Office Hours with Michael Seibel

Let's start with the first question.

Speaker: "Is about doing YC, the program, the core program that people know. A common question is: why is YC worth the 7%? What do you think?"

Speaker: "So when I think about YC, and I talk to founders about it, oftentimes I tell founders it’s in their best interest to start building up unfair advantages in their startup. It used to be that an unfair advantage was capital. Mm-hmm. But more and more now you see capital being very widely available. And so I tell founders, start thinking about what other unfair advantages can they get.

So with YC, I think a lot of founders always want to know about fundraising. What’s the unfair advantage you get around fundraising? First, YC companies get higher valuations, typically 50% to 2x higher than companies who don’t do YC. We see valuations on Demo Day ranging anywhere from 4 million dollars on the low end to 25 million dollars-plus on the high end, with most valuations between 6 and 12 million.

Put another way, when you raise money through YC, you get less dilution. ii. Better investors: We’ve taken the time and energy, over a decade, to collect all of the best angels and VCs and put them in one room. The YC batch is one of the most heavily scouted groups of startups in the world. And so we do the work for you to put the best people in the room. And then the final one is that fundraising happens faster when you go through YC. Some companies can completely finish their fundraise in under two weeks, and almost everyone is finished within two months, as opposed to other processes that you might run alone, which can drag out longer.

So first, we give you a bunch of unfair fundraising advantages. I say the next thing, and I would argue even more importantly, is we give you an unfair advantage around a batch. You’re batched with other companies that are in the similar state as you are. And even if you’re an experienced founder — and I’ve done YC twice — in the second time, I was a very experienced founder. I don’t have, at any given time, a whole bunch of friends and colleagues who are all starting companies right now. And so being able to literally be around a whole bunch of other people who were just getting started and who were grinding, you know, within the first year — and so grinding is extremely valuable from kind of a friendly competition perspective. But it’s also extremely valuable just from a support perspective.

Do all the talk with people who are there with you and to have this whole variety of people. So you can find that people that you’re going to actually relate to the most.

The next one is software. What kind of software does a typical investor give you access to? None. With YC, we give you access to a whole variety of software that gives you unfair advantages. There’s a forum that allows you to ask questions and hear questions from other founders, a forum created for you. There’s Work at a Start-up, which allows you to basically recruit off of YC’s brand. There’s posting job posts on Hacker News; only YC companies can do this. There’s an investor database with over 5,000 entries, including reviews and data from every company that’s ever done YC. There are deals, which are literally millions of dollars worth of discounts given by top companies.

There’s a YC company directory, which allows you, if you’re a B2B company, to sell into other YC companies. It’s one of the secret advantages of being in YC. There’s an alumni directory which also allows you to sell to companies and also allows you to find specific people to give advice and finding. There’s a knowledge base that gives you actual clear tactical written advice on PR, fundraising, growth, etc.

And so most of the time, when you’re raising from angels, typically you get some phone calls. Mm-hmm. You get some email exchanges. With YC, I would argue that you get a platform, and that’s an unfair advantage.

The last thing is additional programming. A lot of people think of YC as a three-month program, one-and-done. In fact, YC is built to support you from the beginning of your company to the end of the company. And two of the newest programs that we’ve built are specifically relevant to a lot of founders.

One is a Series A program where we actually rebadge you with companies that are now in the anywhere between $150,000 to $400,000 a month in revenue, who are going out and raising Series A. We teach you how to raise a Series A. We teach you how to deal with the professional process. We teach you how to do a great deck, and then we send you out at the same time and connect you with investors.

Having an advantage in terms of raising a Series A, I would argue, is one of the biggest competitive advantages you can have. Last, we have what’s called the YC Growth Program, and that’s run by YC Continuity, which is our growth stage fund. And if you’re running a company from anywhere between 50 to 150 employees, suddenly as a CEO, your job changes. It’s not about product-market fit anymore; it’s about how do you manage an organization? How do you build an organization?

And our growth program essentially is a series of dinners that teaches you all the tactics around how to actually be a CEO managing an organization. As a YC founder, all of this is encompassed in the 7%. There’s no additional equity that you have to give to get into any of these programs. When you’re a YC founder, you’re a founder for life.

So I’d argue, when you’re thinking about fundraising in this environment where there’s a lot of money stopped, think what the money is an unfair advantage and start thinking about what other unfair advantages the people who are giving you money can give to your company. I think YC looks great from that perspective, and it’s pretty simple math why it’s worth it."

Speaker: "Yeah, and in tagging on to that, I wanted to cover — we don’t have it in the notes — but your most recent blog post about generating leverage in fundraising."

Speaker: "Yeah, I think this is something that we ought to write more about, and Aaron’s trying to do it with a Series A program. But can you explain that problem and your proposed solution for the average company?"

Speaker: "I think the base of the problem that a lot of founders need to understand is that a lot of fundraising advice is written by VCs. And the unfortunate problem when you’re reading fundraising advice from a Series A VC’s perspective is that they’re not necessarily on your side. And so if you think about it, the narrative around fundraising is typically something like you raise money when you’re running low on money, when you’re at between 12 and 6 months of runway.

