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<human>: Let's take an easy one. I'll give you an easy first example. The founder comes to office hours with us. They have already made a decision. It is obvious they've already made a decision. And they want us to spend an hour validating that they've made the right decision. That's kind of a hard conversation. Because, like, Dalton, if we were being 1,000% honest, what would we actually just say, like, bluntly? <bot>: Well, I think there's two ways to handle this. There's the dishonest way. The easy conversation is to take them at face value and be like, oh, wow, seems like you've thought about this really well. I see no errors in your logic. You're a genius. <human>: You did it again. Exactly. Yeah. Without the information to even verify that, right? Like with no actual facts to verify. <bot>: Wow. What an amazing strategy. This is just A plus work. And then there's the hard thing. And what I think the hard thing is, is not even disagreeing with it. It's to say, it's the question behind the question, which is, Hey, it seems like you've already made a decision, cool. Why are we talking about this? Yes, why are we here right now? Like, what's the question behind the question? Is it that someone else, is it that your co-founder disagrees with you and what you're trying to do is bring my opinion into it to prove that you're right? Yes. Is it that someone else disagrees with, like, there's always a real question hiding behind the scenes And man, people, it's always there. When I bring this up, they're like, ugh. They're like, yeah, there is a question behind a question. <human>: By the way, isn't this such a common theme? I think if you really want to understand office hours in a nutshell, 60 to 80% of the time, a founder will go into office hours with one question, And we won't even end up talking about that. That's not the actual question. <bot>: This comes up a lot with people talking about applying to YC. People always think it's really important. Michael, I have some really important questions I want to ask you about applying to YC. And he talks to them and it's just like... Should I apply to, like, there's no... There's no there there, yeah. It's a no op, there's nothing, there is no question. <human>: Should I report my revenue monthly or quarterly? <bot>: It's like, who, like, just... Yeah, and so again, I get where they're coming from and what they're really, the question behind the question I think is, I feel insecure and I want to talk to you, Dalton and Michael, about this so that you give me validation that I should apply. Great. And so that's the actual question behind the question, not, hey, I have this really complicated question about the application that's, I don't know. </s>

<human>: So what can we talk about then? <bot>: I think it's this. There's a lot of history to learn from about when major technological changes have come out. And to the extent this is a major technological change, as opposed to we're all going to get uploaded to the matrix or whatever. There's a lot to learn from history. And so this is where when founders do ask us advice on what they should be thinking about with AI, or how will AI affect their startups, or is open AI going to kill all their startups? We have a lot to say about that, or we have a lot of suggestions to look from history. </s>

<human>: I think it's interesting because you're seeing this in a lot of conversations with founders right now, right? Let's talk about who is choosing to start a company in this phase and what we can learn from them. <bot>: Yeah, a couple of things. So one, there's a difference between cargo-culting AI and actually using AI to build better features. And so let's talk about the difference. Cargo-culting AI is to say, we have AI. And it's like tangential to what you're doing. You're just saying it to raise money. It doesn't help your customers. It doesn't improve your product, whatever. But we are seeing people adding AI features that dramatically increase retention, that dramatically increase the quality of the product, that make it much easier to charge for it. And that stuff is real, and that is not hype. That's not bullshit. That's real. This is like when people first started launching apps, when the App Store came out. Apps were actually good. There was a hype cycle around apps, and a lot of people were cargo-holding apps. But building a high-quality mobile app that increased the retention of your users? Incredible. Facebook almost died because they didn't do it fast enough. Exactly. I think if you look at, I don't know, we saw from our generation's founders, we saw open source and cloud computing come out. And think about cloud computing. If someone was like, oh, this cloud computing thing's hype, or like, we're not going to add cloud computing because it's just a thing VCs want to hear. You know what I'm saying? There was sometimes people, you remember these people, they were like, haters on cloud computing because it was overly hyped. But that's missing the plot. Just because it was overly hyped didn't mean you shouldn't Put on your thinking cap. Well, it didn't mean you should be like, hey, should we be running some of this stuff from the cloud instead of running our own servers? </s>

<human>: And then the last one, and you brought this up in a previous conversation, it's raising prices. It's like, wow. Well, the thing that we're selling now, money. This thing we're selling a lot of right now, we lose money every time we sell it. Maybe we can increase prices so that we are break even or we make a dollar every time you sell it. Oh, no, that means we're going to sell it to fewer people. It's like, yes. <bot>: So our plan is to sell a dollar for ninety nine cents and it's going well. And we're like, well, have you considered not losing money on every transaction? And like, absolutely not. Well, how dare you even suggest that. <human>: You talk about this a lot. Like, I think it exercises a different muscle in your customers brain when they know they're getting a deal. Right? It's like, like in some weird way they're willing to use a product that's like they would never use in any other circumstance if they know they're getting a dollar worth of value for $0.75. <bot>: Well, and you see this in New York recently with the ten minute delivery stuff. There was like eight of them and you could go get free. They all had coupons. So as a consumer, you could like get a lot of free stuff. And that was all VC subsidized. <human>: Every time that company is losing money. <bot>: It'S a wealth transfer from investors to consumers. You got, I actually appreciate that, you know, clear, some of these companies may make it. There may be one or two, yes, but my guess is the ones that make it are very, very, very smart about this stuff. I mean, yes, as per doordash, who I guess we always talk about. But, you know, they were good at numbers and they understood default alive, defaulted. And they understood burn. Like very sophisticated. And so even though they were playing, they were, they were flying the plane very close to the mountain. Yes, but they were also very aware of the mountain. They knew what they were doing. There were test pilots versus, hey, I don't know, like I read in Techcrunch that if the more I burn, the more I raise. So I guess, do you see the difference? Folks like doing high risk things when you're sophisticated and you know the risks is gonna work out better for you than wishful thinking, high risk takers. That never works. </s>

<human>: I mean, another one's renewable energy. I had a friend who was working on a startup. And he said something to me that I thought was a lie. He was like, oh, yeah, based on where you live in America, you can choose to just buy your energy from a renewable source, like hydroelectric or solar. And I was just like, It doesn't exist. He's like, yeah, it's here. And I'm like, oh, well, it must be like 10x more expensive. He's like, no, like right now, it's I think like 10% more expensive. And I was like, what? Like that's happening. Like we went from solar being the future in the 90s to just being the commonplace reality that no one thinks too much about. And it feeling economical for a lot of people. It's like, oh, you live in a sunny area. You're going to save some money. It did not feel that way in the 90s. Well, we're in a solar-powered building right now. <bot>: And this is solar power powering this lighting. And there's solar panels on the roof. OK, whatever. Do we care? No. No. </s>

<human>: Hey, this is Michael Seibel with Dalton Caldwell and welcome to Rookie Mistakes. We asked YC founders for their rookie mistakes so we could share them with you and help you avoid them. Here's the next comment that was written by a YC founder. We built a product because we thought the world should be a certain way, not because we had a customer who actually wanted to buy the thing we were building. <bot>: This is coming from a pure place. And we look at our heroes, right? We look at Elon Musk. We look at Steve Jobs. And we have this model of people that forced the universe to their will. And Elon, electric cars are the future. I am going to impart electric cars. I'm going to make it happen. And again, he kind of did. Good for him, right? But for most of us mere mortals, It's pretty hard to force people to want the thing that you're selling or the thing that you think is good for them. It's really hard if someone doesn't want something to like debate them and convince them they do actually want it when they don't actually want it. </s>

<human>: And I think the last one, and this is one that is maybe hard for people to understand is that, You know, when you're watching videos or reading our content, this is, we can't personalize it for you, right? Like you're, we're making this for a business concept. <bot>: Yeah, we're just talking to the void. We don't know who's actually watching this. But when we do office hours with companies, everything is personalized. We read their application, we interviewed them, we accepted them to YC. Yes. And so the advice we give is super personalized. Yes. And it's often the case that we will know something about someone's background. Yes. That we can integrate into the advice that we give them. <human>: And I'll say that like more explicitly, we often contradict or it looks like we're contradicting kind of standard YC advice given someone's specific situation. I'd say like on average, we're probably telling them 80% of the same stuff. <bot>: And so an example, if someone was a multi-time founder, like say Sam, and someone was known to be a good investor and we had the opinion that they were a good investor, maybe following the playbook that he's following at OpenAI is exactly right. <human>: And I completely think it's smart. He should do that. And let's be clear, we've had those people do YC. And we've given them different advice. And we have said, hey, maybe it makes sense to raise more money. <bot>: And yeah, if you can put millions of your own money into your own company, you should totally do that. That doesn't apply to most people. Yes. <human>: And so I think this is what's important. I think one of the ways that we try to control ourselves is Figure out what the personal advantages are of every founder we work with and try to figure out how to help them exploit their advantages. I think it's really, really hard to do that in general. Yeah. So, shout out to, of course, Sam and Elon and Peter. They've made a huge impact and, you know, and are better fundraisers than us by a thousand. They're really good at fundraising. But if you want to be the next one of them, take some time to learn about them and their histories. And I think it'd be really helpful. All right. Great bunch. <bot>: Thank you. </s>

<human>: The next area I like to talk about is salary. Oftentimes, and this is more, of course, for companies that have raised funding, just a small incremental five or 10% salary bump can make a huge lifestyle difference, and it's almost always worth it. I think people screw up, and this is where I say to founders, I'd love to hear your advice. If your startup salary is allowing you to save money, it's probably not good, right? You shouldn't be sitting here with Google employee level savings running your startup. However, if your startup salary is giving you the lifestyle that allows you to be all in on your startup because the real world isn't distracting you negatively, then it is good. And what's interesting is that often for different founders, this is a different salary level. For example, when I was starting, I had student loans in college. My co-founders didn't. I made a little bit more money so that I wasn't going into debt with my student loans. And that was perfectly reasonable. And no one was like, oh, well, you need to take X percent less because you need to pay a $200 student loan every month. It's like, no. So sometimes small changes in salary now, you know, if you have a co-founder where it's like, I need to make a half a million dollars a year and I'm 23. Yeah, that's probably different. But like sometimes people are sacrificing penny wise pound foolish, right? Like sometimes people are being penny wise pound foolish. <bot>: I think this is one of those topics, also like equity where what founders want to hear is here's the right answer. One size fits all for everyone. Or here's the formula. Oh, here's a spreadsheet. Here we go, Michael. Here's how much to pay yourselves. Just fill out the spreadsheet and we're done. And sadly, like many things in life, anyone that tells you they're simple answers is probably trying to sell you something. Right? They're like, yeah, it's probably snake oil. And so the subtlety that I agree with you on is, You want to pay yourself enough that you don't get into debt. You want to pay yourself enough so that you're properly motivated. You also want to keep the money in the company. These are all variables that you have to turn. And if you're going to be a successful founder, you have to have good judgment and you have to have opinions. And so when founders have no opinion about this stuff, it's not a great sign. So it's kind of like you need a philosophy of what you're solving for around compensation. You want to set everyone up for success Yes. Align incentives well, and also realize that this, this looks different for every company, man. Like a lot of folks ask me, well, how much should I pay employee number one? I'm like. That's a nonsensical question. Who are they? Do you see what I'm saying? Like, what they want is some answer. Oh, you should pay employee number one X. But like, no man, that's like, that's not how this works. </s>

