stripe came out. I was actually in the Stripe beta. I was one of the first 100 customers of Stripe way back in the day for my third company, the third time I went to accept credit cards. I really wanted it, in terms of make so many people buy it. When it came out and I read about it on the Hacker News, I immediately wanted Stripe. And I hadn't even seen it yet. I just knew I wanted it. So that's the historical context.\n"} {"text": ": I would argue that like there were two fundamental facts that made the existing products not good. The first is that VRBO and Craigslist did not facilitate payments. So when you arranged a house share with someone or staying in someone's apartment, you still had to pay them either in cash or check or wire. And there was a lot of friction because it's two people who don't know each other having to trust each other to transmit payments. I think the second problem that VRBO had was they charge hosts to list. And if you think about the core insight of this market, it's that hosts are the game. If you can get the most hosts, you win. You have the best inventory. But if you charge them upfront to be on your site, you're probably doing it wrong. So to me, timing was huge. Existing product did not, there were 10x improvements that could be made. I think the second thing that was really interesting was that they were solving their own problem. Most people don't realize that Airbnb started because Joe and Nate needed to make rent money. And there was a big conference going on in San Francisco, and they basically rented out room on their floor to host people so that they could make some money. And it's funny, because we always talk about personal problems, but not being able to pay rent, that's a real problem, right?\n: And that doesn't sound like a vacation rental, which was what I was used to seeing on VRBO, which was vacation rentals.\n"} {"text": ": Okay, so here's another one that I see a lot, especially with fundraising, stupid comparatives. So like, in 2021, Tiger gave this company $100 million funding when they accomplished blank 500,000 of ARR. Therefore, we will be able to raise $100 million of funding when we accomplish 500,000. Right, Michael? There's no difference between summer 2022 and summer 2021 at all.\n: Well, and that's how it works, right? As investors, what they do is they just are always consistent and they always make the same decisions. And it's easy for you to tell, reading the TechCrunch announcement, why the investor made the investment. Right? It's clear. Like I read the article, you know, this VC invested in this company. We're kind of like that company in some superficial ways. It's in the bag. We got it.\n: And then the other one that I love about it is like, no, Michael, like that round was announced last week. That just happened. And it's like, sorry, but lots of things are announced way after they happen.\n: Way, way after. And so again, I think what we're saying about what's the stupid goal in this case, playing the stupid game here is trying to create superficial resemblance to other things. Yes. as opposed to deep, the thing is working, or maybe there's a deeper analog to the other thing. But if you're just focusing on the very surface level stuff, yeah, that is not a smart game to be playing.\n: One other example, maybe an old one, we talked about in the past, you know, with Facebook, where you might be able to argue, well, they raised money when they only had a small number of users, right? And then you completely punt on the fact that like, that small number of users were 95% two hour a day Facebook users. So the engagement was like incredible.\n: If you can replicate Facebook's engagement, then you've got something versus replicating, I don't know, it's for college kids or I don't know, people have very superficial stuff there.\n"} {"text": ": Here's another one that's in the news more and more lately. Defrauding your customers. Selling your customers something and telling them it's one thing and you know it's not that thing and your customers lose money or your customers are in some way extremely harmed. What's the prize for doing that, Dalton?\n: No joke. It seems like there's people going to jail and getting arrested and people whose actual lives are now irreparably harmed by the games that they were playing to get growth or to get money. And yeah, they're gonna spend, you know, best case scenario is spending years and years and years in court and in the court system and just having your life changed.\n: Like this isn't making a mistake. We gotta be clear here. Like your state of mind is extremely important here. This is like knowingly pursuing a strategy that you know is harming your users. And I think what's tricky is that oftentimes people don't think this is happening.\n: I think sometimes people forget they're not playing a game. And I think especially in COVID land, I don't know, like one of my explanations is if you spend all day on Twitter and Discord and everything's a game and everything's a joke, everything's silly, you can kind of, I just have noticed some folks lose themselves and not realize that the numbers in the spreadsheet are real dollars. And I don't know, it's like, we're not playing Monopoly. We're not playing sellers of Catan. And I think that the prize that you win is the knock on the door from the police. And that's when you're like, oh, wow, this was real life.\n"} {"text": ": This is kind of a fake disagreement, because if you kind of have been parsing our words carefully, we're talking about living in the Bay Area. So I'll ask you straight up, Dalton. Would you recommend someone starts a startup outside of the Bay Area?\n: Yeah. Well, I genuinely would not. We agree. So the part we're agreeing with. is that, again, think about it. We're working together. We're in the same room right now. We get to live in the same area, even though our personal decisions about where we live are wildly different. We have very different lives. I don't have a yard. I have kids, too. And so what's cool is we get to work together, and we get to work with all these amazing people, and yet we have very different choices on how we want to live.\n"} {"text": ": So in the case of Twitch, if not all, most of the examples of this came from this core problem. And it's why I tell people to not create a live video site. A normal website, even a video site, on a normal day will basically have peaks and troughs of traffic. And the largest peaks will be 2 to 4x the steady state traffic. So you can engineer your whole product such that If we can support 2-4X to steady state traffic, and our site doesn't go down, we're good. On a live video product, our peaks were 20X. Now, you can't even really test 20x peaks. You just experience them and fix what happens when 20x more people than normally show up on your website because some pop star is streaming something. And so two things kind of happened that were really fun about this. So the first hack we had was if suddenly some famous person was streaming, On their channel, there'd be a bunch of dynamic things that could load, like your username would load up on the page with their channel, and the view count would load up, and a whole bunch of other things that would basically hit our application servers and destroy them if 100,000 people were trying to request the page at the same time. So, we actually had a button that could make any page on Justin.tv a static page. All those features would stop working. Your name wouldn't appear, the view count wouldn't update, like literally a static page that loaded our video player and you couldn't touch us. We could just cache that static page and as many people as possible want to look at it. Now to them, certain things might not work right. But they were watching the video. The chat worked because that was a different system. The video worked. That was a different system. And we didn't have to figure out the harder problems until later. Later, actually, Kyle and Emmett worked together to figure out how to cache parts of the page while make other parts of the page dynamic. But that happened way, way later. Dude, that reminds me.\n: Let me give you a quick anecdote. Yes. Remember Friendster before MySpace? Yeah, of course. Every time you would log in, it would calculate how many people were two degrees of separation from you. And it would fire off a MySQL thread, where you would log in, it would look at your friends, and it would calculate your friends and friends and show you a live number of how big your extended network was. And the founders, you know, John Abrams, he thought this was like a really important feature. I remember talking to him about it. Guess what Myspace's do things that don't scale solution was? If they were in your friends list, it would say, this is in your friends, you know, so-and-so is in your friends list. And if it wasn't, it would say, so-and-so is in your extended network.\n: There it is.\n: That was it. That was the feature. And so, so Friendster was like trying to like hire engineers and scale MySQL and they're running into like too many threads on Linux issues and like. updating the kernels, and MySpace was like, ah, so-and-so is your extended network, that's our solution.\n"} {"text": ": Yes. Well, and the second thing is, if they do end in acquisition, and many will end in acquisition, oftentimes, you have to re-interview for your job. Oftentimes, they don't want to bring everyone over in the acquisition, and so that's tricky. And also, you might end up at the big tech company you were running away from. That's right. When you're joining a startup. So I think I'd love to put in a little bit of a, A note here, I think that those 30% that will do well will probably do counterintuitively well. Like really well.\n: Yeah, like very well. Extremely well.\n: Yeah. Even going to work at those companies now is probably a good idea. Absolutely. Yeah. And so I think that's what's so tricky about this is you have to be smart. You can't really be like following the bullshit press or stuff.\n: Yeah, or like the memes on Twitter about what's doing well and not doing well.\n"} {"text": ": You know, I see another one, because corporate governance, that covers your investment docs and where you're incorporating and all that kind of stuff, your vesting, blah, blah, blah, your classes of shares. I sometimes see founders doing crazy stuff. I see another one that you brought up, though, which I really love, is the, like, I'm going to make this startup, but I'm also going to disprove every piece of startup advice. Like, I love this, like, I'm only willing to help my customer if I can simultaneously prove that all of the startup advice is incorrect. And it's like, what?\n: And so, yeah, so the example of that is just to take something that is like widely considered useful or true and try to prove the opposite of it. You know, like my thing will be reliant upon making the small town that I live in the center of the startup ecosystem or something. Like somehow there'll be some other bet they're making that involves a super contrarian thing that has nothing to do. Actually, I can think of an example of these, by the way. One of these was, I remember a founder doing something unrelated, again, I'll keep this anonymous, but they were like, the real thing, the real bet we're trying to make is the hydrogen economy and that no one will use gasoline or solar or wind or, or, or, But then in the future, we're gonna use hydrogen everywhere. And I was like, hey man, maybe don't mention that. We'll keep this between us. Maybe when you're- That's the real secret sauce. Maybe you should keep that on the down low. And the case was, maybe he's right, but that had nothing to do with the actual bet of the startup.\n: No.\n: And to try to throw in this long shot bet that we're all going to be using hydrogen for everything, again, maybe he's right. I don't know. That seemed like a completely unnecessary risk or thing to innovate on.\n: Yeah. And I think that what's so sad about these things is that I think there's a misunderstanding of how hard it is to make something that people want, where people think that they have these extra points, this extra juice to spread to do other things with. And I just, I always like to tell people, it's like, this game is so hard. Without this stuff, I'm like, why do you want the game to be harder? Like I never understood that. Is it fun?\n: Yeah, okay. Let me give you an example of something that's fun. Okay, sure. Like nerd bait kind of stuff. Sure. Again, this is my recollection. My recollection is that when, I believe it was Asana, when they started, they wrote their own programming language. Of course. First. Of course. And why would you do that? Because it's fun. I believe they back that out. Again, someone will correct me if I'm wrong on this. But a lot of times choosing very idiosyncratic programming languages or text stacks, people choose to do it because it's fun. And who am I to fault them for that? But it's like they're optimizing for like, wouldn't it be cool if we wrote our entire thing in this new, idiosyncratic programming language?\n: Yeah, that's such a weird, it's like, I get it on one hand, and your startup should be fun, right? Like you're doing it for a while. I get it on one hand, but I've never seen a founder who didn't have the most fun by helping their customer.\n: Do you remember in the Reddit versus Dig wars, Dig made a lot of technical bets. along these lines, meaning they made a lot of very high-risk technology choices, while Reddit was just like, not. Let's make a social news site. Well, I don't think they were taking any high-risk technical choices. And so this, again, is an example where Dig was taking on all this extra risk on something that had nothing to do with dig.com loading news stories. It was literally about the technologies they were choosing to power the website. Yes.\n"} {"text": ": Do you have any more on the preventative side before we move to treatment?\n: I think it's just this expectation setting. I think so much of life is expectation setting where setting expectations for yourself, setting expectations for people you work with about what to expect. If you are good at that, people can deal with all sorts of stuff. And when you get into the biggest trouble, both with yourself, managing your own brain, as well as working with other people, is when you say a bunch of stuff that turns out to be really not true, and you set expectations poorly, and you have to dig yourself out of this deep hole that you dug yourself into, because you promised a bunch of shit, or you set expectations in such a way that just weren't true. And so expectation setting is key for prevention.\n"} {"text": ": I see this hiring all the time. I see the hiring startup applies to IC, and the thesis is always the same. I'm an engineer. I'm a genius engineer, and I am being assessed by a non-technical recruiter. This is a crime. This is a crime against humanity. It's dehumanizing that I have to go through this experience. And if only the hiring manager was empowered with software, the entire recruiting team and all recruiters would just go away, disappear off the face of the earth through the hiring manager and software. And what's weird is that I kind of believe the premise. I believe An engineer is better at determining whether another engineer is good or bad. However, I also look at the way the world is organized and I ask myself, well, if it seems consistently organized that these massive teams of recruiters exist at all these companies, there must be some efficiency going on that I don't understand, right? And the one core thing that I've learned is that even though engineers are better, at creating other engineers. There are two other facts. One, they don't tend to enjoy doing it. And two, it doesn't tend to be the greatest way to extract value out of a great engineer.\n: Yeah, it's not the best use of their time. Like if you're employing engineers, you don't really want them to spend all their time doing this. You want them to be doing their jobs.\n"} {"text": ": Dalton, before we close, what are some tactical tips you'd give folks who are looking for co-founders now, who are extremely early in their journey or thinking about starting a company?\n: I hear from a lot of folks starting companies where they want to come up with the idea first, maybe they want to raise money first, and then they want to add a co-founder. And I actually think that's going about it in a less than ideal way and actually might cause more problems. I would recommend figuring out who the co-founder is first, and then if you come up with the idea together, and perhaps you fundraise together, then you'll have collective ownership that it's your idea and it's your company versus a lot of times when you add co-founders later, in their mind, it's your company. It's not their company. And even though you worked on the company an extra month than the other person did, which is so silly, right? You'll always have this like, well, this wasn't my idea. This wasn't my company. which isn't great from our retention perspective. If you can both really feel like you shepherded the idea through the earliest stages, you're going to see a lot more ownership and people stepping up when you go through hard times.\n: To reiterate what we talked about at the beginning, I don't want to say co-founders are essential, but man, they're so helpful. It's such a powerful tool. especially in the hardest part of the startup, the pre-product market fit startup. We still encourage everyone to have a co-founder. But like the startup game, right? It's not about doing it well, it's about doing it great. Like having a great co-founder can be a superpower for your company. Having a okay co-founder, not taking this seriously, can be the seed of big problems.\n: Absolutely. And sometimes people, they end up with co-founder issues and like, well, I guess I'm just gonna quit and start a new company and we'll, it's so easy to start a new company and then, It's like, well, good luck. And then you speak to them a year or two later and it's really hard to get back to where they were in the moment. And one of the regrets is they wish they would have spent the time to set up the co-founder relationship well and choose the right person first, then think they can just blow everything up and get a do-over. That's just not how life works. And so the more you can front load this the first time around versus having hard earned lessons.\n: Yeah.\n: Would recommend.\n"} {"text": ": This is Michael Saibo with Dalton Caldwell. And today we're going to talk about how OpenAI is going to kill all startups. This is our last video.\n: Might as well pack it in. We're done. OpenAI is going to do this. They're going to make the videos next.\n: They are, yes. We're the next video.\n: The next video will be SkyNet. AI Dalton and AI Michael.\n: You're right. Doing our video for us. And do a better job than us.\n: Yes.\n: What do they call it? It's not a deep fake.\n: It's like a complete AI recreation.\n: Yes. We're done. Well, it's been fun, so let's talk about how that happened. So I think to start, people need to understand that companies like OpenAI, Anthropic, et cetera, They're actually trying to build AGI. They're not trying to build the AI-powered CRM or better search. They're trying to build AGI. And this is not a debate. We're not going to talk about whether they're going to succeed at building AGI.\n: Yeah, there's plenty of videos and there's plenty of experts that are better experts than us to debate whether AGI is about to be created. And I kind of bring this up. I've heard of Godwin's Law. Please. In an internet debate, when there's people arguing with each other, and one person calls the other person a Nazi, the debate is over, and no good discourse is productive after that. It just means it's over. And so where I'm going with this is, once we start talking about how AI could become God, and we have a Skynet, and take all the things, and we're going to be uploading to the Matrix, I'm arguing nothing useful will happen. That conversation is over with that person. We can't help you.\n: in this video about that. Whether or not Skynet is coming is outside the scope of this video. And we would love to talk about it, but we just don't have the expertise.\n: Someone else is the expert on that, not us.\n"} {"text": ": This is Michael Seibel with Dalton Caldwell. At YC, we often have to have challenging conversations with founders when giving them advice. Today, we would like to talk through some of the hard conversations that founders don't want to have.\n: Dalton, why don't you set this up for us? Well, look, let's start by trying to define a hard conversation. By definition, if it's a conversation you're looking forward to having, it is not a hard conversation. A hard conversation sucks.\n: Yeah.\n: That's why it's called a hard conversation. You don't want to have them. They're bad, right? Or they don't feel good.\n: They don't feel good.\n: They don't feel good. You dread the hard conversations. And so a hard conversation is when the stakes are high. Like it could go bad. It could go off the rails. It could be you're saying something risky or you're making a point. Maybe you're doing something that's impolite or saying something that's impolite. Because again, think about an easy conversation. Easy conversation is superficial. You just agree with someone. You're just like, hey, you're great. Way to go. That's an easy conversation, right?\n: Yes.\n: Hard conversation is not that. A hard conversation is when you're vulnerable. You're putting yourself out there. You're saying something that someone in the conversation is uncomfortable.\n: You know, it's funny, as you set that up, What's tricky being a startup advisor is that you know it's gonna help someone to have hard conversations with them, but you also know that they're not going to enjoy it. And I think as a YC partner in the early days, I think I measured my effectiveness based on how much fun founders had talking to me. And only after a couple batches did I realize that doesn't really do anything, And then when I started having honest conversations and talking about my actual opinions about their product or about how hard they were working, oof, the job changed. Did you experience that?\n: Yeah.\n"} {"text": ": How should the CEO set up a company so that if this battle, you know, if there is a co-founder fight, it's not fatal to the company?\n: The closest to equal you can get, the better, because it avoids this, oh, this person has 10% more, so it's their company. You see all this drama that happens over equity splits. So equal is good. However, here's a pro tip for you. A straight 50-50 deadlock is rough, and we see that kill companies a lot. And so it might be reasonable for the CEO to have one extra share. So you effectively have the same ownership, you're equal co-founders, but that one extra share is you agreeing in writing early that in the event of a 50-50 deadlock, there's a tiebreaker vote.\n"} {"text": ": You can't just sprinkle software on the product.\n: Yeah, or like realtors, like buying a house. Why is it so hard to buy a house? Well, you know, I don't even know how to summarize that. But like, like a lot of founders want to believe they can just like start a company and revolutionize the home sales process. Right. So I feel where it's coming from. But in practice, The simplistic engineering efficiency arguments don't always work when applied to the real world.\n"} {"text": ": I would say one that I see on the YC application that I love is when it's like some kind of weird incorporation. Yes. We incorporated it as a Wyoming LLC. And I'm like, this was a voluntary red flag. This is like, why would you do that? And sometimes they'll even write, well, because, blah, blah, blah. And you're just like.