Y Combinator Startup Podcast - #88 - Office Hours with Michael Seibel

Episode Date: August 3, 2018

Michael Seibel is a Partner and the CEO of YC. He cofounded Justin.tv, which was in the Winter 2007 batch and Socialcam, which was in the Winter 2012 batch.For this episode we took questions from the internet. If you have questions for a future office hours episode, just tweet them our way.Read the transcript here.The YC podcast is hosted by Craig Cannon.We're accepting applications from startups for the Winter 2019 funding cycle. Apply here.Questions00:25 - Why is YC worth 7% of your company?6:25 - Generating leverage when fundraising12:07 - Youssef asks - How did you validate your product market fit?15:00 - LC Carrier asks - How does YC feel about companies who don't want to raise VC after the program?17:05 - Edmilson Rodrigues asks - Do companies need to be incorporated already to participate in YC?18:50 - Alex Rodriguez asks - What do you look for in startups that haven't had good growth but continue to push through (e.g. AirBnB) that makes you accept them?26:50 - Fedor Paretsky asks - Do you have techniques you encourage to make pitches sound more exciting?35:05 - David Chen asks - How to find mentors and advisors?39:25 - building EatNeat asks - What if anything are you specifically looking for in a startup that wants to be a part of the Startup School 2018?40:00 - Ryan Carl Mercer asks - What's your preferred way organizing your time?41:05 - John Rigler asks - Can intrapreneurship be effective? I recently returned to IBM, have a patent, and yet have only vague ideas about how to signal and organize other like-minded folks. Could this path sabotage my dreams?41:55 - Horacio Chávez asks - How would you approach an investor who says "I won't invest unless you have a patent"?42:35 - Yahya Elamrani asks - Why does it feel like entrepreneurs aren’t marriage material? Should an entrepreneur look for an entrepreneurial spouse?44:15 - Yahya Elamrani asks - How intense do you really have to be to found a startup?48:50 - Is there a particular stage of company that's best served by Startup School?50:35 - How do you get the most out of Startup School?

Hey, how's it going? This is Craig Cannon and you're listening to Y Combinators podcast. Today's episode is with Michael Seibel. Michael's a partner and the CEO of YC. He co-founded Justin TV, which was in the winner 2007 batch and Social Cam, which was in the winter 2012 batch. For this episode, we took questions from the internet. If you have questions for a future office hours episode, just tweet them our way. All right, here we go. Let's start with the first question 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? 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, but more and more now you see capital being very widely available. And so I tell founders to 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 on the low end to $25 million 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. Second, 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 group 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, the second time I was 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 are just getting started and who are grinding, you know, within the first year or two and still grinding, is extremely valuable from kind of a friendly competition perspective. But it's also extremely valued just from a support perspective. Do you able to talk to people who are there with you? And to have this whole variety of people so you can find the 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 came from for you. There's work at a startup, which allows you to basically recruit off of YC's brand. There's posting job posts on Hacker News, which only YC companies can do. There's an investor database with over 5,000 entries, including reviews and data from every company that's ever done YC. There's deals, which are literally million. of dollars worth of discounts given by top companies. There's a company, a YC company directory, which allows you, if you're a B2B company, to actually 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 into companies and also allows you to find specific people to give advice. And finally, there's a knowledge base that gives you actual clear tactical written advice on PR, fundraising, growth, et cetera. And so most of the time when you're raising from Angels, typically you get some phone calls. 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 rebatch you with companies. companies that are now in the anywhere between $150,000 to $300,000, $400,000 a month in revenue, who are going out and raising a Series A. We teach you how to raise a Series A. We teach you how to do a 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, this managing 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 any of these programs, get any of the software, and when you're YC finder or YC founder for life. So I'd argue when you're thinking about fundraising in this environment where there's a lot of money, stop thinking about 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 on that perspective.

And it's pretty simple math, why it's worth it. Yeah. And tagging on to that, I wanted to cover, we don't have it in the notes, but your most recent blog posts about generating leverage in fundraising. I think this is something that we ought to write more about. And Aaron's trying to do it with the Series A program. But can you explain that problem and your proposed solution for the average company? 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 a 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 six months of runway. When you raise money, you need to be most sensitive about valuation, which I think is 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 what 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. Yep. And because you're scared that you won't be able to raise, sell early. And even more so, there are probably six or seven terms around a fundraise, a Series A fundraise, how big your option pull 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 a 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, 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 in it as 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've got a lot of customers. You're building product 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. That's the time when 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 12 months before you run out of money. Yeah. And how are you spotting those points? Like I obviously I know that we're in a better situation than we were 18 months ago, who knows where we're going to be in 18 months, but those local peaks and troughs, how do you as a founder identify those? I think the first peak tends to happen when you hit product market fit.