<human>: All right, welcome to Dalton post Michael today we're going to talk about How do you avoid innovating on the wrong? things so to set this up right we're in the Innovation economy. <bot>: Oh, definitely. We're a major innovation. It's right here. <human>: Innovation economy. That's what's happening. We encounter a lot of founders who believe that they need to take what I call innovation juice and spread it across. <bot>: That's what you call it? Innovation juice? Innovation juice. <human>: When I'm trying to insult it. And they have to spread it across every fricking problem they encounter. And I think that there's only a limited amount of innovation energy that any company can have. There's only so much juice, is what you're saying. It's like I set that up. And we have maybe encountered some places where You should maybe just use the best practices. Yeah, here's what I think about this. <bot>: Making a startup work is a miracle. And the fact that you got product market fit and made something people want, you literally performed a miracle to do that. It is amazing. People would die to get what you got. Now the odds that you are going to be able to perform five miracles at once is much, much, much lower. Much lower. And so you want to focus the miracle juice on the single miracle, which is making something people want and making a product, right? Yes. You guys see what I'm saying? Yes. Solving a real customer problem. And then all this other stuff. Yes. Yeah, just do best practices. Please don't innovate. Yes. need to have a low likelihood of success miracle, like you don't wanna have to be right on these long shot bets in five different ways. </s>

<human>: Unless you're the house, which that's the actual good business. <bot>: And it's wild. Like gambling is fun. Maybe not for everyone, but do you think, what's your experience with this stuff? </s>

<human>: So we had two more at Twitch that were really funny. The first one, talking about duress, was our free peering hack. So streaming live video is really expensive. Back then, it was really expensive. And we were very bad fundraisers. That was mostly my fault. And so we were always in the situation, we didn't have enough money. to stream as much video and we had this global audience of people who wanted to watch content. And so we actually hired one of the network ops guys from YouTube who had figured out how to kind of scale a lot of YouTube's early usage and he taught us that you could have free peering relationships with different ISPs around the world and so that you wouldn't have to pay a middleman to say serve video to folks in Sweden. You can connect to yourself, your servers. I forgot what they were called. <bot>: Yeah, it saves you money and it saves them money. That's what they wanted. </s>

<human>: This is Michael Seibel with Dalton Caldwell. And today we're going to talk about, does your startup need to be in San Francisco? Oh, man. We're just we're wading into the debate of the moment. So <bot>: Why don't you kick it off? You've got a controversial review. How about this? Usually in these videos, you and I just agree on everything. I do. It's boring. We disagree. Strongly. We have a different opinion here. <human>: I'm confident you're wrong. <bot>: Okay, good start. So let me start by saying I don't think everyone's startup needs to be in San Francisco to be successful, and that you could build a successful startup and not live in San Francisco. Please, please share. So a lot of the reasons That folks read the discourse about san francisco and man, there's a lot of discourse Yes, is they're very fixated on the lifestyle of living in downtown san francisco Yes, they see all the photos on twitter. They hear the stories. Yes. It's all over national media Yeah, like my parents know all about yes My dad's like so how's it going in san francisco, right? Like, okay, so For me personally, I actually prefer to not live in a dense city. I like living in a place that is warm and bright and sunny and I can walk around and like the birds are singing and like there's trees everywhere. I kind of like living in a boring place, personally I'm speaking for myself, where there's not a lot of distraction and I can just kind of focus on the work I'm doing. Then, you know, really intense stuff going on around me all the time. Also, as you know, you know, I got small children and just for my lifestyle and the happiness of my family, like I prefer to live just in a different environment. You like having a yard? I do. Okay. So I, so I enjoy those things. And then also I think sometimes what people forget, especially that aren't in the Bay Area is, how the actual big employers for most folks in tech are not in San Francisco. They're down south, yeah. Google and Facebook and Apple, the Apple HQ is in Cupertino, nowhere near the San Francisco. <human>: All those old, boring companies, yes. <bot>: And so clearly, in the history of this stuff, all these great companies were built outside of San Francisco. If we actually look how many of the most epic companies in the world in tech were actually built in San Francisco, it's actually not that many. And so to argue that every company has to be in San Francisco is factually wrong. </s>

<human>: What is comforting to me, though, is that when the Runway gets down to about twelve months, the magical thinking starts fading. You know, suddenly. <bot>: It's funny, don't you wish you could bottle up? Like, if you see someone's performance, say there's, you know, you have 18 months of cash. The first, like, you know, 15 months when someone's back is against the wall, the quality of their decisions get much better. If there was a way to, like, gamify, like, if you bottle up the quality of execution and thinking and, like, I don't know, we see people do great work. It's just, you wish they would do this great work when their back is not against the wall again. It reminds me of being in college or something. <human>: Yes. <bot>: Where the papers due. <human>: Yeah. <bot>: And, you know, you didn't go to the class. You didn't show up to anything. And then, like, in the final 24 hours, you, like, you do great work, but you could have done that the whole time and not had a whole fire drill. Right. Isn't that a shame? </s>

<human>: So let's think about it. Because we talked about cargo culting on three levels, right? We're like, okay, garden variety cargo culting, that's still really bad as you cargo code Google. Then we're like, okay, the modern thing is the cargo cult, the modern unicorn that has very little revenue. And now the super, super modern is just a cargo cult the other struggling startup. <bot>: I love when someone references a startup that we know and we're like, no. We're like, no. <human>: Yes. And I think that, like, maybe the base conclusion here is that you have to do some copying. You cannot innovate everything. But I think that, like, I like when founders start with what does the user want? Starts with who are the companies the user's paying for, paying today to provide this service? And what can we learn from those companies? And then what can we learn from those companies writing the service who are successful? Okay, now let's think through it. And I think once you think through it, through user's eyes, you can tell which things are essential. Do people care about the Google logo or do they care that they get search results that are good? <bot>: Hey, how about that fast, right? </s>

<human>: And so that also translates into a lot of actions, right? Mass emailing, right? Mega spam spamming, the like templated email with one word of customization. Yeah, just quick on that. <bot>: Like, you should always say to yourself, if I received this email that I am sending, would I respond? Because hilariously, a lot of people send a lot of email that they themselves think is horrible. <human>: Like they are positive. Like, when I asked this question to the founder, would you respond to this email? They don't even think about it. They're like, absolutely not. I've regularly archived emails that look exactly like this and we're like... <bot>: What? I don't even know how to, what's the next? Well, I think this is going to tie into the theme where I think it's, you don't think your customers are smart or something. Like, you're like, hey, it's not for me, but maybe they want it. <human>: I don't know. Maybe these. And if we were going to unpack the psychology of why people do this, like why they're making these silly motions, I think a lot of it is based on a lot of VC marketing. I think a lot of it is customers are not an end. Serving customers is not the end of my business. Serving customers is a means to getting VC dollars. And we all know that VC dollars, that's the goal. <bot>: That's what we're here to do, right? </s>

<human>: The last one is the extremely young investor just out of college writing a check. Sometimes this person's in college writing a check and kind of trying to build a career in our world. Different from the, this person often is different from the, like, junior investor because this person's usually not working at a VC fund or they're a big fund like that. They're usually kind of a scout or some kind of, in that kind of role. What's the, what's the advice they're often giving? <bot>: Yeah, I mean, look, these people are super sweet and they're super exciting, you know, to talk to. I just think that, like, the same way that the founder realizes their job is to play the part of a founder, and so they, like, watch movies about how founders are supposed to act and, like, read books about it, and they sort of are being like, am I doing it right? Am I a founder now? Like, I think you kind of see this from these investors where they just, they read what other investors say and do, and they sort of, like, say and do whatever it is they read. And so, like, whatever the hot new trend is, whatever people are tweeting about, whatever, like, latest essay they read, they just sort of, like, repeat that and see if. And hopefully no one notices that that's what's going on. </s>

<human>: All right, the next one, the next gift that you receive when you play a stupid game, we've touched on this a little bit, is I'm now burning tons of money because I just scaled negative margins. I had something that wasn't working in this city, and I expanded that thing to 30 other cities. And now it's not working at a massive scale. And I did it because my investors told me to. And now those investors aren't taking my phone call. And this is like so hard because I think people don't realize that either some stage of investors or at some point in your company, someone's gonna pull out your finances and do basic arithmetic and ask themselves, is this real? And like eventually you will be judged based on like, is this real and sustainable? And if it's not like, you know, hey, sometimes you even get post IPO at some point. <bot>: Those people are having a bad time. We're not gonna name any names. It's not being post IPO and then having your stock lose 95% of its value. I don't think those people are having a good, they played a game and here's like the prize they have is having a rough time. </s>

<human>: All right, let's talk about accomplishing goals. So okay, let's say I set a good goal, right? I'm a post-launch B2B SaaS company with a couple users and I am setting a goal of getting my first 10 paying users, right? Great, like we're in the right ballpark. Let's hear about how people screw up accomplishing goals and somehow kind of still play the stupid game. <bot>: Right out of the gate, it's the way that you accomplished it is something that you know in your heart is not like... What's the word I want to use? Kosher? I don't know. What word would you use there, Michael? <human>: I like using the word cheating. Like, you know, it's like you're taking a calculus test. Did you learn calculus and then get the A, or did you cheat and get the A? Like, it's like, you know the answer to that question. The A isn't the goal. It's the representation of your knowledge and your mastery. If you didn't learn something when accomplishing the goal, maybe you didn't accomplish the goal. <bot>: You know, you can fool investors, you can fool co-founders, you can fool a lot of people. <human>: Employees, yeah. <bot>: Yeah, people are very trusting. And so I think the way, the mistake people make is they think that because they fooled people in the short term, They won something. They know they didn't hit the goal. They're like, yeah, what I actually did was I got my friends and family to do blah, blah, blah. There's something where you're like, yeah, we cheated. But no one else seems to be aware of it. So you're like, well, I guess this worked. </s>

<human>: So I think that, like, the framework here is really twofold. One, don't overthink when you don't have to. And then two, remember that, like, most of the work, most of the work is not in these overthinking games, like most of the work, are not in these over optimizing games. <bot>: Yeah. It's action. <human>: Yeah. <bot>: Taking action and not thinking. Right. <human>: Yes, yes. It's launching, it's getting the first customer, it's selling. It's like, it's doing these things yourself. And that's counterintuitive because I think that founders understand that startups are really hard, so they assume you need complex strategies to succeed, and it's like, ah, that's a hard thing. It makes sense when I say it, right. This is hard. We would need a complex strategy. Right. How do you respond to that? What actual kind of strategy do you need? <bot>: I think if you haven't seen really successful startup companies either personally, like, where you were the founder of one, or, you know, people, and you saw them go through it. <human>: Yeah. <bot>: It's hard to believe how silly these things are when they start. Like, I think unless you've literally witnessed it personally and you've seen the silly shit that goes on and, like, how. What it really takes to get big, your brain rejects the idea. <human>: Yeah. <bot>: That that's actually how these companies got built. You're like, no, not true. It had to be like, lots of strategy meetings and whiteboarding, you know, flowcharts and, you know, Gartner magic quadrants of like, like, I think you really. Your brain won't allow you to see that. </s>