\n: Well, I think my theory is there's a lot of smart people. Again, they want to invent it in different ways. And they'll look at something like, corporate law in the existence of the Delaware C Corp and be like I Someone that knows nothing about this could do better. Yes And everyone else is doing Delaware C Corp. Yes, that's not for me. I'm gonna do a and then crazy things happen. Yes, right and so Probably corporate governance is not the best place to innovate one thing that's been funny Headline ripped from the news is yes people looking at the corporate structure of open AI. Yep, and being like oh This is an interesting. This is an instruction manual a Nonprofit that owns a for-profit would not recommend that strategy even the people that work working there I mean even Sam himself has suggested that that was perhaps not the wisest choice. And so again the point here is is the miracle of making something you want is the hard part. But if you're just doing like a startup, you know, Delaware C-Corps are pretty good.\n"} {"text": ": Let's say the punch happens, bam, and you need some treatment. something really bad happens or you suspect something really bad happens. I think the first point that you brought up that I really love is this idea of like, do I have to do anything right now? Like, talk about that a little bit more.\n: Yeah, I think I learned this as a founder the hard way, which is when something bad happens, you want to immediately like make a move. You want to like, call a meeting or you wanna, you get an email with bad news in it, you wanna hit respond and like, in the moment of fight or flight when your adrenaline's pumping, you're like, how dare you, sir? You wanna start writing emails with that tone? Dear sir, in response to your query about, like if you're ever typing an email with that tone, Don't do it. And what I've noticed is you can just like not respond or like let stuff sit a little bit and sleeping on it is the minimum thing I would do. This is what I always tell founders is when they have something to happen to at least sleep on it. Because I just noticed the next day You have a whole new amount of clarity on the situation.\n: And I often find myself in my best moments. In my worst moments, I'm exactly like you said, I'm like, act now, go, send that email, like punch back. In my best moments, I'm always like, if there's ever a decision that feels like it's action one or action two, There's always a third option, which is don't act. And it's almost never presented to you. I find a lot of times lawyers fuck companies with this. It's like, you gotta do this or that. And it's not like, how about we don't respond?\n: Yeah, what if we do nothing?\n: What if no action is taken? And then what's really funny is that the best founders no action becomes one of their like key plays. Like they use that play way more than you think. It's a great play. Such a good play. Um, and it's amazing that like for the best founders, no action is like, you know, 20, 30, 40% of the time what they do, maybe more. But for other founders, they don't even know the play exists. Like they don't even know the play exists.\n: Yeah, maybe just archive the email.\n: Whatever the email says. Yeah, that's true. Just hit archive. You know what's a really big deal? They'll probably reply back. I've noticed that. It's a really big deal. And of course, don't do this in the case where someone's health is on the line or someone's going to go to jail or whatever. That's different.\n: Yeah, it's more of the stuff where it's interpersonal or someone, I don't know.\n"} {"text": ": I think the first thing I'd be thinking about is revenue. I would say that at the end of the day, when a company goes public or when a company is acquired for a lot of money, the market is looking at how much revenue that company is making and is that revenue growing. And I would say that, for example, if I'm at a company right now that's making 50 to 100 million in revenue or more, that's a unicorn. Like, that's pretty good. Yeah, it's reasonable that it's a unicorn.\n: If they have $100 million plus in revenue, OK, that pencil's out, right?\n: Yeah, that's pretty good. I think that if I'm working a company that has like $50 million or less in revenue and is a unicorn, now I'm starting to ask myself the question, do users like the product? What's retention look like? Are we charging as much as we could? Could we charge more? Do we actually have product market fit?\n: Do we actually have product market fit? Again, not likely to be a popular question in management, if you ask management this, but worth considering.\n: And I think a lot of these questions can really be answered by looking at what are the customers doing? Right? I think what's so funny is that if you're an employee inside of a company, most likely the information you need to tell whether the company's doing well or not is like literally available to you.\n: Yeah. Well, and I can imagine there actually may be some folks out there that work at companies where the information is not available to them. Is that OK? Like, what do you think?\n: Is that normal to not be told these numbers? I would say that, like, what's interesting is that Maybe there are certain financials or certain cash on hand or something that it's important for the company, or a founder might decide to keep private. But I would say in most companies, product analytics in some way or another is available, is widely available. And so you can tell whether the users who are paying for your product are actually engaging with it. And man, I think that's like hilariously the simple leading indicator of whether you have a good product is you sold somebody the product, they've successfully onboarded, and they're actively using it.\n: And then they renew. And they do it on the business model of the company.\n"} {"text": ": This is Michael Seibel with Dalton Caldwell. And today we're going to talk about the problem with zero-sum games. So we were chatting, Dalton, and we've seen a lot of zero-sum games kind of in our lifetimes. It seems like it's something that comes and goes pretty, pretty often. Why don't we start with kind of the first time you've encountered a zero-sum game and almost like how you got trapped by it?\n: Yeah, so just to start with definitions, a zero-sum game is a game that you play where the upside that you're getting comes directly from the other player. So if we're talking about money, a classic zero-sum game is we make a bet. And so say we bet, you know, 20 bucks, something will happen and you win. The money that you win comes out of my pocket. There's no new money that's created in the system. It's zero sum. So whatever you gain, I lose. And it all equals out to zero, okay? That's zero sum. A positive sum game is where something happens and as a consequence of it, value is created that lasts for a while. So say that we decided to do something for fun and we built a house. We're like, it would be fun to build a house. So we do the thing and then when it's all said and done, the house exists. Our labor produced something that will last \u2013 that wasn't there before.\n: We can charge rent for it and maybe generate some income.\n: Yeah, exactly. And so we were entertained in both scenarios where we, you know, made a bet versus built something. And in one of those scenarios, it was a, we made something that lasts and the other one, it was just a zero sum form of entertainment.\n"} {"text": ": It's fair. And here's why you're wrong. OK. So I live on Market Street in downtown San Francisco. Fair? Just to be clear. OK. For me growing up, living in a city was aspirational. So I spent my high school and middle school years in a suburb of New York. And when you do that, you know.\n: That means New Jersey, right? Whenever someone says a suburb, I'm from New York. Well, where exactly?\n: They're like, well, you know, upstate. Middle school and high school in New Jersey. And when you're growing up in a suburb of New Jersey, you know where you are is not where the action is. It's true. You know, almost by definition. And at least for me, I perceive getting to the city as part of growing up, becoming an adult. That was a big part of my mentality. Two, I like nice restaurants and nice bars. And those things don't exist in the suburbs. I know someone's going to be in the comments saying, well, in my suburb, there's like, no, no, it doesn't. Sorry. It's just good for where you live. Another thing that I like, especially as a startup founder, I liked having a chip on the shoulder. I liked being in a place where there were things I couldn't afford, where there were places I couldn't go unless I was more successful, where I could kind of see what success could get me. And I always felt like the suburb tried to hide that away. Like everyone was in the same kind of house, in the development, and we all have our own space, we can't see each other. seeing what if we were to make it, what I might be able to get. That was really amazing. Also, I spent my first kind of nine years living in a city in Brooklyn. So I was used to living in an apartment. That was never weird for me. And there are a bunch of amazing newer companies, Uber, Airbnb, DoorDash.\n: I don't know those companies. Well, DoorDash was Palo Alto Food Delivery. That was their original name. So they didn't move there. They didn't start there. And they moved. They moved. OK.\n"} {"text": ": And honestly, that's gonna be kind of the theme of this whole setup, right? Super dirty, but it worked. You had a couple of these in iMeme, right?\n: Yeah, there was a couple that we had in iMeme. So one of them, so at the time, again, like to set the stage, the innovation of showing video in a browser without launching real player? No one here probably knows what that is. But it used to be to launch a video, it would launch another application in the browser that sucked and it would like crash your browser and you hated your life, okay? So one of the cool innovations that YouTube, the startup YouTube had before it was acquired by Google, was to play video in Flash in the browser that required no external dependencies. It would just play right in the browser. At the time, that was like awesome. Like it was like, it was a major product innovation to do that. Um, and so we wanted to do that for music and I mean, and we were looking at the tools available to do it and we saw all this great tooling to do it for video. And so rather than rolling our own tools that was music specific, we just took all of the open source video stuff and hacked the other video code that we had. so that every music file played on iMeem was actually a video file. It was a .FLV back in the day. And it was actually a Flash video player. And it was basically, we were playing video files that had like a zero bit in the video field. And it was just audio. And we actually were transcoding uploads into video files. You know what I'm saying? Like the whole entire thing was, it was a video site with no video. I don't know how else to explain it. And it works. And I do think this is a recurring theme is a lot of the best product decisions are ones made kind of fast and kind of under duress. I don't know what that means. But it's like when it's like 8 p.m. in the office, and the site's down, you tend to come up with good decisions on this stuff.\n"} {"text": ": This is Michael Seibel with Dalton Caldwell, and today we're gonna talk about caring about your customers. Well, first, I guess. Yeah, let's be meta. Here we are. Does this look different? Yes.\n: We're in person.\n: We're trying this. Where's your art?\n: I know.\n: But we are really, literally in person. This is us.\n: We're in person. We're not avatars. We're not in the metaverse.\n: We're not in the metaverse right now, people. Maybe next year. We're upgrading. This is an upgrade. Great. We had so much fun last year, we decided to do this in person. So let's set this up. We're in the beginning of a YC batch, and there are a lot of companies who are trying to get sales, trying to get new customers. Always a good thing. And we might describe some of them as flailing. So what is the sign of a startup that is flailing when trying to get new customers?\n: You know, it's like the old aphorism when all you have is a hammer, everything's a nail. And so they'll have a product, they'll have an idea, and they want to like bully customers or beg, some strategy to like cram it down people's throat. And they're like, why won't they? Take it. Why won't they take this thing that I'm trying to get them to buy?\n: I'm trying to help you. I have this thing and it's good.\n: What's wrong with you? You're making a mistake to not want this thing. And so that's a lot of people's first experience with sales. That was my experience. These people are dumb. Don't they realize how brilliant my software is?\n"} {"text": ": You know, the next topic is on, you know, acquiring companies. And I think that This comes in a number of flavors. One is once again, we're finally grown up. We can make our first acquisition or like we want to get good at this acquisition thing. So we got to start doing it.\n: There's a lot of talent out there, Michael, and some really talented, failing startups would love to be acquired by us. And this will help us grow faster. So we're going to acquire them.\n: And by the way, that doesn't mean that acquiring companies is bad. It just often means the folks who are thinking about it in startup land tend to be thinking about it too early. This is another example of taking later stage advice too early. when the advice you should be taking is make your core business work. Just make your core business work.\n: Yeah, if you're a pre-PMF, if you don't have product market fit yourself, probably you're not gonna buy one. Probably not a great idea. You're laughing, but people are probably like, wait, really? Yeah, really.\n"} {"text": ": Oh God, you brought up one on our list about sandbagging. Let's talk about sandbagging a little bit.\n: Yeah, so sandbagging, I don't know how much people are used to that term. I think it's, I think it's a golf term. But sandbagging is basically where you set goals that are intentionally way easy to hit. with the goal of blowing them out of the water, right? So say you know you can accomplish something in one week. The sandbag version of the goal is to give yourself a month. And then when you go around and you hit the goal, you like look like a genius. And what's funny is when you are working for the man, When you are working at a company, like office space, you know, you're in a cube farm somewhere. It makes sense to sandbag goals. And that's actually great career advice, I suppose, is that you, you know, you set really, you convince people that something's really hard to do, and then you exceed their expectations. What a great way to get promoted or whatever. However, there's a problem. If you're used to doing that, and that's how you think all things should work, when you start working for yourself, when you are your own boss, you are screwing yourself. And what may be a good strategy to rest and vest working at Google or Facebook and to just do as little work as possible by sandbagging goals and working three hours a week or whatever people do, when you're the boss, do you see how that's not great?\n"} {"text": ": Then I think the last thing is they used their own product. Airbnb didn't realize the insight around facilitating payments, around accepting payment when they launched. They didn't have that insight when they launched. Brian came and spoke to YC recently and he shared the story that when he used his own product and he forgot to bring money for payment and the host thought he was a fraud, he realized, oh crap, like our site needs to allow people to pay. Like we have to solve this problem. So it's funny, because these insights seems obvious now, but Dalton, back in the day, put your investor hat on. What were the shit takes? Why did everyone think, oh, this is dumb, you should do this?\n: Well, look, there's two extremes. One was renting a house when someone is already home. Renting a room in a house with a host there was the ultimate, unappealing, scary, bad thing that no one wanted to do, especially older folks, you know, like investor folks.\n: Like investor types. You know, who have a lot of money and can afford nice hotels.\n: Why would I want to go stay in a stranger's apartment in Manhattan? No, thank you. Right. So it was extremely unappealing idea of people worried about those sorts of things. And then like the other the other insight I have for you on this one is it was seen as uncool and impure when you're building a community at this time in history to charge money for it. Like the couch surfing ethos was a very like communal, community-based, pay it forward, social collective action, decentralized goodness thing. And to be commercial, was extremely in poor taste. And remember, Michael, you and I both were the founders in this era. All of the messaging that was bombarded from us, from everyone, all of our peers, is that making money isn't cool and being commercial isn't cool. And what they should have done is get as big as they could and get 100 million people on Airbnb and then charge once they built the network. And so to charge, That's a horrible idea, guys. Build a network first and then charge, right? Again, you went through this as a founder, man.\n: Isn't this what you would have been told? It's what we were told. I mean, Twitch became big when we started diversifying our business model and started accepting direct payments from users in addition to ads. But that was seen as dumb back then. So clearly, and of course this is gonna be a common theme, if they had listened to most of the investors, or most of the founders at the time, Airbnb wouldn't exist.\n: Yeah, it'd be like, well, couchsurfing is free, so your plan is to build something like couchsurfing, but with no users and you're just starting and you're going to charge money for it? Good luck. That sounds like a suicide mission.\n"} {"text": ": Hey, this is Michael Seibel with Dalton Caldwell. Today, we're going to talk about where do great startup ideas come from? We've picked three successful YC companies to unpack this question, Airbnb, Coinbase, and Stripe. And there are three common themes that we've seen through all three of these companies. The first, timing was important. For each of these companies, there was a pre-existing product, pre-existing competitor, dominant, you might say, but there was an opportunity to make something that was 10x better than what existed. Number two, most people, founders and investors, thought these ideas were horrible, either because they were too hard to execute or because they just were bad ideas. And then number three, and I think the coolest one of them, is that each of these opportunities turned out to be bigger than the founders even knew when they started. They turned out to be way bigger. All right, so let's talk about Airbnb. One of the things that I think is really interesting to set this up is that existing products did exist, right? Airbnb did not come up with this idea. So what were you using before Airbnb to Airbnb, Dalton?\n: Yeah, for context, I think if you've only seen Airbnb, you think they came up with the idea. That's probably if I talked to my mom, she'd say, oh, Airbnb is a great idea that those founders dreamed up. But back in the day, I was already using VRBO before Airbnb was even funded by YC or existed. There was also a very popular startup called Couchsurfing, which was quite similar to Airbnb and it had a lot of mindshare, was a big network. And so it kind of felt like the third-rate entrant to a crowded space at the time. I remember when they were in NYC, that was my perspective. Do you remember that, Michael? Had you used any of those? Because I had used VRBO personally, and I thought it was pretty good.\n"} {"text": ": So another way that people screw up the accomplishing goals is not understanding how to take the L. OK, maybe you set the wrong goal. And instead of, Realizing that and setting a new goal, you cheat or do one of these other tactics to try to accomplish it because you feel as though not accomplishing your goal is a failure in and of itself. Man, I find founders screw this up constantly. It's like, you don't have to assume you're gonna be good at setting goals. Like, you can give yourself some slack. Assume you're gonna be bad at it. And like, you can adjust over time. You can set better goals over time. You can not accomplish your goals and learn from it. There isn't this, you know, sometimes in YC, I think people feel this like, oh, we're grading them on whether they accomplish their goals. And it's like, first of all, we're not grading, we're not your teacher, we're not your boss. And second of all, like, your job is to work on the hardest problem in your company. Like that, like, if you've made progress on the hardest problems in your company, you're doing well. That's the whole gist of this. It's not like, oh, did you like, Release that feature when you said you were going to, you know, that no one's going to use. Oh man. And then you talk about excuses a lot. How do people screw that up when they don't accomplish their goal?\n: I just noticed a lot that when folks set goals and are not able to hit them, that's okay. But when folks are in a position where they really think it's important to make a lot of excuses on why it's not their fault and everyone else's fault, and they just have this like inner desire to tell me all the excuses. I think that's not helpful in that \u2013 again, I'm not the boss. I don't care. OK. You didn't hear a goal. Great. Let's move on. It's like they want redemption and so I just think that it's good if something doesn't work to accept it, to acknowledge it, to look at it, but realize you're the boss of yourself and you should just not feel a need to make a million excuses or have like, like create this long narrative where you're the victim and everyone else, it's not your fault and your heart was in the right place and you did everything right but everyone else was wrong. This is usually stuff about sales cycle. Well, you know, the sales cycle is just long. Like this is just too hard. And it's just when people do this, my message to them is like, hey, that's fine. I'm not saying your excuse is wrong, but like why are you spending all this energy trying to plead a case like you're in court? that the thing didn't work, as opposed to like, well, move on and make something that does work. How about that? Spend energy in a positive, proactive direction than weaving the narrative of yourself as the person who did great, but you're misunderstood by the universe.\n"} {"text": ": Here's the other one. I love this one. Dalton, I need an executive team. It's time for my company to become a real serious company. And to do that, I need an executive team. And so I'm gonna spend the next year recruiting the executive team, like it's time. I'm ready to grow up, Dalton. I'm ready to grow up. What do you think about this one? How many great executives have we encountered over the years?