Transcript for Lessons from 1,000+ YC startups: Resilience, tar pit ideas, pivoting, more | Dalton Caldwell (Y Combinator, Managing Director)

Seeing everything people apply to YC with, people all kind of have the same idea.

One of my mantra is, is, just don't die. Being coached and being reminded of the fundamentals and basics, puts you in the right mindset. You have this concept of tarpid ideas. It seems like an unsolved problem. You'll get all this positive feedback from the world. And people have been starting that startup since the 90s.

We're trying to mix up some of the information diet about what kind of ideas people might be contemplated. A lot of people say you're the king of the pivot. A good pivot is like going home. It's warmer. It's closer to something that you're an expert at.

There's a lot of founders that come this close to it all being over and through sheer will kind of just keep it going.

Yeah, thanks so much, Lenny.

Have you ever seen in like NBA basketball or college basketball where they have the coach might go and it shows what they're actually saving the huddle? You ever listen what they actually are saying? They're like, Okay, we need to really focus and get the ball and win this game. Like if you actually listen to what the greatest smartest, most successful athletes are talking about. Like if you listen to what Tiger Woods is saying to his catty, it all sounds like pretty mundane stuff. It's not like what Tiger Woods is talking about with his catty, you know, impossible to decipher jargon. And so like, yeah, you really need to keep your head down on this one. It's things like that. And I think the reason this is true is that even if you're the best in the world, being coached and being reminded of the fundamentals and basics is what puts you in the right mindset and that you already know everything, right? You're at the top of your game if you make it to the elite levels of being a startup founder or basically doing anything that's really hard psychologically. And so yeah, One of my mantra is, is just don't die. Just keep your start up going. Just keep going. And I say that over and over again. And honestly, that is often what people tell me is the most impactful thing I said. It's not that I said some Ninja 5D chess move that they never were thought of before. It's just the constant confirmation that continuing to keep going and doing high quality reps is the game.

The way to summarize that is if you look at all the startup stories that we have at YC and all the companies we funded over all the years, the underlying theme is that rationally the founder should have given up at some point. And so again, let's talk about Airbnb, obviously something you know a lot about. You know, when they probably should have shut down like three or four times before they got into YC, it objectively wasn't working. They were basically ruining their lives. They were disappointing their parents. Everything was wrong. And it was it was a purely irrational act for the founders of Airbnb to keep working on their goofy startup. And so, anyway, that's just one story. If you look across Across the portfolio of YC and non-YC companies, there has to be this irrational, you know, intention to keep going even when the world tells you it's not working and you feel completely defeated. And you likely have to go through this many times and have these near-death experiences. And then you get lucky and then you look like an overnight success. Right? And so that's that's that is that theme that is a summary and I provide you know lots of data and lots of stories there but this is one of those things that the the longer I had this job the more I really really believe this is true.

I think this is a nuanced question, and it's hard for me to say something on a podcast that will actually be useful to people. But here's a couple of facts. One, are you still having fun? Do you still enjoy doing what you're doing? Do you enjoy spending time with your co-founders? Is this actually a fun thing you're doing? And if the answer is yes, I would tend to lean on the keep going. And then if it's more of, wow, this is actually profoundly affecting me in negative way in my relationships with people in my life. And my team, you know, I don't really want to work with my co-founder anymore. And things like that, that I would lean on the probably don't do it anymore. Something that a lot of the folks that turn it around have in common is they actually do love their customers and they love their product. And again, if you in the Airbnb story, and you know it really well, but they really liked Airbnb. And they liked working with each other, and they liked the first host that they met, and they knew all their names. You know what I'm saying? Like, they were actually in love with their startup, even though it was going to happen. And so that's kind of genius signal that you're going is that you really, really love what you're doing, and the people you're doing it with, and you love your customers, and you love the problem. versus when you're just like, yeah, I could care less about any of those things. I'm just having a bad time. Harder to be encouraging in that situation, you know? And this is a fixable situation. You know, you can make it more like the thing you love, can't you?

If it's really going poorly here, if you're having a really bad time, it's no big deal. No one will remember that you that you shut down in your company, probably in 10 years or 20 years, like time. As long as you have integrity, as long as you're an honest person, as long as you handle yourself well through good times and bad, people will remember you fondly. And it's, you know, better. We have such a short life. There's only so many years we get to have our careers doing something that makes you miserable and the only reason you're doing it is to avoid losing face and you know when your heart is not going to work. I don't know. That seems like a pretty big opportunity cost on literally your life.

That definitely happened. And I think the story is the story of the winter 17 batch. And in the winter 17 batch, I funded something like, I don't know, 35, 40 companies in my group, so we subset them into groups. So it wasn't like a lot of companies, and I knew I knew all the really well, and founders can't help but compare themselves with other founders all the time about who's doing well and who's not doing well. And there was this one company, and in my group this batch, it was called the Beyond, that was their name at the time. And it was like a VR headset thing from these Stanford dropouts. And they basically showed up to group office hours, and we're just ashamed. And they're like, our idea is horrible. You know, we might want to shut her company down. This is like really embarrassing. Like they just, I had to like beg them to not give up basically. And if you would have asked people in the batch, what the worst company was. I think they would have said this one. Yeah, not cause like they were like bad people, but it was just like the founders themselves seemed like despondent about how it was going. And then finally lit up. This isn't the story, too. There was another startup also in my group called Cashew, which was this P2P for the UK, P2P Venmox, excuse me. and the UK and it was going really poorly also and not growing. And so if you just took this snapshot in time to know the batch of like who is definitely not doing well, it would clearly have been this beyond company and this cashier company. And so to capture the chase, beyond change their idea and got really excited about it and renamed to Brex and this was Brex, which is like a Decker corn. And cashier changed their idea and renamed to something called Retool. And so out of my 35 companies, the ones that objectively seemed the worst in terms of like it's everything is going bad were by far in retrospect the most successful companies in that group.

