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

0:00 Seeing everything people apply to YC with people all kind of have the same idea. One of these themes is simple pragmatic advice. Sell shit, make money. One of my mantras 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 tar pit ideas. 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. Recently you put out a request for startups, twenty categories of ideas that YC wants to fund. We're trying to mix up some of the information diet about what kind of ideas people might be contemplating. They are currently. 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. Are there other patterns you find across startups that do well? There's a lot of founders that come this close to it all being over and through sheer will kinda just keep it going. Today my guest is Dalton Caldwell. Dalton is managing director and group partner at Y Combinator.

1:00 Where he's worked for over ten years across twenty one different Y C batches. Including working closely in the earliest days of Instacart, Retool, Brex, Deal, DoorDash, Webflow, Replit, Amplitude, Whatnot, Razor Payne. And twenty other unicorns. Prior to White Combinator, Dalton was the co-founder and CEO of IME, which was acquired by MySpace. And co-founder and CO of App Det, which was an early ads free competitor to Twitter.

1:27 Dalton has seen and worked with more startups than nearly any human alive. And in our conversation, we get incredibly tactical and deep on the startup journey. Why it all comes down to simply not losing hope and not letting your startup die. What to do when your startup is struggling and how to know when it is time to give up. What makes a great pivot and signs it's time to pivot?

1:48 Had actually talked to customers. That's why every single startup goes through a point where they feel like all hope is lost. Why investors say no to startups? What most often leads to startups failing. Why you need to avoid overdelegating early on?

2:02 Plus, startup ideas that you should avoid, and also twenty ideas Dalton is looking to fund. Also, so many great stories and lessons. This episode is action packed. With that I bring you Dalton Caldwell after a short word from our sponsors. And if you enjoy this podcast, don't forget to subscribe and follow it in your favorite podcasting app or YouTube. It's the best way to avoid missing future episodes.

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4:38 Dalton, thank you so much for being here and welcome to the podcast. Yeah, thanks so much, Lenny. I'm really excited to talk to you today. It's gonna be great. So to prep for this podcast interview, I asked a bunch of founders that worked with you during Y C What advice you shared with them along the journey that was most transformative to the way they think about product, the way they think about building their startup, the way they operate? And there's a bunch of themes that emerge and I'm gonna touch on a number of these themes.

5:07 One of these themes is just how often you get to like very Simple pragmatic advice and how much of your message is just like Sell shit. Make money. Don't run out of money.

5:17 Why do you think founders need to hear this advice, which is seemingly Simple and obvious. Have you ever seen um And and like NBA basketball or college basketball where they have the coach mic up.

5:30 And it shows what they're actually saying in the huddle. Mm. You ever listen to what they actually are saying? They're like Okay, we we need to really

5:38 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.

5:48 Like if you listen to what Tiger Woods is saying to his caddy It all sounds like pretty mundane stuff. They're not it's not like what Tiger's Tiger Woods is talking about with his caddy is some You know. Impossible to decipher jargon.

6:02 It's like yeah, you really need to keep your head down on this one. It's things like that. And and I think the reason This is true is that Even if you're in the the best in the world. being coached and being reminded of the fundamentals and basics is what puts you

6:21 In the right mindset. And the 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, basically doing anything that's really hard. Um psychologically. And so yeah.

6:34 Yeah. One of my mantras is just just don't die. Just keep your startup going. Just keep going. And I say that over and over again.

6:45 And and honestly That is often what people tell me is the most impactful thing I say. It's not that I said some ninja Five D chess move that they never would have thought of before. It's just the constant affirmation. That continuing to keep going and doing high quality reps.

7:02 Is the game. I know that you'd give a talk that's exactly called that how how not to die. Just to pull on this thread a little bit more, what is what is the general advice you share there for people that Also don't want to die. The way to summarize that

7:16 Is if you look at all the startup stories that we have at Y C and all the companies we funded over all the years. The underlying the Is that rationally the founder should have given up at some point.

7:31 And so again, let's talk about Airbnb, obviously something you know a lot about. So Wait. They probably should have shut down like three or four times. Before they got into Y C.

7:41 It objectively wasn't working. They were basically ruining their lives. They were disappointing their parents. Everything. Was wrong.

7:50 And it was it was a purely irrational act. for the founders of Airbnb to keep working on their goofy startup. And so and again that's just one story. If you look across the Across the portfolio of Y C and non Y C companies. There has to be this irrational

8:09 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?

8:27 And so that's that's that is the theme, that is the 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 have this job, the more I really, really believe this is true. What's your advice kind of on the flip side of that, where There's a lot of startups. Especially these days that are just super struggling have been added for a while.

8:47 their mental health challenges They're really They'd be very sad if they had to shut this thing down, but often it's probably the right move. What's your advice to folks of deciding okay, actually does make sense too? Give up in this case.

9:01 I think this is a nuanced question and it's hard for me to say something on a podcast that'll actually be useful to people, but Here's here's a couple of thoughts. One Are you still having fun? Do you still enjoy doing what you're doing?

9:16 Do you enjoy spending time with your co founders? You know. Like, is this actually a fun thing you're doing? And if the answer of it is is yes, I would tend to lean on the keep going. And then if it's more of wow.

9:29 This is actually profoundly affecting me in a 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. Then I would lean on the probably don't Do it anymore?

9:42 Something that a lot of the folks that turn it around Is they actually do love Their customers? And they love

9:50 Their product. And again, if you in the Airbnb story, again, you know it really well, but They really liked Airbnb. Like and they liked working with each other and

10:00 They liked the first hosts that they met and they knew all their names. You know what I'm saying? Like they were actually they loved their startup. Even though it was going bad. And so that's kind of to me a signal to keep going is that you really, really love what you're doing and the people you're you're doing it with, and you love your customers and you love the problem. Versus where you're just like yeah.

10:22 I could care less about any of those things, I'm just having a bad time. Har 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? Yeah. This is actually very practical and great advice. Like this is something people can sense. Okay, am I actually enjoying this? Do I want to keep doing this?

10:41 Versus like man, such a drag that I have to keep running the startup. Is there anything you could say to folks that are just like, I can't stop because it'll feel like I failed? If it's really going poorly or if you're having a really bad time. It's no big deal. No one will remember that you That you shut down your company probably in ten years or twenty years, like time. As long as you have integrity.

11:02 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.

11:11 We have such a short life. There's only so many years we get to to 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 in your heart it's not gonna work. No, that seems like a pretty big opportunity cost on on literally your life. Right.

11:30 Yeah. That's exactly what I tell founders all the time. Life is short. There's no need to force yourself to work on this. Yeah. And I really like your point of just like is it still enjoyable? Do you like working with your founders? Kind of following the s thread of the struggle train a little bit more. One of the founders of that was uh that worked with you during Y C, uh his name is Danny Alberson shared a story. How during one of the batches of Y C, some but one of the founders.

11:55 Raised. What is wrong with our batch? Everyone is struggling. Nobody is doing well. What had we done? What have we done wrong? And you shared a story uh about Brex that made everyone feel a little better. Can does that ring a bell and if so, can you share that? Definitely happened. And I think the story is the story of the winner seventeen batch. And in the winner seventeen batch.

12:15 I funded something like I don't know. thirty five, forty 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 of them really well. And Founders can't help but compare themselves with other founders all the time.