\n: I mean, look, I think if all you do is consume like VC content, this is an idea that gets introduced into your brain. And I think maybe there is a time where this is a good answer. But it's like so much of the VC content is aimed at late stage founders, which is pretty weird. It's like putting out content that's like, you know, how to care for your your Ferrari or something. Like again, I don't really know who a lot of this stuff is aimed at. The majority of the people that consume it are like two or three person startups. And if you, if all of your advice is like hire an executive team and you have like a 3% pre-PMF startup, like, oh man, like you can get someone to leave. You can get someone with a title to leave Google or Facebook or somewhere really impressive. And you think you're like a big winner that you got someone from this cool company to join your company. But then you wake up and you're like, wow, what did I do? Like what usually happens is they either are, either they joined your startup because they weren't doing well. I'm trying to think of a nice way to say it. Either there's a reason they joined your startup and left Google, or they had expectations that you were farther along or more successful than you actually are. And they get very upset with you when they realize that your startup sucks.\n"} {"text": ": All right, we got two more types here, so two more types. Type, one is other founders. So this is becoming a lot more common nowadays, right? Like founders investing in each other's companies. It's, you know, some people have seen success doing this, others not. But what's the advice that most often you're going to get from another founder to help you when they're on your cap table?\n: Usually when you get advice from other founders, it's heavily based on their personal experience. Duh. But the downside of that is if they really struggle with fundraising personally, all their advice is going to be them basically telling you, don't do what I did. Or if they struggle with distribution, all their advice is going to be around, you know, like they're almost like they have a lot of feelings about what happened to them. Again, this is, we were founders do, dude. Like a lot of my advice was heavily based on my personal experience and it only, it took years of me working at YC to sort of break out of that trap, which is to not be so autobiographical. And the things that I'm telling people.\n"} {"text": ": When we were in this situation with the founder, you know, very recently this started clicking in my head where I'm like, oh shit, like, Can we take a big step back? Do you like your users? Do you like them?\n: Yeah. And people think that's weird. That's not what they expect you to say. No. Why are we talking about if I like my users? Is that relevant?\n: Where are you going with this? These people you're trying to build things for. Do you like them? Now, you brought this up. A lot of companies don't like their users, right? Any examples?\n: Well, look, to speak from personal experience, Comcast, who dislikes their users so much, I think they renamed to Xfinity.\n: That's part of the rebranding. Let's try again. I don't know. Maybe they won't remember.\n: Every experience I've had with them, and again, maybe you have the same one, you can tell that the whole thing was designed with the implicit assumption that they don't like their customers, and their customers are bad. And everything that you try to do they wanna make it bad. Yeah. And it seems to be baked into the whole thing, right? It's pretty weird. Well, they don't have a lot of competition. We can talk about why that is, that's probably a different topic.\n: It helps that they're running a wire to your house. Right. That's a big part of it.\n: Yeah, I'm still a customer, let's be real.\n: I still pay for it. Yes, they figured out that their customer was the government that gave them a monopoly. Yeah. So that's one example. Are there others you think about?\n: I mean, look, there's other stuff like that, like phone companies. But let's talk about another one we've used more often. Social media companies. Let's talk about Facebook. Facebook is known to do some user-hostile stuff. What's the term for it? Dark patterns. There's a whole field of research.\n: Yes.\n: And again, maybe someone would say watching this, oh, well, they kind of like their customers.\n"} {"text": ": Yes.\n: That is not evidence of original thinking.\n: No, No.\n: Versus, you go read a bunch of places.\n: Yes.\n: You digest the information, you synthesize it into your own original work. You maybe cite the sources of what you're learning from, but you actually took the time to digest and process these things. Same thing with the music industry where if you plagiarize a song, that's a problem.\n: Yeah.\n: Like, if you just rip off someone's music, you will get sued. Right. But if you listen to a lot of music and you get influenced by some of the sounds you hear and you integrate these new sounds into the new music that you want to put out.\n: Yes.\n: Totally cool.\n: That's literally, that's the game, that's music.\n: That's the music business is that everyone's being influenced by everyone else. And so again, the really important thing to tease apart is copying completely without thought or anything original thinking or original work, versus being influenced and borrowing good ideas to integrate into your own thing. Right?\n: Doesn't the thing that suck about startups is that you do have to think about a lot of things. There isn't just, you can't just copy and paste. There's a checklist. You do have to think carefully, but I think that's why really smart people are attracted to it. Yeah. Because you have to think really carefully.\n: Yeah.\n: It's an amazing test of your skills. All right, great chat.\n: Great, thanks.\n"} {"text": ": But, yeah, you know, it comes back to that. Like, the best founders are disciplined. What you talked about is that's discipline. Right. That's doing the right thing when no one's forcing to you or no situations forcing you to. And I think that too often, genius is mistaken for discipline. It's like, you know, a lot of people think, oh, this person out executed all their peers because they were smarter. And it's like, that assumes the peers were actually working on the thing they said they were working on, as opposed to, like, hiring and going to conferences and talking to reporters. Discipline to avoid the distractions. I mean, that should be comforting to a lot of people. It's like, yeah, for every ounce of discipline you have, you can probably lose 5, 10 ounces of intelligence and still outperform, you know?\n: Yeah, that's a great point. It's funny how many people that we see, again, let me think how to phrase it with, like, you'd think they'd be really good at a lot of things, but they. I'm not sure what they do with their time. They have a great resume, but it appears they just don't really do work. And the people that sit down and do the focused work. And again, we all know what this is like. And think back to college. Lots of reasons to not work on something. If you could bottle up those moments where you're actually doing focused work, the people that succeed just seem better at that. That's actually the criteria that they seem better at. If you looked at their calendar, if you shadowed them or something, the folks that are really good at this are just better at doing focused work, and it's kind of nothing else. I mean, or at least.\n: Yeah. And by the way, you can't. You can't really change your raw intelligence, but you can get better at this. Like, this is a little bit like, working out like you can. You know, if doing focus work for someone who likes to procrastinate is a little bit painful, the more they do it, the less painful it gets, you know? And so, hey, you know, smart people certainly have an advantage, but, man, hard workers. Oof. Hard workers are dangerous. Hard workers are dangerous. Lazy people are, you know, as a startup founder, lazy people, lazy competitors are your friends.\n: Yeah. It's good when your competitors are focused on the wrong things.\n"} {"text": ": Tell a Google story because I think this one's like the like really like.\n: So look, for the Facebook story, that was firsthand where I personally witnessed the servers with my own eyes. So I'm 100% confident that is what happened because it was me, right? This Google story is secondhand. And so I may get some of the details wrong. I apologize in advance, but I'll tell you this was relayed to me by someone that was there. All right. You ready? So look, The original Google algorithm was based on a paper that they wrote, which you can go read PageRank. It worked really well. It was a different way to do search. They always didn't have enough hardware to scale it, because remember, there was no cloud back then. You had to run your own servers. As the internet grew, it was harder and harder to scale Google. You still with me? Like there were just more webpages on the internet. So it worked great when the web was small, but then they kept having more webpages really fast. And so Google had to run as fast as they could to just stay in the same place. Just to run a crawl and re-index the web was like a lot of work. And so the way the work at the time is they weren't re-indexing the web in real time constantly. They had to do it in one big batch process. back in the day, okay? And so, there was some critical point, this was probably in the 2001 era, again, this is secondhand, I don't know exactly when it was, but there was some critical point where this big batch process to index the web started failing. And it would take three weeks to run the batch process. It was like the, you know, reindex web.sh, you know, it was like one script that was like, do Google, you know, and it started failing. And so they tried to fix the bug and they restarted it and then it failed again. And so the story that I heard is that there was some point where for maybe three months, maybe four months, I don't remember the exact details, there was no new index of Google. They had stale results. So anyone, any user of Google, they didn't know that, you know, the users didn't know this, but any user of Google was seeing stale results and no new websites were in the index for quite some time. Okay. And so obviously they were freaking out inside of Google. And this was the genesis for them to create MapReduce, which they wrote a paper about, which was a way to parallelize and break into pieces all the little bits of crawling and re-indexing the web. Hadoop was created off of MapReduce. There's a bunch of different software use. And I would argue every big internet company now uses the descendants of this particular piece of software. And then it was created under duress when Google secretly was completely broken for an extended period of time because the web grew too fast.\n: But I think this is the most fun part about this story. When the index started getting stale, did Google shut down the search engine? Like that's the coolest part. Like people just didn't realize.\n: They didn't know. And did they build this first? Again, in terms of do things that don't scale, did they build MapReduce before they had any users? No. Like they basically made it this far by just building a monolithic product and they only dealt with this issue when they had to.\n"} {"text": ": Like what are some other examples of quote-unquote gambling out there?\n: Well, think about it. Okay, so poker is a game I played a lot. I'm sure you have too. And in poker, the rules are it's okay to bluff. and you're rewarded. Like the game is to manipulate other people around you to do dumb things. It's not hard to take one extra step to do that kind of behavior outside of poker. And so there's a whole variety of both legal and non-legal confidence games where essentially the way you win is to manipulate people and get them to do what you want when you want them to do it through any means necessary. And Yeah, I think that is rough. And a lot of people do some version of that. I guess maybe we all do to some small extent, but some people really take that to the extreme of making their entire living by fooling other people more or less, right?\n: Well, it's crazy because you're talking about legal versus illegal, but back in the day in the US, I was reading this biography of Morgan Stanley and like, One of the things that happened in the early 1900s before a lot of the financial regulation is that banks would regularly kind of sell really bad paper, really bad debt to unassuming normal Americans, make a lot of money in the transactions, I think the one example I read, it was some country. Some country was speculating, they sold a bunch of debt, they couldn't pay it back, and a bunch of Americans just lost the money. The bank for selling the transaction did fine. The country, well, they can always print more money. It's interesting because in that time, doing that was not illegal. Like it wasn't illegal for the bank to resell something to normal people when they had knowledge that it was bad paper. But those people didn't. And it's funny how many of the financial regulations today come from people in the finance world basically doing zero-sum games and like harming normal Americans. And harming them so much to the point where they're like, you know what we should do? We should like get a law passed because this is crazy. Like this doesn't scale. Like this can really screw a country if you let people play these zero-sum games to the extreme.\n: Yeah. And there's some amount of like lack of empathy or viewing of intentionally wanting to victimize other people. There's some dark stuff along that whole line of thinking. I think if you feel that you are smarter than other people, and this is something we encounter sometimes in our jobs, I think if you feel that you are more intelligent than others, perhaps you can end up on the slippery slope of moral arguments that it's okay for you to make a living off of other people's work because You use your intelligence, your superior intelligence to get them to go along with this, right? You've seen this a lot. They kind of feel like that's freedom.\n"} {"text": ": The next area of prevention, you have to learn how to have hard conversations with your co-founders and for everyone to be okay afterwards. Everyone has to go through this and it's going to suck. But if you have some of those in the bag, when you get punched in the face, you all know a little bit more how to interact with each other. And to me, the biggest challenge that I've seen on this front, and we've talked about this at YC quite a bit, is this anxious, personality type versus avoidant personality type. You know, when people are challenged, people are frustrated, and this is way over simplification, but sometimes people are anxious, they wanna deal with the problem right now, they're leaning in, they wanna talk for, they've talked for two hours with you, and they wanna talk for another two hours with you. And sometimes people are avoidant, and, you know, after five minutes, they're done. They wanna think about it for a long time. They'd rather talk asynchronously. And I actually see that most problems between co-founders The root cause isn't whatever went wrong or whatever they're debating. It's actually their style of dealing with their frustration. And if you can have a little empathy if the person who you're working with has a different style of dealing with frustration than you do. and you can just take a beat, right? I'm the anxious type. You know this, Dalton. I wanna talk about it for six hours, then six more hours. I wanna plan, I wanna write it down right now. Go, go, go, go, go. And I always get into trouble when I'm interacting with someone who reacts negatively to that. And I always have to kind of be like, fuck, I gotta take a beat. In this situation, I gotta take a beat. And so, in my experience, If you can figure out that dance with your co-founder, it's so much more helpful when you're dealing with these external challenges. And like, the startup's going to present many opportunities for frustration with your co-founder, right? Like infinite opportunities.\n: It's like the whole topic today, which is eventually you're going to take punches. You're going to have setbacks with your startup. Eventually you're going to have conflict with the co-founder. 100%. And the thing that you're disagreeing about isn't even the thing. Who cares? It's noise. It's like roommates. Did you put the dishes away? It's not about the thing. It's not about who's right or who's wrong. It's funny because a lot of people want to ask us advice about co-founder stuff. But what they want is us to agree that they were right and their co-founder's wrong.\n: You love that.\n: They're like, Dalton, can I tell you about this situation? Basically, I'm smart. My co-founder's dumb. What do you think I should do about it? And it's like, no, no, no, no, no, no. I'm not going to take the bait on that. The actual thing that you need advice on, a thing to work on, is the meta conversation, which is like, how do you deal with conflict? so that people feel good when it's over. Otherwise, whatever the, you know, not cleaning up your dishes or taking the trash out, whatever the equivalent of that is in your co-founder relationship, eventually it's not gonna work out, man, right? You gotta have tools, because there's gonna be more issues.\n"} {"text": ": Welcome to Dalton and Michael. Today, we'd like to do a follow-up on a video that we recorded a year ago. That video was why you should leave your fang job.\n: We all know these people that want to just tell you their darkest secret, which is they wake up every day and they like dream of quitting. Like they have fantasies of quitting every day. Those are people that probably should quit.\n: This video is why maybe you should leave your failing unicorn startup. Oof. Tricky topic.\n: And let's say signals. We don't know. We don't have all the information. But there might be some hints. There might be some signs you want to be looking for that it might be time to reach greener pastures.\n: And if you're an employee of one of these companies, you probably have the best perspective, a better perspective than investors, maybe sometimes even better perspective than founders on what's really going on. So maybe we should start this by saying there are 1,400 unicorns now. Is that right? Yeah. Wow. Well, I'll ask you. I don't know what you think. Do you think all 1,400 will go public successfully?\n: I think the odds are pretty slim that they're all doing amazing. Yeah. I think that's a fair statement. I think that's a fair statement.\n: And so if you kind of divide this out, even if you're really optimistic, what do you think an optimistic count What percentage of the 1,400 were being super optimistic, they do an IPO, and everyone's really happy? A third? I'm just making this up. A third? A third. Great. So in that case, two-thirds of that 1,400, it's not going to work out. And I think what's unfortunate is that when things don't work out, employees usually don't.\n: They are. Yeah. And the who takes one for the team, they're usually in the category of the team. Right.\n"} {"text": ": Cruise, perfect example. I remember getting into a cruise car with Kyle, driving down 101. And he said to me, uh-oh, there's a shadow in the road. Let's see how we handle this. And I'm like, oh, fuck. This is an MVP. Shadows, eh? Haven't thought about that. Yeah, haven't thought about shadows in ever when driving. And I remember when Cruise did their kind of first open launch, and I got into a Cruise car with my wife, and it just drove us to where we were going. And I remember for the first minute 30 being like, I can't believe this is the same. I can't believe this is on a continuum that started with me being afraid of shadows and now it's like.\n: I actually care about that stuff a lot. If I just think about growing up about just the number of people that I knew that died in car accidents and the number of people that every day get seriously injured or die in car accidents. I think we're going to look back and be like, that was crazy barbaric. That was like having surgeons that didn't wash their hands. Literally. In that era. Yes. Is, I think, how we'll look at some of this transportation stuff. Yes. Right? And we're right on the precipice. It's happening now. It's not like everyone's even excited about self-driving cars. No. It's like, oh, I don't know about this whole self-driving car thing. Drunk drivers aren't that bad, are they? Yeah, yeah.\n: It's only tens of thousands of people who die a year in America.\n: It's like, whatever. And so you should, I would expect people to be pretty excited about this. Yeah. But it's seen as sort of this neutral or divisive issue instead of something that's kind of awesome.\n"} {"text": ": Taking a big hit to your growth rate in order to get to default alive. It sounds a lot like bankruptcy. It kind of sounds a little bit like personal bankruptcy, where it's like you take a hit on your credit score to kind of clear your debts. And the benefit though, is you clear your debt like you are now living sustainably as opposed to unsustainably. Now, here's why it's better than bankruptcy. I think in a traditional bankruptcy, it takes seven years for your credit to kind of get repaired. The startup world works a lot faster than that. So at any given time in your startup, you're being judged on the last six to 18 months. And so if you take this hit, you cut your revenue in half, but you get to default alive. And the result of that is you get to spend the next six to 18 months building a better product, getting closer to product market fit, or getting product market fit. You're going to be judged on just that last six to 18 months. You're not going to be judged on when you had a horrible business that was burning more money than it was making structurally, and you're going to have a huge advantage. And what's tricky was this was kind of our story at Justin tv and twitch almost exactly like.\n: Yeah you had the choice, you looked into the precipice, you guys could have jumped in, you could have just let it go.\n: Like, right, you could have let it go. So, I mean, we had raised about seven or $8 million. We had grown to about, I don't know, let's say like 30 million monthly. People were watching content, we were making about $750,000 a month in revenue, but we were, we had a million dollars a month in expenses. We were burning $250,000 a month. And I swear to God, like, the come to Jesus moment was with half a million bucks in the bank. And I always love this, because as YC founders, we don't talk about these mistakes and want to give you the impression that we didn't make them. Like, we made this exact, we were right there.\n: That's what you love about investors, is they're like, oh, I know everything. They taught me this at McKinsey and Harvard business. Like, like, that's what's nice about being former founders, is. Yeah, man, we got all this shit wrong.\n: Yes. Like, no one is actually playing right towards the mountain. Like, straight up, like, deep, deep mountain, not top mountain. And we, I remember we had this meeting with a lot of our employees, and we were like, look, we got three options. We can die in two months. We can try to get to break even, or we can try to get this thing profitable. And I remember, like, I had to call this meeting, and it was one of the most embarrassing things I've ever had to do upfront because I'm just, like, talking about admitting defeat. I'm like, here's the thing. We're gonna die.\n: We messed up. We blew it. I'm bad at my job.\n: Exactly. I'm raising my hand. I suck at this.\n: Hey, guys, I led us astray.\n: Yes. And I remember thinking, and I think this is the silver lining. I remember thinking, I have no idea whether everyone's just gonna quit or whether they're gonna rally. And everyone rallied, and it shocked me. But then, like, I thought about it more, and I was like, what kind of person joins a fucking startup, right? It's not the kind of person who's like, well, I don't see any risk here. Like, this seems like smooth sailing all the way, right?\n: These are very mature veterans.