When you raise money, you need to be most sensitive about valuation, which I think is completely not true. When you raise money, I think almost strangely people think about raising money when it’s the first moment that they think they can. So I see a lot of companies who are like: ‘We’re an enterprise company, we’re at a million dollars ARR, isn’t it time to go raise Series A?’ That’s where all the VCs say, right?

I’d argue that’s like the earliest possible time to consider raising a Series A. And so this whole kind of narrative around fundraising, especially Series A fundraising, I think is designed to bring you into the front door of the VC as soon as possible to allow them to get the best look possible as early as possible. Right? So we should clarify that in financial terms, right?

So your valuation is probably a little lower at that point. They can probably get a higher percentage of your company at that point. And because you’re scared that you won’t be able to raise, you sell early. And even more so, there are probably six or seven terms around a fundraise — a Series A fundraise — how big your option pool is, how many board members, what the rights of the preferred stockholders are. And if you’re going into a fundraise without leverage, you have a hard time negotiating any of those terms.

And so you might think valuations the game, but actually there’s six other terms that are really important. So I think that, you know, Series A is what confuses a lot of startups. And I really want to focus in on Series A. I think some of these things are different when it comes to raising seed, but Series A is really confusing to a lot of startups, and I think a lot of the advice out there is tricky, and a lot of the common wisdom is actually tricky.

The way that I like to tell this story is I talk to a founder, and I say every startup has a leverage graph. Basically, it has a graph of how much leverage the startup has over time. And I’d argue that that leverage graph in a good company always goes up to the right, but it has peaks and it has valleys. The best founders I know will raise money when their leverage graph is at a local peak, and the founders that struggle will try to raise money when they’re in valleys.

And what’s interesting is that when you’re at a peak, you might not feel like it’s time to raise money. You probably don’t need money. You might even be close to break-even; you got a lot of customers; you’re building products; great things are going really, really well. And as a CEO, it’s oftentimes hard to think, ‘Oh, let me take my mind off of my company to go raise money.’ But in many ways, that’s the absolute best time to raise money. Mm-hmm. That’s the time you have the most leverage. That’s the time when you can walk away. That’s the time when investors are going to be more ready to chase you versus you should chase them.

And so I really tell founders, hey, think about where they are on their leverage graph. And think about this way before you hit that twelve months before you run out of money."

Speaker: "Yeah, and how are you spotting those points? Like I obviously know that we’re in a better situation than we were eighteen months ago. Who knows where we’re gonna be in eighteen months? But those local peaks and troughs, how do you as a founder identify those?"

Speaker: "I think the first peak tends to happen when you hit product-market fit. Okay, I think what happens when you hit product-market fit is that you have a lot of growth, but you are relatively understaffed, and so your growth-to-expenses ratio looks very good. I also think at that point, if you’re a revenue-generating business, you have more money coming in the door than you’ve ever seen before.

And so it’s so funny because every startup wants to get product-market fit. I think most startups don’t realize how much a punch in the face product-market fit is. But I think that’s where the first kind of peak is. I think that what happens when you hit product-market fit is you start investing in scaling your operation, improving your product. Oftentimes, it takes a second priority just making sure your customers can consume your product. And that counterintuitively, I think that’s the most strategic time to raise a Series A.

I think that, you know, your graphs are gonna look great. Hopefully, you’ve got revenue coming in, and hopefully, runway is gonna look good. And so to me, that nails it. Hmm. I think when companies try to raise their Series A, and when I say Series A, I mean, you know, a five to ten-million-dollar round from San Francisco VCs. I think a lot of times, in chat, founders try to raise Series A pre-product-market fit. They have to be over-reliant on their story. And second-time founders, experienced founders, founders with exits tend to do disproportionately well with pre-Series A, product-market pre-product-market fit Series A.

But I think that if you are not one of those founders, if you’re a first-time founder, go in with the numbers. Like it’s just always easier when you’re going with the numbers."

Speaker: "Yeah, and so a related question from the internet. Yousef asked: how did you validate your product-market fit? So if this is in the context of Socialcam, I assume that’s what they mean."

Speaker: "Yeah, I think that like we’ve written about this. I think that, you know, the phrase product-market fit was invented by Marc Andreessen, and then somehow nobody bothered to look at his definition, and now it’s just been misappropriated in every way.

And like the now common use of the phrase is like, ‘I’ve built the thing that my customers want,’ but it’s like even weirder than that because like oftentimes I’ll ask companies or companies ask me if I have product-market fit, and I’m like, ‘How would I know?’ It seems like if you hit product-market fit, you’d be growing uncontrollably. Everything in your company would be breaking. You’d be doing all you can just to keep up with the current customer demand. Like that’s the definition of product-market fit.

Yeah, it’s unambiguous whether that’s happening to you, and like I think a lot of founders think, ‘Oh, product-market fit is I’ve built the right product!’ Right? And it’s like no, product-market fit is what happens after you build the right product and you distribute it well. Like it’s everything else.