But that was really high tech. They wanted to do a really high tech startup. And so they were like, we're going to build a new VR headset. And they know they were good programmers, but they just didn't know anything about optics or the things you might want to be an expert in to build a headset.

Usually a successful pivot gets warmer instead of colder from what you're an expert at and somehow builds on what you learned on the prior idea. way and so in the case of Brexit was let's they had worked on a a fintech company in Brazil when they were younger and so I'm like you need to work more on the thing you know all about and not the thing you know nothing about. And that was what worked for them. In the case of retool, it was the same thing. They built similar internal tools, both at their internships, as well as at their cash shoe. They had all these dashboards they built to like operate their Venmo competitor. And so they knew a lot about what to build. In the case of post hog pivoting into their idea, they knew a lot about analytics and had strong opinions about it. And so it was much closer than what the original idea is. In the case of Zip, Rachel knows a lot about a lot of things and she knew a lot about like the crazy procurement process at Airbnb because he worked there. And so it was kind of like, I couldn't have it just like going home, you know? It's warmer, it's closer to something that you, and it never occurred to you that this thing you know all about would be a good idea, or maybe you consciously, like, I don't want to work on this because I'm burnt out on it. Like sometimes you have to, someone has to get bored of this barrier they have on why they don't want to work on a certain idea.

They started with something to tell your professor you were confused in class. It's like software that they solve to universities and then they ended up pivoting to something kind of like a mixed panel competitor after like two years and it's because they didn't they learned about how analytics works running their first idea. And then no one wanted to adopt their mixed panel competitor. And so we're like, we shouldn't make this JavaScript thing that you embed on your website. They can send events to multiple endpoints at the same time. So the way people would be willing to try our mixed panel competitor side by side with mixed panels, so show that it's better. And then they were like, oh, yeah, no one actually wants that. They just want this JavaScript to send events to different locations. And so there's no way those founders could have started with the final idea. You know what I mean? There was no universe where they would have made up the idea for segment because they didn't know anything about how analytics worked. But because they were grinding for multiple years and became experts on these things is a side effect of their earlier ideas, they had a book really good, unique insights.

Again, this is one of those where I like to give very bespoke nuanced advice on a case-by-case basis to the folks in YCE. But again, just to give you a preview of how I would think about it. I would look at how many more ideas the founder has on how to make it grow. Like if it's not going well and you're out of ideas, that is usually a good time to pivot. But when there's a, you know, you have like half a dozen or it doesn't really good growth ideas that you haven't tried yet. You try them. Like hey, give it a shot. Again, in the Airbnb story, right? They tried all sorts of stuff, including cereal and conventions, like they had a bunch of zany ideas on growth and they didn't run out of them. And so I think when you, I think when they're still gasoline tank on an idea, IP reason to stay at the course, and when when literally the founders like, yeah, I don't know, I guess. Maybe we should pay influencers or something. When that's the kind of ideas they're coming up with, that might be a better sign to pivot.

I think in the example of the zip founders, they were both such great experts. And, you know, I knew Regul really well. He actually worked with me at YC as a visiting partner. And so I was really close to Regul, and he'd done this market place called FlightCar when he was younger, which was, you know, raise a series B, he didn't work out, but it was a really cool company. I had a lot of confidence in his competence on running a business and executing fast and just having great instincts. He really knows the fundamentals and the problem was they weren't clear on what market to go into. It's still with me. And so I actually suggested to do something in their casing and this is a very bespoke. But my suggestion was if you start by looking at what companies are publicly traded and or owned by private equity that are large, and that also are hated by their customers. And to try to intentionally find where there's a noble big market within a comment, combined with the software is horrible. And they kind of did that. Like they basically found out about all this procurement software and what the state of the art was. And that was the prompt. Again, maybe he told you this. That was basically the process.

Yeah. I mean, I can't promise that we're shredder one. But again, in the very bespoke situation when we're jewel, it worked really well because he actually knew exactly once he locked in on that prompt. Oh, man. He ran a masterclass. You know, like they did, they did, they did a plus job.

Of course, like, sorry, yeah, we got to get Lou the shadow. Lou did an amazing job. I just didn't know Lou is well before he did YC, but you're right.

Yeah, I think maybe this pertains into what we see from applications and interviews, which is from where I sit, seeing everything people apply to why see with and what they interview with and whatnot. People don't, people all kind of have the same idea. Like basically, imagine your information consumption, where you're listening to the same podcast, Wing Wing, you're reading the same people on Twitter, you're reading the same blog post, basically you have the same information diet of all these other founders. And your friends will have the same people. Does it seem surprising then that you would all end up with similar startup ideas or similar philosophies on what makes a good startup idea? Of course you are. So this is the metaphor on cities is that if you just are following the same principles and have the same information flow into your brain, you're going to come up with the same ideas as their radios. And so the prompt here is to try to go more off the beaten path either from your personal experience, like in the case of Brax and Retool, or whatnot, there was no one else trying to build marketplaces for Funko Plots. Go deeper in your personal interest or experience to find something that just your exact peer wouldn't come up with an exact of the same way. And again, this is an example. I don't think other people were trying to build one key procurement software. That was not an idea that we saw much of. And so again, the prompt to people is try to mix up what your information diet is or what a reason to expertise you have. And my, well, versus just having all of the same thoughts in everybody else. And so again, let me give you one more example. A few years ago, startups around trucking were super new and fresh because no one was doing them and they worked really well. And then it became completely conventional wisdom to do like trucking related startups. Yeah, I'm not trying to disney one, but you'll see things that become fashionable really quickly because someone found success in this unfashionable space. And then it becomes fashionable.

