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

25:33You get what I mean? And so anyway, and honestly, I worked on tarpid ideas myself as a founder, which is a music discovery. This is something I did in my first startup. That was that, you know, music startups are hard. And trying to be like, oh, we're going to fix music discovery. This was classic things where you can get lots of positive feedback and you can get users to work on those things. But there are aspects of it that make it a very hard idea. So, is that me? Does that make sense? Absolutely. I'm also guilty of this. I had the startup cult local mind that allowed you to talk to people checked in in various locations around the city on four square and go all the back in the day.

26:09And asked him how's 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 four square clones was all anyone worked on for two years? Yeah, they told they told us four square is going to own this. There's no way this idea your building is going to be its own thing. And now yeah, four squares of B2B business. Yeah. And all the four square clones, if they didn't pivot out of doing what they're doing, wouldn't it work?

26:35So anyway, that's that type of carpet is just something that's super appealing. And a lot of people do it. And you can, you can kind of give validation. And that's why that's why is a carpet is a drawsy lamp and you get stuck because it seems like it's like a good idea and you get all this positive feedback. Kind of along these lines, I was talking to a founder recently and 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 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?

27:06If you do these things, investors will say no. Maybe my best advice here is for founders to put themselves in the shoes of investors. And just imagine what their life is like and how if you were in their shoes, you would make decisions. And so given this framework, a lot of investors just don't make that many investments. And has for what we talked about earlier, life is short. And so there's lots of things that an investor that in their hearts thinks is like pretty good. And like, I like this person and I like their pitch. But I only am going to do a few investments. And so even though I really like a lot of mouth this, I'm going to say no.

27:47And I often think that founders think that there's some secret truth that's being held from them on why someone says no. Or like they want more feedback. I need feedback. And it's like, wow, the feedback is we didn't want to invest. And it really is just that. And so I think if you put yourself in the shoes of an investor, I'm like, hey, I only could do a few of these a year. I'm 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 can be truly phenomenally big in some way or, you know, I know you do investments too.

28:22So it's, it's, it's that you only get so many shots as an investor. And so anything that doesn't seem like this is the one, this is the one I want to do is a no. And that that's actually why they're saying no versus this you did, you know, oh, you, you had a bad zoom setup or so. You know, oh, we didn't, we didn't like what color your shirt was. We said no. I don't think that's, I don't think that's how this actually works. You know, 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 the higher bar just because because they have a lot of options.

29:00Yeah, because again, and if you, if you ask someone, we'll put yourself in investor shoes. Wouldn't you be making decisions the same way? Usually founders are like, yeah. But like they come, if you, if you do that exercise, a lot of this starts to make way more sense. Specifically, when you're evaluating startup, I wasn't going to go into this, but I think it might be interesting as market market size. How do you think about the importance of large town as an investor? I see. I think it really depends on what stage you're investing at. And it's absolutely critical. The later stage you get, right?

29:34If you're going to invest in a very high valuation, it is really important. The earlier you go, the less it matters. And some of the most phenomenally good startups, if you were really a panandic about it, the tam would be like tiny. Like the the tam of Uber would be like nothing, right? Like how the tam of Airbnb would have been nothing. The tam of I was a I funded razor pay, which is I think the largest payment processor in India. And the tam of that was tiny because no one was using credit cards in 2015 in India. So you had to believe that the size of the credit card industry in India would like 100x.

30:14Well, guess what happened? You know what I'm saying? And so, so I'm not saying that 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 YC is not, you know, it's just not something I put a lot of thought in. You get what not? Oh, what's the tam of the collectible old Funko pop industry? I don't know. I don't think it's that big, man. I don't know if you do that now. It's just when you invested, but I, you know, things pretty small, but I wasn't worried about it.

30:47That was like the last thing I was worried about. It makes so much sense that at YC, you don't think about it that much because of as you said, many startups pivot anyway. 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, ooh, I ran an Excel model and I'm worried this might not be a big enough tam. That's, that's the top of my list. I think it's important to acknowledge that a lot of investors are very like YC, I think is unique in a lot of ways where you invest very early and you help people through this journey.

31:23A lot of investors are very focused on tam. So you may find you're getting turned out because they don't think there's a big enough market for you to build a big business. Yeah. Or that you're asking them to believe a crazy leap of faith that again, they can say, well, it's theoretically possible you'll be able to sell more than Funko Pops. And I understand that that is your pitch. But I am, I have other opportunities that have less risky. You know what I'm saying? Like, like, it's that because a lot of founders make the argument that the tam is big and you can say, wow, that's a really interesting argument.