It was a culmination of some MVP kind of process. Exactly! Yes, no, an MVP and product-market fit sometimes can be five years apart. And so yeah, no, I totally agree. See, like you know an MVP, the whole goal is to get any customers coming in the door, and then you kind of struggle, struggle, struggle, and some companies find a product where now customers are just beating the crap out of them to get in."

Speaker: "Right, he says it puts the market pulls it out of your hands."

Speaker: "Exactly! Yeah, and so if you don’t feel like growth is beating the crap out of you, you are not in product-market fit, like unambiguously."

Speaker: "Did you guys hit it at Socialcam?"

Speaker: "I would say yes and no. I would say that we definitely got hit in the face with growth; however, I would say that we were particularly good at distribution and not as good at product. And so I would say that our product didn’t retain as well as we wanted to, but we certainly got a ton of growth.

And I think that, you know, in social, you see that happen. And I’d argue that like, you know, did we hit product-market fit? Like I would probably say no. I probably say that there’s growth you can get that doesn’t reflect product-market fit because some part of product-market fit is not only having all these customers coming, but they’re doing what you want them to do. Like your goal of your product is being served.

And the goal of Socialcam was to get everyone to be video creators. When we were blowing up, we were blowing up on video consumption, but not a video creation gadget. So I think that’s probably an important part of what people don’t talk about product. That’s like everything is going well, but it’s like also your business part is working right. You’re not selling a dollar for 80 cents, exactly. You’re not, you know, negative margins. You’re not like getting users to do something that’s like not the thing you wanted them to do."

Speaker: "Yeah, okay. Let’s go into some questions general, like YC application related. So LC Carrier asks: how does YC feel about companies who don’t want to raise VC money after the program? And maybe a canonical example is Zapier, who did a seed round and then went on to be profitable."

Speaker: "So I think what’s interesting about this is like, of course, we don’t care. Like these are your companies. One of the first things we say at the YC kickoff in the beginning of the batch is that you’re the boss. You get to decide what you want to do with your company. We are not the boss.

And I think even more so what’s interesting is that we have a large variety of companies. A large number of companies have never raised from VCs or have only raised from VCs way after product-market fit, profitable, so on and so forth. No, we love those companies just the same. I think that it’s interesting, like in many ways, I think that as YC has become more mainstream, we have to be louder about what we like. We’re lumped in with VCs, and we’re not VCs. That’s not the purpose of this. We’re not here with the kind of sole reason of how do we make sure we make as much money as possible out of every single company we invest in.

Yeah, that’s not the way YC works. Yeah, and to be clear, if your company raises money through YC and then goes on to be wildly profitable, that’s a great outcome. Yeah! Provide no dilution, no pro-rata, no like, that’s — and it’s great for the founders. Like this is, you know, like I think we provide an onboard into VCs if you want it, but like by no means do you have to consume it."

Speaker: "Right. Yeah, I mean, I think this is kind of related to — did you read Aaron’s post this week about advice? Because we’ve entered in this position that’s in between like VC, traditional VC, and universities. We’re just thought of us like the advice-giver and like you have to have permission to do this thing, and we don’t want certain people; it’s not really the case."

Speaker: "Now, related, another super common question, Emil Sen Rodriguez asked: do companies need to be incorporated already to participate in YC?"

Speaker: "So this is another thing that I think is extremely important to understand. A lot of people talk about the growth of YC. + YC certainly has grown pretty significantly. Batch sizes are a little bit more than doubles since I last did YC in 2012.

I would say it’s responsible growth; we’ve prepared ourselves, and I think we still give a really good, high quality of service. But what it’s also done is allow us to have such a variety of companies at a variety of stages. So YC has always been about the super early stage and will always be about the super early stage. We can help you incorporate, and we help a lot of companies.

A company could incorporate when they come in. There are a lot of companies that literally start writing code when they join YC. There are a lot of companies that are pre-launched when they join YC. I think YC’s expansion has allowed us to also work with companies who are post-launch and might have incorporated or raised small amounts of money. But I think sometimes people want to interpret that as like a change of strategy as opposed to just an expansion. You know, this is not an either/or; it’s not an or; it’s an ‘and.’

And also I think it’s really motivational to be in a batch where you have some companies that are pre-launch and still trying to kind of get that MVP out the door, and you have other companies that are like starting to take off. Mm-hm. And I think that, you know, when you want that motivation, you come to a dinner, you see a company taking off, and you think to yourself, ‘We got to get back to work.’ I think that motivation is key. Yeah, that like cohort pressure you see people follow-on after YC to just having dinners with their friends.

Yeah."

Speaker: "You had another question about YC types of companies, so Alex Rodriguez asked: what do you look for in startups that haven’t had good growth but continue to push through? For example, Airbnb, that makes you accept them into the batch?"

Speaker: "I think what’s interesting is that like this concept of traction, I think, is very interesting. I think that there are complicated or not well-defined thoughts that people simplify. So if I tell a startup, ‘Oh, I’m looking for traction,’ I think what they think of is that I’m looking for growth. And like they think that oh if I have growth, why would I need YC? Right?