12:29 about who's doing well and who's not doing well. And there was this one company in in my group dispatch. was called The Ont, that was their name at the time. And it was like a VR headset thing from these uh Stanford dropouts. And They basically showed up to group office hours and were just

12:46 Ashamed. Like our idea is horrible. You know We might want to shut our company down. This is like really embarrassing. Like they just I had to like beg them to not

12:57 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 because like they were like bad people, but it was just like

13:10 The founders themselves seemed like despondent about how it was going. And then funny enough, this isn't the story too, there is another startup also in my group Called Cashew. Which was this P to P for uh the UK P to P Venmo, excuse me, uh Uh in the UK.

13:26 And it was going really poorly also and not growing. And so if you just took the snapshot in time in the middle of the batch of like Who is definitely not doing well. It would clearly have been this Vond company. And it's cashier company. And so to catch the chase

13:40 We aren't Changed their idea and got really excited about it and renamed to Brex, and this was Brex, which is Like a decorn. And Cashu changed their idea and renamed. Do something called Retool.

13:54 And so out of my thirty five companies, the ones that objectively seemed the worst in terms of like it's just everything is going bad were by far In retrospect. the most successful companies in that group. Wow.

14:09 Oh wait, so you're saying uh Brex was a VR That's it completely. They thought was really high tech. They wanna do a really high tech startup and so they're like we're gonna build a new VR headset. And you know, they were good programmers, but they just didn't know anything about

14:22 Optics or the things you might want. To be an expert in to build a headset. Wow. That's an amazing story. It's a great segue. It's just another theme that emerged. From talking to founders about

14:33 advice that you've shared. Lot of people say it. Tell me, you were kind of the the king of the pivot. Of helping people figure out how to pivot. I'm curious just what you've seen makes a good pivot.

14:45 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. Right.

15:00 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.

15:12 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 for Cashu, they had all these dashboards they built to like operate their their Venmo competitor? And so they knew a lot about what to build.

15:31 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 their original idea is. In the case of zip. Where Jewel knows a lot about a lot of things. And um

15:48 She knew a lot about like The crazy picture. Process at Air P and P'cause he worked there. And so it was kinda like A could pivot is like going home, you know?

15:59 It's 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 caught Consciously, you're like, I don't want to work on this because I'm burnt out on it. Like sometimes you have to

16:12 Someone someone has to get over this barrier they have on why they don't want to work on a certain idea. These are amazing. I like how modest you are and like, Oh, here's like a big idea and then you just give very tactical Uh items to look for. So Essentially.

16:28 A good pivot in your experience is you're getting closer, warmer towards something you have experien actual experience in. And two, it builds on Something you've done essentially the core idea of a pivot, right? Where you're like, it in the in the example of Segment, which is obviously a really big successful company, um They started with Something

16:45 To tell your professor you were confused in class? It was like software. That they sold 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.

17:01 Okay. And then no one wanted to adopt their mixed panel competitor. Actually We're like we should make this JavaScript thing that you embed on your website. They can send events to multiple endpoints at the same time.

17:12 So that way people would be willing to try our mixed panel competitor side by side with mixed panel to 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? Th there was no universe they would have made up the idea for segment'cause they shouldn't know anything.

17:34 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 ended up with really good, unique insights. I think that's a really important point there is you don't need to necessarily have that experience before you start the company could come from trying to build the company. Exactly.

17:53 A big question people are always wondering is like, should I pivot? Like, is this the time to pivot? Is this should I keep trying this idea? What's your advice there of just like, okay, now you should really be thinking about something else. 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 Y C. But again, just to give you a preview of how I would think about it. Um I would look at

18:14 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 a dozen really good growth ideas that you haven't tried yet.

18:30 Yeah. Try'em. Like hey, give it a shot. Again in the in the Airbnb story, right? They they tried uh 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

18:47 I think when there's still uh gas in the tank Um on an idea that might be a reason to stay the course. And when when li when literally the founder's like, Yeah, I don't know, I guess Maybe we should pay influencers or something. When that's when that's the kind of ideas they're coming up with. That's that might be a better sign to pivot. That is incredibly.

19:04 Coming back to zip real quick, they went through I think six different pivots before they landed on this idea that is now a billion dollar business. Is there anything from that specific journey that you found really interesting? Because they went in so many different directions, like accounting. marketplaces and I think in the example of the zip founders, they were both such great experts and You know, I knew Rajol really well.

19:26 He actually worked with me at at Y C as a visiting partner. And so I was I was really close to Rajoule and he done this marketplace called Flight Car when he was younger, which was Yeah, Raised Series B. It didn't work out, but it was A really cool company. And um I had a lot of confidence. And

19:45 His competent? On running a business and executing fast and just having great instincts. Like he really knows. The fundamentals. And the problem was they weren't Is clear on what market to go into. You still with me?

19:59 And so I actually suggest that he's to do something in their case, again, this is very bespoke. Um But my suggestion was You start by looking At what

20:08 Companies are um Publicly treated Uh and or owned by private equity that are large. And then also our Hated.

20:17 Um by their customers. And to try to intentionally find Where there's a knowable big market with an income. Um combined with The software is horrible.

20:29 And they kinda did that. Like they basically found out about all this procurement software and what the state of the art was. And that was that was the prompt. Again, maybe he told you this. That was that was basically the process. He did tell me that I love that example and piece of advice so much. I don't know why more people don't do this basically.

20:47 Find a large incumbent. With very low NPS. Uh and try to disrupt them. So straightforward. Yeah, I mean it it I can't promise that works for everyone, but again in the c in the very bespoke situation with Rajou.

21:00 It worked really well because he actually knew exactly once he Locked in on that prompt. Oh man, he was he ran a master class. You know, like they did they did it they did an A plus job. It was really good.

21:12 Also Lou, his co founder, credit to him too. Of course, like sorry, yeah, we gotta give Lou the shout out. Lou did an amazing job. I just didn't know Lou as well before he did Y C, but you're right, we gotta give Lou the credit. I was watching your chat with Michael Sybel talking about pivots and you Either you or he use this phrase. Uh you wanna

21:29 move towards the mountains and the desert. To find the gold. Of a new startup idea versus the middle of the city, you're unlikely to find gold in the middle of San Francisco. Is there anything along those lines that you You can share.

21:41 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 Y C with and what they interview with and and whatnot. Um People don't People all kinda have the same idea. Like like basically

22:01 Imagine this. Imagine your information consumption where you're listening to the same podcast, wink wink. Um 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 are all the same people. Does it seem surprising then that you would all end up with similar start up ideas or similar philosophies on what makes a good start up idea.

22:24 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 gonna come up with the same ideas as everybody else. And so

22:38 The prompt here. is to try to go more off the beaten path, either from your personal experience, like in the case of Brex and Retool Or whatnot, you know, there was no one else trying to build marketplaces for Funko Pops. You know, go go deeper in your own personal interest or experience.

22:54 The the Your exact peer wouldn't come up with in exactly the same way. And again, the zip example, I don't think other people were trying to build Wonky procurement software. That was just that that was not an idea that

23:07 We saw much of. And so again the prompt to people Yes. Try to mix up what your information diet is or what Areas of expertise you have?