<human>: But what is the investor really doing when they give you an offer like that? What's really going on? <bot>: This surprises a lot of people in YC. But this whole, hey, this is great. We love to invest when you find a lead. Just come back when you find a lead. If I translate that out of VC speak, actually means no. And founders are like, what? That means no. Here's why. To the extent that you are in a position where you did have a lead investor, it is very common that the lead investor would want to put in the entire amount of money to hit their ownership target. And so they would not want you to give more of the round to someone else. Right. Not to mention if you had the lead investor already lined up, there'd be a lot of other people that would love to invest alongside the lead investor. And so when someone says, Oh, this is great. Come back to us when you find a lead, you know, give us an allocation in there. What they're actually getting is a free option to invest in the future. If you find an investor that they are impressed by, it costs them nothing to say that. Right. And if you don't find a lead, they just managed to pass on your company while being very nice to you, to your face. Yep. Right? It's like, no, we don't want to invest, but if you somehow find a great lead investor and you come back to us, let's talk about it then. And the founder walks away from that conversation being like, wow, they're really interested. They want to invest. We have offers. When in fact, they just did this ninja move where they said no, but that's how you interpreted it. Isn't that wild? <human>: It's almost as if they have to do this because this is their job. It's almost as if they get to run this game every day with multiple companies and all you're trying to do is raise money and get back to work. Of course they're going to be better at it. Of course they're going to have the cool lines. Of course they're going to tie you into knots. <bot>: It's like you apply to a job at Facebook and they're like, this is great. come back to us with your job offer from Google and Apple, and we'll go from there. So just let us know how it goes, right? <human>: That's not a job offer. Consider this a provisional job offer, assuming that you can get an offer from Google and Apple. And even better, sign something. Yeah, we'll sign something, or we'll give you something that looks official. <bot>: And again, to be clear, maybe someone will see this and be like, oh, but that's, what about this? What about that? Sometimes there are cases of investors that can't write big checks, and they want to invest alongside other people. This happens sometimes, that is possible. So we're not, we're not suggesting this is all things in all universes. We're just saying a lot of YC companies hear this line. And what it usually means, you know, what it means in our experience is no. </s>

<human>: And probably the last trend, and maybe one of the most heartwarming trends, is how many alumni reach out to us and say they're watching these videos? Like how much has that come up for you in the last six months since we got this thing rolling? A lot. <bot>: I think when we first started recording these, my perception, I wasn't really sure who the audience was and maybe I'm still not sure, but it certainly would appear that a lot of YC alums are watching these, which is awesome that we have this direct line for people, you know, to hear from you and I personally about what's going on with YC. I mean, seems better than other forms of communication, right? <human>: You know, it was interesting because, you know, we put out a video, as interesting as we put out a public video about making sure that you are prepared for down economic times before we even sent a letter. And one of the reasons we were inspired to kind of send a letter was the number of alums who had watched that video and reached out and said, thank you for doing this. Like we're rethinking our plan. And so I just think it's exciting to see that the YC alumni are watching these videos alongside prospective founders. It's awesome to see. All right, well, I think that's it. So in closing, we are really looking forward to meeting the next batch, which is going to happen very soon, mid-August. I'm sorry, mid-June. And then we're also ridiculously excited to meet all the founders that we've funded over the past years. We're going to do a massive alumni event in San Francisco in the fall. And so for all the people we haven't seen in person yet, we'll see you soon. Dalton, great to see you. <bot>: Sounds good. Bye. </s>

<human>: You know, this is why it's a little dangerous. This is a dangerous thing. I'll say. You know, we've been accused of being a mafia and we're not a mafia, right? We don't break anyone's legs or anything like that. But it's not completely false, right? Like if you're like made in the mafia, you do get privileges that normal people don't, right? And like when you get to go through YC, you get access, like you said, to resources that other people don't, right? And so there, and there's a little slightly different way. It's a little bit like the mafia. People don't shit on you as hard, you know, like when you're the mafia, like someone's not gonna rob you, right? Like when you're YC VC's don't rip you off. Like, and so I'm not saying it's a mafia, right? I'm saying it's not a mafia. We just have these very clear similarities to what I've seen on Mafia tv. Oh God. Anyways, so this kind of, this part of the feedback that we got from founders, it had two elements. One was we didn't really understand the benefits that YC had when we were applying. It also had this aspect of, there were some really serious misconceptions that we had about YC that didn't get cleared up until we got in. You know, one was this misconception around like, are we actually going to get to work with you personally? Like is there actual structure of this thing where we feel like we're getting really personalized support? But what are some of the other misconceptions that you saw that were obviously, I mean, I would argue, obviously designed to try to convince people to not do YC. These were designed attacks on YC. What else are you seeing out there? <bot>: Trying to encourage founders to think that investors are what makes your company great and that you could get product ideas and product market fit based on who you let on your cap table. So you're like, if I get this investor, they'll do this for me and this investor does this for me. And so, well, YC will do this for me. And it's like, guys, like the way you build a company is not, you're not baking a cake where you, where you sprinkle in three different investors and then a cake pops out. Like, the stupidest thing I've ever heard. This is a really common misconception out there, which is like, I, I hate to break it to you. You're doing all the work. <human>: All the work. <bot>: We're not. The reason, the reason to do YC is not that we're going to do the work for you. It's that it's a great environment to do this with other peers and founders and get access to these resources while you're the one baking the cake. And the amount of resources you get in this network way trumps the resources you get from some random small check. Like, yeah, similar side check, right? Like, so I think that's one. </s>

<human>: What else are you, what else are you seeing in terms of like, this often happens in product where like someone has a magical version of their product in their head. Like, what do you see in that context? <bot>: Yeah, I think in practice, if you can't build a product and you don't have a tech co-founder or whatever, or you have never once built a product and given it to anyone, and you think it's going well, you are too optimistic. Like, it's not going well. Like, sorry. And again, think about how many people over the years that have pitched us like, it's a new social network and it doesn't exist, but it's like Facebook and TikTok and it's with your friends and you can discover, you know, they'll just kind of like rattle all this stuff off, but they will have no code. None of it will exist. And they'll get really frustrated that we aren't pumped about that. Like they don't like they're being too optimistic that the idea that their articulation of this is somehow valuable or interesting. </s>

<human>: So I remember getting our first angry letter. And like during my startup career, I went from angry letter from law firm, getting sued by the company owned by the Prime Minister of Italy, getting sued by the UFC, getting very aggressively invited to testify in front of Congress about sports piracy issues. It was like, that first letter I thought was a disaster, and if only it described all the other shit that was gonna happen. I might have just quit. I might just shut this down. And I remember having this conversation with YC founders now, because it'll always be like, oh God, we got sued. And I'm just like, And, like, welcome to running a business. Like, you got sued. Like, check that box off. <bot>: It just comes with the territory. Like, there's no way to avoid it. Like, there's not a universe where you could do big things and not have these setbacks where folks will tell you you're over. Folks will tell you, you know, you're bad and you should feel bad. </s>

<human>: Maybe the first analogy I'll give you, and this will immediately age me, so I apologize. I was a big Final Fantasy VII player. Do you play Final Fantasy VII? A little bit. Of course. Alright. The basic thing I learned in Final Fantasy VII was that you can fight the boss at a certain level and get your ass kicked. or you can grind for like, you know, 10 more hours and fight the boss and actually like kick their ass. And I think that this analogy applies to a lot of things in the real world and specifically in the startup world, where like investing and leveling yourself up can produce a lot of benefits later on, like deferring a little bit of that satisfaction of getting started right now, so you can upskill, makes you 10 times more powerful. later. But, let's be clear, you have to be upskilling during that time. Yeah, you gotta be grinding. You gotta be grinding. <bot>: The grind has to happen. </s>

<human>: But in the real world, let's talk a little bit about grinding. What's the kind of grinding? What's the kind of upskilling? that you would advise high schoolers to do? <bot>: Well, the most obvious and straightforward one is learn how to code obvious. Like it's pretty tricky, even if you think, hey, I'm not going to be a lot of people say to me, the younger folks, oh, I don't want to be a coder my whole life. I want to be a founder. I want to be a product person. well, you should still learn how to code. Like there's, it's really hard to make an argument. Yes. If you're a young person, why you shouldn't have that skill in your skill tree. Can you make a case? Why do you make no case? <human>: I was the business guy who didn't know how to code. And literally I would say there were many moments in the early stage of a company where I felt borderline useless. And certainly I didn't have the power to impact the product anywhere near as much as my other three co-founders who were, who were software engineers. So like, This is such an obvious one. <bot>: Yes, this is a great thing. AP Computer Science. Yes, you can take replit like there's all these YC companies that help people learn how to code code Academy. There's so many so even if you have some complicated relationship with maybe I don't want to be a programmer. That's fine. Learn the skill. It's like learning how to cast spells or something. Well, I'll push even harder. <human>: Get this complicated view of I don't want to be a coder out of your head. The coders are the most powerful people inside of software companies. That's the hint. The people who code are the most powerful. They're the most highly compensated. They're the hardest to replace. They often have the best ideas. They often have the easiest path to implementing their ideas by far. They're the power center. The talkers, not as much. <bot>: Sometimes people on this coding thing, they're like, well, I didn't grow up coding or I wasn't like a 13-year-old whiz kid like people I know in high school. I'm just trying to argue, you don't need to be that. If you have the right ambition and grind mentality to be willing to learn, of course you can do it. Even if you're 19 or 20, it's never too late to learn that stuff. </s>

<human>: I think that the two silver linings, like one, everyone you respect out there who's doing great things is dealing with all this stuff. And so that should make you feel good. Like every single person you respect who's done something hard has dealt with all this crap and 10x more. So you're not getting some bad hand. Like everyone gets this hand. <bot>: What is that about you? This is just the thing. This is just the game. This is the thing is that you're gonna every day have to deal with things that feel like setbacks. <human>: Well, and you can get, I think that's the second silver lining here is you can get good at this. Right? Like you can get good at dealing with these setbacks. You can actually get better over time. You can learn how to take a punch. <bot>: You can't control whether or not you're going to have setbacks. You can't. You have to like let it wash over you. But you can completely control your reaction. Yeah, that's 100% like what happens in your brain after a setback happens is within your control. And so you want to have acceptance. Yeah, some bad stuff's going to happen and I can't fix it. But man, you have a lot of choices in how you deal with setbacks. And it could be anger, it could be fear, it could be bartering, it could be denial, like we've seen it all. But this is something that you can practice and get good at. And the folks that are great at whatever their thing is, again, like, whether it's athletes or whether it's people putting out music or making movies, like how do they? Like you can get better at dealing with like criticism or people not caring. And like, you can just do that, that's your choice. Like no, there's no structural reason you can't have a better or more productive reaction to the setback, right? </s>

<human>: So let's talk about this in the context of startups. You know, how does this come up when we're talking to founders? How does magical thinking pop its rear, its head up? <bot>: I mean, I think to start with, it's to always have excuses. Like when you ask people direct questions, everything involves a very complicated answer and excuse about why they can't grow, why they can't get customers, why it's hard for them to get customers. why somehow there's a complicated story, it's other people's fault that they can't do something, and all these other people are plotting against them, and like basically they're telling a story where they're the main character, they're the hero of the story, and their startup is great, and if it weren't for all these dang external parties doing bad things, it would be working, right? Again, like put this into practice of like why people can't get a customer, for instance. </s>