It’s kind of this catch-22. When I think about traction, I think about it a little differently. I kind of think, ‘How much time have you been working? And what have you done? Am I impressed with the amount of stuff you’ve done in the amount of time you’ve been working?’ And so to me, like Airbnb, what they had done in that year before they applied to YC — and by the way, I think this story is like told in such a strange way — it was a year; it wasn’t like ten years. Everybody was struggling before they got into YC; it was a year. But what they had done was impressive.

They had launched multiple times. They had been the housing host for the DNC convention and the RNC convention. They’d been on CNN a bunch of times. Then like they’d done a lot of impressive things. The product wasn’t working, but you couldn’t look at the last calendar year and say, ‘Oh, these guys aren’t out there grinding it.’ And so to me, like that’s far more important than whether they’ve been successful.

I think the second thing is that the Airbnb guys felt like they were onto something. Like a lot of investors talk about like what’s your secret sauce, what’s unique insight, what’s the thing that you know that other people don’t, right? And it’s such an overused phrase, but it’s kind of true. The Airbnb guys really thought that people would stay in strangers’ houses and they thought that it could be a significantly better experience than hotels. And they believed that through and through.

Yeah, and even if you don’t agree when you see three people who actually believe that, you think to yourself, ‘Well, why not try? Right? Why not run the experiment?’ Because you were the one that went to bat for them; you have to get into YC. So what was it about them or about the project? Had you used a product before you told PG about it?"

Speaker: "Before I told PG, I had not used the product. No. I hadn’t used it, no, because back when I was working with them, they were really focused on events and so not renting out whole houses either, not rental houses, renting out rooms and still doing the airbed thing.

Yeah, and I didn’t go to the RNC or DNC conventions, and what I saw in them was exactly what I said about traction. They just kept on working. Like one of the things that we say to YC founders, some of what PG always used to say is that companies that do well in YC, you have office hours with them. They tell you they made your problem, you brainstorm some potential solutions, and the next time you talk to them, they’ve moved on to some other problem.

And with the Airbnb guys, it was exactly like that. And the other thing is that they were happy and gracious, you know? Like it’s easy to help people who are like nice. They’re nice, they’re hard-working, yeah, committed.

And I think that this part of the Valley doesn’t get talked about a lot. Like if you’re nice, concise, you know, and hard-working, like more often than not, people will try to help you. Like they won’t go out of their way; they won’t, you know, like stop their business to help your business. But like will they give you an hour? Like yeah!

I think that like sometimes you have to warm up, right? Sometimes you have to, you know, show that you’re being serious. But yeah, like this is not a situation where people feel that your success somehow takes away from them or somehow reduces the size of the pie, so yeah. And I think people are always looking to meet motivated. Like it’s not this weird, close friend network situation where it’s like, ‘I don’t know. I’m done with motivated, inspiring people.’ That’s what I think is so weird about the Valley is that like on the East Coast, all of the networks, in my experience, tended to be around like what you’ve done in the past, like where you worked, where you went to school, what club you were in, right?

And like here, it’s like strangers email me every day. Yeah! I reply to them every day! Like this is like the way of the Valley. Like strangers, like literal strangers. And so like the only thing we all have in common is we’re all crazy enough to try to do startups, and I feel like inside every founder, there’s this feeling like if you’re stupid enough to do a startup, we should have each other’s back because I’m stupid enough to do it too. And there aren’t a lot of people as stupid as us.

Yeah, and you have enough goodwill to keep replying. Yeah, because in those emails, you get a lot of crazy ones. Yeah. And I would just say that knowing what to ask from the right people in a clear, concise, simple way, you can get through to most of them. Is it a crazy cold email? It’s a skill that everyone should work.

So related to that, the Airbnb guys working on different types of things in the first year, I think it’s worth explaining that like that doesn’t necessarily mean pivoting five thousand times. So yeah, that’s a good point. I really — I’ve been trying to kind of nail down what’s the difference between pivoting and iterating, because iterating is clearly good, and I think pivoting is oftentimes strictly inferior.

So one of the things I think about is that when you’re iterating, usually there are lots of things that you can learn about from the previous version of your product because oftentimes you are keeping the same customer or very related customer and you’re solving the same problem or a very related problem. Mm-hmm. And so for me, like I get smarter every time I iterate. I feel like iterating is kind of letting the running the scientific process, and I’m learning every step of the way.

To me, pivoting is when you basically take things outside of your realm of the previous thing you worked on. Mhmm. So in effect, you’re changing the customer drastically or changing the problem drastically. And usually, even though you can kind of justify it to yourself often because there’s similar technology, like you don’t have to completely rewrite your code, I would argue that like you are not learning very much from what you just did; you’re just working on something else.

And I think that rapid iterating is amazing. I think that rapid pivoting is really bad, and I think that, you know, Sam and I can — I give two different pieces of advice on this that I think reach the same point. You know, someone asked Sam when you should pivot, and he said when you’ve exhausted every idea, every single idea on your current problem that you’re solving. Yeah! And I love that construction, but I feel like founders lie to themselves; like I lied to myself as a founder all the time and so I like to tell people like time. I like to say like give something a year or two. Like it really can take that long; it often does.

