Successful Founders Are OK With Rejection – Dalton Caldwell and Michael Seibel

And so I just noticed a lot of these teams the really core thing going on is ego protection and nothing else. And like you can come up with all these intellectual arguments on why actually, you know, but when you really talk to someone and you get down to the core, it's being okay with getting rejection.

"Hey, this is Michael Seibel with Dalton Caldwell. Welcome to Rookie Mistakes. We asked YC founders for their rookie mistakes so we could share them with you and help you avoid them. Here's the first mistake that was written in: in the beginning, when you're still figuring out your idea or product, get in as many user or potential user calls as possible—at least one per day, and ideally multiple. It seems obvious, but it's something that we personally failed at in the beginning.

Don't brainstorm ideas in a silo. You don't know what people want. We have all these ideas in our heads as founders about what people want that the moment they are subjected to reality are embarrassingly wrong. Like there's nothing more humbling. There's nothing that makes you feel shittier than seeing real people using this thing that you built, that you spent a bunch of time on and just like ripping it to shreds and not understanding it or like using none of the features or clicking on the wrong thing. It's horrible. So you talking to users is like the inoculation against this—spending inordinate amounts of time doing something that is completely irrelevant to your end users.

"Okay, so you're suggesting then that I take surveys, right? I mean, what's the most efficient way to learn what my customers want? I should survey them, right?"

So this may, uh, be offensive to some folks, uh, listening to this video, but, um, I don't think that user surveys are that valuable when choosing a startup idea. Surveys are a useful way to get certain kinds of feedback. I would think of it as sort of micro-optimizations or trying to choose directions. Or say you had four ideas, four names for a company; you want to choose which name was the best of the four choices. Yeah, great, run a survey.

But when you're looking for fundamental truths or you're trying to find your first customer market validation, you want to be harsher or harder. Well, what does that mean? That means get someone to give you money for it. Do you see how it's a much higher bar to get someone to pay you money than to fill out a survey or to get someone to actually use your thing every day or to get them to install it on site?

Think about how many products that we would all in a survey say, “Oh, that sounds useful,” like, “Oh, it's, you know, very, very useful idea that you have,” that you would never in a million years actually pay a dollar for. I think the second thing about a survey that I've seen really be horrible is there's a tiny subset of your potential users who actually have expertise. They've actually tried 27 different products. This is actually a really important problem for them.

But if you treat everyone you talk to the same and they filled the same questions, you never get exposed to their expertise. And the best example I saw of this was early days Airbnb. Airbnb did this fun thing to get users in the very early days where they offered people who were putting their homes online for rental on other platforms free digital photos—high-res digital photos—back when, like, digital cameras weren't a thing yet in order to list on Airbnb.

Instead of hiring a photographer, they went out, they got digital cameras, they went out and they took the photos. And to this day, I still remember that there was one guy who they met, they took photos of his house. He loved the photos. He asked them, “Hey, do you want to sit down for coffee or tea or whatever?” They started talking, and then he said, “You know, I've been renting out my house on all of the platforms on the internet for a decade and I have a notebook of all of my notes on all the things they do bad and all the things they do well for the last decade. Do you want to see it?”

So in the Dalton scenario, he would have received an email survey like how he would have signed up for us but not at a listing, not used it, would have sent an email survey like, “How do you like Airbnb? You suggest things to improve,” right? In the real-world example, they got a book of all the things they needed to do. And again, like think about this: imagine you know these guys, the founders of Airbnb back in the day. The way they validated the idea was to ask people on a survey where they did some user research. They did an interview. They did a user interview. Would you like to rent your home?

Do you see how what they could have learned from that is like this versus actually trying to get strangers to rent their home out to other strangers and all the things that popped up trying to actually make the damn business work? Do you see how they learned this much from that versus this much from writing a survey?

"Well, Dalton, it's not even this much. We're not exposed; we're not, it could be negative, right? Like it could be negative."

"You're right."

"Well, I would never want to use that because it's dangerous."

So you need, uh, you know, like done right—you don't make Airbnb.

"Do you have another good anecdote about talking to users about the feature set for Twitch streamers back in the day? Can you share that story about how you created a priority list? Tell us about that."

So, um, when we were pivoting from Justin.tv to Twitch, Emmett Shear and Kevin Lynn were kind of leading the Twitch team and they took this to heart. We had not done talking to users for years. They took this to heart and they basically just started interviewing video game streamers and asking what they wanted. And the funniest thing is that at this point we had built every feature a live video social media site could have.

We had chat, we did messaging, we had a feed, we had social media stuff, we had embedding, we had every kind of sharing; we were on multiple platforms. And so they were really surprised when the first thing people said was “Can I stream in higher quality?”

And we're like, “Really? That's like you don't want—like we'll build you anything."