23:17 And and mine that well. versus just having all the same thoughts as everybody else. And so again, let me give 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 don't know. But

23:37 You'll see things that become fashionable really quickly because someone found success in this unfashionable space, and then it becomes fashionable. This is a good segue to something I definitely want to spend time on, which is you have this concept of Tar pit ideas. Which are essentially ideas people all kind of gravitate towards and get stuck in and either pivot.

23:56 Into and then Can't pivot out of or try to pivot out of. And essentially it's just like Consistently. Bad start up ideas that people continue to try to start.

24:04 Can you just talk about this and then what are some what are some examples of just like bad startup ideas that people should stop trying to start? For people that Are familiar with this terminology for most sometimes they Get defensive and don't get what we were saying. So let me By definition, it is only a tarpet.

24:20 If it seems like it's not. Like like if it's just a regular idea that is hard, that is not a tarpette. The the weird aspect of what we call a tarpid idea is an idea that a lot of people come up with. And then it seems like an unsolved problem, and you get lots of positive feedback for. Right.

24:38 And You have a really good set of arguments that it's a really good start up idea. And that's different than a bad startup idea. Do you get what I'm trying to say? A bad startup idea is like I don't know. Something that is obviously bad, or something where you just can't

24:52 get any positive uh feedback on. But Some of the the most common target would be something like Building um Like an app to coordinate with your friends.

25:03 to decide where to go out at night or where to meet up with people. Which is it Which is a really it's coming from a good place. Like it's a good idea. If you ask your friend, hey, would you like an app? For us to coordinate. To hang out more so we can be friends. I'm like, Yeah, I would love that.

25:18 Like you'll you'll get you'll get all this positive feedback from the world. And people have been starting that startup since like the nineties. Yeah. And so you can validate it, but part of being a true turpet is that you can get good initial validation. D you get what I mean? And so anyway, and and honestly, I worked on Tarpon ideas myself as a founder, which is a music discovery. This is something I did in my first startup. That was that you know.

25:43 Mm. Music startups are hard. Um and Trying to be like, Oh, we're gonna fix music discovery. This was classic things where you can 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 does that make

25:57 Does that make sense? Absolutely, I'm also guilty of this. I had this startup called Local Mind. that uh allowed you to talked to people, checked in in in various locations around the city. on fourth score and go all the back in the day and

26:09 Ask him how's it going? And everyone, when they used it, they're like, Holy shit, this is the most incredible thing I've ever seen. I could see what's happening at this bar. That I'm about to go to. And then they never use it again. Do you remember when Foursquare clones was all anyone worked on for two years? They told they told us Foursquare is gonna own this you there's no way this idea you're building is gonna be its own thing.

26:28 And now yeah, four square is a B to B business. Yeah. And all the four square clones, if they didn't pivot out of doing what they're doing, wouldn't it work. So anyway, that's that's a turpet. It's just something that's super appealing and a lot of people do it, and that you can You can kinda get validation and that's why that's why is a target button is it draws you in and you get stuck. Mm. Because it seems like it's like a good idea and you get all this positive feedback.

26:49 Kind of along these lines, I was talking to a founder recently in She's asking me what causes an investor to say no. to you when you're trying to raise money from them. And I know there's

27:00 Every investor has a very different perspective on what turns them off to a startup. But is there anything that you find is just like here. If you do these things, investors will. Say no. Maybe my best advice here

27:11 is for founders to put themselves in the shoes of investors. And just imagine what their life is like and how if you were in their shoes, you would make decisions. And so Given this framework. A lot of investors just don't make that many investments.

27:27 And as per 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 like I like this person and I like their pitch.

27:39 But I only am gonna do a few investments and so even though I really like A lot about this. I'm gonna say no. And then I I often think that founders

27:49 think that there's some secret truth that's being held from them on why someone says no. Or like there. Like they want more feedback. I need feedback. That's like wow. The feedback is we didn't want to invest. And and it and it really is just that.

28:05 And and so I think if you put yourself in them in the shoes of an investor of like, hey, I only can do a few of these a year, I have very limited budget. They're really just trying to pick the things that they're either personally most excited about or things that they think To be truly phenomenally big in some way. Or Yeah, again you I know you do investments too, so it's

28:23 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. Yeah. And then

28:37 That's actually why they're saying no versus this. You did you know, ooh, you You had a bad zoom set up or something. Oh, we didn't we 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?

28:51 I think that's such a good piece of advice that it's not necessarily they don't believe in what you're doing, it's they have better options. And they're waiting for something that hits a higher bar just because because they have a lot of options. Yeah.'Cause again it and if you if you ask someone, Well put yourself in investor shoes, wouldn't you be making decisions the same way? Usually founders are like, Yeah. But like they can if you if you

29:11 Do that exercise, a lot of this starts to make way more sense. specifically when you're evaluating startups. I wasn't gonna go into this, but I think it might be interesting is mark market size. How do you think about the importance of a large town as an as an investor y C. I think it really depends on what stage you're investing at.

29:29 And it's absolutely critical the later. Stage you get. Right. If you're gonna invest in a very high valuation, it is really important. Um The earlier you go

29:41 The less it matters, and some of the most phenomenally good startups. If you were really uh panantic about it, the TAM Would be like Tiny. Like the the Tam of Uber.

29:55 Would be like Nothing? Right? Like how. Um the TAM of Airbnb would have been nothing. The TA of I I was um I funded Razor Pay, which is I think the largest payment processor in India.

30:05 And the TAM of that was tiny because no one was using credit cards in twenty fifteen in India. So you had to believe. that the size of the credit card industry in India with like hundred X. Well guess what happened? Yeah what I'm saying and so so I'm not saying that the

30:21 having a large market someday doesn't matter. Of course it does eventually, but trying to be super pedantic about market size when you when it's like a pre seed company or someone applying to Y C Is not You know, it's just not something I put a lot of thought on. Again, whatnot. Ooh, what's the TAM? Collectible Funko Pop.

30:39 industry I don't know. I don't think it's that big, man. I don't know if you did that now, so that's when you invested, but I No, things pretty small, but I I wasn't worried about it. That was like the last thing I was worried about. It makes so much sense that at Y C you don't think about it that much because of as you said, many startups pivot anyway.

30:55 So If you like the team. But and I'm not saying it's not important. I just it's not and the things I'm worried about is 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

31:09 Ooh, I ran an Excel model and I'm worried this might not be a big enough TAM. That's that's not at the top of my list. I think it's important to acknowledge though, a lot of investors are very like Y C I think is unique. In a lot of ways where you invest very early and you help people through this journey. A lot of Investors are very focused on TAM, so you may find

31:27 You're getting turned down because they don't think there's a big enough market. For you to build a big business, right? Yeah, or that you're asking them to believe a crazy leap of faith. That Again, they could say, Well, it's theoretically possible you'll be able to sell more than Funko Pops.

31:41 And I understand that that is your pitch. But I am I have other opportunities that are less risky. You know what I'm saying? Like like it's not because the market 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 red I have no you know I'm not gonna argue with you about it, but No.

32:00 I'm not going to And so again it's It's hard to get someone to engage in a debate about TAM, even if you have a You know. Even if you have some proof points

32:11 Ultimately, uh a lot of investors just don't like that risk. Fair enough. Fair enough. Going a slightly different direction. So uh someone else that worked with you. Uh another Lenny, uh Lenny Bogdanov, who started a company called Milk and then he was head of growth at OpenAI for a bit.