Yeah, long, and like it was like concerted, hard work. Yeah, just like I do it on nights and weekends sort of of constant iteration. I do think that like there are these — there’s this myth that if you build it, they will come, and that’s just like a myth. Like behind every one of those stories is a lot more hard work. Mm-hmm. I think another pivoting problem is that people pivot and apply the same solution to multiple problems, and like the solution is just never that good.

And so you just get locked into this thing that won’t work. Yeah. Another thing somewhat related to that Airbnb guys, it’s just how compelling they are. Phador Paretsky asked about basically pitching your company. So they say, what are your thoughts on the strategy of just like being very, very aggressive and enthusiastic about pitching your company in terms of pitching to investors? And are there other techniques you encourage to make your pitches sound more compelling or exciting?"

Speaker: "What I didn’t understand as a founder was that anytime I pitched an investor, it was the, you know, basically round two over a thousand pitch that they ever got. Mm-hmm. So think about it this way: any gimmick or trick that you think might be unique has in fact already been tried by one of those thousand people before you.

And so I think that oftentimes people kind of resort to weird public speaking gimmicks or, ‘Oh, I gotta make a memory,’ or ‘I gotta like create an impact,’ or like a sales type thing, and it’s like honestly, it’s a lot harder to sell to like a salesperson, and a VC is kind of a salesperson. It’s kind of like, it’s a lot harder to do an email marketing campaign to a founder that does email marketing. Like I’m a little bit immune to drip campaigns, right? It’s like, and you’re smart. That’s awesome that you’re smart, but by the way, there are a thousand other people you’re smarter than.

So when I think about doing the pitch, these are the things that actually stand out to me. The first thing is clarity and conciseness. I think that more words are actually bad. When you actually study really good salespeople on the phone, it turns out the customer talks way more than the salesperson. And so when you’re in a really good investor meeting, the investor is fully engaging and is basically like giving ideas and brainstorming. It doesn’t feel like a pitch anymore, right? When you feel like you are pitching for a long period of time, that’s a bad sign, typically, especially in early fundraising. Later fundraising is different, but see, even Series A.

So one, clarity and being concise. I really think most apps can be explained in three sentences. The two: don’t start with your background like you’re telling a story! And oftentimes the mote – and oftentimes people default to telling a story chronologically — and I argue that like actually like you should be thinking a little bit more like ‘Pulp Fiction.’ Laughs. Like tell the interesting parts of the story first. Get me hooked.

Oh yeah, and your background — if your background isn’t one of the top three most interesting things that happen in your startup, then probably you shouldn’t start with it. Now for some startups, it is, right? Like for some startups, the person’s background is. But rare. I think the other thing that’s important is that the investors clearly understand the problem you’re trying to solve. They clearly understand it.

I think so often founders, when it gets straight to the solution, and so what’s weird is in that first couple sentences, like what I want to get out of it is I want to know what you do, right? I don’t have to be sold on it. I just want to know what it is, right? You know, me knowing that Google is a search engine where you go to a website, you type in something you want to know, you click the search button, and then a bunch of webpages that are relevant to what you typed pop up, great! Yeah!

I don’t have to be convinced that I want that; I just have to be convinced that I know what that is, right? Then I want to know anything about traction. Anything like, have you launched? By — is it growing? You know anything like that? I want to know that you have tackled on your founding team, and I want to know why. What’s the problem that you’re trying to solve, and why you wanted to try to solve it?

Mm-hmm. For me, those are the things that like if you can get out in the first 30 seconds, mm-hmm, I can engage in a conversation with you. Mm-hmm. And I think the other thing that I tell founders is that like if you do a bad job, it’s your fault. Like unfortunately, if the person you’re talking to doesn’t get it after the first 60 seconds, it’s not because they’re an idiot; like it’s because you didn’t explain to them well.

And like that’s really hard to hear, but like I just tell founders that straight, and I’m like, look, I’ve been pitched like to infinite times, so like I think I’m not dumb. Well, I mean like it doesn’t really matter if you’re smart! That’s true, maybe! Unfortunately, you’re asking me for something, so you gotta dumb it down for me either way.

So yeah, and I think that oftentimes what’s weird is you have to throw away other instincts. Yeah, forced! You always have to throw away your customer pitch. The investor is almost never a customer, and so it works when the customer is almost the exact opposite of what I work on the investors. Second, you gotta throw away jargon! Mm-hmm.

Right? What makes you sound smart amongst your peers makes you understandable by someone who’s not one of your industry peers. And so I think there are all these like things that like people try to use to make them seem impressive, yeah, which are like driving people to do the exact wrong thing when they’re pitching to a VC.

Yes! Like I actually think you need somewhere between like sixth and ninth grade language. Like that’s it! Oh, that’s a fundamental for me on your blog! All of this does like why are you complicating? No, no! And I think that’s what’s weird is that like you’re speaking, right?

And so like, if you’re not clear and concise, the more brain power after you use to figure out what you’re saying, yeah, like the more, the less viable conversation is gonna be. Mm-hmm. And I think like related to this, people can conflate salesmanship with confidence, and so many of these founders are very confident.

