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<human>: 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. <bot>: 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. </s>

<human>: You're doing pretty well. <bot>: 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. <human>: Yes. <bot>: Those entrepreneurial minded people did really well. </s>

<human>: But what if they say no? <bot>: 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. <human>: 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. <bot>: Yes. Named after Justin. Named Justin.TV. Do you want to work at my startup? Yes. It's me. Yes. </s>

<human>: Here's one. <bot>: 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. </s>

<human>: 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. <bot>: Yeah. <human>: 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. <bot>: 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. <human>: 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. <bot>: Yep. <human>: 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. <bot>: Problems that you know a lot about that you personally observed that maybe you've. </s>

<human>: 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. <bot>: 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. </s>

<human>: 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. <bot>: 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. <human>: 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, <bot>: 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? </s>

<human>: 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? <bot>: 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. </s>

<human>: So if all of this stuff's great, why are people so pessimistic? <bot>: 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. <human>: 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. <bot>: They want only the perfect. You know, it has to all be good with no bad. <human>: With no bad, yes. <bot>: Cut the crust off. Exactly. Cut the crust off, right? <human>: 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. <bot>: Or like, you need to cut your own crust off. I mean, if you want to do that, you can. <human>: 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. <bot>: 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. <human>: 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. <bot>: What's so great about that, Michael? <human>: 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. <bot>: 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. <human>: 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. <bot>: They believed the effort wasn't a waste of time. <human>: 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. <bot>: Great, thanks. </s>

<human>: 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? <bot>: 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. <human>: 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. <bot>: 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. </s>

<human>: 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. <bot>: 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. <human>: And we're at that moment where it's getting interesting. <bot>: It's happening today. Yeah, exactly. </s>

<human>: 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. <bot>: Sounds good. Thanks, man. </s>

<human>: 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? <bot>: 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. </s>

<human>: 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? <bot>: 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. <human>: We rarely meet a founder that's in love with Cisco or Oracle, you know? And that makes sense. Yeah, exactly. <bot>: 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. </s>

<human>: Now, what about when maybe you shouldn't trust your gut? <bot>: 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. <human>: Yeah. <bot>: 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. <human>: Yeah. <bot>: And you just don't have a lot of preferences. Or to the extent you have preferences, they're the same as everyone else. </s>

<human>: 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? <bot>: 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. <human>: 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. <bot>: Exactly. <human>: 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. <bot>: 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. <human>: Exactly. Exactly. <bot>: That's a few steps ahead of where you are. </s>

<human>: 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? <bot>: 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? <human>: 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. <bot>: Yeah. Be rooted in reality. Squarely rooted in real reality. <human>: All right, man. Great talk. <bot>: Sounds good. Thanks. </s>

<human>: Any other things that have made you productive as a manager? <bot>: 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. <human>: Yes. <bot>: 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. <human>: 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? <bot>: 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? </s>

<human>: 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? <bot>: 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. <human>: Like the average user- Or the comparable, or the burger from somewhere else. <bot>: 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? <human>: Dalton, I must be the first person who've ever discovered this pond. <bot>: 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. </s>

<human>: 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. <bot>: For fundraising. <human>: Let's start in general. Let's start in general. How can overthinking be bad? And when can overthinking be bad? <bot>: 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. </s>

<human>: 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. <bot>: 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. <human>: YC sucks. <bot>: 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. </s>

<human>: 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? <bot>: 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. <human>: We're taking, what is it, 20,000 applications? Yes. And turning it into 200-something companies. <bot>: 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. </s>

<human>: 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. <bot>: He was like, go to Russia, buy rockets. Like, that's the extremes. Is that genius or stupid? I can't tell. <human>: I can't tell. <bot>: 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. <human>: 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. <bot>: 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. <human>: Yeah, yeah. <bot>: 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. <human>: 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. <bot>: 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. <human>: Yes. <bot>: Right? </s>

<human>: 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? <bot>: 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. <human>: 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. <bot>: 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. <human>: You still were maybe one of the best thousand people on earth who could play basketball. <bot>: 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? <human>: 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. <bot>: Sounds good. Thanks, man. </s>