\n: Absolutely not, right? And so, you know, we selected for the right people on the pirate ship, right? Like the pirate ship. They knew they were on a pirate ship. And I remember everyone was like, we are going to get this thing profitable. We had to do some bad stuff. We definitely had to let go of some people. Our version of raising prices. We had to put ads on everything. Like, we put pre roll video ads on anything that moved. I remember it was, we had this, we literally had this easel with a big piece of paper on it. And I was like, on this side, we're going to write down everything we can do to cut costs. On this side, we're going to write down everything we can do to make more money. And we're not going to leave this shitty little conference room until there's $100,000 of revenue somehow of profit here. And what's crazy is that we had that meeting in August. By October, we were breakeven. By the end of December, we had generated $1.2 million in profit, and we saved the company. And I remember the feeling of not needing VC's anymore. And let's be clear, that's not the last time we pitched VC's but just, it was the last time that I feel, well, it wasn't the last time. There was a nice little window where for a second, we didn't need VC's to like us in order for our business to be alive.\n: And like, and what's funny, man, is that was the moment you were actually tested. And you guys, like, you, your co founder, like, that was it in retro, in hindsight, you guys had a choice and you did. You took the l, you took the hard, hard, but now here you are and that was like really smart. And we just see so many folks that don't do it. They have that, it's like sitting there in front of them, the hard move, and they don't do it for whatever reason.\n: Well, and what's crazy is the idea for twitch happened after that. And like, I, it makes sense in hindsight, why, like we were, if you're not just freaked out about dying all the time, maybe you can apply your brain to like, how to make this thing work. I think sometimes it's okay to do a startup bankruptcy. Like, sometimes it's okay to take that l get to sustainable and figure shit out. And especially if you've raised, like, you.\n: See people that raise and again, like, let's keep picking on fast. Like, they could have just not spent the money. No one forced them to.\n: Seven months in, they could have stopped spending the money and they'd still have a ton of money.\n: Yeah. And so there's some amount of like, playing along, like, there's some amount of like, founder choosing, making a proactive choice to not course correct, because they believe the fundraising to come in. And again, this is the point of PG's blog post, which is don't do that. Right. And sometimes, you know, this is what happened at my startup and this would happen. This is what happens to the delivery ones is you have contractual, like, lease obligations. Kill people. I had deals with the music industry and there's nothing, literally nothing I could do about that. And that sucked, you know, and so to the extent you have a startup that doesn't have contractual requirements to burn lots of money like WeWork or something, you know, I'd recommend not starting one of those, but if you're in one, you should be really careful of this stuff.\n: Yes. Well, by the way, venture dad is similar. Right. We're like, damn. Like, right when you're hurting, you gotta start paying more money out.\n: And they can very, very similar.\n"} {"text": ": Let's take an easy one. I'll give you an easy first example. The founder comes to office hours with us. They have already made a decision. It is obvious they've already made a decision. And they want us to spend an hour validating that they've made the right decision. That's kind of a hard conversation. Because, like, Dalton, if we were being 1,000% honest, what would we actually just say, like, bluntly?\n: Well, I think there's two ways to handle this. There's the dishonest way. The easy conversation is to take them at face value and be like, oh, wow, seems like you've thought about this really well. I see no errors in your logic. You're a genius.\n: You did it again. Exactly. Yeah. Without the information to even verify that, right? Like with no actual facts to verify.\n: Wow. What an amazing strategy. This is just A plus work. And then there's the hard thing. And what I think the hard thing is, is not even disagreeing with it. It's to say, it's the question behind the question, which is, Hey, it seems like you've already made a decision, cool. Why are we talking about this? Yes, why are we here right now? Like, what's the question behind the question? Is it that someone else, is it that your co-founder disagrees with you and what you're trying to do is bring my opinion into it to prove that you're right? Yes. Is it that someone else disagrees with, like, there's always a real question hiding behind the scenes And man, people, it's always there. When I bring this up, they're like, ugh. They're like, yeah, there is a question behind a question.\n: By the way, isn't this such a common theme? I think if you really want to understand office hours in a nutshell, 60 to 80% of the time, a founder will go into office hours with one question, And we won't even end up talking about that. That's not the actual question.\n: This comes up a lot with people talking about applying to YC. People always think it's really important. Michael, I have some really important questions I want to ask you about applying to YC. And he talks to them and it's just like... Should I apply to, like, there's no... There's no there there, yeah. It's a no op, there's nothing, there is no question.\n: Should I report my revenue monthly or quarterly?\n: It's like, who, like, just... Yeah, and so again, I get where they're coming from and what they're really, the question behind the question I think is, I feel insecure and I want to talk to you, Dalton and Michael, about this so that you give me validation that I should apply. Great. And so that's the actual question behind the question, not, hey, I have this really complicated question about the application that's, I don't know.\n"} {"text": ": So what can we talk about then?\n: I think it's this. There's a lot of history to learn from about when major technological changes have come out. And to the extent this is a major technological change, as opposed to we're all going to get uploaded to the matrix or whatever. There's a lot to learn from history. And so this is where when founders do ask us advice on what they should be thinking about with AI, or how will AI affect their startups, or is open AI going to kill all their startups? We have a lot to say about that, or we have a lot of suggestions to look from history.\n"} {"text": ": I think it's interesting because you're seeing this in a lot of conversations with founders right now, right? Let's talk about who is choosing to start a company in this phase and what we can learn from them.\n: Yeah, a couple of things. So one, there's a difference between cargo-culting AI and actually using AI to build better features. And so let's talk about the difference. Cargo-culting AI is to say, we have AI. And it's like tangential to what you're doing. You're just saying it to raise money. It doesn't help your customers. It doesn't improve your product, whatever. But we are seeing people adding AI features that dramatically increase retention, that dramatically increase the quality of the product, that make it much easier to charge for it. And that stuff is real, and that is not hype. That's not bullshit. That's real. This is like when people first started launching apps, when the App Store came out. Apps were actually good. There was a hype cycle around apps, and a lot of people were cargo-holding apps. But building a high-quality mobile app that increased the retention of your users? Incredible. Facebook almost died because they didn't do it fast enough. Exactly. I think if you look at, I don't know, we saw from our generation's founders, we saw open source and cloud computing come out. And think about cloud computing. If someone was like, oh, this cloud computing thing's hype, or like, we're not going to add cloud computing because it's just a thing VCs want to hear. You know what I'm saying? There was sometimes people, you remember these people, they were like, haters on cloud computing because it was overly hyped. But that's missing the plot. Just because it was overly hyped didn't mean you shouldn't Put on your thinking cap. Well, it didn't mean you should be like, hey, should we be running some of this stuff from the cloud instead of running our own servers?\n"} {"text": ": And then the last one, and you brought this up in a previous conversation, it's raising prices. It's like, wow. Well, the thing that we're selling now, money. This thing we're selling a lot of right now, we lose money every time we sell it. Maybe we can increase prices so that we are break even or we make a dollar every time you sell it. Oh, no, that means we're going to sell it to fewer people. It's like, yes.\n: So our plan is to sell a dollar for ninety nine cents and it's going well. And we're like, well, have you considered not losing money on every transaction? And like, absolutely not. Well, how dare you even suggest that.\n: You talk about this a lot. Like, I think it exercises a different muscle in your customers brain when they know they're getting a deal. Right? It's like, like in some weird way they're willing to use a product that's like they would never use in any other circumstance if they know they're getting a dollar worth of value for $0.75.\n: Well, and you see this in New York recently with the ten minute delivery stuff. There was like eight of them and you could go get free. They all had coupons. So as a consumer, you could like get a lot of free stuff. And that was all VC subsidized.\n: Every time that company is losing money.\n: It'S a wealth transfer from investors to consumers. You got, I actually appreciate that, you know, clear, some of these companies may make it. There may be one or two, yes, but my guess is the ones that make it are very, very, very smart about this stuff. I mean, yes, as per doordash, who I guess we always talk about. But, you know, they were good at numbers and they understood default alive, defaulted. And they understood burn. Like very sophisticated. And so even though they were playing, they were, they were flying the plane very close to the mountain. Yes, but they were also very aware of the mountain. They knew what they were doing. There were test pilots versus, hey, I don't know, like I read in Techcrunch that if the more I burn, the more I raise. So I guess, do you see the difference? Folks like doing high risk things when you're sophisticated and you know the risks is gonna work out better for you than wishful thinking, high risk takers. That never works.\n"} {"text": ": I mean, another one's renewable energy. I had a friend who was working on a startup. And he said something to me that I thought was a lie. He was like, oh, yeah, based on where you live in America, you can choose to just buy your energy from a renewable source, like hydroelectric or solar. And I was just like, It doesn't exist. He's like, yeah, it's here. And I'm like, oh, well, it must be like 10x more expensive. He's like, no, like right now, it's I think like 10% more expensive. And I was like, what? Like that's happening. Like we went from solar being the future in the 90s to just being the commonplace reality that no one thinks too much about. And it feeling economical for a lot of people. It's like, oh, you live in a sunny area. You're going to save some money. It did not feel that way in the 90s. Well, we're in a solar-powered building right now.\n: And this is solar power powering this lighting. And there's solar panels on the roof. OK, whatever. Do we care? No. No.\n"} {"text": ": Hey, this is Michael Seibel with Dalton Caldwell and welcome to Rookie Mistakes. We asked YC founders for their rookie mistakes so we could share them with you and help you avoid them. Here's the next comment that was written by a YC founder. We built a product because we thought the world should be a certain way, not because we had a customer who actually wanted to buy the thing we were building.\n: This is coming from a pure place. And we look at our heroes, right? We look at Elon Musk. We look at Steve Jobs. And we have this model of people that forced the universe to their will. And Elon, electric cars are the future. I am going to impart electric cars. I'm going to make it happen. And again, he kind of did. Good for him, right? But for most of us mere mortals, It's pretty hard to force people to want the thing that you're selling or the thing that you think is good for them. It's really hard if someone doesn't want something to like debate them and convince them they do actually want it when they don't actually want it.\n"} {"text": ": And I think the last one, and this is one that is maybe hard for people to understand is that, You know, when you're watching videos or reading our content, this is, we can't personalize it for you, right? Like you're, we're making this for a business concept.\n: Yeah, we're just talking to the void. We don't know who's actually watching this. But when we do office hours with companies, everything is personalized. We read their application, we interviewed them, we accepted them to YC. Yes. And so the advice we give is super personalized. Yes. And it's often the case that we will know something about someone's background. Yes. That we can integrate into the advice that we give them.\n: And I'll say that like more explicitly, we often contradict or it looks like we're contradicting kind of standard YC advice given someone's specific situation. I'd say like on average, we're probably telling them 80% of the same stuff.\n: And so an example, if someone was a multi-time founder, like say Sam, and someone was known to be a good investor and we had the opinion that they were a good investor, maybe following the playbook that he's following at OpenAI is exactly right.\n: And I completely think it's smart. He should do that. And let's be clear, we've had those people do YC. And we've given them different advice. And we have said, hey, maybe it makes sense to raise more money.\n: And yeah, if you can put millions of your own money into your own company, you should totally do that. That doesn't apply to most people. Yes.\n: And so I think this is what's important. I think one of the ways that we try to control ourselves is Figure out what the personal advantages are of every founder we work with and try to figure out how to help them exploit their advantages. I think it's really, really hard to do that in general. Yeah. So, shout out to, of course, Sam and Elon and Peter. They've made a huge impact and, you know, and are better fundraisers than us by a thousand. They're really good at fundraising. But if you want to be the next one of them, take some time to learn about them and their histories. And I think it'd be really helpful. All right. Great bunch.\n: Thank you.\n"} {"text": ": The next area I like to talk about is salary. Oftentimes, and this is more, of course, for companies that have raised funding, just a small incremental five or 10% salary bump can make a huge lifestyle difference, and it's almost always worth it. I think people screw up, and this is where I say to founders, I'd love to hear your advice. If your startup salary is allowing you to save money, it's probably not good, right? You shouldn't be sitting here with Google employee level savings running your startup. However, if your startup salary is giving you the lifestyle that allows you to be all in on your startup because the real world isn't distracting you negatively, then it is good. And what's interesting is that often for different founders, this is a different salary level. For example, when I was starting, I had student loans in college. My co-founders didn't. I made a little bit more money so that I wasn't going into debt with my student loans. And that was perfectly reasonable. And no one was like, oh, well, you need to take X percent less because you need to pay a $200 student loan every month. It's like, no. So sometimes small changes in salary now, you know, if you have a co-founder where it's like, I need to make a half a million dollars a year and I'm 23. Yeah, that's probably different. But like sometimes people are sacrificing penny wise pound foolish, right? Like sometimes people are being penny wise pound foolish.\n: I think this is one of those topics, also like equity where what founders want to hear is here's the right answer. One size fits all for everyone. Or here's the formula. Oh, here's a spreadsheet. Here we go, Michael. Here's how much to pay yourselves. Just fill out the spreadsheet and we're done. And sadly, like many things in life, anyone that tells you they're simple answers is probably trying to sell you something. Right? They're like, yeah, it's probably snake oil. And so the subtlety that I agree with you on is, You want to pay yourself enough that you don't get into debt. You want to pay yourself enough so that you're properly motivated. You also want to keep the money in the company. These are all variables that you have to turn. And if you're going to be a successful founder, you have to have good judgment and you have to have opinions. And so when founders have no opinion about this stuff, it's not a great sign. So it's kind of like you need a philosophy of what you're solving for around compensation. You want to set everyone up for success Yes. Align incentives well, and also realize that this, this looks different for every company, man. Like a lot of folks ask me, well, how much should I pay employee number one? I'm like. That's a nonsensical question. Who are they? Do you see what I'm saying? Like, what they want is some answer. Oh, you should pay employee number one X. But like, no man, that's like, that's not how this works.\n"} {"text": ": All right, welcome to Dalton post Michael today we're going to talk about How do you avoid innovating on the wrong? things so to set this up right we're in the Innovation economy.\n: Oh, definitely. We're a major innovation. It's right here.\n: Innovation economy. That's what's happening. We encounter a lot of founders who believe that they need to take what I call innovation juice and spread it across.\n: That's what you call it? Innovation juice? Innovation juice.\n: When I'm trying to insult it. And they have to spread it across every fricking problem they encounter. And I think that there's only a limited amount of innovation energy that any company can have. There's only so much juice, is what you're saying. It's like I set that up. And we have maybe encountered some places where You should maybe just use the best practices. Yeah, here's what I think about this.\n: Making a startup work is a miracle. And the fact that you got product market fit and made something people want, you literally performed a miracle to do that. It is amazing. People would die to get what you got. Now the odds that you are going to be able to perform five miracles at once is much, much, much lower. Much lower. And so you want to focus the miracle juice on the single miracle, which is making something people want and making a product, right? Yes. You guys see what I'm saying? Yes. Solving a real customer problem. And then all this other stuff. Yes. Yeah, just do best practices. Please don't innovate. Yes. need to have a low likelihood of success miracle, like you don't wanna have to be right on these long shot bets in five different ways.\n"} {"text": ": Unless you're the house, which that's the actual good business.\n: And it's wild. Like gambling is fun. Maybe not for everyone, but do you think, what's your experience with this stuff?\n"} {"text": ": So we had two more at Twitch that were really funny. The first one, talking about duress, was our free peering hack. So streaming live video is really expensive. Back then, it was really expensive. And we were very bad fundraisers. That was mostly my fault. And so we were always in the situation, we didn't have enough money. to stream as much video and we had this global audience of people who wanted to watch content. And so we actually hired one of the network ops guys from YouTube who had figured out how to kind of scale a lot of YouTube's early usage and he taught us that you could have free peering relationships with different ISPs around the world and so that you wouldn't have to pay a middleman to say serve video to folks in Sweden. You can connect to yourself, your servers. I forgot what they were called.\n: Yeah, it saves you money and it saves them money. That's what they wanted.\n"} {"text": ": This is Michael Seibel with Dalton Caldwell. And today we're going to talk about, does your startup need to be in San Francisco? Oh, man. We're just we're wading into the debate of the moment. So\n: Why don't you kick it off? You've got a controversial review. How about this? Usually in these videos, you and I just agree on everything. I do. It's boring. We disagree. Strongly. We have a different opinion here.\n: I'm confident you're wrong.\n: Okay, good start. So let me start by saying I don't think everyone's startup needs to be in San Francisco to be successful, and that you could build a successful startup and not live in San Francisco. Please, please share. So a lot of the reasons That folks read the discourse about san francisco and man, there's a lot of discourse Yes, is they're very fixated on the lifestyle of living in downtown san francisco Yes, they see all the photos on twitter. They hear the stories. Yes. It's all over national media Yeah, like my parents know all about yes My dad's like so how's it going in san francisco, right? Like, okay, so For me personally, I actually prefer to not live in a dense city. I like living in a place that is warm and bright and sunny and I can walk around and like the birds are singing and like there's trees everywhere. I kind of like living in a boring place, personally I'm speaking for myself, where there's not a lot of distraction and I can just kind of focus on the work I'm doing. Then, you know, really intense stuff going on around me all the time. Also, as you know, you know, I got small children and just for my lifestyle and the happiness of my family, like I prefer to live just in a different environment. You like having a yard? I do. Okay. So I, so I enjoy those things. And then also I think sometimes what people forget, especially that aren't in the Bay Area is, how the actual big employers for most folks in tech are not in San Francisco. They're down south, yeah. Google and Facebook and Apple, the Apple HQ is in Cupertino, nowhere near the San Francisco.\n: All those old, boring companies, yes.\n: And so clearly, in the history of this stuff, all these great companies were built outside of San Francisco. If we actually look how many of the most epic companies in the world in tech were actually built in San Francisco, it's actually not that many. And so to argue that every company has to be in San Francisco is factually wrong.\n"} {"text": ": What is comforting to me, though, is that when the Runway gets down to about twelve months, the magical thinking starts fading. You know, suddenly.\n: It's funny, don't you wish you could bottle up? Like, if you see someone's performance, say there's, you know, you have 18 months of cash. The first, like, you know, 15 months when someone's back is against the wall, the quality of their decisions get much better. If there was a way to, like, gamify, like, if you bottle up the quality of execution and thinking and, like, I don't know, we see people do great work. It's just, you wish they would do this great work when their back is not against the wall again. It reminds me of being in college or something.