31:55And I have no, I have no, you know, I'm not going to argue with you about it, but no, I'm not going to. And so again, it's hard to get someone to engage in a debate about tam, even if you have, you know, even if you have some proof points, ultimately a lot of investors just don't like that risk. Fair enough. Fair enough. Going in a slightly different direction. So someone else that worked with you, another Lenny Lenny Bogdenoff who started a company all milk and then he was head of growth at Open AI for a bit. He asked me to ask you about things, product leaders and startups should watch out for.

32:33Is that ring a bell? I don't remember the specific office hours, but I understand the question. And I of course, you remember Lenny. I think that the advice that he's referencing here is just how important it is to not over delegate. And for the founders to stay close to things. As well as watch out for the trap of hiring super senior people with fancy resumes, really early to start up. I think that's what he's referencing there. And again, this is definitely one of those very basic things that we find ourselves repeating a lot. We're like, yeah, yeah, I get it. Like, don't over delegate. We get it at Daltzahn.

33:07And then like two years later, they're like, wow, we over delegated. 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 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. 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. 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.

33:41They hire senior salesperson to early. What are the yeah, I think it's I think that you get pushed often by investors to hire executives or a scale the team or we need, you know, we need we raise all this money. You got to spend it, you know, we got to you got to show your series about growth and building a world class organization whatever stuff like that. And so you end up with super nice people with super shiny resumes from from big tech companies. Oh, wow, they they did this amazing thing at Google. And then you hire them and then you wake up one day and you're like, Oh, wow, everything went wrong.

34:14Is 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 to first time founders. What how do you as a founder then have time to do all these things? Is there any guidance you give it's just like don't over delegate, don't over hire, but also you need to you know, you have 24 hours in a day. Is it just find the time for you to as well or is there more or two? I think if you just hear a lot about your customers and you care a lot about the product, your instincts are pretty good on what to spend time on. And so for example, spending tons and tons of time like hanging out with investors and networking, probably not it's probably the thing that I would be cutting.

34:58You know what I'm saying? Like it's it's what we talked about. If you really love what you're doing, no one needs to tell you how to reprioritize your time. Your intuition will be correct on what you should be spending all your time on, which is being obsessed with product. I love that advice. This episode is brought to you by Coda. And I mean that literally. I use Coda every day to help me plan each episode of this very podcast. It's where I keep my content calendar, my guest research, and also the questions that I plan to ask each guest. Also during the recording itself, I have a Coda page up to remind myself what I want to talk about.

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36:54Cool. I don't like a few of that. All right. I think you can. So I asked him what is often the most common reason a startup fails. And his answer was 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 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 look at this from a different frame, I think it's that the founders lose hope.

37:33And when you and your heart is like, yeah, we're failing. Like once I can see it when I'm meeting with a founder, when they've resigned themselves, that they're failing. Versus when like, we got one more move in us, we got one more try. Like, you can see in their eyes when they feel like there's more ideas with some last ditch, Hill, Mary thing. It doesn't always work, but it's it's almost like you have to not accept that you're going to fail. And as long as you don't accept that that's going to happen, there's usually a lot more moves you can try to save the company. What maybe it's to get profitable.

38:10Maybe it's to like do some other as anything. Maybe it's to launch a new product. And so it's pretty rare. I would argue that the cause of death is that they had lots of firepower and they were feeling really positive and they just ran out of money. That's actually more rare than founders think. 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 you get them saying like, I think founders are afraid that they're going to run out of money. And that's why they're going to shut down.

38:44And it's way more common that they like their ideas work and they have a big fight with their co -founder. And then they can't agree on what to work on. And then they just like, I don't want to do this anymore. And they shut down. That is the most common cause of death is something that sounds like that story. That is so interesting. And again, this comes back to your core device. Don't die. Just don't die. 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, you're out of ideas.

39:16You're like, 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. And you've also seen enough cases now. You've shared a few of these where they 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 often. You see that turn around. I would argue that 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 going to be over 100 % of the time.

39:52People go through that. You know, we're the founders like, yeah, I guess we've done. I guess we should pack it in. And at least you feel that way at some point in your startup journey. I mean, everyone goes through that. And then there's gradients, people that actually truly got down to very, very hard situations. It's still a high percentage, like maybe 50%. I mean, you can ask founders. There's a lot of founders that come this close to it all be it over and through sheer will kind of just keep it going. You know, that is really empowering. I imagine for many founders hearing this of just knowing every single founder goes through.