<human>: So you've got a theory about this whole game. Share the theory. <bot>: 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? <human>: Hundreds. <bot>: 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. <human>: 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. <bot>: It's something like Retool, I guess, would be an example. <human>: Yes, that sounds great. <bot>: 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. <human>: 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. <bot>: Startups aren't exclusively apps to discover restaurants. Again, like no, there's too many of those. </s>

<human>: 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. <bot>: Because you control it. Yes. Versus if it's inbox driven, other people are in control of your time, which is, watch out. </s>

<human>: 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? <bot>: This is good. We made it. <human>: Yeah. We made it. We survived 20. We survived 19. Kind of nuts. Kind of nuts. All right, man, see you later. <bot>: Sounds good. Talk to you later. </s>

<human>: 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. <bot>: Yep. <human>: 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. <bot>: Yes. <human>: 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. <bot>: 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. <human>: And then maybe raise some money. And then what? <bot>: 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. </s>

<human>: 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. <bot>: And adventure isn't, here's my idea for a social network for dogs. Will you build my website? No. </s>

<human>: Yeah, that's why they're interested. They bought a house. <bot>: 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. <human>: 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. <bot>: 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. <human>: Yeah. <bot>: 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. <human>: Yes, to raise money. <bot>: Versus the thing that we know is actually the problem. Yes. That does not involve AI at all. <human>: Yes. Like we're ignoring all of our expertise. <bot>: Because it's not AI. </s>

<human>: 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. <bot>: 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? </s>

<human>: 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? <bot>: 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. <human>: 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. <bot>: 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. <human>: But right below the surface. Okay. <bot>: 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. </s>

<human>: 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. <bot>: It's highly gamified. <human>: Highly gamified. <bot>: 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. <human>: 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. <bot>: 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. <human>: 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? <bot>: 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. <human>: 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. <bot>: 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. </s>

<human>: 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? <bot>: 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. <human>: Yeah, exactly. <bot>: 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. <human>: I'm a little fucked up. <bot>: 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. <human>: 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. <bot>: 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. </s>

<human>: 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. <bot>: 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. </s>

<human>: 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. <bot>: 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. </s>

<human>: 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 <bot>: 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? </s>

<human>: All right, let's talk about fads. There have been a lot of fads. <bot>: 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. <human>: Yeah. <bot>: 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? </s>

<human>: 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. <bot>: 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. </s>

<human>: 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? <bot>: 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. </s>

<human>: 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. <bot>: 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. <human>: 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? <bot>: 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. </s>

<human>: 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? <bot>: Yep. <human>: 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? <bot>: 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. <human>: 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? <bot>: 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. </s>

<human>: You're walking a good path. You're walking a good path. <bot>: 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. <human>: Yes. <bot>: Just sort of walk in with, oh, this is kind of what I'm thinking, but I'm open-minded. <human>: 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. <bot>: And it's the same idea. I'm arguing this is precisely the same startup just with different people that are the founders. <human>: 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. <bot>: Sounds good. Thanks. </s>

<human>: 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. <bot>: 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. <human>: So you should hold yourself to their standard and maybe you'll get their success. All right, thanks Dalton. <bot>: Thanks. </s>

<human>: 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? <bot>: 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. </s>

<human>: 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. <bot>: 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? </s>

<human>: 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. <bot>: 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. <human>: 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. <bot>: Thanks. </s>

<human>: In this way, there's a bit of advantage to being young, right? <bot>: 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? <human>: Yeah. <bot>: 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? </s>

<human>: 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. <bot>: 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. </s>

<human>: 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? <bot>: 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. <human>: I need recommendations. Yeah. Recommendations from strangers that don't know me. <bot>: 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. <human>: Yes. <bot>: 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. <human>: Yeah. And I spent all that other time working on my company. <bot>: 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. </s>

<human>: Yes. <bot>: 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. <human>: It's not the worst offer. <bot>: 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. <human>: 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. <bot>: Yep. <human>: All right. Great chatting. <bot>: Thanks. </s>

<human>: 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. <bot>: But they look cool. They have, like, a fountain pen, and they're, like, taking beautiful notes, Michael. <human>: 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? <bot>: 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. </s>

<human>: What else falls in this category? <bot>: 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. </s>

<human>: 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? <bot>: 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. <human>: 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. <bot>: 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. <human>: 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. <bot>: Even if you need to pivot, no matter what happens, good or bad, you're in a better position to react to these changes. <human>: 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. <bot>: It's so bad. </s>