\n: Yes.\n: Where the papers due.\n: Yeah.\n: And, you know, you didn't go to the class. You didn't show up to anything. And then, like, in the final 24 hours, you, like, you do great work, but you could have done that the whole time and not had a whole fire drill. Right. Isn't that a shame?\n"} {"text": ": So let's think about it. Because we talked about cargo culting on three levels, right? We're like, okay, garden variety cargo culting, that's still really bad as you cargo code Google. Then we're like, okay, the modern thing is the cargo cult, the modern unicorn that has very little revenue. And now the super, super modern is just a cargo cult the other struggling startup.\n: I love when someone references a startup that we know and we're like, no. We're like, no.\n: Yes. And I think that, like, maybe the base conclusion here is that you have to do some copying. You cannot innovate everything. But I think that, like, I like when founders start with what does the user want? Starts with who are the companies the user's paying for, paying today to provide this service? And what can we learn from those companies? And then what can we learn from those companies writing the service who are successful? Okay, now let's think through it. And I think once you think through it, through user's eyes, you can tell which things are essential. Do people care about the Google logo or do they care that they get search results that are good?\n: Hey, how about that fast, right?\n"} {"text": ": And so that also translates into a lot of actions, right? Mass emailing, right? Mega spam spamming, the like templated email with one word of customization. Yeah, just quick on that.\n: Like, you should always say to yourself, if I received this email that I am sending, would I respond? Because hilariously, a lot of people send a lot of email that they themselves think is horrible.\n: Like they are positive. Like, when I asked this question to the founder, would you respond to this email? They don't even think about it. They're like, absolutely not. I've regularly archived emails that look exactly like this and we're like...\n: What? I don't even know how to, what's the next? Well, I think this is going to tie into the theme where I think it's, you don't think your customers are smart or something. Like, you're like, hey, it's not for me, but maybe they want it.\n: I don't know. Maybe these. And if we were going to unpack the psychology of why people do this, like why they're making these silly motions, I think a lot of it is based on a lot of VC marketing. I think a lot of it is customers are not an end. Serving customers is not the end of my business. Serving customers is a means to getting VC dollars. And we all know that VC dollars, that's the goal.\n: That's what we're here to do, right?\n"} {"text": ": The last one is the extremely young investor just out of college writing a check. Sometimes this person's in college writing a check and kind of trying to build a career in our world. Different from the, this person often is different from the, like, junior investor because this person's usually not working at a VC fund or they're a big fund like that. They're usually kind of a scout or some kind of, in that kind of role. What's the, what's the advice they're often giving?\n: Yeah, I mean, look, these people are super sweet and they're super exciting, you know, to talk to. I just think that, like, the same way that the founder realizes their job is to play the part of a founder, and so they, like, watch movies about how founders are supposed to act and, like, read books about it, and they sort of are being like, am I doing it right? Am I a founder now? Like, I think you kind of see this from these investors where they just, they read what other investors say and do, and they sort of, like, say and do whatever it is they read. And so, like, whatever the hot new trend is, whatever people are tweeting about, whatever, like, latest essay they read, they just sort of, like, repeat that and see if. And hopefully no one notices that that's what's going on.\n"} {"text": ": All right, the next one, the next gift that you receive when you play a stupid game, we've touched on this a little bit, is I'm now burning tons of money because I just scaled negative margins. I had something that wasn't working in this city, and I expanded that thing to 30 other cities. And now it's not working at a massive scale. And I did it because my investors told me to. And now those investors aren't taking my phone call. And this is like so hard because I think people don't realize that either some stage of investors or at some point in your company, someone's gonna pull out your finances and do basic arithmetic and ask themselves, is this real? And like eventually you will be judged based on like, is this real and sustainable? And if it's not like, you know, hey, sometimes you even get post IPO at some point.\n: Those people are having a bad time. We're not gonna name any names. It's not being post IPO and then having your stock lose 95% of its value. I don't think those people are having a good, they played a game and here's like the prize they have is having a rough time.\n"} {"text": ": All right, let's talk about accomplishing goals. So okay, let's say I set a good goal, right? I'm a post-launch B2B SaaS company with a couple users and I am setting a goal of getting my first 10 paying users, right? Great, like we're in the right ballpark. Let's hear about how people screw up accomplishing goals and somehow kind of still play the stupid game.\n: Right out of the gate, it's the way that you accomplished it is something that you know in your heart is not like... What's the word I want to use? Kosher? I don't know. What word would you use there, Michael?\n: I like using the word cheating. Like, you know, it's like you're taking a calculus test. Did you learn calculus and then get the A, or did you cheat and get the A? Like, it's like, you know the answer to that question. The A isn't the goal. It's the representation of your knowledge and your mastery. If you didn't learn something when accomplishing the goal, maybe you didn't accomplish the goal.\n: You know, you can fool investors, you can fool co-founders, you can fool a lot of people.\n: Employees, yeah.\n: Yeah, people are very trusting. And so I think the way, the mistake people make is they think that because they fooled people in the short term, They won something. They know they didn't hit the goal. They're like, yeah, what I actually did was I got my friends and family to do blah, blah, blah. There's something where you're like, yeah, we cheated. But no one else seems to be aware of it. So you're like, well, I guess this worked.\n"} {"text": ": So I think that, like, the framework here is really twofold. One, don't overthink when you don't have to. And then two, remember that, like, most of the work, most of the work is not in these overthinking games, like most of the work, are not in these over optimizing games.\n: Yeah. It's action.\n: Yeah.\n: Taking action and not thinking. Right.\n: Yes, yes. It's launching, it's getting the first customer, it's selling. It's like, it's doing these things yourself. And that's counterintuitive because I think that founders understand that startups are really hard, so they assume you need complex strategies to succeed, and it's like, ah, that's a hard thing. It makes sense when I say it, right. This is hard. We would need a complex strategy. Right. How do you respond to that? What actual kind of strategy do you need?\n: I think if you haven't seen really successful startup companies either personally, like, where you were the founder of one, or, you know, people, and you saw them go through it.\n: Yeah.\n: It's hard to believe how silly these things are when they start. Like, I think unless you've literally witnessed it personally and you've seen the silly shit that goes on and, like, how. What it really takes to get big, your brain rejects the idea.\n: Yeah.\n: That that's actually how these companies got built. You're like, no, not true. It had to be like, lots of strategy meetings and whiteboarding, you know, flowcharts and, you know, Gartner magic quadrants of like, like, I think you really. Your brain won't allow you to see that.\n"} {"text": ": But what is the investor really doing when they give you an offer like that? What's really going on?\n: This surprises a lot of people in YC. But this whole, hey, this is great. We love to invest when you find a lead. Just come back when you find a lead. If I translate that out of VC speak, actually means no. And founders are like, what? That means no. Here's why. To the extent that you are in a position where you did have a lead investor, it is very common that the lead investor would want to put in the entire amount of money to hit their ownership target. And so they would not want you to give more of the round to someone else. Right. Not to mention if you had the lead investor already lined up, there'd be a lot of other people that would love to invest alongside the lead investor. And so when someone says, Oh, this is great. Come back to us when you find a lead, you know, give us an allocation in there. What they're actually getting is a free option to invest in the future. If you find an investor that they are impressed by, it costs them nothing to say that. Right. And if you don't find a lead, they just managed to pass on your company while being very nice to you, to your face. Yep. Right? It's like, no, we don't want to invest, but if you somehow find a great lead investor and you come back to us, let's talk about it then. And the founder walks away from that conversation being like, wow, they're really interested. They want to invest. We have offers. When in fact, they just did this ninja move where they said no, but that's how you interpreted it. Isn't that wild?\n: It's almost as if they have to do this because this is their job. It's almost as if they get to run this game every day with multiple companies and all you're trying to do is raise money and get back to work. Of course they're going to be better at it. Of course they're going to have the cool lines. Of course they're going to tie you into knots.\n: It's like you apply to a job at Facebook and they're like, this is great. come back to us with your job offer from Google and Apple, and we'll go from there. So just let us know how it goes, right?\n: That's not a job offer. Consider this a provisional job offer, assuming that you can get an offer from Google and Apple. And even better, sign something. Yeah, we'll sign something, or we'll give you something that looks official.\n: And again, to be clear, maybe someone will see this and be like, oh, but that's, what about this? What about that? Sometimes there are cases of investors that can't write big checks, and they want to invest alongside other people. This happens sometimes, that is possible. So we're not, we're not suggesting this is all things in all universes. We're just saying a lot of YC companies hear this line. And what it usually means, you know, what it means in our experience is no.\n"} {"text": ": And probably the last trend, and maybe one of the most heartwarming trends, is how many alumni reach out to us and say they're watching these videos? Like how much has that come up for you in the last six months since we got this thing rolling? A lot.\n: I think when we first started recording these, my perception, I wasn't really sure who the audience was and maybe I'm still not sure, but it certainly would appear that a lot of YC alums are watching these, which is awesome that we have this direct line for people, you know, to hear from you and I personally about what's going on with YC. I mean, seems better than other forms of communication, right?\n: You know, it was interesting because, you know, we put out a video, as interesting as we put out a public video about making sure that you are prepared for down economic times before we even sent a letter. And one of the reasons we were inspired to kind of send a letter was the number of alums who had watched that video and reached out and said, thank you for doing this. Like we're rethinking our plan. And so I just think it's exciting to see that the YC alumni are watching these videos alongside prospective founders. It's awesome to see. All right, well, I think that's it. So in closing, we are really looking forward to meeting the next batch, which is going to happen very soon, mid-August. I'm sorry, mid-June. And then we're also ridiculously excited to meet all the founders that we've funded over the past years. We're going to do a massive alumni event in San Francisco in the fall. And so for all the people we haven't seen in person yet, we'll see you soon. Dalton, great to see you.\n: Sounds good. Bye.\n"} {"text": ": You know, this is why it's a little dangerous. This is a dangerous thing. I'll say. You know, we've been accused of being a mafia and we're not a mafia, right? We don't break anyone's legs or anything like that. But it's not completely false, right? Like if you're like made in the mafia, you do get privileges that normal people don't, right? And like when you get to go through YC, you get access, like you said, to resources that other people don't, right? And so there, and there's a little slightly different way. It's a little bit like the mafia. People don't shit on you as hard, you know, like when you're the mafia, like someone's not gonna rob you, right? Like when you're YC VC's don't rip you off. Like, and so I'm not saying it's a mafia, right? I'm saying it's not a mafia. We just have these very clear similarities to what I've seen on Mafia tv. Oh God. Anyways, so this kind of, this part of the feedback that we got from founders, it had two elements. One was we didn't really understand the benefits that YC had when we were applying. It also had this aspect of, there were some really serious misconceptions that we had about YC that didn't get cleared up until we got in. You know, one was this misconception around like, are we actually going to get to work with you personally? Like is there actual structure of this thing where we feel like we're getting really personalized support? But what are some of the other misconceptions that you saw that were obviously, I mean, I would argue, obviously designed to try to convince people to not do YC. These were designed attacks on YC. What else are you seeing out there?\n: Trying to encourage founders to think that investors are what makes your company great and that you could get product ideas and product market fit based on who you let on your cap table. So you're like, if I get this investor, they'll do this for me and this investor does this for me. And so, well, YC will do this for me. And it's like, guys, like the way you build a company is not, you're not baking a cake where you, where you sprinkle in three different investors and then a cake pops out. Like, the stupidest thing I've ever heard. This is a really common misconception out there, which is like, I, I hate to break it to you. You're doing all the work.\n: All the work.\n: We're not. The reason, the reason to do YC is not that we're going to do the work for you. It's that it's a great environment to do this with other peers and founders and get access to these resources while you're the one baking the cake. And the amount of resources you get in this network way trumps the resources you get from some random small check. Like, yeah, similar side check, right? Like, so I think that's one.\n"} {"text": ": What else are you, what else are you seeing in terms of like, this often happens in product where like someone has a magical version of their product in their head. Like, what do you see in that context?\n: Yeah, I think in practice, if you can't build a product and you don't have a tech co-founder or whatever, or you have never once built a product and given it to anyone, and you think it's going well, you are too optimistic. Like, it's not going well. Like, sorry. And again, think about how many people over the years that have pitched us like, it's a new social network and it doesn't exist, but it's like Facebook and TikTok and it's with your friends and you can discover, you know, they'll just kind of like rattle all this stuff off, but they will have no code. None of it will exist. And they'll get really frustrated that we aren't pumped about that. Like they don't like they're being too optimistic that the idea that their articulation of this is somehow valuable or interesting.\n"} {"text": ": So I remember getting our first angry letter. And like during my startup career, I went from angry letter from law firm, getting sued by the company owned by the Prime Minister of Italy, getting sued by the UFC, getting very aggressively invited to testify in front of Congress about sports piracy issues. It was like, that first letter I thought was a disaster, and if only it described all the other shit that was gonna happen. I might have just quit. I might just shut this down. And I remember having this conversation with YC founders now, because it'll always be like, oh God, we got sued. And I'm just like, And, like, welcome to running a business. Like, you got sued. Like, check that box off.\n: It just comes with the territory. Like, there's no way to avoid it. Like, there's not a universe where you could do big things and not have these setbacks where folks will tell you you're over. Folks will tell you, you know, you're bad and you should feel bad.\n"} {"text": ": Maybe the first analogy I'll give you, and this will immediately age me, so I apologize. I was a big Final Fantasy VII player. Do you play Final Fantasy VII? A little bit. Of course. Alright. The basic thing I learned in Final Fantasy VII was that you can fight the boss at a certain level and get your ass kicked. or you can grind for like, you know, 10 more hours and fight the boss and actually like kick their ass. And I think that this analogy applies to a lot of things in the real world and specifically in the startup world, where like investing and leveling yourself up can produce a lot of benefits later on, like deferring a little bit of that satisfaction of getting started right now, so you can upskill, makes you 10 times more powerful. later. But, let's be clear, you have to be upskilling during that time. Yeah, you gotta be grinding. You gotta be grinding.\n: The grind has to happen.\n"} {"text": ": But in the real world, let's talk a little bit about grinding. What's the kind of grinding? What's the kind of upskilling? that you would advise high schoolers to do?\n: Well, the most obvious and straightforward one is learn how to code obvious. Like it's pretty tricky, even if you think, hey, I'm not going to be a lot of people say to me, the younger folks, oh, I don't want to be a coder my whole life. I want to be a founder. I want to be a product person. well, you should still learn how to code. Like there's, it's really hard to make an argument. Yes. If you're a young person, why you shouldn't have that skill in your skill tree. Can you make a case? Why do you make no case?\n: I was the business guy who didn't know how to code. And literally I would say there were many moments in the early stage of a company where I felt borderline useless. And certainly I didn't have the power to impact the product anywhere near as much as my other three co-founders who were, who were software engineers. So like, This is such an obvious one.\n: Yes, this is a great thing. AP Computer Science. Yes, you can take replit like there's all these YC companies that help people learn how to code code Academy. There's so many so even if you have some complicated relationship with maybe I don't want to be a programmer. That's fine. Learn the skill. It's like learning how to cast spells or something. Well, I'll push even harder.\n: Get this complicated view of I don't want to be a coder out of your head. The coders are the most powerful people inside of software companies. That's the hint. The people who code are the most powerful. They're the most highly compensated. They're the hardest to replace. They often have the best ideas. They often have the easiest path to implementing their ideas by far. They're the power center. The talkers, not as much.\n: Sometimes people on this coding thing, they're like, well, I didn't grow up coding or I wasn't like a 13-year-old whiz kid like people I know in high school. I'm just trying to argue, you don't need to be that. If you have the right ambition and grind mentality to be willing to learn, of course you can do it. Even if you're 19 or 20, it's never too late to learn that stuff.\n"} {"text": ": I think that the two silver linings, like one, everyone you respect out there who's doing great things is dealing with all this stuff. And so that should make you feel good. Like every single person you respect who's done something hard has dealt with all this crap and 10x more. So you're not getting some bad hand. Like everyone gets this hand.\n: What is that about you? This is just the thing. This is just the game. This is the thing is that you're gonna every day have to deal with things that feel like setbacks.\n: Well, and you can get, I think that's the second silver lining here is you can get good at this. Right? Like you can get good at dealing with these setbacks. You can actually get better over time. You can learn how to take a punch.\n: You can't control whether or not you're going to have setbacks. You can't. You have to like let it wash over you. But you can completely control your reaction. Yeah, that's 100% like what happens in your brain after a setback happens is within your control. And so you want to have acceptance. Yeah, some bad stuff's going to happen and I can't fix it. But man, you have a lot of choices in how you deal with setbacks. And it could be anger, it could be fear, it could be bartering, it could be denial, like we've seen it all. But this is something that you can practice and get good at. And the folks that are great at whatever their thing is, again, like, whether it's athletes or whether it's people putting out music or making movies, like how do they? Like you can get better at dealing with like criticism or people not caring. And like, you can just do that, that's your choice. Like no, there's no structural reason you can't have a better or more productive reaction to the setback, right?\n"} {"text": ": So let's talk about this in the context of startups. You know, how does this come up when we're talking to founders? How does magical thinking pop its rear, its head up?\n: I mean, I think to start with, it's to always have excuses. Like when you ask people direct questions, everything involves a very complicated answer and excuse about why they can't grow, why they can't get customers, why it's hard for them to get customers. why somehow there's a complicated story, it's other people's fault that they can't do something, and all these other people are plotting against them, and like basically they're telling a story where they're the main character, they're the hero of the story, and their startup is great, and if it weren't for all these dang external parties doing bad things, it would be working, right? Again, like put this into practice of like why people can't get a customer, for instance.\n"} {"text": ": What I will say, though, is that, like, Don't let yourself be held back by these fake limitations. These are fake.