40:27Okay. I think it's actually over. Following on this real quick, the advice that you stopped sharing, which is about talking to customers, I'm just going to 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. Easier said than done. You get a lot of asks. You get one customer asking for a lot of stuff. There's a big company that's like, build this thing, we'll buy a pay a million dollars. Just general guidance of just like what to pay attention to and what to build versus avoid.

40:57Yeah, I think what I talked to aspiring founders about this a lot, they're like, yeah, I talked to customers. We get a cool, and I'm like, cool, whoa. How many customers do you talk to? And they're like, wow. And they get really quiet. And so I think this is one of those things like, hey, you should have a healthy diet and exercise every day or whatever. Where people know it, and that doesn't mean they do it. And so I think to start with, you have to get out in the world and talk to people in person. And you can't just hide behind your keyboard and call that talking to customers, right? And I think a lot of folks, the inclinations are to like, you know, build a landing page and buy some Instagram ads and try to get people to sign up for something.

41:39And again, maybe maybe that's something, but I think a lot of the reason people do that is they, they're just shy, and they don't want to put themselves out there because it's a little awkward to go talk to people. And you kind of have to sack yourself up to go out in the physical world, get people to meet with you, get them to take you seriously, show them a product you're building. And so again, to be very tactical here, you can do a self -assessment. In the past month, how many in -person physical minions have I had with potential customers? Maybe you've done a lot, I don't know, listen to her, maybe you have, but you know, it's shocking how many companies I talk to, they're like, well, we're focused on raising our precede round before we talk to customers, like things like that.

42:23And again, I think the core core thing going on is just social anxiety and like looking stupid. And I think you just got to get past that, you know, you just got to start doing it until it doesn't feel bad anymore. But you know, think about how stupid the Airbnb fatters must have felt they were like, hey, you should rent out your house and I'm going to come in and sleep in your house and hear some air bet. Like, like it's, the whole thing is a little awkward, right? So you got power through the awkwardness of talking to people. And once you start doing it, it's actually kind of fun. And so once you get used to overcoming this awkwardness, I think people do much better talking to customers.

43:07And so one does this self evaluation. Is there a heuristic that tells you this is enough? What do you look for? Is there a number you're going to 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, 20 or 30 % at your time that the calendar says something like customer meeting, customer call, like meeting with food, meeting with this person. And when the calendar is not that, or it's all, you know, again, what you're actually doing is just buying ads to try to validate your idea that I don't, I don't think that's cognitive customers, you know, I think that's something else.

43:46That's an awesome heuristics. So roughly, fifth through your time, at least, should be talking to customers. Yeah. And again, it depends on the idea of space you're working on, some are more, some are less. So yeah, I just, it should be a fair amount of time. And nothing substitutes for an actual conversation versus just staring at analytic statuals. Makes so much sense. So Airbnb is a classic example of they went to New York and talked to their host and things like that. Is there another startup that comes to mind that did this really well? I found just a really cool way and how sols to talk to customers.

44:14Well, again, if you, if you, some of the companies we talked about, I mean, for Brex, they, we're just talking to other people in their batch and that worked extremely well. Same with Regule is they just sold it inside of the YC network. I think with ZIP, they were just beasts at getting companies on calls with them to ask them about procurement. And I think they had way more than 20 % of their time. Like, when you looked at their calendars, oh man, I think they were doing, they were talking to customers a lot to build their first product and kind of pre -selling it before they built it. Same with post -doc.

44:47I guess that's a different go to market. They launched this open source thing to start with. And it was, they, their calendars are filled with people that were trying to implement the first open source version of post -doc or were so excited about it. And people on Hacker News were excited about it. And like, they had this like huge influx of people that were excited that post -doc exists and had lots of feedback and by reports, like, it wasn't always positive, but they never lacked for people that wanted to talk to them once, once they launched that, which was very impressive. On ZIP, I actually have a lot of their story.

45:19And one of my series on how to build a B2B startup. And what they did actually, as you know, is they just called DMed people on LinkedIn and asked them for advice on, hey, we're trying to understand how you enjoy your current procurement products and then they ended up being early beta testers. And I think they did, and I think they did a hundred, like hundreds of these. They just had, oh yeah, no, there was a numbers game. They were just grinding at this. And so yeah, that was that was very good. The other classic YC stories, the, the callison collision, I think it's called where the callison install, callison install, okay.

45:51Where can you tell that story briefly? The callison install is what often happens with customers is that they say, yes, I want to buy your product. And then they do not implement it. They just go quiet. They're like, there's no implementation. And this is very bad if you're selling software to someone. If they never implement it, they're going to churn. And you're not, you know, you basically failed on the on the one yard line. Okay. And so they kind of developed this tactic to be like, oh, well, you know, I'm at the neighborhood. You know, I'll drop by your office to help you implement Stripe.