32:26 He asked me to t ask you about Things product leaders and startups should watch out for. Does that ring a bell? I don't remember the specific office hours, but I I understand the question and I of course you remember Lenny. Um

32:40 I think that the advice that he's referencing here is just how important it is. to not overdelegate and for the founders to stay close to things. Um, as well as watch out for the trap of hiring Super senior people with fancy resumes really early hit a startup. I think that's what he's referencing there. And again, this is a definitely one of those very basic things that

33:01 We find ourselves repeating a lot. Um where they're like, Yeah, yeah, I get it. Like don't overdelegate. We get it at Dalton And then like two years they're like, Wow. We overdelegated Uh 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.

33:18 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 experienced this in Airbnb culture, but You know, you can't delegate caring about your users and you can't delegate caring that the product is great.

33:34 That is so critical. To make this even more real, what are what is it that you see them do? It's they hire a PM too early, they hire a senior salesperson too early, what are the Yeah, I think it's I think that you get pushed often by investors to hire executives or scale a team or we need, you know Yep. We need we ri you raise all this money, you gotta spend it, you know, we gotta you gotta show you're serious about growth and building a world class organization. Whatever, stuff like that.

33:58 And so you end up with Super nice people with super shiny resumes from from big tech companies. Oh wow, the 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

34:12 Everything went wrong. It's that really anyone's fault. It's just that you you You hope you took your eye off the ball, and this is what happens. Um to first time founders a lot.

34:24 How do you as a founder then have time to do all these things. Is there any guidance you give just like Don't overdelegate, don't overhire. But also You need to you you'll v you have twenty four hours in a day.

34:35 Is it just find the time prioritize well or is there more more to it? I think if you just care 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

34:52 Hanging out with investors and networking. Probably not it's probably the thing that I would be cutting. Um Yeah, you know what I'm saying? Like it's it's what we talked 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. Which is

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36:40 Koda.io slash Lenny Okay, so One of your former one of your colleagues, currently colleagues, not former colleagues, Gustaf was on the podcast. Previously. His episode is I think the fourth most popular episode of all time currently, so no pressure. Cool. Okay. I don't know if I can keep that. All right. I think you can.

36:58 So I asked him what Is often the most Common reason a startup fails. And his answer was

37:06 They don't talk to customers. They don't find product market fit. Nothing else matters if they can't do that. And so his advice is talk to customers more often. So two questions here. First of all, just Is there anything else you would add to

37:18 Why do startups fail? I know we talked about some of these already, but just what comes to mind there. I completely agree with what Gustav said, but to to look at this from a different frame I think is that the founders lose hope. And

37:33 When you in your heart is like yeah, we're failing like once I can see it when I'm meeting with the founder. When they resigned themselves. The They're failing.

37:43 Versus when like we got one more move in us, we got one more try. But you can see in their eyes like there's More ideas or some last ditch hail marry thing. Um It doesn't always work, but It's it's almost like

37:58 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 still like

38:11 Do some other zany thing. Maybe it's You know, to launch a new product. Um 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.

38:26 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.

38:39 But do you get what I'm saying? Like I think founders are afraid that they're gonna run out of money and that's why they're gonna 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 or like I don't want to do this anymore and they shut down. That is the most common cause of death, is something that sounds like that story.

38:58 Mm. That is so interesting. And again, this comes back to your Core advice, don't die. Just don't die.

39:06 We talked about this already of just like Sometimes it's actually okay to die. And I guess just to refresh that lesson is if you're not having fun anymore. Maybe yeah. So you're out of ideas. You're like, I'm just I'm done. Like if you know in your heart that you're done, you don't have to keep going through the motions. No one benefits.

39:23 And you've also seen enough cases now, you've shared a few of these where They all they're all hope was potentially lost. But they kept going and then they turned into a huge success story. And I think most people don't see those examples. I guess is there anything you can share just like how often that happens, how often you see that turn around? I would argue that

39:43 If we define it as the company had a near death experience where it was going poorly and the founders seriously wondered if it was all gonna be over. A hundred percent of the time people go through That You know, where the founders like, Yeah, I guess we're done. Yes, we should pack it in.

39:57 And at least you feel that way at some point in your startup journey. Man, everyone goes through that. Um and again there's gradiations, people that actually truly got Down to very, very hard situations, it's still a high percentage, like maybe fifty percent. I mean you can ask founders. There's a lot of founders that

40:14 come this close to it all being over and through sheer will kinda just keep it going. You know? That is really uh empowering, I imagine, for many founders hearing this of Just knowing every single founder goes through okay, I think it's actually over.

40:29 Yep. Following on this real quick, the advice that Gustave shared, which is about talking to customers. I'm just gonna keep trying to pull wisdom out of your head. Do you have any advice for just how to effectively talk to customers? We're always hearing talk to customers, build things they want.

40:43 Easier said than done. You get a lot of Ask. You get one customer asking for a lot of stuff. There's a big company that's like build this thing, we'll buy you, pay you a million dollars. Just do general guidance of just like what to pay attention to and what to build versus avoid. Yeah, I think when I talk to

40:59 To To aspiring founders about this a lot. They're like, Yeah, I talked to customers, we get a cool They're like cool. How many customers do you talk to? And they're like well

41:08 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 or whatever where people 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.

41:24 And you can't just hide behind your keyboard. And call that talking to customers. Right. And I think a lot of folks their inclinations are to like, you know. build a landing page and buy some Instagram ads and try to

41:37 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'cause it's a little awkward. To go talk to people?

41:49 And Hm. And you kinda have to suck 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.

42:01 And so again to be very tactical here. You can do a self assessment. In the past month, how many in person physical meetings have I had with potential customers? Maybe you've done a lot. I don't know, listener, maybe maybe you have, but

42:14 You know. It's it's shocking how many companies I talk to. They're like, Well We're focused on raising our pre seed round before we talk to customers. Like things like that. And and again, I think the the core the core, core thing going on is um Just social anxiety? And like

42:32 Looking stupid. And I think you just gotta get past that. You know, you just gotta start doing it until it doesn't feel bad anymore. But you know, think about how how Stupid the Airbnb founders must have felt they were

42:46 Like, hey, you should rent out your house and I'm gonna come and sleep in your house and here's an hair bed. Like Like it's the whole thing a little awkward, right? You gotta power through the awkwardness. Of talking to people. And um once you start doing it, it's actually kinda fun.

43:00 And so once you Once you get used to to overcoming this awkwardness, Um, I think people do much better at talking to customers. When someone does this self evaluation, is there a heuristic that tells you this is Enough.

43:13 What do you look for? Is there a number like how many per week, how many per month? 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. twenty or thirty percent of your time that The calendar says something like

43:27 Customer Meeting, customer, call. Like Meeting with Foo, meeting with this person. And when the calendar is not that or it's all, you know, again, what you're actually doing is just buying ads.