<human>: What I will say, though, is that, like, Don't let yourself be held back by these fake limitations. These are fake. <bot>: I think that's such a great way to close off this thinking. I think the reason we got a lot of requests to do this video, I think it was from technical founders that had been told by investors, you need a business founder, and are kind of looking for our advice about that, or they're not really sure. And I think a lot of times when investors give a founder that feedback, which is you need a business co-founder, they're actually giving you direct feedback on what they see is a deficiency in your appetite to do the work <human>: Yes, yes <bot>: In a polite way <human>: Or or or the quality that you did the work, the quality of your pitch or the quality of how you set up your company. But it doesn't mean you don't have the skills to do it. <bot>: Yeah. Like if you meet with someone like, I don't want to do sales. I hate doing sales. Sales is bad. A lot of advice would be, yeah, maybe you should get a non-tech founder, right? <human>: Well, by the way, that's why I hate that advice, because that advice is suggesting the solution versus telling you the problem, which is like, hey, you might have to talk to your customer. You don't seem like you like that. That's going to screw you. There are many ways of solving that. That's correct. You could learn to like it. You could hire someone who does. You could hire an engineer who does. You can hire. But I do think that don't believe this idea that there's some magic with one business person plus one tech person equals startup win. No, no. <bot>: And I think along these lines, sometimes people have a lot of pushback of our advice on why you need a co-founder full stop. But our argument is not you need a business co-founder to teach you business because they went to business school. <human>: No. <bot>: It's just that this is so hard. You need another person to go through this experience with. It's not that there's any one particular bit of experience that is necessary. Right? <human>: Like 100% you need someone to offer emotional support because this thing is going to be hard. <bot>: Yeah. <human>: Yes. Yes. All right, good chat. <bot>: Sounds good. Thanks, man. </s>

<human>: As a founder, here's the trick. You're not gonna be as good at this as the person you're negotiating against if they're an investor who invests in a bunch of companies and you're a first-time founder. So by using standard paperwork, by using a lawyer who actually has done a lot of startup work, You prevent yourself from getting screwed. <bot>: And so this is one advantage of trying to raise money from people that have a track record of public companies. Because you know they're optimizing for you to build a really big company versus some investors optimize for your company is going to sell for 10 or 20 million dollars. And so they structure their entire documents around that kind of outcome. </s>

<human>: So, we talk about all the situations where maybe overthinking is not a good idea. But you also describe, you know, there are certain situations, you call them trapdoor decisions, when maybe you want to think a little bit harder then before making a move. So what are some examples of those? <bot>: Yeah, so legal issues don't break any law. Like, saying you didn't know there was a law is not a great legal defense. Regulatory issues, similarly. Oh, I didn't know that. I couldn't launder this money. Probably not great. You may want to overthink that and look into it. Things that affect people's health and well being. Yeah, you should overthink that. You should really spend the time worrying about people. Right, man? <human>: Like, let's not be fast and loose. If we're building an online pharmacy, let's. Let's measure twice, cut once. <bot>: Totally. <human>: And. And I think that, um, what really good founders do is they are very good at figuring out, are they dealing with something like that, or are they not? Because even within legal right, there's certain things that are like, oh, this is like, whatever. And there's certain things that are, like, really bad. <bot>: Michael, should I file patents for all of my ip? <human>: Exactly. <bot>: That's a classic overthinking. <human>: Probably not. <bot>: Probably not. </s>

<human>: I think the other thing that we think about a lot is, let's say you don't want to believe our theory here, right? Talk about theory.Let's say a theory, right? <bot>: I don't like this because this is not flattering to me, Michael. Yes. I don't like what you guys are saying because it doesn't help me. <human>: You could just look at big companies and ask yourself, do there exist big companies that have only technical founders? What would you say to that question? <bot>: Yeah, I mean, let's look at the most valuable companies on the stock market. Google is obviously two technical founders. <human>: Yes. <bot>: NVIDIA, we just talked about, is all technical founders. <human>: Yes. <bot>: Microsoft was two technical founders when they started. <human>: Pretty valuable company. <bot>: Pretty valuable company. So wait, that's, of the most valuable companies in the world, that's three of them so far. Yeah. You know, Facebook is complicated about who's counted as a co-founder or not. Yeah. Like, you know, Zuckerberg was a technical founder and Moskowitz and all that. And then if you look in the YC portfolio, you know, Stripe. <human>: Yep. <bot>: Dropbox. <human>: Yep. <bot>: There's a theme here for this. <human>: So sometimes I like to say like, hey, even if you don't want to believe these theories, you could just... look it up, right? If this is your question, do I need a business co-founder? You could just look it up and be like, well, if Google didn't need one. <bot>: Yeah. But people will be able to point to other examples. And that's fair. We're not saying that you shouldn't have one. <human>: We're just saying you don't need it. <bot>: Yes. We're not arguing this is the exhaustive truth. We're just saying it is not absolutely necessary. And we are providing proof of said argument. </s>

<human>: Yes. So this is Michael Siebel with Dalton Caldwell. And today we just finished up a YC batch, and we're getting a ton of feedback. We thought it'd be great to talk to you all about that. Let's be critical for a second. I would argue this is something that YC does poorly, that they. That they very clearly pointed out. They were like, when we applied to YC, we really didn't know what we were applying for. One founder said to me, we just thought it was a three month program. We had no idea that you follow on, invest in companies later, that you have programs for helping me raise a series A or for helping me as I'm scaling. We had no idea. Another founder said to me, we didn't even understand how YC was organized. We thought it was just going to be some big online lecture. Like, we didn't know we would be assigned a group partner. We didn't know we'd be put into groups and sections. We get to meet with small groups of companies that are, like, in our area, and they didn't know any of this stuff. And that's kind of a knock on us, I think. Sometimes we assume people know. A lot of these founders were like, well, I applied to YC because I talked to alums, and they really liked it. And then when I got here, I was like, oh, shit. Like, this is way more stuff than I ever thought. One founder was like, dude, we didn't even know that you helped us hire. And then today, there was a meeting about the YC hiring platform, and we were like, oh, we didn't know. We spent 7%. We had no idea what we were getting for. I don't know. Why do you think we suck at that, though, Dalton? Like, it's pretty obvious we're bad at it. <bot>: There's just a lot of moving parts. And so people know about the batch because they heard, you know, oh, it's a three month program. Oh, you moved to the Bay area, and you spend time, and even then, there's confusion. It's like, yeah, no, like, you get to know us in person. Sometimes they're, like, surprised that it's really you and me that you meet. They think we're, like, paid actors or something. <human>: How many accept calls do you do where they're like, so am I gonna get to work with, like, you? Yeah, I'm calling you you have anyone else? Who else would it be? <bot>: We're the youtubers. We're just the front guys. The real, the real. It's like, no, it's really us. And, and, and so I think they know about the program. I think they may have heard something about demo day, but it's always way more impressive than they expect. And then they have no idea that. We keep talking to the companies for a while, and there's all this other crazy stuff we do to give people an edge, a lot of which we kind of don't, can't talk about. And so I think that's part of the reason we don't market it as well, is a bunch of the stuff we do is meant to be secret. I don't know how you market that. And there's just a lot of data that's we keep secret unless you're in YC, and that is gonna stay that way. <human>: A lot of secret data. You know, the other thing that's. That, that makes it hard. I've started to realize this. It's too easy to think of YC as a university. And when I think back, you know, I'm sure Yale has changed a couple ways in the last 20 years since I went, but it's not changed that, that much. Right. I'm sure Stanford's changed some ways since you went, but it's not changed that much. And I think that when we think about a university, we're preconditioned to think it's probably 99% the same year over year. Yeah. And I think what people don't think about YC is as a product. Right. If you were to look at Instagram day one and look at Instagram now, it's completely different. And you would expect that. You would expect the product to change all the time. And I think people's misconception is YC as a university or a school. <bot>: Yeah. <human>: It's not. YC is a product. <bot>: I think you nailed it. We talked to people about this. I think they think we have some lessons we're gonna teach you or something. And they're like, I love, I love the like, well, I've watched all your videos, so we kind of get YC. It's like, guys, these videos aren't YC. Like. <human>: Yeah. <bot>: Anyway, so it's not like a school where we're like, here's our syllabus. We're gonna read you. Here's our lecture. Here's lecture four, how to use that ain't it? It's more like you're you're in the club and you get access to the resources and if you are ambitious and you are smart, the sky is the limit. If you actually work with people that know what they're doing, there's doors that opens. And the bigger your ambition is, the more doors are going to open. </s>

<human>: Like I would argue the next one that I see all the time is I talked to an investor, I talked to a friend or I talked to a customer and they said this wasn't going to work. And I take that to mean like I ascribe godlike predictive powers to one of those three people and think I need to quit or do something else because an investor, a friend, or a customer said this wasn't going to work. As opposed to thinking, let's go through the list, your friends are idiots and don't know anything, especially if they would never use your product. Investors are close seconds as idiots, especially if they would never use your product, don't invest in your space, aren't good investors, don't invest in a lot of companies. And then your customer might not be an early adopter, or God forbid, you might have misidentified the customer and you might be pitching someone who would never be a customer no matter what. So like, you know, Just like one negative signal does not mean you can't build a startup, or this product's not gonna work, or this idea's not gonna work. One last one that I wanna throw in because I find it really interesting. We help founders set goals for YC. What's the goal I wanna accomplish by the end of YC? We call it the demo day goal. I'm constantly seeing founders who don't accomplish that goal thinking their company is dead. Oh, we didn't accomplish our demo day goal. We didn't accomplish our goal for the next three months. Obviously, this is a bad company. And they missed the whole point where like, and it's really funny now because I actually wrote this in the advice we give the founders in the batch, but they still missed the point. Like setting the aggressive goal, the purpose was to get you to move fast, to get you to go, go, go. Like it was the juice. Like if you learned a bunch pursuing that goal, you got value, even if you didn't accomplish it. But like so many founders kind of go into the Demo Day season being like, we didn't accomplish our Demo Day goal, does that mean our company sucks? It's like, no, not even a little bit. <bot>: It's all some version of gave up too early or wants to give up. You're too pessimistic if you want to give up too early or if you expect it to be really easy for you or you think it's easier for everyone else. You have like a victimization thing. Well, everyone else has it easier than me. The world's out to get me. You know, I don't think that's, that means you're being too pessimistic. Um, ultimately you can redirect your energy if things aren't working. but you shouldn't give up fast. I don't know how else to articulate it. Founders that are too pessimistic, the way you know they're being too pessimistic is they freaking give up. It's obvious when they're too pessimistic and they bring everyone down. Their co-founders, everyone around them talks to them and feels worse after talking to them and deflated. Yeah. And last thing on this, we talk about the synonyms of YC of the difference between being high energy and low energy. It's like the Eeyore thing. You want to talk to someone and get energy when they're telling you about their company and walk away from the conversation being like, yeah, that person's going to do things. I'm excited to talk to them. If talking to you is deflating, again, this is not pejorative, but it's like, that's a sign you're too pessimistic that like trying to express what you're working on and what problems you want to solve cause people to feel drained. Yes. </s>

<human>: And let's be clear, very similar in the smartphone game, right? Very similar. <bot>: Yeah, we all had smartphones, and there was an app store. And at that era, if you were building mobile apps right when the iPhone came out, you could have made some pretty basic stuff and got a lot of users. The bar was quite low in historical perspectives. Because like, you know, people wanted to do stuff with their iPhone. Whereas now in every app category, there's dozens of things. And so, right? Like it's, you had to be in the right time and right place for some of those ideas, right? </s>