Yeah, but oftentimes they, you know, it’s like that Steve Martin quote! Like they’re so good they can’t be ignored! The reason is like they don’t really have to like take the money from a certain investor, so they can just confidently walk into any room! Yeah! Communicate it clearly!

Well, you know what I think creates? I’ve only seen two things reliably create real confidence, not fake confidence. One is you’ve done something impressive in the past; that makes you confident. The second is you have the numbers."

Speaker: "Alright? Like you got one of those two things, like you deserve to be confident! So, you know, for first-time doubt is the numbers! Huh! And I would underscore this for international founders. I think it’s really hard to clearly communicate what living in another country and that specific problem in another country is like to an investor here.

That’s so important! That’s so important! But what’s fun is that when you get it right, what’s fun is like, I mean we’ve invested in a bunch of companies out of Nigeria. You know when they explained to you that you can have five credit card processing machines at the hotel from five different companies and you can swipe your credit card in each one of them and it won’t work?

Yeah! See, I have to pay your hotel bill in cash! You’re like, ‘Oh, if that happened, that’d be super painful!’ But you know, right, as opposed to saying, ‘Oh, credit card processing doesn’t work in Nigeria.’ Right? Yeah! It’s like I’m kind of worried! I’m like, come on! You know, right?

Like when you can tell a story and paint that picture, and like it took me how long? It took me ten seconds to paint that picture, and I get told, ‘Oh, but you get it right!’ As opposed to, ‘Let me tell you about the history of credit cards in Nigeria!’ Right? Yeah!

I mean, and by the way, Nigeria is 200 plus million people! Another thing that, like, I don’t know how I see. Actually, that’s a really important thing to — facts are really important! One of the things I think is interesting about a lot of investors is that they know like 2 inches on a lot of different subjects. And like if you know like 6 inches, they will think you’re very smart, and if you know 1 inch, they’ll think you’re very stupid.

Yeah! And so like just doing some friggin’ research! And like when you talk, like, oh, I often tell founders like write down everything you just said and count the number of facts! And like if you didn’t say any facts, just say some facts! Oh! It’s great!"

Speaker: "So do you — this is related. So David Chen asks: how do you find mentors and advisors, but when you’re pitching your company, are you pitching it to mentors and advisers to get warmed up? Or are you just pitching it to random people at Starbucks?"

Speaker: "I think that like one piece of advice that Justin Khan gives that I really like is aggressively practice pitching friends, colleagues, existing investors before you go out. Yeah! And that like there’s something that you can learn from every run of it. And I think that one of the strange and unfortunate things is that fundraising is so hard, and the process in general has been made so painful that founders shy away from it, and they want to do it as fast as possible with as least practice as possible.

And unfortunately, I think that doesn’t serve them well. And so I think practice is really, really important. Yeah. On this thing about mentors, so I get asked five times a day, ‘Can I be a mentor to your company?’ And I would consider I have never met them. A formula, I don’t like the mentor word. I feel like it’s an old-fashioned word. It kind of reminds me of the day of like master and apprentice.

Mm-hmm. Where like you actually needed someone, like you’re not a blacksmith, like someone has to teach you that shit or else you’d not be able to do it. Like you could drive, but you can’t go on the internet and Google search box! Just like, you know, it’s like — and I feel as though for some reason.

And by the way, I think in corporate America, mentors are probably extremely helpful. I don’t know; I’ve not really been punching more Cabrera. But I think a lot of this advice comes out of corporate America and comes out of like career prep centers and all that stuff. I think for me personally, I give advice to a lot of startups and I’m happy to like this part of my job, and I wouldn’t do this job if I didn’t like it.

To me, when someone asks me to be a mentor, it’s asking way more of a commitment. Right? It’s like what I’m saying is that without being your mentor, if you ask me a question in a clear and concise way, I will 99% of the time reply within a week with what I think is the best answer. You get that for free? For free!

And so what I think about is again someone asking me to be a mentor; I’m like, ‘Oh god, what else do they want?’ Well, it’s like, ‘Hey, Michael, we’ve never met, do you want to be in a single relationship together? Yes? A little, right?’

And I also — I always feel like when those people — if they just emailed me a question of, ‘Yeah, like what question do you want to ask? Let’s just pretend I am your mentor, right? Let’s pretend I’m everyone’s mentor; you already have that! Like what? And you know, if you’re looking to like put my name on something, that’s like silly. Who cares?

Right? Like no investor’s gonna be like, ‘Oh, well because Michael signed up as your mentor, I’m going to invest.’ Like no, no good investor will say that. I think what a lot of founders have found, both in YC now, is that if they asked me for help, I’ll try to help them.

Yeah! And like that’s what you want! So stop asking for a mentor! Like it’s funny because I actually had this conversation with someone else, and I was like, ‘You know, this company that I helped a bunch,’ I was like, ‘I don’t think they — like I’m not their mentor.’

And then it was funny because one of the guys was like, ‘Oh, I talked to them,’ and they say, ‘You’re one of their…’ They just asked for help, and I and I was happy to help them, so don’t raise the stakes of a new relationship! Just ask for help!