46:25And kind of just like create, again, it was a little awkward like we talked earlier, but you would be like, yeah, I'm in, I'm in the neighborhood like, how about I drop by? And then they would show up. And they would be like, cool, cool. Can you like pull up your text editor? Oh, yeah, cool. All right. Hey, can you, can I, can I drive? Can I have the keyboard? And they would just sort of like install Stripe into the customers website. You know, smiling, being like charming, charming guys. And then we'd be like, oh, that's cool. Okay. Well, like, can we like roll out the website now? And they basically would kind of not go away until you finish the implementation of Stripe.

47:01And 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 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 they weren't very good at that. It was an incredible story. And now they're like, I don't know, $100 billion in business. And that's how it all begins. Yeah, I was an early Stripe customer at my startup. And yeah, Patrick would like, we used Google talk at the time. Patrick would be sending me messages like on a weekly basis, just like check and end.

47:35And so again, it's funny how successfully so scared. But yeah, Patrick was very hands on with all of his customers. It was extremely available. Like I can say that because I was one of them. 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. Oh, surely not. It's just you got to do like if you want your startup to work, this is just what you got to do, you know, how does the territory? This is going to be just a way broad question. And I don't know if you'll have an answer, but just there are other just patterns you find across startups that do well.

48:07This is like maybe the 64th million dollar question of just founders and what they do that ends up leading to success. 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, or 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 because there's just so much variation.

48:39Like Tony from DoorDash is so different than a lot of folks in Rajul is so different and grand from whatnot. These are all very, very different people. Patrick is a different kind of person, Ryan from Flexport. Like these, these are very different personality types. But the thing that I would argue folks that build really big companies have in common is they just really want it. And they really believe in themselves and they really believe they can make it work. And then there's somehow deep in their internal psyche, there's something that's like, I'm the one. And I won't take, I won't accept this not working.

49:25And 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, somewhere deep down in there, they're like, oh yeah, I'm going to make this work. This is, this company is going to be big. 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. And people start to believe it because they believe it so much. And they convince their employees to believe it and they convince everyone around them that this is going to happen to them.

50:03And so again, this is not a personality treat. This is, I'm arguing this is like a core belief. So interesting. And it connects so much to what we've been talking about. Just don't die. Don't lose hope in which work and on. A founder hearing this might feel like, man, I don't know if I'm like so convinced this is going to work in your experience. How much of this is internally, they're so certain and convinced versus externally they need to show this confidence. Well, I think it's internally they're convinced. I, I'm not sure it's external, but in this is the big, but 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.

50:44And so I, again, I know a lot of founders like, whoa, I don't feel that way. Oh, no, maybe I'm, you know, maybe I'm an imposter and I shouldn't do a start. Well, of course, you don't feel that way if you haven't talked to any customers and haven't built a product like, you know, but what, what usually happens is you pivot to a good idea where you start with a good idea that you care about and customers you care about and you launch it and the better the product does, the more obsessed you get with your own company. Like I think in the case of Stripe, I don't want to, you know, tell Patrick's story for him, but I recall him saying it at some point, he wasn't sure that Stripe was going to work until they were like a year or two in.

51:23And then once it started working, and then he, you know, they really believed in it, but it wasn't like he woke up one day, like Stripe is the thing, it's going to be, it's going to work. I think, I think you build conviction and you have this like network effect virtual cycle where you get work conviction. The more customers reflect back to you and data reflects back to you that you're on the right track. This is exactly what Scott Belzky shared in our episode when I asked him when to pivot is, do you have more conviction? This is going to work or less conviction over time. And so I like that connection we just made there.

51:57Okay, so we've talked about all these way startups fail bad ideas, tarp it ideas. I want to go to the flip side and talk about good startup ideas. So recently, you put out a request for startups, which is essentially 20 categories of ideas that you want to fund. That YC 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. Yeah. And so we put out the request for startups just to inspire people to maybe apply with ideas that aren't the ones that we always see. It's not like prescriptive, like we will only fund ideas on those, it is not that at all.

52:32It's just 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 don't. And so a couple of the ones that 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 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'm a feeling we're going to see a lot more applications working on that.

53:06And so it kind of worked as intended, which is to introduce this idea space to founders that didn't even know what an ERP was. Now they'll go learn about it. Another one is, you know, we'd like to fund open source companies. And so that's one of the RFS's where, you know, if there if more people apply to YC with open source ideas, I think we'd be pretty excited about that. And that might hope maybe founders didn't realize that that would be something we wouldn't have fun. Same with space companies. Yeah, we've had a lot of successful space companies, you know, several of the folks that are actually going to space right now that are SpaceX are YC companies.