<human>: This is Michael Seibel with Dalton Caldwell, and today we're going to talk about our advice for high schoolers. Uh-oh. It's been a little while. It's been a little while. So maybe the place to start, because I think that oftentimes young people are in a rush, maybe we need to start by saying the startup game isn't going away. That's true. You've got time. And look, I think to set this up, <bot>: We know a lot of young people watch these videos. We know they like startup content. We know they may even anonymously be involved in startups on Discord. It's crazy. for the folks that apply to YC, a lot of them are literally in high school. And so we understand who you are, if you're watching this, or if you know someone like this, you can forward them the video. But we want to speak directly to you, high school students, who are trying to figure out, who are ambitious and want to be a part of what's happening in the tech world, in the startup world, and aren't really sure where to begin. </s>

<human>: So we've, we've kind of talked all around it, but let's, let's kind of pin the tail here. Like what is a tar pit idea? Let's really dig in. What are we talking about here? <bot>: A tar pit idea is a consumer idea that many people try. It's an idea, part of the reason it's a tar pit and not just a hard idea is it has to feel sexy or you have to get lots of encouragement to work on it. You're likely to get positive feedback. Something about it will emotionally make you not want to pivot away from it. Again, this is kind of what's weird about why we use this term. is if you are not obstinately unwilling to quit working on it, then it's not a tar pit. It's just a regular bad idea. It's just a regular idea if you're not like, and so a true tar pit is one that you will be defensive about when you are presented with evidence that the idea is challenging. </s>

<human>: All right, so like we said, pessimism sucks, but it's curable. Optimism's a little harder. And I might argue, maybe the reason why optimism is a little harder is because we're kind of saying that the good point is optimistic. So if you're too optimistic about your startup, you're like way off in the never never land. And like, that's a harder thing for us to, That's a harder thing for us to cure. So why don't you introduce the audience to this concept of magical thinking? This is something you talk about to the whole batch, and I think it's one of the best talks. <bot>: Yeah. The term I use is magical thinking. I think it's like a psychology term. And yeah, I think it's used in more of a clinical setting. So this is not the technical technical definition That's just my founder version of magical thinking. Yeah, magical thinking is where you start to believe you live like in a magical world with magical causes and effects and that like things that aren't rooted in reality are true for you. And so an example of like a magical thought is, hey, if I was in an airport and I saw Michael in the airport and I could like approach him and pitch my startup, he would immediately see what a brilliant idea I have and get out of his checkbook and fly me away from my life and help advise me to become the next Google. So like some people think that way and that's like completely nuts, right? Like don't do that. <human>: Well, by the way, I think they extend that thought to that's how companies get funded. Like they extend that thought beyond themselves to believing that's how the world works. Like the people who get funding get lucky like that or like do that, so I have to do it too. And they don't bother actually studying how the world really works. <bot>: Yeah, or it's like they've watched too many romantic comedies or something, you know, it's like they think their life is a movie and they're the main character, where like, if they do some really complex act showy act that's dramatic and like something you would see in a movie. If you literally do that, like somehow it's going to work out for you. You know what I'm saying? Like there's lots of versions of this, but it's like someone that's not rooted in actual cause and effect of reality and can't tell the difference between normal cause and effect. Like, Hey, the way you meet Michael is you apply to YC on the website. And then like, we're just normal people. And, You know, like it's like actually pretty straightforward. But when you start to believe that there's like magical ways to break into whatever, you know, so anyway, that's my definition. And there's more subtle versions of this, but the whole concept of magical thinking is a poor grasp of how the world actually works. </s>

<human>: Sure. <bot>: If you had one of the founders who, instead of learning how to code in college, they went to law school, and they were practicing attorney, and they knew how to sell to attorneys. <human>: That could help. <bot>: That sounds pretty legit. That could help. Right? <human>: Yeah, Let's say that you're selling software to doctors and hospitals. It might help that there's someone who's a doctor. <bot>: Yeah. <human>: Or maybe you're making a prescription drug, or maybe you're making a drug distribution company. Like <bot>: Yep, might help. </s>

<human>: Hey, this is Michael Seibel with Dalton Caldwell and welcome to Rookie Mistakes. We've asked YC founders for their rookie mistakes so we can share them with you and help you avoid them. Here's the last note written in by a YC founder. You should care just as much about the terms of your fundraise as you should care about the economics, the valuation and the amount of money you raise. There are lots of rights. There are lots of terms inside of a funding deal that can screw you no matter how high the valuation is. <bot>: I think that investors are aware that founders want high valuations and they want the press release about, you know, they raised a lot of dollars or they raised at a high valuation or whatever. And so they're very aware of this. And so one of the ways that you sometimes see investors take advantage of this need on the part of founders is to say, great, we'll give you your ask around valuation or amount. But you need to give us all this other stuff. And often the things they ask for are sort of jargon filled inside baseball. </s>

<human>: Welcome to Dalton plus Michael. Today, we're going to talk about, do you need a business co-founder? So many of you have seen our video, do you need a tech co-founder? I think we can summarize that as, Yes. <bot>: Yes. <human>: Yes. Now, a far more complicated question. Do you need a business co-founder? It would seem like these are one on one. Why are we making this video? Why is this an interesting question? <bot>: I think the short answer is yes asterisks. And I think this comes down to definitions. What does it mean to be a non-technical founder? And so if we define this as, does every startup need one person who can't code full stop? The answer is of course no, that is. Why would you even ask that question? <human>: I think we think that. <bot>: We'll explain. We'll break this down. And so let's talk about the asterisks. So basically, every company has stuff that needs to happen. And so to enumerate some of the tasks that need to happen that are not related to writing code, let's enumerate some of these. Incorporation. Bank. Payroll. You know, bureaucratic, filling out forms, paying taxes every year. <human>: Back office. The back office. <bot>: Whatever you want to call it. Someone's got to do that. If not, you are breaking the law. Yep. That's a problem. So someone has to do that. Yes. Talking to customers. <human>: Someone has to talk to a customer. <bot>: You don't need to know how to write code to talk to a customer, right? <human>: You do not. No. <bot>: So someone needs to do that. <human>: Yes. <bot>: Hiring people? That's not writing code, but you have to interview people, whatever, right? <human>: People won't just show up. <bot>: Yeah. Sales is a really important one. We talk about this a lot. If no one on the team considers it their job to do sales, we have a problem. <human>: No sales will happen. <bot>: Right? And someone that doesn't know how to code could do sales. Fundraising is another one. Do you need to know how to code to fundraise? <human>: No. <bot>: Negative. <human>: Customer support as well. <bot>: Totally. Like replying to emails? Yeah. <human>: Yes. <bot>: And so the point is, as we're enumerating all these, anyone that is a founder could be doing these and is qualified to do it. <human>: Yes. <bot>: But a technical co-founder is just as qualified to do these tasks as a non-technical co-founder. <human>: These are smart human tasks. <bot>: Yeah. <human>: Smart generalist tasks. <bot>: And so We have seen lots of cases where everyone on the team may have a technical degree. <human>: Yes. <bot>: But there's still a clear, someone knows they have to do this stuff. Right, man? </s>

<human>: Let's talk about what we see great founders not do. What comes to mind, Dalton? What are founders avoiding? <bot>: Look, I think the trickiest thing for everybody is social media. It's like social media is the black hole for time. And you know, we're all guilty of it too, like it's addictive. And so what's tricky is how to have a healthy relationship with social media so that you aren't spending 24-7 paying attention to who the main character on Twitter is that said something dumb and everyone's making fun of them. It's so hard not to do that constantly. And it's also not hard to think that you are a startup founder and you're succeeding and you did well. But if a hidden camera was shadowing you through the day, it was like you just read Twitter all day. You know what I'm saying? Imagine if there was a hidden camera auditing what people actually did with a lot of their time. I think some people out there would be pretty embarrassed if there was a full, clear-eyed accounting of where their time went. It's like, hey, Discord here, TechCrunch here, Twitter here. It's like, how much time are you actually spending on not those things? <human>: It's hard, man. I had a Twitter problem. And one of the things that I realized is that sometimes willpower isn't enough. What I did was I unfollowed everyone on Twitter. And then I installed this Chrome app that basically disables 3 quarters of Twitter's features. And I was just, it was like, this is an addictive thing. I need an intervention. And that did it. That kind of killed my Twitter, because it was just like, oh, well. And it was funny, because for a while, Twitter kept on trying to feed me interesting articles and interesting stuff. But they couldn't really do it, because I was not following anyone. I wasn't really interacting with many tweets. And so eventually, just like, it broke. <bot>: Yeah, I mean, I uninstalled Facebook years ago. So I don't have it. I don't have notification turns on. I don't have the Twitter app installed on my phone. So again, everyone should do what works for them. People that actually are super productive do abnormal things to turn all this crap off. You have to aggressively be abnormal on protecting your time. Because if you don't, the world is going to steal your time from you. It's going to steal your energy from you. And that's a bad trade-off if you're a startup founder, man. What a waste of time. </s>

<human>: Yeah, you know, the last one for me is this crazy misconception about how far along you have to be. And like, what pains me about this misconception is that it can be destroyed through basic research. It's like, look at the companies who've done YC, who've been successful, and look at how far along they were when they applied. Yet over and over again, people will tell founders, like, oh, unless you have this much revenue, or unless you're live, or unless you've been doing something for this period of time, or like, YC is for scaling, but it's not for starting. It's like garbage. Like, literally 40% of the last batch came in with just an idea. Most of them were working when they applied, were at work, working jobs when they applied. <bot>: It's true. And again, let me just say the brutal truth. This is the brutal truth. Some company that their idea to start was to first raise a pre seed round and sell 30% to some random investor, have some co founder who lasted a year, and then they had to fire them and now they have a bunch of equity who's gone through three pivots and burned half a million dollars and applies to YC. Michael, would you rather fund that or the brand new company that started a month ago? They just quit their jobs. The crap table is completely clean and the founders are just like totally jazzed and ready to start a company. Like who do you think is more likely to succeed? <human>: Yeah, you know, you know, I think if you look at the last batch, it's very clear where our preferences lie. <bot>: Yeah. People that their idea that you've, you know, go to, I go to YC once you're ready to scale or once you've done all the stuff and after you know exactly wrong. Dude, how many companies we funded the past few batches that they have to change their idea, which is fine, it's good to change, right? We like it, but they've already raised and they already have all this hair on the company and they think they're really far along. How much harder is it to change your idea once you have a bunch of hair on the company because you thought you were ready to scale so hard? </s>