\n: I think that's such a great way to close off this thinking. I think the reason we got a lot of requests to do this video, I think it was from technical founders that had been told by investors, you need a business founder, and are kind of looking for our advice about that, or they're not really sure. And I think a lot of times when investors give a founder that feedback, which is you need a business co-founder, they're actually giving you direct feedback on what they see is a deficiency in your appetite to do the work\n: Yes, yes\n: In a polite way\n: Or or or the quality that you did the work, the quality of your pitch or the quality of how you set up your company. But it doesn't mean you don't have the skills to do it.\n: Yeah. Like if you meet with someone like, I don't want to do sales. I hate doing sales. Sales is bad. A lot of advice would be, yeah, maybe you should get a non-tech founder, right?\n: Well, by the way, that's why I hate that advice, because that advice is suggesting the solution versus telling you the problem, which is like, hey, you might have to talk to your customer. You don't seem like you like that. That's going to screw you. There are many ways of solving that. That's correct. You could learn to like it. You could hire someone who does. You could hire an engineer who does. You can hire. But I do think that don't believe this idea that there's some magic with one business person plus one tech person equals startup win. No, no.\n: And I think along these lines, sometimes people have a lot of pushback of our advice on why you need a co-founder full stop. But our argument is not you need a business co-founder to teach you business because they went to business school.\n: No.\n: It's just that this is so hard. You need another person to go through this experience with. It's not that there's any one particular bit of experience that is necessary. Right?\n: Like 100% you need someone to offer emotional support because this thing is going to be hard.\n: Yeah.\n: Yes. Yes. All right, good chat.\n: Sounds good. Thanks, man.\n"} {"text": ": As a founder, here's the trick. You're not gonna be as good at this as the person you're negotiating against if they're an investor who invests in a bunch of companies and you're a first-time founder. So by using standard paperwork, by using a lawyer who actually has done a lot of startup work, You prevent yourself from getting screwed.\n: And so this is one advantage of trying to raise money from people that have a track record of public companies. Because you know they're optimizing for you to build a really big company versus some investors optimize for your company is going to sell for 10 or 20 million dollars. And so they structure their entire documents around that kind of outcome.\n"} {"text": ": So, we talk about all the situations where maybe overthinking is not a good idea. But you also describe, you know, there are certain situations, you call them trapdoor decisions, when maybe you want to think a little bit harder then before making a move. So what are some examples of those?\n: Yeah, so legal issues don't break any law. Like, saying you didn't know there was a law is not a great legal defense. Regulatory issues, similarly. Oh, I didn't know that. I couldn't launder this money. Probably not great. You may want to overthink that and look into it. Things that affect people's health and well being. Yeah, you should overthink that. You should really spend the time worrying about people. Right, man?\n: Like, let's not be fast and loose. If we're building an online pharmacy, let's. Let's measure twice, cut once.\n: Totally.\n: And. And I think that, um, what really good founders do is they are very good at figuring out, are they dealing with something like that, or are they not? Because even within legal right, there's certain things that are like, oh, this is like, whatever. And there's certain things that are, like, really bad.\n: Michael, should I file patents for all of my ip?\n: Exactly.\n: That's a classic overthinking.\n: Probably not.\n: Probably not.\n"} {"text": ": I think the other thing that we think about a lot is, let's say you don't want to believe our theory here, right? Talk about theory.Let's say a theory, right?\n: I don't like this because this is not flattering to me, Michael. Yes. I don't like what you guys are saying because it doesn't help me.\n: You could just look at big companies and ask yourself, do there exist big companies that have only technical founders? What would you say to that question?\n: Yeah, I mean, let's look at the most valuable companies on the stock market. Google is obviously two technical founders.\n: Yes.\n: NVIDIA, we just talked about, is all technical founders.\n: Yes.\n: Microsoft was two technical founders when they started.\n: Pretty valuable company.\n: Pretty valuable company. So wait, that's, of the most valuable companies in the world, that's three of them so far. Yeah. You know, Facebook is complicated about who's counted as a co-founder or not. Yeah. Like, you know, Zuckerberg was a technical founder and Moskowitz and all that. And then if you look in the YC portfolio, you know, Stripe.\n: Yep.\n: Dropbox.\n: Yep.\n: There's a theme here for this.\n: So sometimes I like to say like, hey, even if you don't want to believe these theories, you could just... look it up, right? If this is your question, do I need a business co-founder? You could just look it up and be like, well, if Google didn't need one.\n: Yeah. But people will be able to point to other examples. And that's fair. We're not saying that you shouldn't have one.\n: We're just saying you don't need it.\n: Yes. We're not arguing this is the exhaustive truth. We're just saying it is not absolutely necessary. And we are providing proof of said argument.\n"} {"text": ": Yes. So this is Michael Siebel with Dalton Caldwell. And today we just finished up a YC batch, and we're getting a ton of feedback. We thought it'd be great to talk to you all about that. Let's be critical for a second. I would argue this is something that YC does poorly, that they. That they very clearly pointed out. They were like, when we applied to YC, we really didn't know what we were applying for. One founder said to me, we just thought it was a three month program. We had no idea that you follow on, invest in companies later, that you have programs for helping me raise a series A or for helping me as I'm scaling. We had no idea. Another founder said to me, we didn't even understand how YC was organized. We thought it was just going to be some big online lecture. Like, we didn't know we would be assigned a group partner. We didn't know we'd be put into groups and sections. We get to meet with small groups of companies that are, like, in our area, and they didn't know any of this stuff. And that's kind of a knock on us, I think. Sometimes we assume people know. A lot of these founders were like, well, I applied to YC because I talked to alums, and they really liked it. And then when I got here, I was like, oh, shit. Like, this is way more stuff than I ever thought. One founder was like, dude, we didn't even know that you helped us hire. And then today, there was a meeting about the YC hiring platform, and we were like, oh, we didn't know. We spent 7%. We had no idea what we were getting for. I don't know. Why do you think we suck at that, though, Dalton? Like, it's pretty obvious we're bad at it.\n: There's just a lot of moving parts. And so people know about the batch because they heard, you know, oh, it's a three month program. Oh, you moved to the Bay area, and you spend time, and even then, there's confusion. It's like, yeah, no, like, you get to know us in person. Sometimes they're, like, surprised that it's really you and me that you meet. They think we're, like, paid actors or something.\n: How many accept calls do you do where they're like, so am I gonna get to work with, like, you? Yeah, I'm calling you you have anyone else? Who else would it be?\n: We're the youtubers. We're just the front guys. The real, the real. It's like, no, it's really us. And, and, and so I think they know about the program. I think they may have heard something about demo day, but it's always way more impressive than they expect. And then they have no idea that. We keep talking to the companies for a while, and there's all this other crazy stuff we do to give people an edge, a lot of which we kind of don't, can't talk about. And so I think that's part of the reason we don't market it as well, is a bunch of the stuff we do is meant to be secret. I don't know how you market that. And there's just a lot of data that's we keep secret unless you're in YC, and that is gonna stay that way.\n: A lot of secret data. You know, the other thing that's. That, that makes it hard. I've started to realize this. It's too easy to think of YC as a university. And when I think back, you know, I'm sure Yale has changed a couple ways in the last 20 years since I went, but it's not changed that, that much. Right. I'm sure Stanford's changed some ways since you went, but it's not changed that much. And I think that when we think about a university, we're preconditioned to think it's probably 99% the same year over year. Yeah. And I think what people don't think about YC is as a product. Right. If you were to look at Instagram day one and look at Instagram now, it's completely different. And you would expect that. You would expect the product to change all the time. And I think people's misconception is YC as a university or a school.\n: Yeah.\n: It's not. YC is a product.\n: I think you nailed it. We talked to people about this. I think they think we have some lessons we're gonna teach you or something. And they're like, I love, I love the like, well, I've watched all your videos, so we kind of get YC. It's like, guys, these videos aren't YC. Like.\n: Yeah.\n: Anyway, so it's not like a school where we're like, here's our syllabus. We're gonna read you. Here's our lecture. Here's lecture four, how to use that ain't it? It's more like you're you're in the club and you get access to the resources and if you are ambitious and you are smart, the sky is the limit. If you actually work with people that know what they're doing, there's doors that opens. And the bigger your ambition is, the more doors are going to open.\n"} {"text": ": Like I would argue the next one that I see all the time is I talked to an investor, I talked to a friend or I talked to a customer and they said this wasn't going to work. And I take that to mean like I ascribe godlike predictive powers to one of those three people and think I need to quit or do something else because an investor, a friend, or a customer said this wasn't going to work. As opposed to thinking, let's go through the list, your friends are idiots and don't know anything, especially if they would never use your product. Investors are close seconds as idiots, especially if they would never use your product, don't invest in your space, aren't good investors, don't invest in a lot of companies. And then your customer might not be an early adopter, or God forbid, you might have misidentified the customer and you might be pitching someone who would never be a customer no matter what. So like, you know, Just like one negative signal does not mean you can't build a startup, or this product's not gonna work, or this idea's not gonna work. One last one that I wanna throw in because I find it really interesting. We help founders set goals for YC. What's the goal I wanna accomplish by the end of YC? We call it the demo day goal. I'm constantly seeing founders who don't accomplish that goal thinking their company is dead. Oh, we didn't accomplish our demo day goal. We didn't accomplish our goal for the next three months. Obviously, this is a bad company. And they missed the whole point where like, and it's really funny now because I actually wrote this in the advice we give the founders in the batch, but they still missed the point. Like setting the aggressive goal, the purpose was to get you to move fast, to get you to go, go, go. Like it was the juice. Like if you learned a bunch pursuing that goal, you got value, even if you didn't accomplish it. But like so many founders kind of go into the Demo Day season being like, we didn't accomplish our Demo Day goal, does that mean our company sucks? It's like, no, not even a little bit.\n: It's all some version of gave up too early or wants to give up. You're too pessimistic if you want to give up too early or if you expect it to be really easy for you or you think it's easier for everyone else. You have like a victimization thing. Well, everyone else has it easier than me. The world's out to get me. You know, I don't think that's, that means you're being too pessimistic. Um, ultimately you can redirect your energy if things aren't working. but you shouldn't give up fast. I don't know how else to articulate it. Founders that are too pessimistic, the way you know they're being too pessimistic is they freaking give up. It's obvious when they're too pessimistic and they bring everyone down. Their co-founders, everyone around them talks to them and feels worse after talking to them and deflated. Yeah. And last thing on this, we talk about the synonyms of YC of the difference between being high energy and low energy. It's like the Eeyore thing. You want to talk to someone and get energy when they're telling you about their company and walk away from the conversation being like, yeah, that person's going to do things. I'm excited to talk to them. If talking to you is deflating, again, this is not pejorative, but it's like, that's a sign you're too pessimistic that like trying to express what you're working on and what problems you want to solve cause people to feel drained. Yes.\n"} {"text": ": And let's be clear, very similar in the smartphone game, right? Very similar.\n: Yeah, we all had smartphones, and there was an app store. And at that era, if you were building mobile apps right when the iPhone came out, you could have made some pretty basic stuff and got a lot of users. The bar was quite low in historical perspectives. Because like, you know, people wanted to do stuff with their iPhone. Whereas now in every app category, there's dozens of things. And so, right? Like it's, you had to be in the right time and right place for some of those ideas, right?\n"} {"text": ": This is Michael Seibel with Dalton Caldwell, and today we're going to talk about our advice for high schoolers. Uh-oh. It's been a little while. It's been a little while. So maybe the place to start, because I think that oftentimes young people are in a rush, maybe we need to start by saying the startup game isn't going away. That's true. You've got time. And look, I think to set this up,\n: We know a lot of young people watch these videos. We know they like startup content. We know they may even anonymously be involved in startups on Discord. It's crazy. for the folks that apply to YC, a lot of them are literally in high school. And so we understand who you are, if you're watching this, or if you know someone like this, you can forward them the video. But we want to speak directly to you, high school students, who are trying to figure out, who are ambitious and want to be a part of what's happening in the tech world, in the startup world, and aren't really sure where to begin.\n"} {"text": ": So we've, we've kind of talked all around it, but let's, let's kind of pin the tail here. Like what is a tar pit idea? Let's really dig in. What are we talking about here?\n: A tar pit idea is a consumer idea that many people try. It's an idea, part of the reason it's a tar pit and not just a hard idea is it has to feel sexy or you have to get lots of encouragement to work on it. You're likely to get positive feedback. Something about it will emotionally make you not want to pivot away from it. Again, this is kind of what's weird about why we use this term. is if you are not obstinately unwilling to quit working on it, then it's not a tar pit. It's just a regular bad idea. It's just a regular idea if you're not like, and so a true tar pit is one that you will be defensive about when you are presented with evidence that the idea is challenging.\n"} {"text": ": All right, so like we said, pessimism sucks, but it's curable. Optimism's a little harder. And I might argue, maybe the reason why optimism is a little harder is because we're kind of saying that the good point is optimistic. So if you're too optimistic about your startup, you're like way off in the never never land. And like, that's a harder thing for us to, That's a harder thing for us to cure. So why don't you introduce the audience to this concept of magical thinking? This is something you talk about to the whole batch, and I think it's one of the best talks.\n: Yeah. The term I use is magical thinking. I think it's like a psychology term. And yeah, I think it's used in more of a clinical setting. So this is not the technical technical definition That's just my founder version of magical thinking. Yeah, magical thinking is where you start to believe you live like in a magical world with magical causes and effects and that like things that aren't rooted in reality are true for you. And so an example of like a magical thought is, hey, if I was in an airport and I saw Michael in the airport and I could like approach him and pitch my startup, he would immediately see what a brilliant idea I have and get out of his checkbook and fly me away from my life and help advise me to become the next Google. So like some people think that way and that's like completely nuts, right? Like don't do that.\n: Well, by the way, I think they extend that thought to that's how companies get funded. Like they extend that thought beyond themselves to believing that's how the world works. Like the people who get funding get lucky like that or like do that, so I have to do it too. And they don't bother actually studying how the world really works.\n: Yeah, or it's like they've watched too many romantic comedies or something, you know, it's like they think their life is a movie and they're the main character, where like, if they do some really complex act showy act that's dramatic and like something you would see in a movie. If you literally do that, like somehow it's going to work out for you. You know what I'm saying? Like there's lots of versions of this, but it's like someone that's not rooted in actual cause and effect of reality and can't tell the difference between normal cause and effect. Like, Hey, the way you meet Michael is you apply to YC on the website. And then like, we're just normal people. And, You know, like it's like actually pretty straightforward. But when you start to believe that there's like magical ways to break into whatever, you know, so anyway, that's my definition. And there's more subtle versions of this, but the whole concept of magical thinking is a poor grasp of how the world actually works.\n"} {"text": ": Sure.\n: If you had one of the founders who, instead of learning how to code in college, they went to law school, and they were practicing attorney, and they knew how to sell to attorneys.\n: That could help.\n: That sounds pretty legit. That could help. Right?\n: Yeah, Let's say that you're selling software to doctors and hospitals. It might help that there's someone who's a doctor.\n: Yeah.\n: Or maybe you're making a prescription drug, or maybe you're making a drug distribution company. Like\n: Yep, might help.\n"} {"text": ": Hey, this is Michael Seibel with Dalton Caldwell and welcome to Rookie Mistakes. We've asked YC founders for their rookie mistakes so we can share them with you and help you avoid them. Here's the last note written in by a YC founder. You should care just as much about the terms of your fundraise as you should care about the economics, the valuation and the amount of money you raise. There are lots of rights. There are lots of terms inside of a funding deal that can screw you no matter how high the valuation is.\n: I think that investors are aware that founders want high valuations and they want the press release about, you know, they raised a lot of dollars or they raised at a high valuation or whatever. And so they're very aware of this. And so one of the ways that you sometimes see investors take advantage of this need on the part of founders is to say, great, we'll give you your ask around valuation or amount. But you need to give us all this other stuff. And often the things they ask for are sort of jargon filled inside baseball.\n"} {"text": ": Welcome to Dalton plus Michael. Today, we're going to talk about, do you need a business co-founder? So many of you have seen our video, do you need a tech co-founder? I think we can summarize that as, Yes.\n: Yes.\n: Yes. Now, a far more complicated question. Do you need a business co-founder? It would seem like these are one on one. Why are we making this video? Why is this an interesting question?\n: I think the short answer is yes asterisks. And I think this comes down to definitions. What does it mean to be a non-technical founder? And so if we define this as, does every startup need one person who can't code full stop? The answer is of course no, that is. Why would you even ask that question?\n: I think we think that.\n: We'll explain. We'll break this down. And so let's talk about the asterisks. So basically, every company has stuff that needs to happen. And so to enumerate some of the tasks that need to happen that are not related to writing code, let's enumerate some of these. Incorporation. Bank. Payroll. You know, bureaucratic, filling out forms, paying taxes every year.\n: Back office. The back office.\n: Whatever you want to call it. Someone's got to do that. If not, you are breaking the law. Yep. That's a problem. So someone has to do that. Yes. Talking to customers.\n: Someone has to talk to a customer.\n: You don't need to know how to write code to talk to a customer, right?\n: You do not. No.\n: So someone needs to do that.\n: Yes.\n: Hiring people? That's not writing code, but you have to interview people, whatever, right?\n: People won't just show up.\n: Yeah. Sales is a really important one. We talk about this a lot. If no one on the team considers it their job to do sales, we have a problem.\n: No sales will happen.\n: Right? And someone that doesn't know how to code could do sales. Fundraising is another one. Do you need to know how to code to fundraise?\n: No.\n: Negative.\n: Customer support as well.\n: Totally. Like replying to emails? Yeah.\n: Yes.\n: And so the point is, as we're enumerating all these, anyone that is a founder could be doing these and is qualified to do it.\n: Yes.\n: But a technical co-founder is just as qualified to do these tasks as a non-technical co-founder.\n: These are smart human tasks.\n: Yeah.\n: Smart generalist tasks.\n: And so We have seen lots of cases where everyone on the team may have a technical degree.\n: Yes.\n: But there's still a clear, someone knows they have to do this stuff. Right, man?\n"} {"text": ": Let's talk about what we see great founders not do. What comes to mind, Dalton? What are founders avoiding?\n: Look, I think the trickiest thing for everybody is social media. It's like social media is the black hole for time. And you know, we're all guilty of it too, like it's addictive. And so what's tricky is how to have a healthy relationship with social media so that you aren't spending 24-7 paying attention to who the main character on Twitter is that said something dumb and everyone's making fun of them. It's so hard not to do that constantly. And it's also not hard to think that you are a startup founder and you're succeeding and you did well. But if a hidden camera was shadowing you through the day, it was like you just read Twitter all day. You know what I'm saying? Imagine if there was a hidden camera auditing what people actually did with a lot of their time. I think some people out there would be pretty embarrassed if there was a full, clear-eyed accounting of where their time went. It's like, hey, Discord here, TechCrunch here, Twitter here. It's like, how much time are you actually spending on not those things?