So let me I definition it is only a carpet if it seems like it's not. Like if it's just a regular idea that is hard, that is not a carpet. The the weird aspect of what we call a carpet ideas and idea the lot of people come up with and then it seems like an unsolved problem and you get lots of positive feedback for right and you have a really good set of arguments that it's a really good startup idea. And that's different than a bad startup idea. You can when I'm trying to say a bad startup idea is like, I don't know, some of you that is obviously bad or something where you just can't. get any positive feedback on. But some of the most common carpet would be something like building an app to coordinate with your friends to decide where to go out a night or where to meet up with people, which is a really, it's coming from a good place. It's a good idea. If you ask your friends, hey, would you like an app for us to coordinate to hang out more so we can be friends? And I'm like, yeah, I would love that. But you'll get all this positive feedback from the world. And people have been starting that startup since like the 90s. And so you can validate it. But part of being a true carpet is that you can get good initial validation. Did you get what I made? And so anyway, and honestly, I worked on Tarkon ideas myself as a founder, which is a music discovery. This is something I did in my first startup. That was that. Music startups are hard and trying to be like, oh, we're going to fix music discovery. This was classic things where you could get lots of positive feedback and even get users to work on those things. But there are aspects of it that make it a very hard idea. So, is that me?

Did you remember when Forest Court clones was all anyone worked on for you?

Yeah. And all the Forest Court clones, if they didn't pivot out of doing what they're doing wouldn't have worked. So anyway, that's not a carpet. It's just something that's super appealing and a lot of people do it. And you can, you can kind of get validation. And that's why that's why it is a carpet is a draws you land and you get stuck. Because it seems like it's like a good idea and you get all this positive people.

Maybe my best advice here is for founders to put themselves in the shoes of investors and just imagine what their life is like and how if you are in their shoes you would make decisions. And so given this framework, a lot of investors just don't make that many investments and has for what we talked about earlier, life is short. And so there's lots of things that an investor that in their hearts thinks is like pretty good. And look, I like this person and I like their pitch. But I only am gonna do with you investments. And so even though I really like a lot about this, I'm gonna say no. And I often think that founders think that there's some secret truth that's being held from them on why someone says no or like they're like they want more feedback. I need feedback. That's like, wow, the feedback is we didn't want to invest. And it really is just that. And so I think if you put yourself in the shoes of an investor, I've like, hey, I only could do a few of these a year. I'm very limited budget. They're really just trying to pick that things that they're either personally most excited about or things that they think could be truly phenomenally big in some way, or, you know, I know you do investments too. So it's it's It's that you only get so many shots as an investor. And so anything that doesn't seem like, this is the one, this is the one I want to do is a no. And that that's actually why they're saying no versus this you did, you know, oh, you, you've had a bad zoom set up person. You know, oh, we didn't, we didn't like what color your shirt was. We said no. I don't think that's, I don't think that's how this actually works, you know.

Yeah, because again, and if you ask them, well, put yourself in the investor shoes. Wouldn't you be making decisions the same way? Usually founders are like, yeah. But like, if you do that exercise, a lot of this starts to make way more sense.

I think it really depends on what stage you're investing at. And it's absolutely critical the later stage you get. Right. If you're going to invest in a very high valuation, it is really important. The earlier you go, the less it matters, and some of the most phenomenally good start-ups, if you were really panandic about it, the Tam would be tiny. Like the Tam of Uber would be like nothing, right? Like how the Tam of Airbnb would have been nothing, the Tam of I was a, I funded razor pay, which is I think the largest payment processor in India and the tam of that was tiny because no one was using credit cards in 2015 in India. So you had to believe that the size of the credit card industry in India would like hundred X. What gives what happened? You know what I'm saying? And so, so I'm not saying that the, having a large market someday doesn't matter, of course it does eventually, but trying to be super pedantic about market size when it's like a pre-seed company or someone applying to YC is not, you know, it's just not something I put a lot of thought on it. Again, what not? Ooh, what's the term of the collectible, funky pop industry? I don't know. I don't think it's that big, man. I don't know if you do that now, so this one you invested, but I, you know, things pretty small, but I wasn't worried about it. That was like the last thing I was worried about.

But, and I'm not saying it's not important. I just, it's not in the things I'm worried about. It's like, hey, how do you get users? Hey, how do you grow things like that? Like, are you making something people want? Those are the things I'm really worried about as opposed to, ooh, I ran an Excel model and I'm worried this might not be a big enough tam. That's, that's not the top of my list.

Yeah, or then you're asking them to believe a crazy leap of faith that, again, they get say, well, it's theoretically possible you'll be able to sell more than Funko pops. And I understand that that is your pitch. But I have other opportunities that have less risky. You know what I'm saying? Like, it's not because a lot of founders make the argument that the Tam is big. And you can say, wow, that's a really interesting argument. And I have no ret, I have no, you know, I'm not gonna argue with you about it. But no, I'm not going to have that. And so again, it's hard to get someone to engage in a debate about Tam, even if you have, you know, even if you have some proof points, ultimately a lot of investors just don't like that risk. Fair enough.