<human>: This is Michael Seibel with Dalton Caldwell. Today, we're gonna talk about whether you are being too optimistic or too pessimistic about your startup. So Dalton, set this topic up. We certainly meet many founders who fall in either of these categories pretty regularly. <bot>: Yeah, I mean, the fact is you need to be both optimistic and pessimistic, okay? And if you're too far on either extreme, you, are going to fail. Right? That's simple. So to start with, why don't you let's talk about the comical stereotype of someone that's too pessimistic. And we know these people. So what is it like? Paint me the picture, Michael. Who's the stereotypical, too pessimistic founder? What are they like? <human>: It is like one painful experience causes them to want to either quit everything or change everything and fill in the blank on the painful experience. It's like bad customer call, bad investor pitch meeting, talk to a friend, like whatever it is, talk to an advisor, but like one negative experience is getting them to run away. <bot>: Yeah, it's like Eeyore or something. I don't know if that's too weird of a reference, but you know, woe is me. Everything, everything bad is happening to me. You know, the world's out to get me. Everything that could go wrong is going wrong. and everything's going to shit and they're screwed. Like it's just nothing, nothing good can happen to me. That is what talking to a too pessimistic founder is like. How about the comical stereotype of someone who's too optimistic? What's it like talking to them? <human>: So at first you get really excited. You're like, there must be something here. But the longer they keep talking, the more you are extremely confused why it doesn't appear like anything has happened, like any values been created, or any insight has been found. And then like, at some point, you start asking questions, because you're assumed that you're the idiot. But by the end of the conversation, like you are convinced the person actually has no idea what they're doing. That's never happened to us before though. That's all theoretical. <bot>: Yeah. It's like talking to someone that's had too much coffee or is medicated or something where everything is great. Everything is wonderful. Everyone is out to help them. Like the planets are aligning, you know, like their startup is the best thing ever. And then again, yeah, you ask questions and you're like, wait, this all sounds kind of bad. Aren't you concerned about some of this stuff? And they're like, no, no, this is all going according to plan. This is like, this is really good. And so again, at both extremes here, there are problems. Okay. </s>

<human>: Number two, we talked about this a little bit. design, learning how to use basic design software. Yeah, this is one that kind of blows my mind because when I think back to my startups, I had to power up, you know, Photoshop, we use this thing called ramp back in the day, like basically, if a button needs to be made, and we didn't have a designer, Yes, make the button, you know, like it didn't have to look that good. And so this is a skill that anyone can grasp for and like there's examples of good design and bad design all over the internet, right? So you can easily copy. I think the third one is launching products. Like man, if you could get a product out, It doesn't have to be used by any people. It doesn't have to, but just like actually going through the full emotion of coming up with an idea for a little side project and releasing it and handing it to someone. Cause you're doing reps. <bot>: Like one of the things I noticed at YC is a lot of the folks that later on become great founders, they worked on projects in high school that may not be commercially like venture funded companies, but they were like pretty cool. Yeah. And so one of the examples I always think of was back in the 90s, there was a computer program called Winamp. And that's how you would listen to the MP3s you downloaded from Napster. And some high school kids, Mark Zuckerberg and Adam D'Angelo, I believe, built a music recommendation plugin for Winamp. And it was quite popular. I think it was called like The Brain or something like that. And so it was just like a free plugin and it was quite popular and they made it when they were in high school. And I don't think it had anything to do with what they did later on in life. But they knew how to write code. They knew how to make something they themselves wanted, which was music recommendation for Winamp. And they released it, and I think it got like millions of downloads. <human>: It was pretty popular. They went through all the motions a startup founder has to, but in this kind of like no stakes. <bot>: Yeah, they weren't trying to, it wasn't a business, at least to my understanding. Maybe they thought it was, but it was more of making something cool. Yes. And this sort of story comes up a lot in some of the founders that we fund is that they do stuff like this. And you'll ask them, well, why were you doing that? And they almost don't understand the question. It's their nature to build things and release them. So again, the advice part is find low stakes things you can work on, give them to the world. And again, I think there's a lot of the advice if you want to be in the music industry, if you want to be a writer, a lot of the advice, if you listen to the greats, to young people is do the reps. And even if you write the poem and don't show it to anyone, or even if you are in a bunch of bands that don't make it and break up, you got the reps in when you were young. </s>

<human>: The next one that comes up a lot, if you're going to be a startup founder one day, you got to learn how to talk to people, got to learn how to make friends. And needless to say, I think that this is a skill that people kind of assume you can't learn. Like assume like, oh, some people are just really social and other people are just shy. And like, I can't change that. But I know you and I have seen this with YC founders, like massively change. Absolutely. This is 100% a learnable skill. And anyone who says otherwise is really doing you a disservice. I think what's so interesting about this one is just like the previous examples, the way you get better at it is you suck at it first. <bot>: Yeah, and you have to be willing to be uncomfortable. Again, I think my high school mentality, I don't know if you felt the same way, is you believe too much that your identity then, like that's a nerd, that's a jock, that's a this, like it was like you would put people and sort people into buckets like they were like permanent. Yes. And that's fake. Yes. That shit is not permanent. Everyone could be anything. Yes. yes if they choose to yes and so you can make a choice if you're like well i'm not really you know a people person or like i'm not the kind of person that would go and talk to everyone at a party or whatever like yeah you could do that </s>

<human>: I think that like, you know, it's so funny, but in my mind it's so clear. You do YC because you want an amazing peer group. You do YC because you want to not be screwed over by investors. You do YC because you want honest feedback and you want to take responsibility for the win or loss of your company. And you do YC because so many other great companies did YC and extracted value out of it, that you should be confident that if you're a great founder, you can extract value out of it. Well, it's that simple. And like so many people that convince founders that YC is bad, they can't explain why taking their money or doing their program or doing their thing is better. All they can do is like neg YC. And like, if you ever see someone making an argument that's 100% ripping something else down and 0% explaining why their thing is good, if all of your talking points is the alternative, is bad, you know, maybe all you're selling is fear because that's all you have to sell. And like maybe that's your business model is selling fear, not the kind of investor I'd want on my cap table. <bot>: And then what's the reality? Like inside of YC? If you're a YC company, if you're in the batch <human>: Yeah. <bot>: If you're getting the advice from us to prepare for demo day. How'd it go, Michael? What did we notice? <human>: You know, first, valuations. I think everyone was nervous that valuations this summer would come way down. Wasn't it, like hashtag VC summer vacation or some shit like that was going on where no one was around? Prices are almost exactly the same as they were during the last batch when it was like VC heaven on earth and money was flowing like crazy. We saw 15 to 25. Some companies raised at 30, almost no change from the last batch. Didn't see any change on speed. You know, we saw investors going from meeting to commitment within one to two meetings. Didn't see any difference on terms like, you know, investors weren't demanding board seats or weird craziness. I don't know. What do you see? <bot>: All similar stuff. And again, I think this is like an evergreen lesson for everybody. YC alums or people, not in YC, is it's too easy to take an anecdote that you heard from people or stuff people are saying in the group chat and think it applies to you. Like, one of the classic mistakes we see from later stage YC companies is they base how easy or hard they think their fundraisers will be based on TechCrunch articles they read of other people raising. They're like, hey, so and so just raised. So I'm going to be able to raise the same valuation. And think about how much time you and I have to talk people off the ledge on how, like, some random company in Europe raising for, like, some AI, whatever, doesn't magically mean their fundraising to be easy, right? Like you're. It's like bad data. Like garbage in, garbage out. Okay, so again, the advice for folks is your mileage may vary. I'm sure there are people out there having a harder time fundraise, I apologize to you. Right? I'm not saying my experiences, the experiences YC companies have the same as yours, but this is sort of the meta point I'm making, which is too many folks think fundraising is a market like the stock market, and that there's like graphs and charts you can have. And it all operates like an efficient market instead of what it actually is, which is like ten different things, right, Michael? Like, the YC funding ecosystem is like its own little universe. <human>: It's its own thing. <bot>: Right it operates separately than this other stuff. </s>

<human>: You know, it's funny, it's like, it's almost like there are these two sets of tools. There's one set of tools that allow you to organize your time better. And there's another set of tools that protect your time. And yeah, effective people use both constantly. And I think ineffective people sometimes are mistaken and they think, if I were just had a stronger will, like needing tools is the problem. like successful people just have a stronger will. And that's like not true. It's like no, successful people reach for tools all the time. Like successful people recognize their weaknesses and actually reach for tools. Now here's the one that comes up a lot. The collecting of mentors, advisors, weird credentials, like advice. Oh, I went through three different accelerators and an idea lab. Oh, my advisory board, I'm building my advisory board. Why do you think founders are attracted to that versus just building something and launching it? <bot>: It smells like you're doing successful startup stuff. You're like part of a community of startup this, and there's all this stuff you can do. I'm not saying it's all bad, but it's a bottomless pit of time suck. You could go so far deep in there, you could be in that bottomless pit for years and be a startup founder that's never built a product and has never gotten a single customer because you just cycled in and out of various forms of startup mentorship. It's weird. It's like going to Hollywood and getting acting lessons. Yes. And you're in this acting lessons mode for years, and you're like, yeah, I'm an actor. You know what I'm saying? It feels like you're making progress, right? But you're not. </s>

<human>: Let's talk about investor incentives. Do you believe investors are incentivized to tell companies to raise more money or less money and why? <bot>: I think it depends on the stage that the company is at. I think for tiny startups, investors aren't going to fund them anyway and so saying what they want to hear, like saying smart thing that captures mindshare so that when you do get successful, they'll want to come talk to you, not a bad idea. I don't know what to pursue that. I think for companies that they actually want to fund or perhaps they've already funded, I think it is reasonable as an investor to want the company to get huge. Investors are going for huge outcomes, so still with me, right? And so that often looks like you should be growing faster. Oh, your revenue looks flat. You should be spending more on sales. You should be spending more on marketing. And so coming from a good place from their perspective, you might have a misalignment of incentives sometimes where the investor – the worst thing you do for an investor is like be profitable but not grow fast enough for them versus if you're a founder, that ain't so bad. </s>

<human>: So, you know, one of the interesting things here to kind of wrap up is that we make mistakes. Like, we screw up. There is a YC partner common bad advice kind of mode. And we were talking about this before the show, and I think you said it right, which is like the kind of lean startup, don't hire, don't spend too much money. Like, talk to your users, put a shitty MVP out in the world. Path is the path that works for everyone in all cases. I think sometimes we can fall into that trap, but there are many examples that doesn't apply. Right? Like, what are your thoughts on where YC partners ourselves? We can get tripped up and give bad advice. <bot>: Yeah. I think that the biggest critique I would have of ourselves is that sometimes it works right out of the gate, and sometimes you can spend two years building a product in a cave and never talk to a single user and it's perfect and you immediately get product market fit. Sometimes that happens. I think that we just, we have enough data points that it seems like insane of us to ever recommend that strategy statistically. Like, it's like, it's like, hey, oh, you have cancer. Oh, well, you know, if you go on a water fast, that might fix it. Like, maybe. I think that it just feels a bit hard for us to recommend making a strategy to not do those things. But we have enough data points of YC companies. We see companies that can't bootstrap or can't launch an MVP and have to go build something in a vacuum for two or three years. <human>: Yes. <bot>: And sometimes it works. Right. <human>: Yes. The best YC partners are very careful with how forcefully we give the YC advice, because, like, the longer you hear, the longer you have a kind of running record of the time. I told someone to do it like this. And the opposite worked. <bot>: Yep. <human>: And so, you know, honestly, to, but. <bot>: To me, you know what the lesson is there, Michael? The founders that made it work believed in themselves and they knew that we couldn't fix it. Like, they actually internalized the whole meta point of this video, or at least what I'm trying to get across with it, which is like, you know, they took bits and pieces, they took information from the outside world, but they took personal accountability, that they're the ones who are gonna have to make it work. And they weren't counting on blindly following anyone as being the way it ain't right. </s>