And you don’t have to — and they also don’t know, like maybe you just give them terrible advice! Maybe you say yes to being their mentor, and then you drive them off a cliff! Yeah, I mean like advice is one of those things, right? Like take it with a grain of salt!

Yeah! I don’t think there was nobody who I felt fulfilled a traditional mentor role in my time at YC in the Valley. Like that kind of like took me under their wing and showed me what was what, right? Like nobody did that! Right? A lot of people helped a lot of people, and I asked for help, but nobody — I almost feel like a mentor in some ways is taking responsibility for your success!

And like nobody does that, especially if they haven’t invested in you, but even if they have, they don’t do that! Usually, it’s just like after enough years, you’re friends! Yeah! And then maybe that’s it! Like after enough years, you like meet up just because! Yeah, which is great."

Speaker: "Alright, let’s go to another question. So I just want to clarify this one on the first page. Building Neat asks what, if anything, are you looking for in a startup that wants to be part of Startup School?"

Speaker: "Anyone can do startups; anyone can do Startup School! Okay, I think we designed it like to be extremely explosive. We designed it to be step one! Yeah, like in any state you’re in, you can get value out of this thing, and that’s what we decided! Yeah, and that there will be these grants given out, but that’s gonna be decided after the fact!

Yeah, or I guess at the end. Ryan Karl Mercer, a frequent podcast and the question-asker, asks what’s your preferred way of organizing your time?"

Speaker: "I hate giving advice on this because I don’t think I do it particularly well. I have like an Mei star important emails, and I use a to-do list. You know, that’s, I think like probably the biggest time hack I’ve had has been since I’ve had a kid. I think the biggest time that I’ve had is that I’ve been one lucky enough that my parents closed so they can help watch my baby, and then I think the second thing is I’ve been fortunate enough to be able to afford someone to help at night.

I think those are probably the two things that are keeping me like functional right now, but I do not think I am a model of organization."

Speaker: "Let’s go to the next one! So John Rigler asked: can intrapreneurship be effective? And by that he means starting something within a company? I believe I recently returned to IBM; I have a patent and yet only vague ideas about how to signal and organize other like-minded folks within the company. Could this path sabotage my dreams?"

Speaker: "So I caveat this answer by saying that I’ve only worked in a big company for I think 14 months of my entire working life, and I have exactly one experience with intrapreneurship, and it did not work out very well. So, you know, in my single experience, it didn’t work. I can’t give you advice on how to make it work for you or if it does work.

I mean certainly there are big companies that invent new things all the time, so somebody has figured out how to get that done! But this is an area I have — I would argue almost less than zero knowledge of."

Speaker: "Okay! Horacio Chavez asked: how would you approach an investor who says, ‘I won’t invest in you unless you have a patent?’"

Speaker: "I probably would just talk to another investor. Yeah! That’s not a typical response, especially in technology startups. I can’t speak to biotech and so on and so forth, but in technology startups, that is such an untypical response; it’s almost indicative that that investor is not very good.

Yeah, or they’re trying to say no, I’m sure! I mean, but like that’s a bad way of saying no nicely! Like greater ways to say no! Yeah, yeah."

Speaker: "Alright, so yeah, LM Ronnie asks why, in a sense, it’s just we’re gonna have relationship questions now. Why does it feel like entrepreneurs aren’t marriage material? SH? An entrepreneur looks for an entrepreneurial spouse!"

Speaker: "That’s an interesting question! So I started dating my wife when I was doing a company; I thought I was marriage material! I don’t know! I think, um, I think what they’re trying to get at is that, so like say, yeah, so you’re really dedicated to social cam and it’s taking up a lot of your time and all these justin.tv! Oh really? Yeah! And that consumes all your time; therefore, you might not in someone’s eyes be a great partner, and I think that’s what they’re getting at!

But I mean, I think different people like different things! I think that, um, you know, some relationships are really motivated by work, and people find someone who is really into their job is something that’s attractive. Yeah! I think some relationships, some people are in LA way!

Yeah! You know, but I don’t think — I think that it is pretty easy to see how intense an entrepreneur is working on their job pretty early in a relationship! And you know if that’s not something that someone likes, then they should move on to something that they like!

Yeah, yeah! In that second question? An entrepreneurial spouse? I would just say a spouse that’s okay doing their own thing, whatever that might be! Just they’re okay doing their own hobby or whatever! I hate to be like general on this, but my wife certainly was that way!

My wife is certainly someone who didn’t need me to be around 24/7! Yeah, exactly! And I think that’s good! Alright, yeah! Ha asked another question: how intense do you really have to be to found a startup?"

Speaker: "I think that this is such an interesting question because like ‘intense’ is such an interesting idea, right?

So like, okay, I’ll tell you like two different versions, right? Yeah! So Justin.tv, there were probably at the max point five or six of us living in a two-bedroom apartment. One, two people were sharing bunk beds; one person had a room to their own; one person was sleeping in the living room, and I was sleeping on the balcony.

We worked; the office was the apartment. Yes! We worked, you know, when we were at home, and our roommates were the people in the company! So there, you know, that was, you know, that was that part! And then moreover, the building was full of other startups! Yeah! And so my friends were startup founders, and we were going through YC. So on and so forth, right?