I don't remember the specific office hours, but I understand the question, and I of course remember Lenny. I think that the advice that he's referencing here is just how important it is to not over delegate and for the founders to stay close to things, as well as watch out for the trap of hiring. super senior people with fancy resumes really early to start up. I think that's what he's referencing there. And again, this is definitely one of those very basic things that we find ourselves repeating a lot. Um, where they're like, yeah, yeah, I get it. Like, don't over delegate. We get it at Dalton and then like two years later, they're like, wow, we over delegated. We need to we need to go clean that up so that is probably the best product advice and the folks that are really great at product the founders that are are always deeply in the weeds on product and still care a lot and are still talking to customers no matter how late stage it gets again. I'm sure you experience this an Airbnb culture, but you know you can't delicate caring about your users and you can't delegate caring that the product is great that is so critical

What are the, yeah, I think that you get poached often by investors to hire executives or scale the team or we need, you know. We need, you raise all this money, you got to spend it, you know, we got to, you got to show your series about growth and building a world class organization, whatever, stuff like that. And so you end up with super nice people, which super shiny resumes from big tech companies. Oh, wow, they did this amazing thing at Google. And then you hire them and then you wake up one day and you're like, oh, wow, everything went wrong. Is that really anyone's fault? It's just that you, you hope, you took your eye off the ball and this is what happens to, first time founders want.

I think if you just hear a lot about your customers and you care a lot about the product, your instincts are pretty good on what to spend time on. And so for example, spending tons and tons of time, like hanging out with investors and networking, probably not, it's probably the thing that I would be cutting. You know what I'm saying? It's what we talk about earlier. If you really love what you're doing, no one needs to tell you how to reprioritize your time. Your intuition will be correct on what you should be spending all your time on, which is Being obsessed with product.

I could clearly agree with what Gustav said, but to look at this from a different frame, I think it's that the founders lose hope. And when you and your heart is like, yeah, we're failing. Like once I can see it when I'm meeting with a founder when they've resigned themselves that they're failing. Versus when we got one more move in us, we got one more try. Like you can see in their eyes when they feel like there's more ideas with some last-age, hell, everything. It doesn't always work, but it's almost like you have to not accept that you're going to fail. And as long as you don't accept that that's going to happen, there's usually a lot more moves you can try to save the company. What maybe it's to get profitable, maybe it's to like do some other as anything, maybe it's, you know, to launch a new product. And so it's pretty rare. I would argue that the cause of death is that they had lots of firepower and they were feeling really positive and they just ran out of money. That's actually like more rare than founders think. Um, it's much more common that they still have some money left. I'm not saying a lot, but some money, and they're just like, yeah, I'm done. I'm out of ideas. I don't want to do this anymore. And again, fair enough, you know, but you know, I'm saying like, I think founders are afraid that they're going to run out of money, and that's why they're going to shut down. And it's way more common that they like, their idea doesn't work, and they have a big fight with their co-founder, and then they can't agree on what to work on, and then they just like, I don't want to do this anymore, and they should have. That is the most common cause of death is something that sounds like that story.

Yeah, you're out of it. You're like, I'm just, I'm done. Like if you know in your heart than you're done, you don't have to keep going through the motions. No one benefits.

I would argue that. If we define it, is the company had a near death experience where it was going poorly, and the founders seriously wondered if it was all going to be over 100% of the time. People go through that, you know, with the founders like, yeah, I guess we've done, guess we should pack it in. And at least you feel that way in some way that you're starting to journey, and everyone goes through that. Um, any of those gradations, people that actually truly got down to very, very hard situations, it's still a high percentage, like 50%. I mean, you can ask founders, there's a lot of founders that come this close to it all being over and through a sheer will kind of just keep it going, you know.

Yeah, I think what I talked to to aspiring founders about this lot. They're like, yeah, I talked to customers. We get a cool, and I'm like, cool, well, how many customers you talk to? And they're like, wow, and they get really quiet. And so I think this is one of those things like, hey, you should have a healthy diet and exercise every day or whatever, where people don't know it, and that doesn't mean they do it. And so I think to start with, you have to get out in the world and talk to people in person. And you can't just hide behind your keyboard and call that talking to customers. Right. And I think a lot of folks, the inclinations are to like, you know, build a landing page and buy some Instagram ads and try to get people to sign up for something. And again, maybe I maybe that's something, but I think a lot of the reason people do that is they, they're just shy and they don't want to put themselves out there because it's a little awkward to go talk to people. And you kind of have to sack yourself up to go out in the physical world, get people to meet with you, get them to take you seriously, show them a product you're building. And so again, it'd be very tactical here. You could do a self-assessment. In the past month, how many in-person physical meanings have I had with potential customers? Maybe you've done a lot, I don't know, listener, maybe you have, but, you know, it's shocking how many companies I talked to that they're like, well, We're focused on raising our pre-seed round before we talk to customers, like things like that. And again, I think the core thing going on is just social anxiety and like looking stupid. And I think you just gotta get past that. You know, you just got to start doing it until it doesn't feel bad anymore. But, you know, think about how stupid the Airbnb founders must have felt they were like, hey, you should run out of your house and I'm going to come and sleep in your house and here's an Arabic. Like it's the whole thing is a little awkward, right? So you got power through the awkwardness of talking to people. And once you start doing it, it's actually kind of fun. And so once you get used to overcoming this awkwardness, I think people do much better at talking to customers.

Yeah, I don't know if I know a good number. I think it's look at your calendar and there should be, you know, 20 or 30% at your time that the calendar says something like customer meeting customer call, like meeting with food, meeting with this person. And when the calendar is not that or it's all, again, what you're actually doing is just buying ads to try to validate your idea. I don't think that's talking to customers. I think that's something else.