43:41 To try to validate your idea that I don't I don't think that's talking to customers. Yeah. I think that's something else. That's an awesome heuristic. So roughly fifth of your time. At least should be talking to customers. Yeah. And again, it depends on the idea space you're working on. Some are more, some are less. Um so again, I just It should be a a fair amount of time and nothing substitutes for an actual conversation versus just staring at analytics dashboards. Makes so much sense. So the Airbnb is a classic example of

44:05 They went to New York and talked to their host and things like that. Is there another startup that comes to mind that would did this really well? I've found just a really cool way And hustle to talk to customers. Well again if you if you Some of the companies we talked about, I mean

44:18 For Brex they were just talking to other people in their batch and that worked extremely well. Um same with Retool is they just sold it inside of the Y C network. I think with zip they were just beasts. Uh getting companies on calls with them. to ask them about procurement.

44:34 And I think they had way more than twenty percent 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 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

44:53 They their calendars are filled with people that were trying to implement the first open source version of postdoc or so excited about it. And People on Hacker News are excited about it and like They have this link. huge influx of people that were Excited that post hog existed and had lots of feedback and uh

45:09 By records? Like it was it was positive, but They never lack for uh people that wanted to talk to them once once they launched that, which was very helpful. Mm-hmm. on Zip actually have a lot of their story in one of my series on how to build a B to B startup. And what they did actually, as you know, uh is they just called DMed people on LinkedIn.

45:26 And ask them for advice on hey, we're We're trying to understand how you enjoy your current procurement product and then They ended up being early beta testers. And I think they and I think they did hundreds like hundreds of these. Oh yeah, no, it was a numbers game. They they they were just grinding at this. And so yeah, that was that was very good. The other classic uh

45:44 Y C story is the the Callison Collision, I think it's called or the Collison install. Oh, call us an install. Okay. Where can you tell that story briefly? The Collins and install is um what often happens with customers. Is that

45:59 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, but they never implement it, they're gonna churn.

46:11 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.

46:19 You'd be like, Oh, well You know, I'm in the neighborhood, you know, I'll drop by your office to help you implement strike. And kinda just like create again, it was a little awkward like we talked about earlier, but you would you would be like Yeah. I'm I'm in I'm in the neighborhood, like how about I drive? And then they would show up And they'd be like, cool, cool.

46:36 Can you like pull up your text editor? Oh yeah, cool. All right. Um hey, can you can I can I drive? Can I have the keyboard? And they were just sort of like install stripe into their customers website. You know, smiling, being like charming charming guys, and then be like, Oh, that's cool. Okay, well like can we like roll out the website now?

46:54 And and they basically would kinda not go away until you uh finish the implementation of stripe. And like Again, it was actually helpful because they were doing all this white glove service to get it implemented. That was very effective. And I think the takeaway from that story is

47:09 Even when you get a yes, you're not actually done with sales. You have to Finish the last mile. to get the thing implemented and uh they were very good at that. That was an incredible story. And uh now they're like at an a hundred billion dollar business and that's how it all begins. Yeah, I was an early uh Stripe customer at my startup and yeah

47:27 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 how successful these folks get, but yeah, Patrick was very hands on with all of his customers and was extremely available. Um

47:43 Like I I can see that. Because Yeah. And I'm sure he had social anxiety going through all that. That wasn't a comfortable thing to do, just like keep pushing people to install your software and deploy it. Oh, surely not. It's just you gotta do like if you want your startup to work, this is just what you gotta do, you know? Come on, the territory. This is gonna be just a way broad question and I don't know if you'll have an answer, but just

48:05 Are there other just patterns you find across startups that do well? This is like maybe the Sixty four million dollar question. I've just founders and what they do that ends up Leading to success.

48:15 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.

48:29 Well, I don't think there's a personality type that people should copy and 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'cause there's just so much variation. Like Tony from DoorDash is so different.

48:43 than a lot of folks and Rajol was so different and Grant from what not. These are all very, very different people. Patrick is a different kind of person. Ryan from Flexport. Like these. These are just Very different personality types.

48:56 But The Thing that I would argue Folks that build really big companies have in common Is they just really want it.

49:05 And they really believe in themselves. And they really believe they can make it work. And then they're somehow deep in their internal psyche, there's something that's like I'm the one.

49:19 And I won't take I won't Except. This not working. And even though objectively there's all there's all this data coming in. This isn't working, this is bad, you know, my employees want to quit, my executives want to quit, you know, whatever it is.

49:35 Somewhere deep down in there. They're like Oh yeah. I'm gonna make this work. This is This company is gonna be big.

49:42 And they and they 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.

49:55 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 for them. And so again, this is not a personality treat. This is I'm arguing this is like um A core belief. So interesting. And it connects so much to what we've been talking about.

50:13 Just don't die. Don't lose hope in what you're working on. Yeah. A founder hearing this might feel like, Man, I don't know if I'm like so convinced this is gonna work. In your experience, how much of this is Internally there.

50:25 so certain and convinced versus externally they need to show this Confidence. Well, I think it's internally they're convinced. I I yeah, I'm not sure it's external, but and this is the big butt. 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 I again I know a lot of founders like, Well, I don't feel that way.

50:47 Oh no, maybe I'm you know Maybe I'm an imposter and I shouldn't do a story. 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 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.

51:05 And you launch it. And the better the product does The more obsessed you get with your own company. Like I I think in the case of Stripe, I don't wanna you know tell Patrick story for him, but

51:16 I recall him saying it at some point He wasn't as sure that Stripe was gonna work until they were like a year or two in. And then once it started working and then he you know they really believed in it. But it it wasn't like he woke up one day and like stripe is the thing, it's gonna be it's gonna work. Um I think I think you build conviction and you have this like um

51:35 network effect virtual cycle where you get more conviction. The more customers reflect back to you and data reflects back to you that you're on the right track. This is exactly what Scott Delsky shared in our episode when I asked him.

51:49 When to pivot is Do you have more conviction this is gonna work or less conviction over time? And so I like that connection we just made there. Okay, so we've talked about all these way startups fail, bad ideas, tarpet ideas. I wanna go

52:04 Good start up ideas. So recently you put out a request for startups. Which is essentially twenty categories of ideas. That you want to fund the Y C wants to fund. Can you share some of these ideas that you're excited about? And basically you're looking to fund and looking for founders to work on.

52:21 Yeah. Um and so we 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, like we will only find ideas on those lists. 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 contemplating they are currently.

52:42 And so um A couple of the ones that we we put out there, one of them I made one about ERPs, which is you know, enterprise resource planning software. And I did that because I get so few applications on that. And

52:55 They're usually pretty good. And I just would love to see more people look at that and learn about what ERPs are. Just because It's so rare that people apply with that. And now I have a feeling we're gonna see a lot more applications working on that. And so it kinda Worked as intended, which is to introduce this idea space to founders that Didn't even know what an ERP was.

53:13 Now they'll go learn about it. Um Another one is, you know, we like to fund open source companies. And so that's one of the RFSs where Yeah. If there if more people applied to Y C with open source ideas, I think we'd be pretty excited about that and that might open

53:28 Maybe founders didn't realize that would be something we want to fund. Same with space companies. Yeah, we've had them. A lot of success with space companies. Um You know, uh Several of the folks that are actually going to space right now that aren't space X are Y C companies.

53:41 And so I think sometimes founders feel like those ideas are too bold and ambitious. But no, we you know I love before people apply with space companies. And so think about it that way where we're just trying to put out we're trying to plant seeds. of idea spaces that perhaps someone subconsciously filtered out.