\n: It's hard, man. I had a Twitter problem. And one of the things that I realized is that sometimes willpower isn't enough. What I did was I unfollowed everyone on Twitter. And then I installed this Chrome app that basically disables 3 quarters of Twitter's features. And I was just, it was like, this is an addictive thing. I need an intervention. And that did it. That kind of killed my Twitter, because it was just like, oh, well. And it was funny, because for a while, Twitter kept on trying to feed me interesting articles and interesting stuff. But they couldn't really do it, because I was not following anyone. I wasn't really interacting with many tweets. And so eventually, just like, it broke.\n: Yeah, I mean, I uninstalled Facebook years ago. So I don't have it. I don't have notification turns on. I don't have the Twitter app installed on my phone. So again, everyone should do what works for them. People that actually are super productive do abnormal things to turn all this crap off. You have to aggressively be abnormal on protecting your time. Because if you don't, the world is going to steal your time from you. It's going to steal your energy from you. And that's a bad trade-off if you're a startup founder, man. What a waste of time.\n"} {"text": ": Yeah, you know, the last one for me is this crazy misconception about how far along you have to be. And like, what pains me about this misconception is that it can be destroyed through basic research. It's like, look at the companies who've done YC, who've been successful, and look at how far along they were when they applied. Yet over and over again, people will tell founders, like, oh, unless you have this much revenue, or unless you're live, or unless you've been doing something for this period of time, or like, YC is for scaling, but it's not for starting. It's like garbage. Like, literally 40% of the last batch came in with just an idea. Most of them were working when they applied, were at work, working jobs when they applied.\n: It's true. And again, let me just say the brutal truth. This is the brutal truth. Some company that their idea to start was to first raise a pre seed round and sell 30% to some random investor, have some co founder who lasted a year, and then they had to fire them and now they have a bunch of equity who's gone through three pivots and burned half a million dollars and applies to YC. Michael, would you rather fund that or the brand new company that started a month ago? They just quit their jobs. The crap table is completely clean and the founders are just like totally jazzed and ready to start a company. Like who do you think is more likely to succeed?\n: Yeah, you know, you know, I think if you look at the last batch, it's very clear where our preferences lie.\n: Yeah. People that their idea that you've, you know, go to, I go to YC once you're ready to scale or once you've done all the stuff and after you know exactly wrong. Dude, how many companies we funded the past few batches that they have to change their idea, which is fine, it's good to change, right? We like it, but they've already raised and they already have all this hair on the company and they think they're really far along. How much harder is it to change your idea once you have a bunch of hair on the company because you thought you were ready to scale so hard?\n"} {"text": ": This is Michael Seibel with Dalton Caldwell. Today, we're gonna talk about whether you are being too optimistic or too pessimistic about your startup. So Dalton, set this topic up. We certainly meet many founders who fall in either of these categories pretty regularly.\n: Yeah, I mean, the fact is you need to be both optimistic and pessimistic, okay? And if you're too far on either extreme, you, are going to fail. Right? That's simple. So to start with, why don't you let's talk about the comical stereotype of someone that's too pessimistic. And we know these people. So what is it like? Paint me the picture, Michael. Who's the stereotypical, too pessimistic founder? What are they like?\n: It is like one painful experience causes them to want to either quit everything or change everything and fill in the blank on the painful experience. It's like bad customer call, bad investor pitch meeting, talk to a friend, like whatever it is, talk to an advisor, but like one negative experience is getting them to run away.\n: Yeah, it's like Eeyore or something. I don't know if that's too weird of a reference, but you know, woe is me. Everything, everything bad is happening to me. You know, the world's out to get me. Everything that could go wrong is going wrong. and everything's going to shit and they're screwed. Like it's just nothing, nothing good can happen to me. That is what talking to a too pessimistic founder is like. How about the comical stereotype of someone who's too optimistic? What's it like talking to them?\n: So at first you get really excited. You're like, there must be something here. But the longer they keep talking, the more you are extremely confused why it doesn't appear like anything has happened, like any values been created, or any insight has been found. And then like, at some point, you start asking questions, because you're assumed that you're the idiot. But by the end of the conversation, like you are convinced the person actually has no idea what they're doing. That's never happened to us before though. That's all theoretical.\n: Yeah. It's like talking to someone that's had too much coffee or is medicated or something where everything is great. Everything is wonderful. Everyone is out to help them. Like the planets are aligning, you know, like their startup is the best thing ever. And then again, yeah, you ask questions and you're like, wait, this all sounds kind of bad. Aren't you concerned about some of this stuff? And they're like, no, no, this is all going according to plan. This is like, this is really good. And so again, at both extremes here, there are problems. Okay.\n"} {"text": ": Number two, we talked about this a little bit. design, learning how to use basic design software. Yeah, this is one that kind of blows my mind because when I think back to my startups, I had to power up, you know, Photoshop, we use this thing called ramp back in the day, like basically, if a button needs to be made, and we didn't have a designer, Yes, make the button, you know, like it didn't have to look that good. And so this is a skill that anyone can grasp for and like there's examples of good design and bad design all over the internet, right? So you can easily copy. I think the third one is launching products. Like man, if you could get a product out, It doesn't have to be used by any people. It doesn't have to, but just like actually going through the full emotion of coming up with an idea for a little side project and releasing it and handing it to someone. Cause you're doing reps.\n: Like one of the things I noticed at YC is a lot of the folks that later on become great founders, they worked on projects in high school that may not be commercially like venture funded companies, but they were like pretty cool. Yeah. And so one of the examples I always think of was back in the 90s, there was a computer program called Winamp. And that's how you would listen to the MP3s you downloaded from Napster. And some high school kids, Mark Zuckerberg and Adam D'Angelo, I believe, built a music recommendation plugin for Winamp. And it was quite popular. I think it was called like The Brain or something like that. And so it was just like a free plugin and it was quite popular and they made it when they were in high school. And I don't think it had anything to do with what they did later on in life. But they knew how to write code. They knew how to make something they themselves wanted, which was music recommendation for Winamp. And they released it, and I think it got like millions of downloads.\n: It was pretty popular. They went through all the motions a startup founder has to, but in this kind of like no stakes.\n: Yeah, they weren't trying to, it wasn't a business, at least to my understanding. Maybe they thought it was, but it was more of making something cool. Yes. And this sort of story comes up a lot in some of the founders that we fund is that they do stuff like this. And you'll ask them, well, why were you doing that? And they almost don't understand the question. It's their nature to build things and release them. So again, the advice part is find low stakes things you can work on, give them to the world. And again, I think there's a lot of the advice if you want to be in the music industry, if you want to be a writer, a lot of the advice, if you listen to the greats, to young people is do the reps. And even if you write the poem and don't show it to anyone, or even if you are in a bunch of bands that don't make it and break up, you got the reps in when you were young.\n"} {"text": ": The next one that comes up a lot, if you're going to be a startup founder one day, you got to learn how to talk to people, got to learn how to make friends. And needless to say, I think that this is a skill that people kind of assume you can't learn. Like assume like, oh, some people are just really social and other people are just shy. And like, I can't change that. But I know you and I have seen this with YC founders, like massively change. Absolutely. This is 100% a learnable skill. And anyone who says otherwise is really doing you a disservice. I think what's so interesting about this one is just like the previous examples, the way you get better at it is you suck at it first.\n: Yeah, and you have to be willing to be uncomfortable. Again, I think my high school mentality, I don't know if you felt the same way, is you believe too much that your identity then, like that's a nerd, that's a jock, that's a this, like it was like you would put people and sort people into buckets like they were like permanent. Yes. And that's fake. Yes. That shit is not permanent. Everyone could be anything. Yes. yes if they choose to yes and so you can make a choice if you're like well i'm not really you know a people person or like i'm not the kind of person that would go and talk to everyone at a party or whatever like yeah you could do that\n"} {"text": ": I think that like, you know, it's so funny, but in my mind it's so clear. You do YC because you want an amazing peer group. You do YC because you want to not be screwed over by investors. You do YC because you want honest feedback and you want to take responsibility for the win or loss of your company. And you do YC because so many other great companies did YC and extracted value out of it, that you should be confident that if you're a great founder, you can extract value out of it. Well, it's that simple. And like so many people that convince founders that YC is bad, they can't explain why taking their money or doing their program or doing their thing is better. All they can do is like neg YC. And like, if you ever see someone making an argument that's 100% ripping something else down and 0% explaining why their thing is good, if all of your talking points is the alternative, is bad, you know, maybe all you're selling is fear because that's all you have to sell. And like maybe that's your business model is selling fear, not the kind of investor I'd want on my cap table.\n: And then what's the reality? Like inside of YC? If you're a YC company, if you're in the batch\n: Yeah.\n: If you're getting the advice from us to prepare for demo day. How'd it go, Michael? What did we notice?\n: You know, first, valuations. I think everyone was nervous that valuations this summer would come way down. Wasn't it, like hashtag VC summer vacation or some shit like that was going on where no one was around? Prices are almost exactly the same as they were during the last batch when it was like VC heaven on earth and money was flowing like crazy. We saw 15 to 25. Some companies raised at 30, almost no change from the last batch. Didn't see any change on speed. You know, we saw investors going from meeting to commitment within one to two meetings. Didn't see any difference on terms like, you know, investors weren't demanding board seats or weird craziness. I don't know. What do you see?\n: All similar stuff. And again, I think this is like an evergreen lesson for everybody. YC alums or people, not in YC, is it's too easy to take an anecdote that you heard from people or stuff people are saying in the group chat and think it applies to you. Like, one of the classic mistakes we see from later stage YC companies is they base how easy or hard they think their fundraisers will be based on TechCrunch articles they read of other people raising. They're like, hey, so and so just raised. So I'm going to be able to raise the same valuation. And think about how much time you and I have to talk people off the ledge on how, like, some random company in Europe raising for, like, some AI, whatever, doesn't magically mean their fundraising to be easy, right? Like you're. It's like bad data. Like garbage in, garbage out. Okay, so again, the advice for folks is your mileage may vary. I'm sure there are people out there having a harder time fundraise, I apologize to you. Right? I'm not saying my experiences, the experiences YC companies have the same as yours, but this is sort of the meta point I'm making, which is too many folks think fundraising is a market like the stock market, and that there's like graphs and charts you can have. And it all operates like an efficient market instead of what it actually is, which is like ten different things, right, Michael? Like, the YC funding ecosystem is like its own little universe.\n: It's its own thing.\n: Right it operates separately than this other stuff.\n"} {"text": ": You know, it's funny, it's like, it's almost like there are these two sets of tools. There's one set of tools that allow you to organize your time better. And there's another set of tools that protect your time. And yeah, effective people use both constantly. And I think ineffective people sometimes are mistaken and they think, if I were just had a stronger will, like needing tools is the problem. like successful people just have a stronger will. And that's like not true. It's like no, successful people reach for tools all the time. Like successful people recognize their weaknesses and actually reach for tools. Now here's the one that comes up a lot. The collecting of mentors, advisors, weird credentials, like advice. Oh, I went through three different accelerators and an idea lab. Oh, my advisory board, I'm building my advisory board. Why do you think founders are attracted to that versus just building something and launching it?\n: It smells like you're doing successful startup stuff. You're like part of a community of startup this, and there's all this stuff you can do. I'm not saying it's all bad, but it's a bottomless pit of time suck. You could go so far deep in there, you could be in that bottomless pit for years and be a startup founder that's never built a product and has never gotten a single customer because you just cycled in and out of various forms of startup mentorship. It's weird. It's like going to Hollywood and getting acting lessons. Yes. And you're in this acting lessons mode for years, and you're like, yeah, I'm an actor. You know what I'm saying? It feels like you're making progress, right? But you're not.\n"} {"text": ": Let's talk about investor incentives. Do you believe investors are incentivized to tell companies to raise more money or less money and why?\n: I think it depends on the stage that the company is at. I think for tiny startups, investors aren't going to fund them anyway and so saying what they want to hear, like saying smart thing that captures mindshare so that when you do get successful, they'll want to come talk to you, not a bad idea. I don't know what to pursue that. I think for companies that they actually want to fund or perhaps they've already funded, I think it is reasonable as an investor to want the company to get huge. Investors are going for huge outcomes, so still with me, right? And so that often looks like you should be growing faster. Oh, your revenue looks flat. You should be spending more on sales. You should be spending more on marketing. And so coming from a good place from their perspective, you might have a misalignment of incentives sometimes where the investor \u2013 the worst thing you do for an investor is like be profitable but not grow fast enough for them versus if you're a founder, that ain't so bad.\n"} {"text": ": So, you know, one of the interesting things here to kind of wrap up is that we make mistakes. Like, we screw up. There is a YC partner common bad advice kind of mode. And we were talking about this before the show, and I think you said it right, which is like the kind of lean startup, don't hire, don't spend too much money. Like, talk to your users, put a shitty MVP out in the world. Path is the path that works for everyone in all cases. I think sometimes we can fall into that trap, but there are many examples that doesn't apply. Right? Like, what are your thoughts on where YC partners ourselves? We can get tripped up and give bad advice.\n: Yeah. I think that the biggest critique I would have of ourselves is that sometimes it works right out of the gate, and sometimes you can spend two years building a product in a cave and never talk to a single user and it's perfect and you immediately get product market fit. Sometimes that happens. I think that we just, we have enough data points that it seems like insane of us to ever recommend that strategy statistically. Like, it's like, it's like, hey, oh, you have cancer. Oh, well, you know, if you go on a water fast, that might fix it. Like, maybe. I think that it just feels a bit hard for us to recommend making a strategy to not do those things. But we have enough data points of YC companies. We see companies that can't bootstrap or can't launch an MVP and have to go build something in a vacuum for two or three years.\n: Yes.\n: And sometimes it works. Right.\n: Yes. The best YC partners are very careful with how forcefully we give the YC advice, because, like, the longer you hear, the longer you have a kind of running record of the time. I told someone to do it like this. And the opposite worked.\n: Yep.\n: And so, you know, honestly, to, but.\n: To me, you know what the lesson is there, Michael? The founders that made it work believed in themselves and they knew that we couldn't fix it. Like, they actually internalized the whole meta point of this video, or at least what I'm trying to get across with it, which is like, you know, they took bits and pieces, they took information from the outside world, but they took personal accountability, that they're the ones who are gonna have to make it work. And they weren't counting on blindly following anyone as being the way it ain't right.\n"} {"text": ": But I think that you've brought up a really good point. Having the ability to do these tasks is different from having the appetite to do these tasks.\n: Yes.\n: And to do them well.\n: And let's triple underline that word, appetite.\n: Yes.\n: It's not, oh, yeah, well, Michael, I could go do sales. That's not hard.\n: I can definitely reply to emails. Yes.\n: You know, I could. Well, Dalton, are you going to do that?\n: I think this is extremely important, right? And I think that when we're looking into this question, we have to ask ourselves, like, who is going to adopt these tasks and responsibilities? It can be a technical person, it can be a non-technical person. You need someone on your founding team who's willing to adopt these tasks and do them well.\n: Yeah, with vigor, with excitement, with like, they want to be the best in the world at those tasks and not begrudgingly full of excuses why they don't want to do it or that work is beneath them or whatever, right?\n: Bringing toxicity into the company.\n: Like, no, not that.\n"} {"text": ": And it's like, and I think that it'd be helpful for us to talk about some of those specific horror stories that they tell us about. Right? Company in my group that raised money, they were desperate. They raised a good chunk of money from an investor who put in hundreds of thousands of dollars and bought over a third of the company straight away. And what they didn't tell that founder is that every subsequent investor would say to themselves, huh, this investor put in a relatively small amount of capital, bought so much of the company that the founders are going to get so diluted, they're not going to end up owning anything, and it's going to shut off later stage rounds completely. And these founders, of course, that a couple hundred thousand, that wasn't enough. They raised more. They raised more. They came in YC with almost 50% dilution. And it's like, from an investor who knows better, but who saw that they could get leverage over a founder and something took it.\n: This leverage point is fascinating because so much of when you talk to founders that go out to do a lot of fundraising, there's a lot of talking points that get beat into your head and it's easy to believe them, like, oh, I have to own 20%. Oh, I have to have a board seat. Oh, if you raise it too high of a valuation, it's bad. Oh, like, and when you think about it, those are actually very, you know, clever talking points from the investor perspective. And again, so many memes out there about fundraising that are be, are being pushed by folks where it's convenient. Do you see how it's actually convenient to be like, prices are down and founders should give up more rights than they used to give during the economy. What, what are some other horror stories, man? What else you got from this batch?\n: Yeah, I mean, I had one where the investor, the founder, was like, hey, when we previously went out, we wanted to raise a million dollars and the investor wanted us to do it as a price round and to pay for $50,000 of their legal fees. And I'm like, companies raise on safes and pay nothing. There are no lawyers. On this situation, you hand fifty K and the even more criminal thing is great. You want to do a price round. Awesome. There's standard paperwork for that. It shouldn't cost $50,000 to a price round. Like, you're just ripping off founders, pure and simple. Ripping off founders. There are other situations where someone is basically like, oh, I'm committing to be in your round, but I need to be the last money in. Tell me when you've raised.\n: Yeah, once you find another million I'm in.\n: But, like, you have to, and you have to leave room for me. I'm like, are you just making rules up? This isn't how it works. Right, but founders don't know. We got another one where it'll be like someone saying, all right, I'm committing 500,000 of your $2 million round. You just have to go and get the rest. I'm going to lead. You just have to go raise another 1.5 million. Like these horror, these are like all horror stories over and over from founders in this batch talking to us about fundraising before doing YC. And it's like, I know why they were shell shocked. I know why they were shocked when they didn't want fundraising during YC. They didn't hear any of this shit.