<human>: But I think that you've brought up a really good point. Having the ability to do these tasks is different from having the appetite to do these tasks. <bot>: Yes. <human>: And to do them well. <bot>: And let's triple underline that word, appetite. <human>: Yes. <bot>: It's not, oh, yeah, well, Michael, I could go do sales. That's not hard. <human>: I can definitely reply to emails. Yes. <bot>: You know, I could. Well, Dalton, are you going to do that? <human>: I think this is extremely important, right? And I think that when we're looking into this question, we have to ask ourselves, like, who is going to adopt these tasks and responsibilities? It can be a technical person, it can be a non-technical person. You need someone on your founding team who's willing to adopt these tasks and do them well. <bot>: Yeah, with vigor, with excitement, with like, they want to be the best in the world at those tasks and not begrudgingly full of excuses why they don't want to do it or that work is beneath them or whatever, right? <human>: Bringing toxicity into the company. <bot>: Like, no, not that. </s>

<human>: And it's like, and I think that it'd be helpful for us to talk about some of those specific horror stories that they tell us about. Right? Company in my group that raised money, they were desperate. They raised a good chunk of money from an investor who put in hundreds of thousands of dollars and bought over a third of the company straight away. And what they didn't tell that founder is that every subsequent investor would say to themselves, huh, this investor put in a relatively small amount of capital, bought so much of the company that the founders are going to get so diluted, they're not going to end up owning anything, and it's going to shut off later stage rounds completely. And these founders, of course, that a couple hundred thousand, that wasn't enough. They raised more. They raised more. They came in YC with almost 50% dilution. And it's like, from an investor who knows better, but who saw that they could get leverage over a founder and something took it. <bot>: This leverage point is fascinating because so much of when you talk to founders that go out to do a lot of fundraising, there's a lot of talking points that get beat into your head and it's easy to believe them, like, oh, I have to own 20%. Oh, I have to have a board seat. Oh, if you raise it too high of a valuation, it's bad. Oh, like, and when you think about it, those are actually very, you know, clever talking points from the investor perspective. And again, so many memes out there about fundraising that are be, are being pushed by folks where it's convenient. Do you see how it's actually convenient to be like, prices are down and founders should give up more rights than they used to give during the economy. What, what are some other horror stories, man? What else you got from this batch? <human>: Yeah, I mean, I had one where the investor, the founder, was like, hey, when we previously went out, we wanted to raise a million dollars and the investor wanted us to do it as a price round and to pay for $50,000 of their legal fees. And I'm like, companies raise on safes and pay nothing. There are no lawyers. On this situation, you hand fifty K and the even more criminal thing is great. You want to do a price round. Awesome. There's standard paperwork for that. It shouldn't cost $50,000 to a price round. Like, you're just ripping off founders, pure and simple. Ripping off founders. There are other situations where someone is basically like, oh, I'm committing to be in your round, but I need to be the last money in. Tell me when you've raised. <bot>: Yeah, once you find another million I'm in. <human>: But, like, you have to, and you have to leave room for me. I'm like, are you just making rules up? This isn't how it works. Right, but founders don't know. We got another one where it'll be like someone saying, all right, I'm committing 500,000 of your $2 million round. You just have to go and get the rest. I'm going to lead. You just have to go raise another 1.5 million. Like these horror, these are like all horror stories over and over from founders in this batch talking to us about fundraising before doing YC. And it's like, I know why they were shell shocked. I know why they were shocked when they didn't want fundraising during YC. They didn't hear any of this shit. <bot>: And what's tough is, when you think about it, to just go back to the, to the music industry metaphor, the entertainment industry metaphor. For a lot of folks, they were, they would have been better off. Or people would say, I was. I would have been better off. Just like, waiting longer to get better, a better agent, or like, not having, like, a bad agent, just having no agent, or having a bad manager who, like, stole the masters from me, maybe having. And so this is what's weird, is a lot of the content marketing we get from the venture capital industry is to convince people they need it and want it immediately. It's like the message that you're brainwashed with is a, is a founder is like, you can't even start without raising a pre seed round. And we're in the business of pre seed round, blah, blah, blah, blah. Right? And again, I hope people never hear that from YC or they don't get that from us. We say the opposite. If you watch our other videos, we're like, yeah, like, you don't actually need to go raise money to, like, start a company and to, like, get customers. Like, this is deeply part of the YC mantra, which is if your idea for how you start a startup is to first create a pitch deck and go pitch VC's, you're setting yourself up to get screwed. You're setting yourself up to get taken advantage of by people who are going to have 20 different ways to rip you off, versus if you do something cool, you're gonna have a lot more leverage. Right. </s>

<human>: So what's the big takeaway here? I think the takeaway is one before you thrive, you have to survive. And sometimes you're within, you know, sometimes you're gonna hit product market fit in the first 18 months of your company, sometimes you're not. And if you're running your company default alive, you're giving yourself enough time to figure out product market fit. And, man, sometimes during a product market, if it's complicated. <bot>: And you're not losing sleep about the macro environment, think about how many founders right now are sweating bullets watching the stock market and watching interest rates. And I don't blame them, right? Like, I'm not saying that's wrong, but the default life founders are kind of like, eh, whereas the ones who know they need to raise soon, there's, they're worried, they ask a lot of questions and I get where it's coming from, but they seem nervous. </s>

<human>: And not only that, they multiply when you have, God forbid you have employees, right? Like then it's even worse. <bot>: I think it's helpful to do this self-diagnosis if you're too optimistic or too pessimistic, to put yourself in the shoes of your employees and imagine who would you want to work for? Who would you think would be like a good leader? Because to answer this, I think a good leader is an optimist. If they don't believe, they're a horrible leader. Like right out of the gate, a pessimistic leader who doesn't believe that things can work, quit. That's a bad leader. So you're off the team. On the other hand though, a too pessimistic, sorry, too optimistic leader has horrible plans Their plans involve magical things happening, rainbows and ponies and space time travel. If you actually listen to the over-optimistic person's plans, any reasonable employee would be like, wow, this person has lost their minds. <human>: They have no idea what's going on here. And it becomes a little scary when your leader sounds like that. Suddenly you're like, oh, God, like, are we even going to get the basics right when this person doesn't seem to be tethered to any landmass at all? <bot>: You know, the person said two months ago that our company was great and we were all going to be rich. And now they're saying, you know, the funding fell through, but they have a solution. Are we going to even make payroll? Yes. <human>: Like you lose your credibility in like two seconds. Yes. You make that perfect point. When you cross over being too optimist, your employees start questioning everything. You lose all trust because they're like, oh, crap. If the leader can't see this obvious thing right in front of their face, uh-oh. What else have I not uncovered yet on what the leader can't see? <bot>: And you feel like you're strapped to this crazy person. You're like, oh, no. I'm in a car and the driver of the car is completely insane and is going to take us all down. What have I done with my life? So those are the extremes, right? So if you're overly pessimistic, it ain't going to work. It's over. Pack it up. And if you're too optimistic, it's probably over too. But what do you do? Or like, how do you self-diagnose, Michael? Like, I'm sure people are always, whenever we say things like this, people are like, well, how do I know which one applies to me? </s>

<human>: Yeah, it's funny, when I was playing Starcraft way back in the day, like, people always talk about macro versus micro. And I feel as though investors love macro. Macro you can do on an excel spreadsheet. <bot>: Yeah. <human>: What's your build order? Like, what's your tech tree? Da da da. And I remember, like, you can macro like a motherfucker. And then when you have three guys versus the other guys. Three guys, and they're better at micro than you, you just lose. It's just like, you just lose. And my, I would have friends who are so good at StarCraft, like they would just play me crippled and still destroy me. And it works the same way here. Right. <bot>: And I think that's a great point. If you engage with this metaphor, we're talking about micro. You've got to be great at micro to get something off the ground. And no amount of macro experience helps you be good at micro. <human>: I think you start being great at micro to earn the privilege of doing macro at all. And then how many CEO's do we find who still serve on the road? They're like, oh, crap, I gotta get into that product. Cause it's. Something's broken. I gotta go six levels down and fix something. Cause like. <bot>: Well like, I would compare it to, you know, I think a lot of people would love to be Ryan from Flexport, where he was buying a 747. He's buying jets. Yeah. And like, moving stuff all over the world. And what he's worrying on, worrying about now is micros. <human>: Micro, right. <bot>: Like, some things changed in the market, and now he's extremely worried about micro and his company. And that's what makes him great, is he can shift between those two things. </s>

<human>: I think another one here is how to help people. I think that what's tricky about being a startup founder is you have to be empathetic. You actually have to care about your customers. You have to care about your users. And I think this is something you can start practicing early. And, you know, I remember doing this and it was this really weird story. I remember tutoring some kid in high school and I'll tell you, I'll be honest, right? I was doing it the check the box on the like national merit scholarship, whatever the contest of the thing. And I remember, you know, I was maybe 11th grade and I was shooting this ninth grader. And I remember the parents on the second or third time I came, just looking at me and smiling and being like, and I realized, oh my God, like they really, really, really want their kid to learn. And they are so happy that I'm taking time and they're paying me. And they're still so happy that I'm taking time out of my schedule to help this kid. And I was like, oh my God, like, that's when like it kind of clicked a little bit where I was like if you help someone they'll really appreciate like if you actually help them right if you care and I actually took it more seriously um and it was funny because I remember there was one time where I screwed up and I couldn't make it and I was like oh my god they're gonna they're gonna fire me like I was supposed to be there And they were like, totally fine. Just come back next week. It's totally fine. And I think you might find that with your customers. Even if you screw up, if you really care and you're really helping them. They're not going to fire you. They're not going to fire you. It is so rare to find products or people who actually care. Yeah. That's a rare thing. Especially from young people. <bot>: Again, people are really impressed when young people care. Give a shit. Teachers notice. People notice. I don't know. It's a way to stand out. </s>

<human>: It's so weird to me because looking back to high school it was such a like it was such a sandbox, like, it was such an environment where my interactions with people didn't matter, really, right? Like, I'm not, how many high school people are you still really close with, right? Not a ton, right? So like, one, that reputation's not gonna follow you in the real world, and two, you can experiment. Like, you can play. You can be whoever you wanna be. Yeah, if you make a fool of yourself, you go to college, you're not gonna see those people ever again. I think it's totally fine. Totally fine. And I think that the other thing that I learned about this is that everyone else feels shy too. Even the people who you think don't feel shy. Even the people who you think, oh, they make a bunch of friends. Everyone has that thing inside of them being a little bit like, oh. And I think when you're older, you get that. Yes, you get it a lot. <bot>: But man, you don't get that. You don't get that the popular kids have their own thing they're working on. </s>