53:58 is what might be a good start up idea and and You know. Hopefully that creates a a a new set of startup ideation for the person. And we're gonna link to this page in the show notes for folks that wanna explore. I'll give up a couple more real quick. Uh a way to end cancer.

54:15 No big deal. Spatial computing. New defense technology, bringing manufacturing back to America. So a lot of like hard Science deep tech stuff, which is which is Maybe a new I don't know. I know I imagine you guys have invested in this

54:29 In the past, but it feels like we have, right? So these aren't like oh, we've never invested in these before. It's more of like hey, it'd be cool If we saw more applications along these lines, it would be nice. Um because it it Currently feels a little bit under Uh You know, yeah. Th there could be more startups working on that stuff. Yeah. Instead of the target ideas.

54:48 Uh A couple more real quick. Better Enterprise Glue. Yep. I like that, yeah. Say more about that. What does that look like?

54:55 The software to connect all these business systems is usually pretty brittle and janky, and there's been lots of good startups founded to solve this problem. Um I think there's still a lot more room for improvement and likely LMs will improve like we'll probably be able to create better and better blue so all sorts of software systems can talk to each other. So again, very broad idea.

55:15 But Yeah, I think we'll see a lot of very successful companies Where that's the kernel of the idea they start. Awesome. One last one, small fine tuned models as an alternative to gigantic generic ones. Yep.

55:26 Sweet. And so we'll send We'll include this link in the show notes and folks can click on each of these and you basically there's a lot more explanation of what it is you're thinking about there. Awesome. Okay, just a couple more questions. Yep. Uh

55:39 Your background. So From what I've read. In the early two thousands, you were You're basically hanging out with some of the biggest success stories of today.

55:48 Folks like Zuck and Reed Hoffman, Sam Altman. Elon. Sean Parker, this is before they really became anyone. And They all became very successful.

55:58 I'm curious just what Looking back at that. What you've noticed is consistent across these folks that end up being really successful over time. Back in two thousand three, being

56:09 in Silicon Valley and being nutrition in 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 um

56:19 I cold emailed Reed Hoffman when LinkedIn was like twelve employees and he just responded And he's like, Oh, let's have lunch. He he was just like a guy and everyone else that was doing I guess you could call it social networking.

56:34 Uh where that was sort of the people that I knew. There was a few conferences you would go to and there'd be like thirty people there. It reminds me of stories about the Homer Computer Club. I'm not saying this is as cool. But when I read stories about what it was like When when the Homebrew Computer Club existed.

56:48 Yeah, it's a very small number of people that all knew each other, that were real like Weirdo outsiders that were into this stuff. Okay. And so that's what in the post dot com boom. Bay he area startup scene, that's Legitimately what it felt like.

57:03 And so I didn't think a lot about the personality traits of these people. Um they were all again, they were all Pretty different. But what they had in common. is the folks that are now the really big names

57:15 just had a lot of staying power. Right. So when I when I met Sam, he had dropped out of Stanford to work on loops. Which is hilariously a way to find people around you to hang out with. Interesting theme here, huh? He was cool, he's just he was this really young guy and um He just kind of

57:32 Did that Wasn't huge, and then he got into other stuff and ended up working at YC, ended up getting involved in hard tech, and is now kind of like reinventing himself as um the the big mind behind AI, which is which again awesome. But if I think about who he was back in the day.

57:50 He was yeah, he was like a twenty three year old working on a thing for feature phones to find Friends in your neighborhood. Their customer was Boost Mobile. go find the commercials for loops that Boost Mobile put out on YouTube. Those are actually pretty funny. Have you seen those commercials? I don't know, but I'm going to go check them out. Anyway it's pretty funny. So yeah, like that's that's the the real story. Um

58:11 And then yeah, I remember I was in downtown Palo Alto at the time and um You Some of the some of the folks I was friends with were friends with Sean Parker. And this was actually before Sean Parker went to Facebook. He was part of Napster. And so one of my friends like Oh, we need to get my friend arrived at the airport. So I ended up getting

58:29 Sean Parker arrived at the Oakland Airport and Again, I what was he like? I don't know. He just Basically sat in the backseat on the phone the whole time. But again, my point is. I wasn't like wow, these are gonna be really big successful people that one day will be important in the world.

58:44 It just felt like A bunch of nerds that really like the internet and computers. kind of doing things that they were interested in and were just obsessed with this. Like there was no they weren't like, gee, should I move to New York? Or gee, should I Maybe I should uh go to law school. Like it was people that were very bought in.

59:04 to to stain Working on Internet companies. And so you'll see these folks just reinvent themselves multiple heras, right? Okay, like Reed Hoffman, right? He was a

59:16 Worked at PayPal. Right. And then Uh he did LinkedIn. And then he was like a VC and like he's kind of had like all these different eras where it's the same person, but it's it's almost like a different figure, right? There's a lot of interesting lessons there. One is

59:30 that your career is long and you will have the opportunity to do many things and you can continue to shift. Like in my example, this is my fourth career, I realized I was in engineer, then a founder, then a product manager, and now whatever this job is. And I think that's really common. I think the other again is the personality types point, which I didn't comment on, but I think it's so important. That you can be super

59:50 introverted and be super successful. You can be super extroverted and be very successful. And I think the key there is use your skills. And strengths. to achieve the same things. You don't have to be the amazing presenter on Steve Jobs type stage.

1:00:04 You can do the same thing in a different way. And then the other point there is again coming back to You just need to be really excited and enjoy the work you're doing,'cause that'll drive you forward. And make you be successful. So I like that that

1:00:17 I love that the story is Kind of a summary of so many of the things you've shared so far. There's other two other fun stories, maybe pick one or the other one is You sold your startup to MySpace and your job was basically to save MySpace. Uh

1:00:29 And then the other is you're the reason Andreason Horowitz missed out on Instagram. Yeah. Couldn't invest. So which of those would you want to share? Well, it's it's kind of the same story. Okay. Great. And and the way that it's the same story is um My my second company, um

1:00:46 Basically, I sold my first company in MySpace. It was the music company that I worked on and The they recruit a new CEO um who was Formerly the COO of Facebook called Owen Van A so again, hilariously part of the same little circle of people. And Owen was like okay, we need to fix MySpace. You know, Rupert Murdoch's

1:01:07 Got the juice. We he wants me to fix it. Like we're gonna turn we're gonna we're gonna do it. So come up with some ideas. And Kinda the best idea that I could come up with at the time. was doing something around uh mobile photo sharing. Something kind of like Twitter, but for photos. And I figure with MySpace's user base that would work pretty well.

1:01:25 This was like in twenty ten, so it was right as the app store was getting big and I had a lot I had a lot of success In the app store with I mean, 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.

1:01:38 Bien 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 Their apps were not great.

1:01:47 This was again ancient history. And So that was sort of like My plan and then Immediately uh Juan Venata was fired.

1:01:56 And so I didn't even really get onboarded. And so I just like left. I think I worked in my space for like a month. Because the person that acquired my company got fired and there was like

1:02:06 I think the whole work chart 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 I wasn't really sure who my point of contact was at that point. I don't think they knew either. It was just a message. Just Tom. Um just message Tom. No, no, he was long gone. Okay. Seriously I know you're kidding, but no, like literally I don't know who was Left at that point. Um great Tom with Long. Yeah.