\n: And what's tough is, when you think about it, to just go back to the, to the music industry metaphor, the entertainment industry metaphor. For a lot of folks, they were, they would have been better off. Or people would say, I was. I would have been better off. Just like, waiting longer to get better, a better agent, or like, not having, like, a bad agent, just having no agent, or having a bad manager who, like, stole the masters from me, maybe having. And so this is what's weird, is a lot of the content marketing we get from the venture capital industry is to convince people they need it and want it immediately. It's like the message that you're brainwashed with is a, is a founder is like, you can't even start without raising a pre seed round. And we're in the business of pre seed round, blah, blah, blah, blah. Right? And again, I hope people never hear that from YC or they don't get that from us. We say the opposite. If you watch our other videos, we're like, yeah, like, you don't actually need to go raise money to, like, start a company and to, like, get customers. Like, this is deeply part of the YC mantra, which is if your idea for how you start a startup is to first create a pitch deck and go pitch VC's, you're setting yourself up to get screwed. You're setting yourself up to get taken advantage of by people who are going to have 20 different ways to rip you off, versus if you do something cool, you're gonna have a lot more leverage. Right.\n"} {"text": ": So what's the big takeaway here? I think the takeaway is one before you thrive, you have to survive. And sometimes you're within, you know, sometimes you're gonna hit product market fit in the first 18 months of your company, sometimes you're not. And if you're running your company default alive, you're giving yourself enough time to figure out product market fit. And, man, sometimes during a product market, if it's complicated.\n: And you're not losing sleep about the macro environment, think about how many founders right now are sweating bullets watching the stock market and watching interest rates. And I don't blame them, right? Like, I'm not saying that's wrong, but the default life founders are kind of like, eh, whereas the ones who know they need to raise soon, there's, they're worried, they ask a lot of questions and I get where it's coming from, but they seem nervous.\n"} {"text": ": And not only that, they multiply when you have, God forbid you have employees, right? Like then it's even worse.\n: I think it's helpful to do this self-diagnosis if you're too optimistic or too pessimistic, to put yourself in the shoes of your employees and imagine who would you want to work for? Who would you think would be like a good leader? Because to answer this, I think a good leader is an optimist. If they don't believe, they're a horrible leader. Like right out of the gate, a pessimistic leader who doesn't believe that things can work, quit. That's a bad leader. So you're off the team. On the other hand though, a too pessimistic, sorry, too optimistic leader has horrible plans Their plans involve magical things happening, rainbows and ponies and space time travel. If you actually listen to the over-optimistic person's plans, any reasonable employee would be like, wow, this person has lost their minds.\n: They have no idea what's going on here. And it becomes a little scary when your leader sounds like that. Suddenly you're like, oh, God, like, are we even going to get the basics right when this person doesn't seem to be tethered to any landmass at all?\n: You know, the person said two months ago that our company was great and we were all going to be rich. And now they're saying, you know, the funding fell through, but they have a solution. Are we going to even make payroll? Yes.\n: Like you lose your credibility in like two seconds. Yes. You make that perfect point. When you cross over being too optimist, your employees start questioning everything. You lose all trust because they're like, oh, crap. If the leader can't see this obvious thing right in front of their face, uh-oh. What else have I not uncovered yet on what the leader can't see?\n: And you feel like you're strapped to this crazy person. You're like, oh, no. I'm in a car and the driver of the car is completely insane and is going to take us all down. What have I done with my life? So those are the extremes, right? So if you're overly pessimistic, it ain't going to work. It's over. Pack it up. And if you're too optimistic, it's probably over too. But what do you do? Or like, how do you self-diagnose, Michael? Like, I'm sure people are always, whenever we say things like this, people are like, well, how do I know which one applies to me?\n"} {"text": ": Yeah, it's funny, when I was playing Starcraft way back in the day, like, people always talk about macro versus micro. And I feel as though investors love macro. Macro you can do on an excel spreadsheet.\n: Yeah.\n: What's your build order? Like, what's your tech tree? Da da da. And I remember, like, you can macro like a motherfucker. And then when you have three guys versus the other guys. Three guys, and they're better at micro than you, you just lose. It's just like, you just lose. And my, I would have friends who are so good at StarCraft, like they would just play me crippled and still destroy me. And it works the same way here. Right.\n: And I think that's a great point. If you engage with this metaphor, we're talking about micro. You've got to be great at micro to get something off the ground. And no amount of macro experience helps you be good at micro.\n: I think you start being great at micro to earn the privilege of doing macro at all. And then how many CEO's do we find who still serve on the road? They're like, oh, crap, I gotta get into that product. Cause it's. Something's broken. I gotta go six levels down and fix something. Cause like.\n: Well like, I would compare it to, you know, I think a lot of people would love to be Ryan from Flexport, where he was buying a 747. He's buying jets. Yeah. And like, moving stuff all over the world. And what he's worrying on, worrying about now is micros.\n: Micro, right.\n: Like, some things changed in the market, and now he's extremely worried about micro and his company. And that's what makes him great, is he can shift between those two things.\n"} {"text": ": I think another one here is how to help people. I think that what's tricky about being a startup founder is you have to be empathetic. You actually have to care about your customers. You have to care about your users. And I think this is something you can start practicing early. And, you know, I remember doing this and it was this really weird story. I remember tutoring some kid in high school and I'll tell you, I'll be honest, right? I was doing it the check the box on the like national merit scholarship, whatever the contest of the thing. And I remember, you know, I was maybe 11th grade and I was shooting this ninth grader. And I remember the parents on the second or third time I came, just looking at me and smiling and being like, and I realized, oh my God, like they really, really, really want their kid to learn. And they are so happy that I'm taking time and they're paying me. And they're still so happy that I'm taking time out of my schedule to help this kid. And I was like, oh my God, like, that's when like it kind of clicked a little bit where I was like if you help someone they'll really appreciate like if you actually help them right if you care and I actually took it more seriously um and it was funny because I remember there was one time where I screwed up and I couldn't make it and I was like oh my god they're gonna they're gonna fire me like I was supposed to be there And they were like, totally fine. Just come back next week. It's totally fine. And I think you might find that with your customers. Even if you screw up, if you really care and you're really helping them. They're not going to fire you. They're not going to fire you. It is so rare to find products or people who actually care. Yeah. That's a rare thing. Especially from young people.\n: Again, people are really impressed when young people care. Give a shit. Teachers notice. People notice. I don't know. It's a way to stand out.\n"} {"text": ": It's so weird to me because looking back to high school it was such a like it was such a sandbox, like, it was such an environment where my interactions with people didn't matter, really, right? Like, I'm not, how many high school people are you still really close with, right? Not a ton, right? So like, one, that reputation's not gonna follow you in the real world, and two, you can experiment. Like, you can play. You can be whoever you wanna be. Yeah, if you make a fool of yourself, you go to college, you're not gonna see those people ever again. I think it's totally fine. Totally fine. And I think that the other thing that I learned about this is that everyone else feels shy too. Even the people who you think don't feel shy. Even the people who you think, oh, they make a bunch of friends. Everyone has that thing inside of them being a little bit like, oh. And I think when you're older, you get that. Yes, you get it a lot.\n: But man, you don't get that. You don't get that the popular kids have their own thing they're working on.\n"} {"text": ": So, to wrap up, right, like, the FAANG optimization, I think there's a couple kind of takeaways here. Like, I think the first one is that, like, if you're technical and you want to be a founder, And you decide that Feng is the right part for you, the right path for you at least to start. A couple of things you should be thinking about. One is how long you're going to stay, right? Like how can you stay for long enough to get the value without getting trapped? Because if you get trapped, your plan goes to shit. It sounds like the second one and you were touching on this. Don't work on projects that will make you hate your life, make you hate tech, cause you to decide to just become a nomad who roams weird beaches in Southeast Asia. We know these people. Yeah.\n: I know a lot of ex-Facebook people who feel that they did evil, and they made money doing it, and they seem pretty unhappy about it. They're not happy about the work that they did in the universe. And so, yeah, don't don't do that. Like like the psychic scars of doing that stuff is is expensive.\n: Well, and it'll prevent you from being optimistic about tech, which you need to be if you're going to be a startup founder, like you need to be optimistic. I say the last one is have a plan at the start. Know what you're trying to accomplish. You're trying to get a visa, you're trying to save money, you're trying to get this on your resume. Have a plan for what you're trying to accomplish by taking one of these jobs and a plan for when you want to leave. It's a lot easier to have a plan when you're not looking a bonus in the eye. Right? If you come in with the plan, when the bonus thing happens, you'll see it coming. If you're fighting the bonus head to head with no plan, bonus wins most of the time. All right. With that, that's how to break out a faang. Thanks Dalton.\n: Thanks.\n"} {"text": ": I think we also see when founders have this mentality, some will kind of engage in the zero to one and kind of fail and like live in that zone. I see a lot not even engaging in the zero to one. Like, you know, they're hiring a bunch of people, getting an office. Like they almost forget they have to get the first customer and they start gearing up for customer 100.\n: Well, but it's because if your market analysis is perfect, it's impossible that the customers won't want it. Right.\n: It's a foregone conclusion. The first customer is a foregone. What's the real problem is how do we scale?\n: Yeah, I'm much more worried about that.\n: Yes. Yeah, so I think it's funny you described it. I like this analogy. Like the starcraft analogy. What's this?\n: Yeah, it's kind of like we've all played real time strategy games like starcraft or what have you, and when you're playing one of those games, you're just like, okay, ooh, need more pylons. Okay, cool. Let's build some siege tanks over here. You're basically playing a video game. It's just a, you've got to scale the thing up as quickly as possible. There's not like a version of StarCraft where you try to build the base and it doesn't work or your units all just die or something. I don't know. It's a different game. And so I think people are playing this ramp up scale game and they feel like they're playing a video game. And again, they're completely shocked how hard it is to get it off the ground. It is really different than what people expect.\n"} {"text": ": Well, let's start with pessimistic. Yeah, so you might be too pessimistic. So this happens all the time in YC. You sent a shitty email to a hundred customers that wasn't personalized. You didn't send it to the right person. You sent it in the middle of the night. It had typos. Your call to action was like, would you like to join me for a six hour phone call to discuss this further? And you only got like five replies. Oh my God, the world's coming to an end. Our startup doesn't work because 100 potential customers we emailed didn't produce 100 leads. We get this like every batch and we have to be like, it's gonna be fine, folks.\n: I think it's expectations today. I think you can be too pessimistic if you can't If you don't, if anything short of absolute unmitigated success right out of the gate doesn't happen and you're like, you know, you're like, oh man, this isn't working out for me. I'm really worried. It's like poor expectation setting. And so I think a lot of folks just, they don't realize that this stuff is hard and that even when it's working, you mostly get nos. And so that's the way you might be too pessimistic is, It doesn't immediately work.\n"} {"text": ": I think the second big takeaway here is that investors are not going to twist your arm to burn. But you should also be careful to not react to the slightest suggestion that burning more might be okay. Like unfortunately or fortunately you're in control here. And like, if someone whispers to you, oh, maybe you should slam that airplane into the mountain, that's not like, that doesn't mean that you're not the pilot holding onto the stick and you can control where the airplane's going\n: And they're going to be fine.\n: And you're going to be fine.\n: Yeah, this is the thing, this is what's so weird about this business is like who has to live with the rest of their lives? That that was their startup or that they could have done something different they weren't able to versus the investors, like, yeah, whatever, cool. And they go, you know, they don't think about it at all ever again.\n: And then maybe the last takeaway here is that if you, if you are in an operationally intensive business, you know, a la DoorDash, you better be ten x better than the people around you at knowing your numbers, at steering that plane.\n: Well, yeah, the CEO, the founders have to be pushing for this. Not the board, not the vps, not your CFO.\n: Founders have to care about this. And I'd argue this is one of the dirty little secrets behind Amazon. They've always known that they were in a low margin business and they've always run their company that way. And I'm sure they were so tempted to look at a Google or a Facebook and say, why don't we do those things? And like they had to be strong enough to say, because we're not in ridiculous high margin businesses. Like they are, like we're going to play our game. Anything I missed, Dalton? Any other final takeaways?\n: I think you got it. I mean, I think anyone who's. Anyone out there who's stressed about raising the next round, this is just a helpful reminder. You should read the blog post. You do the math. But you don't have to be as stressed out. If your default alive, it actually completely changes. It's like a weight is lifted off your shoulders. It's crazy because you don't. You're not hoping that some stranger somewhere. Is going to bail you out. It's a bad feeling, but when you're in control, you feel much better. So I recommend it.\n: All right. Great chatting, Dalton.\n: Thanks.\n"} {"text": ": A lot of what people don't understand is the power of running an auction, right? Like, they just, like, it's so rare that you really get to run an auction. You know, most founders, early stage founders, are not running an auction, they're begging for money. Like, let's be frank, Dalton. You and I were there, right? Like, we were, we were begging for money. Like, when you're in an auction, you get to do things like name your own price. Like YC companies say to investors, we're raising this much money at this price. Are you in or are you not in? Right? Like, that's a foreign language to people who've, like, most people who've raised around, oh, we need to lead to prices different for YC companies. I think the other thing that happens when you're running an auction that people don't understand is you get inbound offers. Like, a typical company in this batch got between ten, and I've seen 60 or 70 investors cold emailing them, wanting to learn about investing in their company. I got founders messaging me on slack. Michael, what's going on? And I'm like, oh, yeah, no, this is just how, this is what, nobody told you this is what happened at YC? They're like, no. And I'm like, oh, yeah, this is, yeah. Investors cold email you. You don't cold email investors. And they're like, mind blown. Mind blown. So I think that's what's so funny is that we talked to so many founders who had such a different experience fundraising, often from the same funds, before doing YC than after doing YC. And let's dig into that. I think you have this great analogy around this kind of early stage investing environment. Try to frame what's going on here.\n: My first company was in the music industry, for better or worse. And so I learned a lot about, in the eight years I worked on it, I learned a lot about how the music industry works and how Hollywood works in general. And I started to see a lot of parallels between those industries and Silicon Valley. Again, kind of depressingly, if I'm honest with you, and it's the following, a lot of the folks who are most approachable when you're a first timer or when you're just moving to the area or you're trying to break into the industry, the friendly people that want to talk to you are often the most exploitative. And they're the people whose business model is just like, squeeze you and, like, pull you up the funnel to someone else.\n: And you feel like they're doing you a favor while doing, right.\n: Yeah. They're like, they're gatekeepers, but they're really friendly. And you don't know. You're like, oh, you're a talent scout. Oh, you like you know, you like the way my demo, you came to my show? Like, whatever it is, like, there's folks who really aggressively sell themselves to newcomers. And part of the pitch is, oh, I'm really important. I know all these important people. I can open doors for you. You know, here's some other people that I know. I can introduce you to them. Like, there's all these, like, kind of promises. And sadly, the story with a lot of folks, you know, in the entertainment business is you learn the hard way that those. You want to not talk to those people or you want to understand there's. You want to make it to the. To the big leagues and get, again, if we're talking about agents or something, to the extent you can get a really good, well known agent that's like a large agency, like CAA or something. All right, well, then you made it. Like, it's like, a key step to go from, like, anyway, we. I don't wanna get too deep in the Hollywood stuff, but there's commonalities across these industries. And the thing I noticed in Silicon Valley in my startup experience was a lot of the characters that came out of the woodwork and that they were the most successful, to me, is a first time founder. In retrospect, we're not great. Like, hey, give me advisor shares to introduce you to someone. Hey, pay to pitch. We have a pitch competition. Come in. Hey, you know, like, all these angles that weren't great. And what's weird is a lot of the people, you know, were, like, medium famous and had, like, some social media clout, like, you. Like, they did enough to seem successful or drive fancy cars or seem rich that you would think they did actually know people. I mean, you had this, too with, like, fake advisors, right?\n"} {"text": ": I also think what's interesting is that If you are a technical person and you happen to be solving your own problem, the idea that you would need a business co-founder is not only confusing because Let's say you're building a dev tool, your business co-founder probably is not the right person to sell or fundraise or hire or talk to customers. So literally, the idea that you couldn't do those tasks is actually silly. A technical person should be doing those tasks.\n: Yes.\n: And if you're solving your own problem, it's a technical problem. It's kind of a no-brainer that you don't need a business co-founder. Maybe you need another co-founder.\n: I mean this is an example, we will talk about examples of this a little bit later. When you think about it how could a business person with no technical background even come up with the idea for NVIDIA? Or been in a position to execute on it versus an electrical engineer? And so the CEO of NVIDIA, I don't think he spends a lot of time coding, to be honest with you. But the fact that he was a trained electrical engineer with a history of doing electrical engineering, with a specific vision of how to build a new CPU company, excuse me, GPU company. That seems important, right?\n: Seems important.\n: I don't know if a non-tech founder would have helped NVIDIA way back in the day.\n: No. And certainly if they would have helped, it's not obvious they would have been essential.\n: Correct.\n"} {"text": ": What's been some examples of great investor advice? Because I think you and I both have these.\n: The best investor advice I ever got as a founder is that I was swimming in my head with too many ideas at once, and I had too much data, and that someone from the outside could look at everything and be like, oh, this is working. They could take. They could take all of this, like, consternation and, like, complicated stuff. And, like, I can think of a couple times in my life when someone was just like, this is working. You should do more of this. And they were right, and it added a ton of value. Or conversely, this is bad. You're failing.\n: Yeah.\n: And again, I was full of excuse, like. Like, my brain was full of, like, a thousand different threads going a different direction. But to have someone synthesize that into something very simple was super helpful. Dude, I got great advice like that when I was a founder.\n: Number one piece of advice we ever got was from someone who had experienced big companies, a guy named Gideon Yoo. And we had just gotten Justin TV profitable, and we were very proud of ourselves. And the first year, we really tried to monetize, we made $8 million in annual revenue, which I think now would qualify as, like, a decacorn or something. And he came to talk to us, and he basically said, folks, look, you should be happy. Congratulations, but your company sucks. Maybe don't change stuff. It's all going to die. And all the work you put in so far, no one's going to remember what you did. And what was great is, like, there was no, like, and so you should do this. It was just more like. And that's. That's my current status of your company in a nutshell. And it's exactly what we needed to hear, which is, like, the best investors point out the problem. They don't give you a solution. They just point out the problem. And they knew it. We knew that was the problem, too. It's just when someone says it to you, you're like, oh, crap.\n: But isn't that funny? Because, again, so many incentives in life are set up to be nice or to tell people that they're great and they should stay great, and everything they're doing is great and they're taking over the world. But weirdly, again, if I think back to the founder advice that I got, and same with you, it's actually when people are kind of hard on us.\n: Yeah.\n: That was actually what was hopeful.\n"}