<human>: 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. <bot>: 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. </s>

<human>: 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? <bot>: Well, something I noticed when we were founders is there wasn't access into the mind of investors very much. <human>: 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. <bot>: 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 <human>: startup classes <bot>: 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 <human>: What's a good idea? <bot>: 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. </s>

<human>: 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. <bot>: Yeah. <human>: So anyways, hopefully that's inspiring. Good chat. <bot>: Thanks. </s>

<human>: 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. <bot>: 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. </s>

<human>: 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? <bot>: 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 <human>: 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. <bot>: 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. </s>

<human>: 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. <bot>: 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. <human>: 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. <bot>: 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, <human>: Oh, wait, something just broke. Fuck. <bot>: Oh, hold on. Sight's down. OK. Sight's down. <human>: All right. <bot>: 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. </s>

<human>: 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. <bot>: Yeah, they state a fact. They're stating facts. </s>

<human>: There was no growth hacking. <bot>: 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. <human>: 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. <bot>: 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. </s>

<human>: You had some thoughts on when a launch goes bad. <bot>: 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. <human>: 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. <bot>: People on Hacker News are like, you should be ashamed of yourself. and you're bad and all of your ideas are bad and... <human>: I could have built this in three days. <bot>: 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? </s>

<human>: 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. <bot>: 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. <human>: By weirdos on the internet, like literally. Yeah, literally. <bot>: 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. </s>

<human>: 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? <bot>: 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. </s>

<human>: 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. <bot>: Or they just dismiss it out of hand. It's too hard. They'll just kind of shut this line of thinking down. <human>: 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. <bot>: Yeah, I don't know anyone. OK. <human>: 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. <bot>: Yeah. <human>: And so it's just like, it's a shame because it's so much wasted talent. <bot>: 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. <human>: This doesn't apply to you. <bot>: 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. <human>: 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. <bot>: But if you go back to that, they're like, I'm going to prove you wrong, Michael. </s>

<human>: 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? <bot>: 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? <human>: Yeah, any sense. <bot>: Do you know anything about it? <human>: Yes. <bot>: 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. <human>: 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. <bot>: 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. </s>

<human>: 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. <bot>: 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. </s>

<human>: Yes. <bot>: 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. <human>: Yeah, that's the game. And so you might find yourself, after watching this video, asking yourself, what do I need to unlearn? <bot>: 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? <human>: Everyone can reach for the idiot approach. Everyone has the intellectual capacity to reach for the idiot approach. <bot>: If I didn't know anything. <human>: 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. <bot>: Thanks. </s>

<human>: 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? <bot>: 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. <human>: Yeah. <bot>: 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. <human>: Dalton? I think the extremes in the meme is like, did I sleep last night? It's like, I didn't sleep last night. <bot>: Do I have time to wonder if I have product market fit? <human>: That's. <bot>: 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. </s>

<human>: 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? <bot>: 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. <human>: What about the press? We got to do a press launch. It doesn't have to be an event. <bot>: Yeah, I don't want people to see my idea and copy it. So it's got to be perfect. <human>: Yes. <bot>: That's why. <human>: 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? <bot>: 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. <human>: 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. <bot>: 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. <human>: Yes. When we find them. I'm totally open to bring out a co founder when I find that one. <bot>: But first, we're going to raise money, and then I think that'll attract a better co founder. <human>: Yeah. Yeah. <bot>: 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. <human>: 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. <bot>: Justin Kahn likes to put a camera on his head, you know? Let's go, let's go. This is our guy. <human>: Like, we were drinking buddies. <bot>: Why did they pick you? Is your. Is their co founder? Wasn't it? <human>: Like, well, because I helped them find an apartment and open. <bot>: There you go. This guy helped us find an apartment. All right. He's the co founder of twitch. Done. </s>

<human>: 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? <bot>: 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. <human>: 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. <bot>: Yeah, they can't catch you in the next round. <human>: 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. <bot>: Right. </s>

<human>: 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? <bot>: 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. </s>

<human>: 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. <bot>: 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. </s>

<human>: 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? <bot>: 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. </s>

<human>: 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? <bot>: 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. </s>

<human>: Let's put this in historical context though, because this giving before you receive is not new. <bot>: 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. <human>: And if you take some of their inspiration when you're building your products, maybe you can have some wild success. <bot>: 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. <human>: 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. <bot>: Great. </s>