53:41And so I think sometimes founders feel like those ideas are too bold and ambitious. But no, you know, I love more people apply with space companies. And so think about it that way where we're just trying to put out, we're trying to plant seeds of idea spaces that perhaps someone subconsciously filtered out is what might be a good startup idea. And you know, hopefully that creates a new set of startup ideation for the person. And we're going to link to this page in the show notes for folks that want to explore. I'll give a couple more real quick a way to end cancer. No big deal. Spatial computing, new defense technology, bringing manufacturing back to America.

54:21So that'll 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 in the past, but it feels like we told me yeah, right? So these aren't like, oh, we've never invested in these before. It's more like, hey, it'd be cool if we saw more applications along these lines. It would be nice because it currently feels a little bit under, you know, yeah, there could be more stripes working on this stuff. Yeah, instead of the sharp head ideas, a couple more real quick, better enterprise glue. Yep, I like that idea. Say more about that.

54:54What does that look like? 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. I think there's still a lot more room for improvement and likely LLM's will improve, but we'll probably be able to create better and better blue. So all sorts of software systems can talk to each other. And so we get a very broad idea, but yeah, I think we'll see a lot of very successful companies where that's the kernel of the idea they start with. Awesome. One last one, small fine tune models as an alternative to gigantic generic ones.

55:25Yep. 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. One is just your background. So from what I've read in the early 2000s, you were, you're basically hanging out with some of the biggest success stories of today, folks like Zuck and Reid Hoffman, Sam Altman, Elon, Sean Parker. This is before they really became anyone. And they all became very successful. 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.

56:06Back in 2003, being in Silicon Valley and being New Zealand startups, they're just, it was a really small space. There just weren't that many people that were into this stuff. And so I remember, I called emailed Reid Hoffman when LinkedIn was like 12 employees and he just responded and he's like, oh, let's have lunch. He was just like a guy and everyone else that was doing, I guess you could call it social networking. That was sort of the people that I knew. There was a few conferences you would go to and there'd be like 30 people there. It reminds me of stories about the home rear computer club.

56:42I'm not saying this is cool, but when I read stories about when it was like when the home rear computer club existed, it's a very small number of people that all knew each other. There were real like weirdo outsiders that were into this stuff. Okay. And so that's what in the post .com boom, they hear a startup scene. That's legitimately what it felt like. And so I didn't think a lot about the personality traits of these people. They were all, again, they were all pretty different people. But what they had in common is the folks that are now the really big names just had a lot of staying power.

57:16Right. So when I met Sam, he had dropped out a Stanford to work on Loot, which is hilariously a way to find people around you to hang out with. Interesting thing here, huh? He was cool. He was this really young guy and he just kind of did that. It 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 the big mind behind AI, which is, which is, again, awesome. But if I think about who he was back in the day, he was, yeah, he was like a 23 year old working on a thing for feature phones to find friends in your neighborhood.

57:57Their customer was boost mobile. You could go find the commercials for Loops, the boost mobile put out on YouTube. Those are actually pretty funny. Have you seen those commercials? No, but I'm going to go check about it. Anyway, it's pretty funny. So yeah, that's the real story. And then yeah, I remember I was in downtown Palo Alto at the time. And you, some of the folks I was friends with were friends with Sean Parker. And this 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 to ride to the airport. And so I ended up giving Sean Parker ride to the Oakland airport.

58:31And again, I, what was he like? I don't know. He just basically said the backseat on the phone the whole time. But at big and my point is I wasn't like, wow, these are going to be really big successful people that one day will be important in the world. It just felt like a bunch of nerds that really liked the internet and computers kind of doing things that they were interested in. And we're just obsessed with this. Like there was no, they weren't like, gee, should I move to New York or gee, should I, maybe I should go to law school? Like he was people that were very bought in to to stain working on internet companies.

59:10And so you'll see these folks just reinvent themselves multiple hair as, right? Okay, like Readhoff and right, he was a work to PayPal. Right. And then he did LinkedIn. And then he was like a VC and like, like, he's kind of had like all these different eras where it's the same person, but it's almost like a different figure. Right. There's a lot of interesting lessons there. One is 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 an engineer, then a founder, then a product manager, now whatever this job is.

59:43And 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 introverted and be super successful. You can be super extroverted, 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. 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 because that'll drive you forward and make you be successful.