"Yeah, can I?" You know what they said? They're like, “Well, you know, my computer costs like four grand and I paid for like the best internet connection in my neighborhood, and I'm streaming this HD game and it looks like crap.” And we were like, “Huh?”

Well, because we built our own media server and we were controlling our old streaming, that was like the easiest change you could ever make. And like it would cost us incrementally more, but it was like what? But like from a building product perspective, it was very anticlimactic.

And so I think like three days later, like, you know, we introduced like, you know, higher HD or something and these people went crazy. They were like, “I've never—first of all, they're like, I never imagined you could do this. Like I thought it was some massive technical issue that was where you were screwing us for like a year just because it was too hard—and like suddenly you fix it. And then, two, I've never used the website where I talked to someone about it and then it got better.”

And so, um, this kind of started a series of, in hindsight, what looked like extremely obvious things to build. Right? One was I want my stream to look better. Um, very quickly, too was I’d like to make money, please. Like, can you help me make money? You guys don’t—you want a social network, dude? Don’t you want to customize your page more with different colors and themes?

It’s like, “No, but like I’ll run ads on my own stuff.” It's like, “What do you mean?” It's like, “Oh, if you give me a button where I'll just run a video out on my own users and I can make money, I'll click it!” And really, but wouldn't that—what?

And then, once again, we already had video ads. Like once again, it's like, like that's not even hard to build. Like, like the hardest thing was, like, what should the button look like? And again, dude, you were experts; you were running Justin. How many years in were you? Justin:

"It was five years in. We were five years into your startup; you knew everything about everything. But then you were like, oh yeah, I guess we should talk to some of our users.”

“And they said a bunch of stuff that blew your minds that none of you would have thought. And not only did it blow our minds—like the engineers listening should appreciate it—it wasn't hard to build. Like we could make them happy so easily compared to all the other on our brainstorm list that was like, you know, months-long projects. And I was like oh damn!

So, anyway, clearly, um, going a little deep helps. Putting yourself in a situation where you can have a deep conversation is way better than anything else.

Um, we touched on this and I want to bring up a quote because it—we can dig a little bit deeper. A YC founder wrote in, "A potential customer's opinion is not valuable unless they're willing to pay you, or use the product regularly, or share the product with their friends." They call this financial capital (pay you), time capital (usage), or social capital (give it to their friends).

I think people really struggle with this because I think it’s getting at the core of like a human condition thing, which is we want to be loved. If we don't want to be rejected. And so, you know, getting through all these layers of defense that you've created for yourself to protect yourself from rejection is really hard.

And it's like, yeah man, it's personal work—like it's work you're doing in your head. It's not work you're doing in the external world. And so I just noticed a lot of these teams the really core thing going on is is ego protection and nothing else.

And like you can come up with all these intellectual arguments on why actually, you know, but when you really talk to someone and you get down to the core, it's being okay with getting rejection. I always like to think about this a little bit like science. Like imagine that you're a founder—oh sorry! If you're a founder—imagine you're a scientist, right?

And you could design one of two experiments: one experiment that actually tests your hypothesis and will give you actual information about whether your hypothesis is right or wrong, another experiment that doesn't test the important variable at all.

How many founders do we know who are never testing the important key hypothesis of their company for the exact reason you talked about? Because if I know that I'm wrong, my ego shatters or my investors will hate me, or my co-founders will leave, or some other reason I've told myself for not just figuring out is the thing I think true or not.

And what I find so surprising is that some founders just—it doesn’t occur to them to think this way. You know, we, the Stripe founders, come in and talk last batch, and we always get founders asking us about pricing. “I've got to discount my product. Got to make it free early.” And duh-duh-duh-duh-duh-duh-duh.

And the Stripe founders said, “We thought that startups had a problem accepting credit cards. We thought that all of the existing products out there back in the day were too hard to use and it's too much of a pain in the ass. See, now we tested our hypothesis. We built something for developers that was a lot easier for startups to use, and then we charged more than the competition for it.”

Now any scientist would say, “Okay, well, if we're trying to like test this variable, charging more to figure out whether startups would use this thing, it seems like a great just logical test.”

But for a startup founder that seems like a crippling decision. And what I loved about the Stripe founders here is that they just went with the logical test. Like they kind of put their ego to the side and they said, “Hey, what's the fastest, most logical test that we can run to see if this thing is something people want?”

Anyways, so we've talked about this like problem, this mistake of like are my users willing to spend some capital, any kind of capital in using my product. Here's the last one that I love. Um, the last one is kind of what I call the terrorist user or like the user that you love more than they love you.

So here's the quote from the YC founder: "When the customer you're pitching says, ‘We really love your tech, but we can't pick it up today because X, but we want to use it in our next project and we'll be in touch soon,’ um, this is a rejection. They don't want your tech; they just said they loved—it just want you out of their office.