<human>: So, to wrap up, right, like, the FAANG optimization, I think there's a couple kind of takeaways here. Like, I think the first one is that, like, if you're technical and you want to be a founder, And you decide that Feng is the right part for you, the right path for you at least to start. A couple of things you should be thinking about. One is how long you're going to stay, right? Like how can you stay for long enough to get the value without getting trapped? Because if you get trapped, your plan goes to shit. It sounds like the second one and you were touching on this. Don't work on projects that will make you hate your life, make you hate tech, cause you to decide to just become a nomad who roams weird beaches in Southeast Asia. We know these people. Yeah. <bot>: I know a lot of ex-Facebook people who feel that they did evil, and they made money doing it, and they seem pretty unhappy about it. They're not happy about the work that they did in the universe. And so, yeah, don't don't do that. Like like the psychic scars of doing that stuff is is expensive. <human>: Well, and it'll prevent you from being optimistic about tech, which you need to be if you're going to be a startup founder, like you need to be optimistic. I say the last one is have a plan at the start. Know what you're trying to accomplish. You're trying to get a visa, you're trying to save money, you're trying to get this on your resume. Have a plan for what you're trying to accomplish by taking one of these jobs and a plan for when you want to leave. It's a lot easier to have a plan when you're not looking a bonus in the eye. Right? If you come in with the plan, when the bonus thing happens, you'll see it coming. If you're fighting the bonus head to head with no plan, bonus wins most of the time. All right. With that, that's how to break out a faang. Thanks Dalton. <bot>: Thanks. </s>

<human>: I think we also see when founders have this mentality, some will kind of engage in the zero to one and kind of fail and like live in that zone. I see a lot not even engaging in the zero to one. Like, you know, they're hiring a bunch of people, getting an office. Like they almost forget they have to get the first customer and they start gearing up for customer 100. <bot>: Well, but it's because if your market analysis is perfect, it's impossible that the customers won't want it. Right. <human>: It's a foregone conclusion. The first customer is a foregone. What's the real problem is how do we scale? <bot>: Yeah, I'm much more worried about that. <human>: Yes. Yeah, so I think it's funny you described it. I like this analogy. Like the starcraft analogy. What's this? <bot>: Yeah, it's kind of like we've all played real time strategy games like starcraft or what have you, and when you're playing one of those games, you're just like, okay, ooh, need more pylons. Okay, cool. Let's build some siege tanks over here. You're basically playing a video game. It's just a, you've got to scale the thing up as quickly as possible. There's not like a version of StarCraft where you try to build the base and it doesn't work or your units all just die or something. I don't know. It's a different game. And so I think people are playing this ramp up scale game and they feel like they're playing a video game. And again, they're completely shocked how hard it is to get it off the ground. It is really different than what people expect. </s>

<human>: Well, let's start with pessimistic. Yeah, so you might be too pessimistic. So this happens all the time in YC. You sent a shitty email to a hundred customers that wasn't personalized. You didn't send it to the right person. You sent it in the middle of the night. It had typos. Your call to action was like, would you like to join me for a six hour phone call to discuss this further? And you only got like five replies. Oh my God, the world's coming to an end. Our startup doesn't work because 100 potential customers we emailed didn't produce 100 leads. We get this like every batch and we have to be like, it's gonna be fine, folks. <bot>: I think it's expectations today. I think you can be too pessimistic if you can't If you don't, if anything short of absolute unmitigated success right out of the gate doesn't happen and you're like, you know, you're like, oh man, this isn't working out for me. I'm really worried. It's like poor expectation setting. And so I think a lot of folks just, they don't realize that this stuff is hard and that even when it's working, you mostly get nos. And so that's the way you might be too pessimistic is, It doesn't immediately work. </s>

<human>: I think the second big takeaway here is that investors are not going to twist your arm to burn. But you should also be careful to not react to the slightest suggestion that burning more might be okay. Like unfortunately or fortunately you're in control here. And like, if someone whispers to you, oh, maybe you should slam that airplane into the mountain, that's not like, that doesn't mean that you're not the pilot holding onto the stick and you can control where the airplane's going <bot>: And they're going to be fine. <human>: And you're going to be fine. <bot>: Yeah, this is the thing, this is what's so weird about this business is like who has to live with the rest of their lives? That that was their startup or that they could have done something different they weren't able to versus the investors, like, yeah, whatever, cool. And they go, you know, they don't think about it at all ever again. <human>: And then maybe the last takeaway here is that if you, if you are in an operationally intensive business, you know, a la DoorDash, you better be ten x better than the people around you at knowing your numbers, at steering that plane. <bot>: Well, yeah, the CEO, the founders have to be pushing for this. Not the board, not the vps, not your CFO. <human>: Founders have to care about this. And I'd argue this is one of the dirty little secrets behind Amazon. They've always known that they were in a low margin business and they've always run their company that way. And I'm sure they were so tempted to look at a Google or a Facebook and say, why don't we do those things? And like they had to be strong enough to say, because we're not in ridiculous high margin businesses. Like they are, like we're going to play our game. Anything I missed, Dalton? Any other final takeaways? <bot>: I think you got it. I mean, I think anyone who's. Anyone out there who's stressed about raising the next round, this is just a helpful reminder. You should read the blog post. You do the math. But you don't have to be as stressed out. If your default alive, it actually completely changes. It's like a weight is lifted off your shoulders. It's crazy because you don't. You're not hoping that some stranger somewhere. Is going to bail you out. It's a bad feeling, but when you're in control, you feel much better. So I recommend it. <human>: All right. Great chatting, Dalton. <bot>: Thanks. </s>

<human>: A lot of what people don't understand is the power of running an auction, right? Like, they just, like, it's so rare that you really get to run an auction. You know, most founders, early stage founders, are not running an auction, they're begging for money. Like, let's be frank, Dalton. You and I were there, right? Like, we were, we were begging for money. Like, when you're in an auction, you get to do things like name your own price. Like YC companies say to investors, we're raising this much money at this price. Are you in or are you not in? Right? Like, that's a foreign language to people who've, like, most people who've raised around, oh, we need to lead to prices different for YC companies. I think the other thing that happens when you're running an auction that people don't understand is you get inbound offers. Like, a typical company in this batch got between ten, and I've seen 60 or 70 investors cold emailing them, wanting to learn about investing in their company. I got founders messaging me on slack. Michael, what's going on? And I'm like, oh, yeah, no, this is just how, this is what, nobody told you this is what happened at YC? They're like, no. And I'm like, oh, yeah, this is, yeah. Investors cold email you. You don't cold email investors. And they're like, mind blown. Mind blown. So I think that's what's so funny is that we talked to so many founders who had such a different experience fundraising, often from the same funds, before doing YC than after doing YC. And let's dig into that. I think you have this great analogy around this kind of early stage investing environment. Try to frame what's going on here. <bot>: My first company was in the music industry, for better or worse. And so I learned a lot about, in the eight years I worked on it, I learned a lot about how the music industry works and how Hollywood works in general. And I started to see a lot of parallels between those industries and Silicon Valley. Again, kind of depressingly, if I'm honest with you, and it's the following, a lot of the folks who are most approachable when you're a first timer or when you're just moving to the area or you're trying to break into the industry, the friendly people that want to talk to you are often the most exploitative. And they're the people whose business model is just like, squeeze you and, like, pull you up the funnel to someone else. <human>: And you feel like they're doing you a favor while doing, right. <bot>: Yeah. They're like, they're gatekeepers, but they're really friendly. And you don't know. You're like, oh, you're a talent scout. Oh, you like you know, you like the way my demo, you came to my show? Like, whatever it is, like, there's folks who really aggressively sell themselves to newcomers. And part of the pitch is, oh, I'm really important. I know all these important people. I can open doors for you. You know, here's some other people that I know. I can introduce you to them. Like, there's all these, like, kind of promises. And sadly, the story with a lot of folks, you know, in the entertainment business is you learn the hard way that those. You want to not talk to those people or you want to understand there's. You want to make it to the. To the big leagues and get, again, if we're talking about agents or something, to the extent you can get a really good, well known agent that's like a large agency, like CAA or something. All right, well, then you made it. Like, it's like, a key step to go from, like, anyway, we. I don't wanna get too deep in the Hollywood stuff, but there's commonalities across these industries. And the thing I noticed in Silicon Valley in my startup experience was a lot of the characters that came out of the woodwork and that they were the most successful, to me, is a first time founder. In retrospect, we're not great. Like, hey, give me advisor shares to introduce you to someone. Hey, pay to pitch. We have a pitch competition. Come in. Hey, you know, like, all these angles that weren't great. And what's weird is a lot of the people, you know, were, like, medium famous and had, like, some social media clout, like, you. Like, they did enough to seem successful or drive fancy cars or seem rich that you would think they did actually know people. I mean, you had this, too with, like, fake advisors, right? </s>

<human>: I also think what's interesting is that If you are a technical person and you happen to be solving your own problem, the idea that you would need a business co-founder is not only confusing because Let's say you're building a dev tool, your business co-founder probably is not the right person to sell or fundraise or hire or talk to customers. So literally, the idea that you couldn't do those tasks is actually silly. A technical person should be doing those tasks. <bot>: Yes. <human>: And if you're solving your own problem, it's a technical problem. It's kind of a no-brainer that you don't need a business co-founder. Maybe you need another co-founder. <bot>: I mean this is an example, we will talk about examples of this a little bit later. When you think about it how could a business person with no technical background even come up with the idea for NVIDIA? Or been in a position to execute on it versus an electrical engineer? And so the CEO of NVIDIA, I don't think he spends a lot of time coding, to be honest with you. But the fact that he was a trained electrical engineer with a history of doing electrical engineering, with a specific vision of how to build a new CPU company, excuse me, GPU company. That seems important, right? <human>: Seems important. <bot>: I don't know if a non-tech founder would have helped NVIDIA way back in the day. <human>: No. And certainly if they would have helped, it's not obvious they would have been essential. <bot>: Correct. </s>

<human>: What's been some examples of great investor advice? Because I think you and I both have these. <bot>: The best investor advice I ever got as a founder is that I was swimming in my head with too many ideas at once, and I had too much data, and that someone from the outside could look at everything and be like, oh, this is working. They could take. They could take all of this, like, consternation and, like, complicated stuff. And, like, I can think of a couple times in my life when someone was just like, this is working. You should do more of this. And they were right, and it added a ton of value. Or conversely, this is bad. You're failing. <human>: Yeah. <bot>: And again, I was full of excuse, like. Like, my brain was full of, like, a thousand different threads going a different direction. But to have someone synthesize that into something very simple was super helpful. Dude, I got great advice like that when I was a founder. <human>: Number one piece of advice we ever got was from someone who had experienced big companies, a guy named Gideon Yoo. And we had just gotten Justin TV profitable, and we were very proud of ourselves. And the first year, we really tried to monetize, we made $8 million in annual revenue, which I think now would qualify as, like, a decacorn or something. And he came to talk to us, and he basically said, folks, look, you should be happy. Congratulations, but your company sucks. Maybe don't change stuff. It's all going to die. And all the work you put in so far, no one's going to remember what you did. And what was great is, like, there was no, like, and so you should do this. It was just more like. And that's. That's my current status of your company in a nutshell. And it's exactly what we needed to hear, which is, like, the best investors point out the problem. They don't give you a solution. They just point out the problem. And they knew it. We knew that was the problem, too. It's just when someone says it to you, you're like, oh, crap. <bot>: But isn't that funny? Because, again, so many incentives in life are set up to be nice or to tell people that they're great and they should stay great, and everything they're doing is great and they're taking over the world. But weirdly, again, if I think back to the founder advice that I got, and same with you, it's actually when people are kind of hard on us. <human>: Yeah. <bot>: That was actually what was hopeful. </s>