1:00:16So I like that that 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. And then the other is you're the reason and Jason Horowitz missed out on Instagram. Yeah, and couldn't invest. So which of those would you want to share? Well, it's kind of the same story. Okay. And the way that it's the same story is my my secret company basically I sold my first company in MySpace. It was the music company that I recruited a new CEO who was formerly the COO a Facebook called Owen Van Nautet.

1:00:58So again, hilariously part of the same circle of people. And Owen was like, okay, we need to fix MySpace. You know, Rupert Murdoch's got the juice. He wants me to fix it. We're gonna do it. So come up with some ideas. And kind of the best idea that I could come up with at the time was doing something around mobile photo sharing. So many kind of like Twitter but for photos. And I figured with MySpace's user base that would work pretty well. This was like in 2010. So it was right as the App Store was getting big. And I had a lot of success in the App Store with I -Neme. It was one of the top music top downloaded music apps.

1:01:34And so I was like, wow, the App Store was really good. And I was really into apps being the thing. And at this time Facebook was a little really on. They were trying to do cross -platform mobile apps if you recall. And their apps were not great. This was again, ancient history. And so that was sort of like my plan. And then immediately a whole event not it was fired. And so I didn't even really get onboarded. And so I just like left. I think I worked at MySpace for like a month because the person that acquired my company got fired. And there was like, I think the whole workshop got fired. So I didn't even know I didn't even know who to talk to.

1:02:10It was really great. It was a great experience. You know what I'm saying? 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 mess. Just Tom. Just message Tom. No, no, he was long gone. I know you're kidding, but no, like literally I don't know who was left at that point. Tom was long gone. 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. And I ended up, yeah, starting the company and quickly was able to raise an angel around because people remember my company from the first one.

1:02:44And the major investor we had was Andrews and this is one of their first board seat investments like Mark and Jason was on my board. And you know, again, that I have my own set of stories about that. But it was it was interesting experience. And we launched it. And I think we got half a million or a million users like you can go find tech print charred was about it. And it was we launched an Android and iOS and it was mobile photo sharing. And actually was growing pretty well. Okay. And then what happened is there was another portfolio company called Berben, which was originally a four square clone that was built by by these two guys.

1:03:20And they decided to pivot out of that and into what was was pretty similar to my thing. You know, again, fair enough. I just how this works. And they did some mean smart. Again, this just me talking. I don't know what their version of story is. But what I think they did that was smart is if you looked on the paid app store charts, the number one app was hypsimatic and it hypsimatic cost money. And what do we know about what people want? They want things that are free the cost money, right? And so they basically built a pretty legitimate knockoff of the hypsimatic filters combining it with a social graph.

1:03:55And they launched it and it pretty quickly took off. So of course, this is Instagram, right? And so it took out really quickly and like, you know, that was like a wild experience for me to be like, oh, this seems familiar. And basically because Andrewson Horowitz invested in my company was on the board, even though they were investors in Instagram, that was like a conflict 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 be right in the middle of something that became culturally so important.

1:04:36I imagine there's a bullseye in your back from a 16 Z for a little bit. Oh, I don't actually think they care. I don't think they held it against me. Because like, what did I do wrong? I started a company. You know what I'm saying? Obviously, there was some frustration, but I was like, I was a guy who had a company that they invested in. I don't know. I didn't feel like they, I didn't feel, I didn't feel much higher from them. I think this is just how life works. Yeah. I wonder if they changed their conflict policies after that at all. I don't think so. I think this happened multiple other times.

1:05:15But those aren't my stories as well. And by the way, I don't know if you mentioned the name of your starter. It was called Pick Please. Yeah, it's called Pick Please. Yeah. Great. Okay. So for the final phase, before we get to a very exciting lighten around, I have these two segments, recurring segments, a failure corner, and contrarian corner. We can do both or we can pick one or the other failure corner. Share a story if something a time in your career, or you failed, and when you learned from that experience, contrarian corner, what's something you believe that a lot of the most other people don't believe?

1:05:45Yeah. I think for contrarian corner, I know where I would start, and I think it's relevant for your listener. Like, I think this is relevant to this. And so, and maybe, and you could argue, this isn't contrarian, but here is, here's what I think. I think growth and growth hacking, and doing all this analytics, AB testing stuff, is a total waste of time for very early startups. And that one of the weird things about having lots of startup advice on the internet, again, this is one of the reasons we started making videos at YC, is a lot of the advice was catered towards later stage companies, like, oh, here's how you set up your board, and here's how you motivate your sales team.