This is a ‘don't call me, I'll call you.’ So how does a founder interpret whether they're talking to a real customer or someone who's just trying to be polite or just trying to move on or doesn't have the need? Like how do you figure out—you, we told them to talk to their potential users. How do I figure out what are they talking to a live one?

I think if we talk about being scientists again, like we did a moment ago, a scientist would be dispassionate and would say “Okay, no,” and they wouldn't think about it anymore and they would go on to the next thing.

You know, Dalton, I think a lot of the reason why founders get caught in this trap is because they were never taught what sales really is, like they were taught sales in the context of—I would almost argue—argument.

Like I think what a lot of founders think sales is is more like what lawyers have to do to convince a jury. Like a jury's has to be there and like they're going to make a decision, and as a lawyer your job is to convince them one way or the other. I would argue that the best salespeople convincing is really low on the list of what they're doing.

Like I might say convincing isn't on the list of what they're doing, right? I would argue that the best salespeople are spending a lot of their time doing two things: learning and filtering—learning and filtering.

It's a successful conversation with the customer if they say no quickly and they teach you about other kinds of customers who also are going to say no quickly. That's a success! And like filtering out the customers who will never get to a yes as soon as possible is a success. And I think that a lot of founders have never done sales are like, “Oh no, if they say no that just means that they don't understand how good my thing is and I have to explain it better,” as opposed to like, “No, that no is a gift, figure out what you could have asked them so they would have said no in the first three minutes of the conversation.”

You know, so YC we kind of talk about this as customer validation. Like every sales call should start with three questions that allow the customer to disqualify themselves from your product, right? A lot of your calls should be ending in the first five to ten minutes. Like, you know, “I don't think we're right for you now. We're happy to call you back when we can do this thing or that thing, but I don't think we're right for you now.”

And if enough founders—and it's funny because the themes are all the same—being willing to say no, being willing to test the core hypothesis—oh sorry—being willing to accept a no, being willing to test the core hypothesis, not feeling bad when someone doesn't want your thing.

Like having, yeah, of self-recrimination and self-doubt. And you know, like you can get really dark and it's like someone just doesn't want to buy your thing. Like who cares? You have to get used to it. It's like lots of people out there.

So, um, if we were to wrap this up, this has become commonplace advice now to talk to your users. And I think that the reason why people don't do it—and, and you know, clearly what you've kind of played out—is they don't do it because it makes them feel bad and they don't want to feel bad.

And you know, here's what I told you startups: I hope you're passionate about what you're working on because you're going to feel bad all the time. Like that's what you signed up for! So like don't run. Don't—like it's kind of like a marathon runner being like, “Man, I hate that feeling when my legs are super cramped and I don't want to run anymore.” It's like, well, you're going to feel that way all the time.

Like you're good because you can deal with that feeling and stay productive and stay logical and stay scientific about what you're doing. I think about a lot of what you just said in terms of the trade-off of being an employee versus being a founder.

When you're an employee, if you're working at Apple or Google, you don’t have to worry about any of this stuff. You’re like, you got 15 layers protecting you from external world feedback that you don’t want. You have several layers of managers telling you it's all going to be okay and giving you constructive positive feedback.

You have them getting fired when it doesn't work out, right? That's their fault; it wasn't your fault. You have company all-hands where you can express—you know, like you have all these layers where your—this is all the stuff that's filtered out from you, man.

Like this is not your problem when you have a job. When you're a founder, there is no filter. And I think people freak out because they treat being a founder as the same sort of thing as being an employee. They're like, “Oh, either I'm going to work at Google or I'm going to start a startup.” It's like, well no, this is different, right?

One of them—one of those things—you’re like a worker bee and like you can just work on your thing and it's really low stress. And like, you know, you have to worry about your manager liking you and stuff like that is this—there's no managers, there's no filter, you're just out there dangling in the wind and every breeze that comes your way you're gonna feel.

Yeah, you, the inputs that you experience as a founder are like completely unfiltered. Yeah, it's just—and you have to be the person that tells the people working with you that it's all going to be okay.

You're now on the role of the filter. Like, you are the filter, not the person being filtered. Yikes. I think a lot of folks aren't mentally prepared for this.

Um, reality is tricky when it's not filtered, but I'd argue it's more fun. It's more fun to look at the sky with your own eyes than to look at a drawing of a picture of a movie of a day of the sky. Like it's more fun.

Like you gotta live your life, right? Like, you know, we only get a short time on this earth, so you might as well use your own two eyes.

Um, that's—that's at least my thought on this. All right. Well, this is a great—this is a great wrap-up on talking to users, why and why it feels like crap.