Yeah. And again, it depends on the idea space you're working on, some are more or some are less. So yeah, it should be a fair amount of time. And nothing substitute for an actual conversation versus just staring at analytics dashboards.

Well, again, if you, if you, some of the companies we talked about, I mean, for Brex, they were just talking to other people in their batch and that worked extremely well. Same with Regul as they just sold it inside of the YC network. I think with zip, they were just beasts at getting companies on calls with them to ask them about procurement. And I think they had way more than 20% of their time. Like, when you looked at their calendars, oh, man. I think they were doing, they were talking to customers a lot to build their first product and kind of pre-selling it before they built it. Same with postdoc, I guess that's a different go to market. They launched this open source thing to start with and it was They, their calendars are filled with people that were trying to implement the first open source version of post hog or so excited about it. And people on Hacker News were excited about it. And they had this like huge influx of people that were excited that post hog exists and had lots of feedback and by reports, like it wasn't as positive, but they never lacked for people that wanted to talk to them once they launched that, which was very awesome.

Oh yeah, there was a number of games. They were just grinding at this and so yeah that was that was very good.

The call us in install is what often happens with customers is that they say, yes, I want to buy your product and then they do not implement it. They just go quiet. They're like, There's no implementation. And this is very bad if you're selling software to someone. If they never implement it, they're going to turn. And you're not, you know, you basically failed on the on the one yard line. Okay. And so they kind of developed this tactic to be like, oh, well, you know, I'm at the neighborhood, you know, I'll drop by your office to help you implement stripe. And kind of just like create again, it was a little awkward like we talked earlier, but you would be like, yeah. I mean, I'm in the neighborhood like how about a draw by and then they would show up and they would be like cool cool. Can you like pull up your text editor? Oh, yeah, cool. All right. Hey, can I can I can I drive? Can I have the keyboard and they would just sort of like install stripe into the customers website? You know, smiling being like charming charming guys and they're like, oh, that's cool. Okay. Well, like can we like roll out the website now and they basically would kind of not go away until you finish the implementation of stripe. And like again, it was actually helpful because they were doing all this white glove service to get implemented. That was very effective. And I think the takeaway from that story is even when you get a yes or not actually done with sales, you have to finish the last mile to get the thing implemented. And they were very good at that. And it was an incredible story.

Yeah, I was an early, uh, strength customer. My startup. And yeah, Patrick would like, um, we used Google talk at the time. Patrick would be sending me messages like on a weekly basis, just like checking in. And so again, it's funny and how successful these folks get. But yeah, Patrick was very hands on with all of his customers and was extremely available. Um, like, I can say that because I was one of them.

Oh, surely not. It's just, you've got to do, like if you want your start to work, this is just what you got to do, you know, on the territory.

I don't think personality types matter as much. I've seen very quiet people, very extroverted people, very, you know, you name it. I've seen all sorts of personality types. So for me personally, I don't think that there's a right, well, I don't think there's a personality type that people should copy. He'd be like, I need to be like this person, you know, I need to be like Steve Jobs, I need to be like, Elon, you know, I don't really believe in that because there's just so much variation. Like Tony from DoorDash, it is so different. Then a lot of folks in Regillal is so different and Grant from whatnot. These are all very, very different people. Patrick is a different kind of person, Ryan from Flexport, like these are just very different personality types. But the thing that I would argue folks that build really big companies have in common is they just really want it. and they really believe in themselves, and they really believe they can make it work. And then there's somehow deep in their internal psyche, there's something that's like, I'm the one. And I won't take, I won't accept this not working. And even though objectively, there's all this data coming in. This isn't working. This is bad. You know, my employees want to quit. Like, executive is wanna quit. You know, whatever it is, somewhere deep down in there, they're like, oh yeah, I'm gonna make this work. This company is gonna be big and they just believe. And it's almost like that internal gravitational force inside of them is so large. It kind of warps the world to bend to that will. And people start to believe it because they believe it so much. And they convince their employees to believe it. And they convince everyone around them that this is going to happen to them. And so again, this is not a personality treat. This is, I'm arguing, this is like a core belief.

Well, I think it's internally, they're convinced. I mean, I'm not sure it's external, but in this is a big buck. No one has this at the early stages when they don't have a good idea and they don't have customers and like it's objectively not working. And so again, I know a lot of founders like, well, I don't feel that way. Oh, no, maybe I'm, you know, maybe I'm an imposter and I shouldn't do a start. Well, of course, you don't feel that way if you haven't talked to any customers and haven't built a product, like, you know. But what usually happens is you pivot to a good idea where you start with a good idea that you care about, and customers you care about, and you launch it, and the better the product does, the more obsessed you get with your own company. Like, I think in the case of Stripe, I don't want to, you know, tell Patrick's story for him, but I recall him saying it at some point. He wasn't as sure that Stripe was going to work until they were like a year until end. And then once it started working, then he, you know, they really believed in it. But it wasn't like he woke up one day and like, strike this thing. It's going to be, it's going to work. I think I think you build conviction and you have this like network effect virtual cycle where you get work conviction, the more customers reflect back to you and data reflects back to you that you're on the right track.