1:06:27Like, it was all aimed at Series A, Series B founders, and not for seed stage founders. And the problem was, seed stage founders would consume all the later stage advice and get really confused. And so the anti -pattern I see is there are lots of founders that are very familiar with your awesome work, which again, I really recommend. I like it. But when you have no customers and you're reading, you know, Lenny's guys on how to set up split testing and how you did growth in Airbnb, oh man, that is so dumb. That is so not helpful. And so you see this inclination away from getting a first customer, getting one customer, and talking to that person.

1:07:02And instead, they have like all this really complex growth hacking theory. I think this also happens if you worked in big tech, where your product already has scale. And so, you know, if you work at Facebook, your job is to launch new little features. Yeah, of course you should make heavy use of analytics and heavy testing and split testing and future flags. Yeah, yeah, yeah, yeah, it makes sense. When you have no users, what are you doing? So, do you think that's contrarian? What do you think? Like, I'm just trying to argue this advice applied to a startup that's too early is like actively not helpful.

1:07:38I think it's contrarian for many people, 100%. I also 100 % agree with it. 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. I mean, again, I'm not saying you're doing everything wrong, but 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, maybe just to 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.

1:08:13What's your sense of just like when you say don't do this sort of thing, but this is okay. What kind of falls in those buckets? I think it depends on the idea. I think in the case of whatnot, they obviously it was consumer app and they needed to get users, but they were very intellectually honest on the metrics for how you get a marketplace off the ground and they didn't just go dump all their money into Instagram ads and like they effectively knew they needed to focus on buyers and on the buy side and build momentum on the buy side. They really understood marketplaces. And so for consumer, I think it's having a sophisticated view of how you get the consumer company off the ground.

1:08:54I think if you look at the Facebook story, them getting 100 % penetration on the Harvard campus first instead of launching overall, get good strategy. Would recommend that strategy. So again, the way I would strap away that is know what your pumps are of what companies you your archetype is and then look at what they did on the zero to one and ignore what they do today. Right? Don't pay attention to what Facebook does today. If you're a brand new startup founder, pay attention to Facebook when they were getting their first thousand users. What would those tactics? I feel like this should be its own episode where we just go into how to get your first thousand users.

1:09:32I know there's a video actually willing to like Gustav made with YC's advice on how to get your users. Did you want to visit failure corner or not? Or should we move on? I feel that tons of stuff. I, I, is an investor. I thought 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, right? You just heard a specific story there. I guess what I learned is that you just can't let it get to you too much. And you got to keep going. And that if you keep going, no one really remembers those as much.

1:10:12And it doesn't really define you. And it shouldn't, you know, fear of failure shouldn't dominate all of your thoughts. And instead you should use your energy and positivity to keep trying to do good work. Right? Because back, back in the day, if I would be like, well, you know, I guess started trying for me. I guess tech isn't for me. I wouldn't have had a career doing any of this stuff. I wouldn't be working in YC. I wouldn't be advising companies. Right? So I always had to have, in my life, a lot of optimism and energy and use that energy and motor to keep me going. And it served me really well.

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

1:11:20Yeah, I guess, I guess the final thought is, you know, if someone wants to do startup and doesn't know where to start, just to give you permission to talk to potential customers and try to presell something before you write code and have those conversations. I think so many folks don't know where to begin on starting to start up. And my tactical advice is start doing customer validation. First, versus building a PowerPoint deck versus trying to raise money versus like all these other things. I think a lot of people don't use that strategy. And it basically, if you find people that are really excited and you do line up customers, that is a great green light that it is time to do a startup, right?

1:12:05That 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 a buyer talk in, build it before you? It depends on based on the building. Once you have some conviction, they're like, Oh, I think I would have a customer. I think I'd at least one person would use this thing I wouldn't build. At least one. I love it. 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?

1:12:38I 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 give you 80 % of the way there. You know what I'm saying? That they want to hire someone for millions of dollars to give themselves coaching. I'm like, well, have you read these really basic sales books? And they're like, no. And so I think that's a low cost way to go on to Amazon, getting to yes and a few other of the top sellers, I forget the names.

1:13:12And just read those. And that is your crash course on how to be great sales. Awesome. There's also this book called Founding Sales that I imagine you're familiar with. Peekas and Jews 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. We'll link to that. Do you have a favorite recent movie or TV show that you really enjoyed? This may be warping with what you're asking for. But I like to watch old shows a lot. And so I keep rewatching like the sopranos and the wire. And it always is different to me every time.