<human>: 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. <bot>: 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. <human>: I thought the movie was over. <bot>: 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. <human>: 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. <bot>: They have setbacks. Yes. Like, it's no fun. Like, these people have a hard time. Like, they have constant setbacks. </s>

<human>: 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. <bot>: 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. <human>: 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. <bot>: 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. <human>: 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? <bot>: Yeah, people that are curious, founder curious people. </s>

<human>: 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. <bot>: And did they spend money on marketing? <human>: 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. <bot>: 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. </s>

<human>: 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? <bot>: So, let's break this down. And I think, to start with, when we say VC, we don't literally just mean venture capitalist. <human>: Sure. <bot>: This should include management consultants. <human>: Yes. <bot>: 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. <human>: Yes. <bot>: Right. I mean, that's a job. <human>: Yes. <bot>: To analyze fundraising trends, to do market analysis, to read surveys about the market. <human>: Yes. <bot>: Again, lots of experts. <human>: You guys talk to experts. Yes. <bot>: 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. <human>: Yeah. <bot>: Right. <human>: Public market investor should think like a public market. <bot>: Right on. <human>: Yes. <bot>: 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. <human>: Yes. <bot>: Bring this framework to getting their first startup idea and trying to get a first customer. Right. <human>: 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. <bot>: Yeah. <human>: 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. <bot>: 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. </s>

<human>: 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? <bot>: 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. <human>: 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. <bot>: 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. </s>

<human>: 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. <bot>: 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. <human>: They find us. They find us. <bot>: 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. <human>: 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. <bot>: Yeah. </s>

<human>: 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? <bot>: 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. <human>: They invest in an Uber competitor super early, and then Uber comes. Makes it harder. They can't write a check. <bot>: 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 ƒthink 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. </s>

<human>: 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? <bot>: 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. </s>

<human>: So anyways, what would be your last parting piece of advice for someone who suspects they're in this world? <bot>: 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. <human>: 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. <bot>: Thanks. </s>

<human>: Yeah. <bot>: What do you think? <human>: 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. <bot>: 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? <human>: Very. <bot>: 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. <human>: Yep. <bot>: 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. </s>

<human>: 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. <bot>: 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. </s>

<human>: What other trends are you seeing for the summer 22 batch? <bot>: 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? </s>

<human>: Now, let's be clear, all these businesses worked. <bot>: Yeah. <human>: So let's talk about it. <bot>: Right? <human>: 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. <bot>: 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. <human>: Made a perfect sense. <bot>: But how many people did we know that blindly copied the Google Playbook? And they did not replicate Google's success, did they? <human>: 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. <bot>: 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? <human>: Yes. <bot>: 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. <human>: 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. <bot>: You need some different tactics. You can't just copy Facebook blindly and hope it works. <human>: 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. <bot>: 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. <human>: Yeah. <bot>: That does not make you apple. That is cargo culting. <human>: 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. <bot>: That's pretty good. <human>: That's valuable. <bot>: So hard to replicate this stuff, right? Man, it is. </s>

<human>: 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? <bot>: 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. </s>

<human>: 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? <bot>: 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. </s>

<human>: I think the last example in light of Cruz, Cruz this week allowed any – 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? <bot>: 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. </s>

<human>: 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? <bot>: 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. </s>

<human>: All right. So the next one is Elon. You're familiar with this story. <bot>: 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. <human>: 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. <bot>: 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. </s>

<human>: 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. <bot>: Real estate investing, stock market investing, being lawyers, being doctors. Again, go look up the numbers. </s>

<human>: 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? <bot>: 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. <human>: Well, they would know if they did any Google searching. But they're experts, so they don't have to do any Google searching. <bot>: 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. </s>

<human>: 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. <bot>: 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. <human>: 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. <bot>: It's better, it's like a lot better. <human>: 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. <bot>: So yeah, so communications, a little better. </s>

<human>: 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. <bot>: 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. <human>: 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. <bot>: 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? <human>: To play devil's advocate, though. Well, we have a bunch of great engineers, Dalton. We can always get Accu hired, right? <bot>: 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. <human>: But. <bot>: 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. </s>

<human>: Now, what about the early employee? <bot>: 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. </s>