Yeah. And so we put out the request for startups just to inspire people to maybe apply with ideas that aren't the ones that we always see. It's not like prescriptive. We will only fund ideas on those. It is not that at all. It's just sort of, remember when I talked about earlier with information diet, we're trying to mix up some of the information diet about what kind of ideas people might be contemplated. They don't curve. And so a couple of the ones that we put out there, one of them I made one about ERPs, which is enterprise resource planning software. And I did that because I get so few applications on that. And they're usually pretty good. And I just would love to see more people look at that and learn about what the ERP's are, just because it's so rare that people apply with that. And now I'm a feeling we're going to see a lot more applications working on that. And so it kind of worked as intended, which just introduced this idea space to founders that didn't even know what an ERP was. Now they'll go learn about it. Another one is, you know, we like to fund open source companies. And so that's one of the RFS's where, you know, If more people apply to YC with open source ideas, I think we'd be pretty excited about that and that might maybe founders didn't realize that would be something we would want to find. Same with space companies. Yeah, we've had a lot of success with space companies. Several of the folks that are actually going to space right now that aren't space X or YC companies. And so I think sometimes founders feel like those ideas are too bold and ambitious. But no, you know, I love more people apply with space companies. And so think about it that way, we're just trying to put out, we're trying to plant seeds of ideas faces that perhaps someone subconsciously filtered out is what might be a good start up ideal. And, you know, hopefully that creates a new set of start up ideation for the person.

Right. So these aren't like, oh, we've never invested these before. It's more like, hey, it'd be cool if we saw more applications along these lines. It would be nice because it currently feels a little bit under You know, there can be more stars working on this stuff.

The software to connect all these business systems is usually pretty brittle in janky. And there's been lots of good startups founded to solve this problem. I think there's still a lot more room for improvement and likely LLMs will improve. But we'll probably be able to create better and better blue. So all sorts of software systems can talk to each other. And so again, very broad idea. But yeah, I think we'll see a lot of very successful companies where that's the kernel of the idea they start with. Awesome.

Back in 2003, being in Silicon Valley and being in Eastern and Startups, they're just It was a really small space. There just weren't that many people that were into this stuff. And so I remember I called the emails read Hoffman when LinkedIn was like 12 employees and he just responded and he's like, oh, let's have lunch. It wasn't, he was just like a guy and everyone else that was doing, I guess you could call it social networking, that was sort of the people that I knew. There was a few conferences you went to and there'd be like 30 people there. It reminds me of stories about the Homer computer club. I'm not saying this is cool, but when I read stories about when it was like when the Homer computer club existed, you get some very small number of people that all knew each other that were real weirdo outsiders that were into this job. Okay, and so that's what in the post.com boom they hear a straight up scene. That's legitimately what it felt like. And so I didn't think a lot about the personality traits of these people. They were all, again, they were all pretty different people. But what they had in common is the folks that are now the really big names. Just had a lot of stay in power. Right. So when I met Sam, he had dropped out of Stanford's work on Luke's, which is hilariously a way to find people around you through hangout with. Interesting theme here. He was cool. He was this really young guy. And he just kind of did that. wasn't huge and then he got into other stuff and ended up working at YC and ended up getting involved in hard tech and is now kind of like reinventing himself as the the big mind behind AI which is which is awesome but if I think about who he was back in the day he was yeah it was like a 23 year old working on a thing for feature phones to find friends in your neighborhood The customer was boost mobile, but you can go find the commercials for loops that boost mobile put out on YouTube. There's actually pretty funny. Have you seen those garages? No, but I'm going to go check it out. Anyway, it's pretty funny. So yeah, like that's the real story. And then yeah, I remember I was in downtown Palo Alto at the time and you Some of the folks I was friends with were friends with Sean Parker, and this is actually before Sean Parker went to Facebook, he was part of Napster. And so one of my friends was like, oh, we need to get my friend arrived at the airport. And so I ended up giving Sean Parker arrived at the Oakland airport. And again, what was he like, I don't know, he just basically said in the back seat on the phone the whole time. But I begin my point is I wasn't like, wow, these are going to be really big successful people that one day will be important in the world. It just felt like a bunch of nerds that really liked the internet and computers. Kind of doing things that they were interested in. And we're just obsessed with this. Like there was no, they weren't like, gee, should I move to New York? Oh, gee, should I maybe I should go to law school? Like he was people that were very bought in to to stain working on internet companies. And so you'll see these folks just reinvent themselves multiple heroes, right? Okay, like read-off and right he was worked a PayPal, right? And then he did LinkedIn and then he was like a VC and like like he's kind of had like all these different heroes where it's the same person, but it's it's almost like a different figure, right?