1:13:43And I, you know, things like that. I think here's a silly answer. I've been really enjoying watching old episodes of Colombo, which was a television show from the 70s and 80s. I don't know why I don't even know if this is instructive. But it is for some reason, I'm really into that right now. It's very old episodes of Colombo. You're an old soul belted. I guess. I don't know. It just feels like a time machine to a different time when I watch these things. Definitely. Maybe one of the most unique answers yet. Fair enough. Colombo. Well, okay. I guess I'm not trying to give you an answer where I sound super clever.

1:14:15I'm actually. That's actually what I'm watching. It does actually sound very sophisticated and clever. Do you have a favorite interview question that you like to ask? I guess founders in this context. I don't really believe in trick questions. And I think I just start with, hey, so tell me about what you're working on or what if you learn since you started? 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're not saying so I like the most simple props and let them take the conversation where they want to go.

1:14:56I 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 YC interviews. Yeah, and I know this is like its own podcast episodes. I think evidence that they actually have thought about it. As per I said earlier, that they've done research, that they have opinions, that they they care about it. Sometimes when you when people answer questions are like, you can just tell that it's really superficial and they haven't put much care or soul into their answers. You know, awesome. Do you have a favorite product that you recently discovered?

1:15:34They really like. Like my word ring and my Apple watch and all that good stuff. Like I've been a fan. There's a YC clinic called Cy Fox SIP HLX. I just signed it for and they do at home blood testing. And basically I'm trying to sync that at home blood testing thing into all my other devices. I think I don't know, I really enjoy all the stuff that Apple and other startups are working on and YC companies are working on around personal health. And so yeah, those are products I'm into. Cy Fox. Okay. And wait, then you do like needle and stuff and you take your own blood? It's this little tiny needle.

1:16:10It doesn't hurt at all. And it 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. Yeah. And I just discovered that it was one of those cases where I saw it. I saw it and then I later was like, Oh, wait, that's a YC company. Like basically I became a customer and was pleasantly surprised that it's a YC company. And I think I found it's SIP HLX Health .com. Yeah, I really rose off the tongue, right? Yeah, that's where I'm at. Very cool. Okay, I see this little needle. Okay, great. Go Cy Fox. Okay, two more questions.

1:16:49Do you have a favorite life motto that you often come back to find useful in work 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 if you don't, you should probably make a change whenever 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 I think that you just can go back to this over and over and over again.

1:17:23Is a is a is a good prompt on how to decide what to do with your life? Easier said than done to change that in many cases, but it always starts with realizing, okay, this isn't actually what I'm doing. Yeah, it did it to yourself. Yeah, I'm not really enjoying this. And then trying to like, well, how can I fix it? Having that conversation with you? 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 want to be doing this. But if it's every day and continues to happen, then that's a sign you should change it. Exactly.

1:17:54Final question, you and Michael Cybel 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? It depends. Some of the episodes are more for folks that already have a startup and they're dealing with like problems. I don't know, some of the episodes about investors or or things like that. 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 those of strangely become very popular and gotten a lot of views with non -star -dap founders, which is a pleasant surprise.

1:18:33And so I'd recommend those for folks in the audience that are not currently startup founders. I don't know. Life tips from top founders, I think is the trend of billionaires. For those of that one. Yeah, yeah, I think that was pretty popular. So what I'd be looking for is diagnosed. Am I a current founder and I have founder problems, were I just looking for general philosophy type questions? And I really like those philosophy ones. We have one for high school students and it's aimed. The audience is, here's advice for high school students that are interested in startups. Here's some tips that you should be thinking about.

1:19:04Again, pretty narrow target audience, but I love that episode because we're really trying to speak directly to that audience. And you know, thanks for your advice. Dalton, you are wonderful. Thank you for sharing so much wisdom. This is Action Pack that I'm really excited for founders to listen to this. I think it's going to make a big dent in a lot of people's lives. Two final questions. Working folks, fine online if they want to reach out and follow up on some of this. And how can listeners be useful to you? I'm on twitter .x .com and Dalton C is my username. And also my LinkedIn is pretty good.

1:19:34It's pretty popular. I don't know. Just search for my name on LinkedIn. And yeah, I love to see you all there. And then how can folks be hopeful? I mean, honestly, it's just great when folks want to apply to YC and do a startup and so feel free to dive into other videos and apply to YC. And something that's really special about my job is I get the privilege of getting to fund companies that they already know me from videos and they're shocked that I'm exactly the same. Like effectively, they're like, wow, you're just that guy from the videos I've been watching. And it's so cool that you're just exactly like you see them in the videos.

1:20:14And so basically, yeah, if people like what I have to say and they like the videos and apply to YC, I would love to fund their companies. Dalton, thank you so much for being here. Sure thing. Thanks so much, Lenny. Appreciate it. Bye 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. 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.