On one hand, that sounds like really intense, right? I don’t know though; like college is kind of similar, right? You’re living with people, you’re going to school with, like oftentimes, you know, they have similar interests; like you’re kind of enclosed in this space; you’re all kind of doing something similar!

Like, yeah, I don’t see it as that different. Now, what I will say is that like — I think when describing the steady-state, I didn’t think of it as like this like massive intensive thing! What I will say is that the lows are low!

Yeah! Like when people talk about emotional rollercoaster, I hate that phrase because it’s so cliched! But like there have been times in my startup’s history where I’ve like gone home and cried! Like there have been times where I thought, ‘Pack it up, last five years of your life down the drain!’ There have been times when I’ve thought, you know, I’ve lost my best friend!

There have been times where I’ve thought like all kinds of stuff, right? Just bad, bad stuff! So I think that like you need to be resilient! You need to be able to — that kind of stuff! I’m not saying that you like shove it away; you need to be able to get past those lows!

Yeah! You need to be able to wake up the next morning or a couple days later and get back into the game! So I would almost argue that the resilience thing is maybe more important than the intensity thing!

I kind of feel like it doesn’t feel like intensity when you’re doing the thing you like to do! And your setup should be the thing you like to do, hopefully! Yeah, yeah!

I think intensity can be used as a synonym for like an asshole, and that's definitely — I would just — wanted to spell that! Like that is absolutely not true! That we like — an asshole! No, no! But like going back to the Airbnb thing, I think intensity could also be a signal of working efficiently, and many of the really great founders do that!

Like I’m not sure! I don’t like the word intensity because I feel like it’s like morally ambiguous! Like I would say passionate! Yeah! Like you know, passionate? Yes! An asshole? No!

Yeah! Like I feel like intensity could be passionate, or it could be an asshole! I just have this horrible image of like, ‘Hey, I’m like the intense hustler! I just get shit done!’ People don’t like salespeople as well!

It’s weird to like talk about this world, but it’s like when I — when I was at Justin.tv, we were just starting, right? Like sometimes I think people find hard to understand how much of an engineering backbone there is to this whole thing, and a lot of the like norms are kind of — I would almost argue invented by engineers or former engineers.

And so like, you know, people not wanting long meetings, people not wanting concise communication, like a lot of these are kind of traits you find in the engineering community, yeah? And like salespeople and engineers are like water and oil!

Like so or else is a stereotypical salesperson! Yeah! The kind of cartoonish con television-ish salesperson, an engineer! And so like I had to learn a lot!

Like I had to learn a lot about just the engineering culture, and I feel like I’ve embraced it as my own now! But like it’s different! It’s not business! It’s not New York! Like it’s not business guy first here; it’s kind of engineer first!

Yeah, it’s definitely not polished! No! Don’t wear a suit! So just a couple more questions about Startup School. Do you think there’s a particular stage of company that this would be most beneficial for, or doesn’t it matter?"

Speaker: "You know, it’s funny! I always get this question in the context of applying to YC! And I always tell founders it’s like — sometimes people phrase applying to Startup School, applying to YC as if we’re charging $50,000 and it was a 10-year life commitment!

It’s free! Yeah! I think it’s free to apply to YC; it’s free to apply and it’s free to do Startup School! Like if you’re curious about it, founders, they don’t tend to talk themselves out of things! Right?

Try it! Yeah, try to apply YC! Like if you get an interview, you learn more! Like try Startup School! If you like it, great! If you don’t like it, don’t! Like talking yourself out of free things is like kind of weird! Right? Like you — oh my god!

Kevin Hale used to say that he would scream at people, ‘We’re giving away free lottery tickets! What are you doing?’ It’s so true! It’s so true! So it’s just like, you know, don’t talk yourself out of stuff!

Like part of being a founder is just kind of like some amount of just do! You know? And if you find yourself talking yourself out of things, like maybe we can talk yourself out of the thing you should be doing right now!

Yeah, yeah! And so yeah, there’s no contract! There’s no like we’re not gonna come hunt you down if you want to apply later to YC, it won’t count against you! There’s really no cost! Yeah! Like in any, in financial, moral, occasional, all of the potential cost is no cost!"

Speaker: "Yeah, okay. So then assume we get over the fear of applying, of doing Startup School, how do you get the most out of it?"

Speaker: "I think that the way you get the most out of it is you devote a significant amount of time to making progress in your company goals every week. Do not think of this as an educational program!

Yeah! Don’t think of this as a program where you sit there and you’re gonna learn about how to be a founder! Like learn by doing! This is a learn by doing type business! And so you should think where do I want to be from a metrics perspective, from a milestones perspective at the end of Startup School?

And map out that path through Startup School and like where do you want to be week over week to get to where you want to go? I think that’s how I get the most value! But if you can move two times faster to get your MVP, you get to launch your first customers, because you’re in Startup School!

You’ve got a great service for free, and it’s way more! It’s way better than, you know, whatever lectures we could do! Yeah!"

Speaker: "Alright man, thank you!"

Speaker: "Alright, thanks much!"