Well, it's kind of the same story. Okay. And the way that it's the same story is My, my second company, um, basically, I sold my first company in my space. It was the music company that I worked on and the, they recruited a new CEO, um, who was formerly the CLO, a Facebook called Owen Vandotta. So again, colorously part of the same circle of people and Owen was like, okay, we need to fix my space, you know, River Murdox. got the juice. He wants me to fix it. We're going to turn, we're going to do it. So come up with some ideas. kind of the best idea that I could come up with at the time was doing something around a mobile photo sharing, something kind of like Twitter, but for photos, and I figured with my space as user base that would work pretty well. This was like in 2010, so it was right as the app store was getting big, and I had a lot of success in the app store with I name. It was one of the top music, top downloaded music apps, and so I was like, wow, the app store was really good, and I was really into apps being the thing. And at this time, Facebook was a little early on. They were trying to do cross-platform mobile apps, if you recall. And then their apps were not great. This was, again, ancient history. And so that was sort of like my plan. And then immediately, a Juan Venato was fired. And so I didn't even really get onboarded. And so I just like left. I think I worked at my space for like a month because the person that acquired my company got fired. And there was like, I think the whole workshop got fired. So I don't even know. I didn't even know who to talk to. It was really great. It was a great experience. You know what I'm saying? I wasn't really sure to my point of contact was at that point. I don't think they knew either. It was just a match. Just Tom. Just message Tom. No, no, he was long gone because I know you're kidding, but no, like literally I don't know who was left at that point. Tom was long gone. No. So I was like, well, I should just do a new startup, and I should work on something like what I was thinking about. And I ended up, yeah, starting the company, and quickly was able to raise an angel around, because people remembered my company from the first one. And the major investor we had was Andrews and Horowitz. This is one of their first board seat investments, like Mark and Jason was on my board. You know, again, that I have my own set of stories about that, but it was interesting experience. And we launched it, and I think we've got half a million or a million users, like you can go find TechPrint Charterals about it. And it was, we launched an Android N iOS, and it was mobile photo sharing, and actually it was growing pretty well. And then what happened is there was another portfolio company called Durban, which was originally a forceware clone that was built by these two guys. And they decided to pivot out of that into which was pretty similar to my thing, you know, again fair enough, I should tell this works. And they did something smart. Again, this is me talking, I don't know what their version of story is, but what I think they did that was smart is if you looked on the paid app store charts, the number one app was hypnotic. And hypnotic costs money. And what do we know about what people want? They want things that are free, the cost money. Right. And so they basically built a pretty legitimate knockoff of the hypnotic filters, combining it with this social graph, and they launched it in a pretty quickly took off. So of course, this is Instagram, right? And so it took out really quickly and like, yeah, that was like a wild experience for me to be like, oh, this seems familiar. And And basically because Anderson Horowitz, like, invested in my company was on the board, even though they were investors in Instagram, that was like a conflict that they didn't do the deal. And then for whatever reason, this became like a big source of like Silicon Valley gossip, which was like, wow, I can't believe this happened. And so it was just a really weren't experienced for me as a founder to be right in the middle of something that became culturally so important.

Oh, they don't actually think they care. I don't think they held it against me because like, what did I do wrong? It's true. I started a company. Like, you know what I'm saying? Like, obviously there was some frustration, but I was like, I was a guy who had a company. that they invested in. I don't know. I didn't feel like they, I didn't feel much higher for them. I think it's, this is just how, this is how life works.

It'll, I don't think so. I think this happened, I think this happened multiple other times.

Yeah, I think for contrarian corner, I know where I would start, and I think it's relevant for your listener. Like, I think this is relevant to this. And so, and maybe, and you could argue, this isn't contrarian, but here's, here's what I think. I think growth and growth hacking and doing all this analytics, AB testing stuff is a total waste of time for very early startups, and that One of the weird things about having lots of startup advice on the internet. Again, this is one of the reasons we started making videos at YC is a lot of the advice was cater towards later stage companies. Like, oh, here's how you set up your board and here's how you motivate your sales team. Like, it was all aimed at series A series B founders and not for seed stage founders. The problem was seed stage founders would consume all the later stage advice and get really confused. And so the anti-pattern I see is there are lots of founders that are very friendly with your awesome work, which again, I really recommend. I like it. But when you have no customers in your reading, you know, Lenny's guys on how to set up split testing and how you did growth at Airbnb, oh man, that is so dumb. That is so not helpful. And so you see this inclination away from getting a first customer, getting one customer, and talking to that person. Instead, they have like, all this really complex growth hacking theory. I think this also happens if you work in big tech where your product already has scale. And so, you know, if you work at Facebook and your job is to launch new little features, yeah, of course you should make heavy use of analytics and abtesting the split testing and future flags. Like, yeah, yeah, yeah, make sense. When you have no users, What are you doing? So do you think that's contrary and what do you think? I'm just trying to argue this advice applied to a start at this too early is like actively not helpful.

I mean, again, I'm not saying you do anything wrong, but imagine if The OG Airbnb founders took all of your current advice and applied it when they had like four users and then new their names. And they were like trying to run complicated growth hacking split test things.

I think it depends on the idea. I think in the case of whatnot, they obviously, it was consumer app and they needed to get users. But they were very intellectually honest on the metrics for how you get a marketplace off the ground and they didn't just go dump all their money into Instagram ads. And they effectively needed to focus on buyers and on the buy side and build momentum on the buy side. They really understood marketplaces. And so for consumer, I think it's having a sophisticated view of how you get the consumer company off the ground. I think if you look at the Facebook story, then getting 100% penetration on the Harvard campus first, instead of launching overall. Good. Good strategy. Would recommend that strategy. So again, the way to extrapolate that is know what your pumps are, of what companies you, your archetype is, and then look at what they did on the zero to one, and ignore what they do today. Right? Don't pay attention to what Facebook does today. If you're a brand new startup founder, pay attention to Facebook when they were getting their first thousand users. What would those tactics?

I feel that turns of stuff. Is it investor? I make lots of bad investments as well as good ones. I think in my startups, I pivoted a lot and a lot of things I did didn't work out. And so again, I just gave you a specific story with pickleas, right? You just heard a specific story there. I guess what I learned is that you just can't let it get to you too much. And you got to keep going. And that if you keep going, no one really remembers those as much. And it doesn't really define you. And it shouldn't, you know, fear of failure, shouldn't dominate all of your thoughts. And instead, you should use your energy and positivity to keep trying to do good work, right? Because back in the day, if I would be like, well, you know, I guess starting chart for me, I guess tech isn't for me. I wouldn't have had a career doing any of this stuff. I wouldn't be working in YC. I wouldn't be advising companies, right? So I always had to have in my life a lot of optimism and energy and use that energy and motor to keep me going and it served me really well, right? Even if lots of stuff I tried didn't work and continue to not work, you know? Again, obvious stuff I know, but yeah, that doesn't mean it's not true, even though it's obvious.