1:02:27 And So I was like well. I should just do a new startup and I should work on something like what I was thinking about.

1:02:35 And I ended up starting the company and quickly was able to raise an angel round because people remembered uh my company from the first one. And the the major investor we had was Andrew Jorwitz. This is one of their first board seat investments like Mark Andrewsen was on my board. And um

1:02:52 You know, again that was that I have my own set of stories about that, but it was it was Interesting experience and we launched it in I think we got Half a million or a million users? Like you can go Fine Tech Princh articles about it. And it was We launched on Android and iOS and it was mobile photo sharing and actually was growing pretty well.

1:03:10 Okay. And then what happened is there was another portfolio company called Bourbon. Which was originally a fourth wear clone. that was built by by these two guys and They decided to pivot.

1:03:23 out of that and into What Which was pretty similar to my thing, you know, again, fair enough, that's just how this works. And They did something smart.

1:03:33 Again, this is just me talking. I don't know what their version of the 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 hipstomatic. And it hipstomatic cost money.

1:03:43 And what do we know about what people want? They want things that are free that cost money. Right? And so they basically built a pretty legitimate knockoff of the hipstomatic filters. combining it with a social graph and they launched it and it pretty quickly took off.

1:03:57 So of course this is Instagram, right? And so it took off really quickly and like yeah, that was like a wild experience for me to be like oh This seems familiar. Um And And basically because uh Andrew Horowitz had like invest in my company was on the board Even though they were investors uh in Instagram, uh

1:04:15 that was like a conflict they and they didn't do the deal. And then for whatever reason This became like a big source of like Silicon Valley gossip. Which is like wow, I can't believe this happened. And so it was just a really weird experience for me as a founder. To um

1:04:30 To be right in the middle of something that became culturally so important. Imagine there's a bullseye in your back from A sixteen Z for a little bit. Oh they're all

1:04:43 I don't actually think they care. I don't think they held it against me, um,'cause 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 I was a guy who had a company

1:04:58 That they invested in. I don't know. I I didn't feel like they I didn't feel I didn't feel much higher for them. I think it's this is just how this is just how life works. Yeah. Uh, I wonder if they change their conflict policies after that. At all. I don't think so. This h I think this happened

1:05:13 I I think this has happened multiple other times. Uh But those aren't my stories as well. And by the way, I don't know if you mentioned the name of your startup, it's called Pi Pick Please. Yeah, it's called Pick Please. Yeah, great.

1:05:22 Okay. So for the final phase, before we get to our very exciting late ground, I have these two segments, recurring segments. I have Failure Corner. And contrarian corner. We can do both or we can pick one or the other. Failure corner. Share a story of something.

1:05:38 a time in your career where you failed and when you learned from that experience. What's something you believe that a lot of That most other people don't believe. Yeah, I think for contrarian corner I know where I would start and I think it's relevant.

1:05:50 Or your listener. Like I think this is relevant to this. Um and so and yeah, maybe and you could argue this isn't contrary. But Here is Here's what I think.

1:05:59 I think Growth. And growth hacking and doing all this analytics, A B testing stuff. Um

1:06:07 is a total waste of time for very early startups. And that One of the weird things about having uh lots of startup advice on the internet, uh, again, this is one of the reasons we started making videos at Y C is a lot of the advice was catered towards later stage companies. Like oh here's how you use Set up your board and here's how you

1:06:25 Motivate your sales team. Like it was 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 There are lots of founders that are Very familiar with your awesome work, which again I really recommend. I like it. But when you have no customers and you're reading

1:06:45 You know, Lenny's guides 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.

1:06:55 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 worked in big tech where they're up the your product already has scale. And so you know, if you work at Facebook, your job is to launch new little features.

1:07:16 Yeah, of course you should make heavy use of analytics and A B testing and split testing and feature flags. Yeah, yeah, yeah. It makes sense. When you have no users. What are you doing? So do you think that's contrary? What do you think? Like I'm I'm just trying to argue

1:07:32 This advice applied to a startup that's too early is like actively Not helpful. I I think it's contrarian for many people, one hundred percent. I also one hundred percent agree with it. Makes me feel like I need to at the top of my post share. Here's who this is for if you're Earlier than this, ignore it. If you're later than this, ignore it.

1:07:49 I mean again, I'm not saying you're doing anything wrong, but i imagine if the OG Airbnb founders took all of your current advice and applied it when they had like four users and they knew their names. And they were like trying to run complicated growth hacking split test things. Yeah.

1:08:04 Maybe just to uh clarify when you talk about growth Growth hacking. So obviously when you're starting something, say a consumer app. There's a you need to get a bunch of users somehow. What's your sense of just like when you

1:08:15 Say don't do this sort of thing, but this is okay. It kinda falls in those buckets. Yeah. I think it depends on the idea. Um I think in the case of whatnot. They obviously

1:08:25 It was a consumer app and they needed to get users, um 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 Like they effectively knew.

1:08:40 They needed to focus on buyers and on the buy side and build momentum on the buy side. Um, they really understood marketplaces. And so for consumer I think it's having a sophisticated view of how you get

1:08:52 the consumer company off the ground. I think if you look at the Facebook story Them getting a hundred percent penetration on the Harvard campus first instead of launching overall. Again. Good strategy. Would recommend. Um that strategy.

1:09:04 So again, the way to extrapolate that is know what your comps 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 were those tactics?

1:09:28 I feel like this should be its own episode where we just go into how to get your first thousand users. I know there's a video actually we'll link to you. But Gustave Maid. Uh with Y C's advice on how to get your users. Did you want to visit Failure Corner or not? Or shall we move on?

1:09:43 I failed at tons of stuff. Um, I I is an investor, I find 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 with With Pickley's, right? You just heard a specific story there.

1:10:00 I guess what I learned is that You just can't let it get to you too much and you gotta 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

1:10:18 Dominate all of your thoughts. And instead you should use your energy and positivity to keep trying to do good work. Right. Cause back back in the day, if I would be like, Well, you know, I guess started aren't for me, I guess tech isn't for me. I wouldn't have Had a career.

1:10:33 Doing any of this stuff. I wouldn't be working in Y C. I wouldn't be advising companies, right? So I always had to have In my life, um A lot of optimism and energy and use that energy and motor to keep me going and it served me really well.

1:10:48 Right. Lots of stuff I tried didn't work and continue to know. You know, again, obvious stuff I know, but Yeah. That doesn't mean it's not true, even though it's obvious. I feel like that's a recurring theme here.

1:11:00 And I love that it's another version of just how not to die. There's like the startup itself that shouldn't die. And then there's your just drive and motivation to keep going and try new things. When things don't work out. Yep. I love all the recurring themes and messages for people here. Dalton, is there anything else you want to leave listeners with before we get to our very exciting lightning round?

1:11:20 Yeah, I guess I guess the final thought um You know, 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 pre-sell something before you write code.

1:11:35 And have those conversations. I think so many folks Don't know where to begin. On starting a startup. And

1:11:43 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.