Yeah, I guess the final thought is If someone wants to do a startup and doesn't know where to start, just to give you permission to talk to potential customers and try to presell something before you write code and have those conversations, I think somebody folks don't know where to begin on starting a startup and my tactical advice is start doing customer validation. First, versus building a PowerPoint deck versus trying to raise money versus like all these other things, I think a lot of people don't use that strategy. And basically, if you find people that are really excited and you do line up customers, that is a great green light that it is time to do with startup, right? That can get you down the path. So yeah, I think that's my final question.

Build it once you have some conviction and they're like, oh, I think I would have a customer. I think at least one person would use this thing. I want to build this one.

I think a lot of founders were afraid of doing sales and they don't know how to do sales and they think they need these really experienced sales coaches and they need all this training and I'll be like, well, go on to Amazon and find the most popular sales books like Getting to Yes that everyone reads and just read those and that'll get you 80% of the way there. And I'm saying that they want to hire someone for millions of dollars to give themselves coaching. And I'm like, well, have you read these really basic sales books? And they're like, no. And so I think as a low cost way to go into Amazon, getting to yes and a few other of the top sellers, I forget the names. And just read those. And that is your crash course on how to be great sales.

This may be worth being the, what you're asking for, but I like to watch old shows a lot, and so I keep rewatching like the sopranos and the wire, and it always is different to me every time, and I, you know, things like that. I think here's a silly answer. I've been really enjoying watching old episodes of Colombo, which was a television show from the 70s and 80s. I don't know why. I don't even know if this is instructive, but it is, for some reason, I'm really into that right now. It's very old episodes of Colombo.

I guess, I don't know. It just feels like a time machine to a different time when I watch these things.

Fair enough.

Well, again, I guess I'm not trying to give you an answer where I sound super clever.

I don't really believe in trick questions, and I think I just start with, hey, so tell me about what you're working on, or what if you learn since you started? The amount of these are trick questions, but I think you can get the most honest and interesting answers by asking them most straightforward basic things and having that be like a blank slate for their answers to drawn. You know what I'm saying? So I like the most simple props and let them take the conversation where they want to go.

I think evidence that they actually have thought about it. Like, as per I said earlier, that they've done research, that they have opinions, that they care about it, right? Sometimes when people answer questions, they're like, you can just tell that it's really superficial, and they haven't put much care or soul into their answers.

Like, we're arranging my Apple Watch and all that good stuff. Like, I've been a fan. There's a Yseke Lenny called CyFox, SIPHOX. I just signed it for it and they do kind of home blood testing. And basically, I'm trying to sync that home blood testing thing into all my other devices. I think, I don't know, I really enjoy all the stuff that Apple and other startups are working on and Yseke companies are working on around personal health. And so yeah, those are products I'm into.

It's this little tiny needle, it doesn't hurt at all, and it takes a few drops of blood, and you do it at home, and you mail it in, and then it has all these blood tests. It's actually really cool. Yeah, and that's, I just discovered that it was one of those cases where I saw it, I saw it, and then I later was like, oh, wait, that's a YC company. Like, basically, I became a customer, and it was pleasantly surprised,

Yeah, it really rose off the tongue, right? Yeah, that's where the end of it.

Just check in with yourself that you're having fun. And that you enjoy what you're doing. And if you don't, you should probably make a change. Whatever that is, and again, if you're a founder, you're in control, right? You can change your own company. But I think a lot of people go through life and they don't ask themselves this question, like, am I having fun? Am I enjoying this? So I value you when I'm spending my time on. And I think that you just can go back to this over and over and over again. And it's a good prompt on how to decide what you do with your life.

Yeah, I'm not really enjoying this. And then trying to say, well, how can I fix it? Having that conversation with you? Yeah.

It depends. Some of the episodes are more for folks that already have a startup and they're dealing with like problems. I don't know, some of the episodes about investors or or things like that. It's very clear that the audience for those is current startup founders. And there's a lot that are just more life advice, how to make decisions and think about. And that is, those have strangely become very popular and got a lot of views with non-startup founders, which is a pleasant surprise. And so I recommend those for folks in the audience that are not currently started founders. I don't know. Life tips from top founders. I think it's from billionaires is that one. Yeah. Yeah. I think that was pretty popular. So what I'd be looking for is diagnosed in my occurred founder and I have founder problems where I might just looking for general philosophy type questions and I really like those philosophy ones. We have one for high school students and it's aimed. The audience is here's advice for high school students that are interested in startups. Here's some tips that you should be thinking about. Again, pretty narrow target audience, but I love that episode because we're really trying to speak directly to that audience.

I am on Twitter slash x.com and Dalton see this by username. And also my LinkedIn is pretty good. It's pretty popular. I don't know. Just search for my name on LinkedIn. And yeah, I love to see you all there. And then how can folks be helpful? I mean, honestly, it's just great one folks want to apply to YC and you would start up and so feel free to dive into other videos and apply to YC. And something that's really special about my job is I get the privilege of getting to find companies that they already know me from videos and they're shocked. that I'm exactly the same. Like effectively, they're like, wow, you're just that guy from the videos I've been watching. And it's so cool that you're just exactly like you seem in the videos. And so basically, yeah, if people like what I have to say in the like the videos and apply to YC, you'd be, I would love to sound their company.