1:11:54 I think a lot of people don't use that strategy. And and basically if you If you find people that are really excited and you you do line up customers, that is a great green light that it it is time to do a startup, right? That can get you down the path. So Yeah. I think that's my final. And then with that, when does the building come in? Is it build it while you're talking, build it before you it depends on basically. Build it once you have some conviction that you're like, Oh, I think I would out

1:12:17 A custom I think I at least one person would use this thing I want to build. At least one. I love it. I leg I love the simplicity and pragmatism of all of your advice. Dalton, welcome to the very exciting lightning round. I've got six questions for you. Are you ready? Let's do it. What are two or three books that you recommend most to other people?

1:12:38 I think a lot of founders are 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 eighty percent of the way there.

1:12:57 You know what I'm saying? Like they wanna hire someone for millions of dollars to give them sales coaching. I'm like, Well have you read These really basic sale books. And they're like, No.

1:13:06 And so I think that's a low cost way. To go on to Amazon, get into 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 at sales. Awesome. There's also this book called Founding Sales that I imagine you're familiar with. No.

1:13:20 Pete Kazanji was on the podcast talking about that, and that's something I always recommend, because it's just like how founders can do sales. Start there. Start there. Great. I'll link to that. Um, do you have a favorite recent movie or TV show that you really enjoyed? This may be warping the what you're asking for, but I like to watch old shows a lot, and so I keep re watching Like the sopranos and the wire and it always is different to me every time and I you know

1:13:43 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 seventies and eighties. I don't know why. I don't even know if this is destructive. But It is um For some reason I'm really into that right now. It's very old episodes of Columbia. You're an old soul, Delta.

1:14:01 I guess I don't know. I It's it just feels like a time machine uh to a different time when I watch these things. Definitely uh Maybe one of the most unique answers yet. Fair enough.

1:14:10 Colombo. Well again, I guess I'm not trying to give you an answer where I sound super clever. I'm just I'm actually telling you the wrong answer. So it uh that's actually what I'm watching. It does actually sound very sophisticated and clever. Yeah.

1:14:23 Do you have a favorite interview question that you like to ask? I guess founders in this context. I don't really believe in in trick questions and I think I just start with Hey, so tell me about what you're working on. Or

1:14:36 What have you learned since you started? Yeah, none of these are trick questions, but I think you can get the most honest and interesting answers by Asking the most straightforward basic things and having that be like a blank slate. For their answers to draw on You know what I'm saying? So I like the most simple prompts and let them

1:14:54 take the conversation where they want to go. I know this probably is too a very big question, but just what do you look for in their answer that gives you a sense of this is a good Or bad answer. For for for Y C interviews. Yeah, I know and I know this is like its own podcast episode. Evidence.

1:15:10 that they actually have thought about it. Like as per I said earlier, that they've done research, that they have opinions, that they that they care about it. Right. Sometimes when you when people answer questions are like You can just tell that it's Really superficial.

1:15:25 And they haven't put much care or soul into their answers. Yeah. Awesome. Do you have a favorite product that you've recently discovered that you really like?

1:15:35 I like my Aura Ring and my Apple Watch and all that good stuff. Like I've been a fan. Uh there's a Y Calendy called Cyfox S I P H O X. I just uh sign up for and they do Kind of home blood testing? And and basically I'm trying to sync that. at home blood testing thing into all my other devices.

1:15:52 Um I think I don't know, I really enjoy All the stuff that Apple and other startups are working on and Y C companies are working on around personal health. And so yeah, those are products I'm into. Cyfox. Okay. And wait, then you do like a needle and stuff and you take your own blood? It's this little tiny needle. It doesn't hurt at all. And you just 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.

1:16:19 Yeah, and that's I just discovered that It's one of those cases where I d I saw it uh I saw it and then I and then I later was like, Oh wait, that's a Y C company. Like basically I became a customer and was pleasantly surprised. That uh that it's a Y C company. And I think I found it. So it's S I P H O X Health.com. Yeah, it really rolls off the top, right? Yeah, that's the name of it.

1:16:41 Very cool. Okay, I see this the little needle. Okay. Great. Go Cy Fox. Uh, okay, two more questions. Do you have a favorite life motto that you Often come back to find useful and work.

1:16:53 Or in life, share with friends. Just check in with yourself that you're having fun. And and that you enjoy what you're doing. And

1:17:02 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 is So I value what I'm spending my time on and uh

1:17:19 I think that you just can go back to this over and over and over again. Um is a is a It's a good prompt on how to Decide what to do with your life.

1:17:29 Easier said than done to change that in many cases, but it always starts with realizing, okay, this isn't actually what it to yourself. Yeah, I'm not really enjoying this. And then trying to be like, Well, how can I fix it? Having that conversation with yourself. Yeah. It reminds me of a Steve Jobs quote where You wake up. Day after day. Like it's okay to wake up some days being like, I don't wanna be doing this.

1:17:49 But if it's every day and continues to happen, then that's a sign. You should change it. Exactly. Final question. You and Michael Sibel have been doing this incredible podcast together. If somebody wanted to check out the podcast and dive in, is there an episode that you love most that you think they could start with?

1:18:05 It depends. Some of the episodes are more For Folks that already have a startup. And they they're dealing with like problems. I don't know, some of the episodes about Investors or

1:18:17 Or things like that, like 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

1:18:27 Those have strangely become very popular and gotten a lot of views with non-startup founders, which is a pleasant surprise. And so I'd recommend those for folks in the audience that are Not currently startup founders. I don't know. Um Life tips uh from top founders, I think is the one is that one. Yeah, yeah, I think that was pretty popular. So what I'd be looking for is Diagnose, am I a current founder and I have founder problems, or am I just looking for a general

1:18:53 philosophy type questions. And I really like those philosophy ones. We have one for high school students and it's aimed the audiences 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. Um And you know, I think it's pretty good advice.

1:19:13 Dalton, you are wonderful. Thank you for sharing so much wisdom. This is action packed. I'm really excited. for founders to listen to this, I think it's gonna make a big dent in a lot of people's lives. Two final questions. Where can folks find you online if they want to reach out and follow up on some of this? And how can listeners be useful to you? I am on Twitter slash X dot com and Dalton C um is my username. And also my LinkedIn is pretty good. It's it's it's pretty popular. I don't know. Just

1:19:36 Search for my name on LinkedIn. Um And uh yeah, I I Love to see you all there. How can folks be helpful? I mean, honestly, it's just great when folks want to uh apply to YC and and do a startup. And so feel free to dive into our other videos and apply to YC. And something that's really special about my job is

1:19:56 I get the privilege of getting to fund companies. that they already know me from videos and they're shocked. That I'm exactly the same as Like effectively, um They're like, wow, you're you're just that guy from the videos I've been watching and and and

1:20:11 It's so cool that You're just exactly like you seem in the videos. And so basically, yeah, if if people like what I have to say and they like the videos in applied Y C, it'd be I would love to to fund their companies. Dalton, thank you so much for being here. Sure thing. Thanks so much, Lenny. Appreciate it. Hi everyone. Thank you so much for listening. If you found this valuable, you can subscribe to the show on Apple Podcasts, Spotify, or your favorite podcast app.

1:20:37 Also, please consider giving us a rating or leaving a review, as that really helps other listeners find the podcast. You can find all past episodes or learn more about the show at Lenny's Podcast.com. See you in the next episode.

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