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 hit 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. And I think that what happens when you hit product market fit is you start investing in scaling your operation. Improving your product oftentimes takes a second priority to just making sure your customers can consider.

assume your product. And that counterintuitively, I think that's the most strategic time to raise a a series A. I think that, you know, your graphs are going to look great. Hopefully you've got revenue coming and hopefully your run-lay is going to look good. And so to me, like, that's, that nails it. I think when companies try to raise their series A, and when I say series A, I mean, you know, five to ten million dollar round from Sandhole Road VC, I think a lot of times when founders try to raise series A pre-products. 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's. But I think that if you are not one of those founders, if you're a first-time founder, going with the numbers. Like, it's just always easy when you're going with the numbers. Yeah. And so a related question from the internet, Yusuf asked, how did you validate your product market fit. So this is in the context of social cam. I assume that's what they mean. Yeah, I think that like, we've written about this. I think that, you know, the phrase product market fit was invented by Mark 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 hit product market. 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. And everything else is going right. They think it's the 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 with you. Like, you know, in MVP, the whole goal is get any customers coming in the door. Yeah. 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. Right. He says it put the market pulls. it out of your hands. 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. Did you guys hit it at social cam? 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 have all these customers coming, but they're doing what you want them to do. Like the goal of your product is being served. And the goal of Social Cam was to get everyone to be video creators. When we were blowing up, we were blowing up on video consumption, but not on video creation.

Gotcha. So I think that's probably an important part of people don't talk about product market. It'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.

Yeah. Okay. Let's go into some questions in general like YC application related. So LC Carrier asked, how does YC feel about companies? 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. 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, like a large number of companies that never raised from VCs are only raised from VCs way after product market fit, profitable, so 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 because 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 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 for YC. No dilution, no pro rata money. Yeah, no, no. 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. 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 as 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. No, not at all. Related, another super common question. Emilson Rodriguez asked, do companies need to be incorporated already to participate in YC? So this is another thing that I think is extremely important to understand. A lot of people talk about the growth of YC, and YC certainly has grown pretty significantly.

Batch sizes are a little bit more than double since I lasted YC in 2012. I would say it's responsible growth. We've prepared ourselves, and I think we still give it. a really good and high quality of service. But what it's also done is it's allowed 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 company can 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 end. And also, I think it's really motivational to be in a batch where you have some companies

that are pre-launch and are still trying to kind of get that MVP out the door. And you have other companies that are like starting to take off. 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 too, just having dinners with their friends every couple weeks. Yeah.

Yet 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 back? batch. I think what's interesting is like this concept of traction, I think is very interesting. I think that there are complicated, 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 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 kind of catch-22. When I think about traction, I think about it a little differently. I can, kind of think, how much time have you been working and what have you done? And 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 10 years that Airbnb 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. They, 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 on to something. Like a lot of, a lot of investors talk about like, what's your secret sauce? What's your 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, 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 in hotel. And they believe 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? Give it a try, right? Well, why not run the experiment? Because you, you were the one that went to bat for them to get into YC. So what was it about them or about the product? Had you used a product before you told PG about it? Before I told PG, I had not used the product. No.

I'd been on the product, but I had not used it. No, because back when I was working with them, they were really focused on events. And not renting out whole houses either. Not renting whole houses, renting out rooms and still doing the airbed thing. And I didn't go to the RNC or DNC convention. 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 is something that PG always used to say,

which is that companies that do well in YC, you have office hours with them. They tell you their major 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 hardworking. Yeah. And I think that this part of the valley like doesn't get talked about a lot. Like if you're nice, concise, you know, and hardworking, 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 them 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. Totally. So. Yeah.

And I think people are always looking to meet motivated. Like it's not this weird like close friend network situation where it's like, yeah, 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 the 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

live 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. Isn't it crazy? Isn't it crazy? Isn't it crazy? Cold emailing is a skill that everyone should work on. So it works.

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 5,000 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's 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 very related problem.

And so for me, like I get smarter every time I iterate. I feel like iterating is kind of 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. So in effect, you're changing the customer drastically or you're 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 rapid pivoting is really bad. And I think that, you know, Sam and I can give two different pieces of advice on this that I think reaches the same point. You know, someone asked Sam, when do you, should you 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 like to myself as 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. Like it often does take that long. And 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 is 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. 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 the Airbnb guys is just how compelling they are. Fador Peretzky asked about basically pitching your company. So they say, what are your thoughts? on the strategy of just like being very, very aggressive and, like, 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? What I didn't understand as a founder was that anytime I pitched an investor, it was the, you know,

basically round to over a thousandth pitch that they ever gotten. 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 got to make a memory or got to like create an impact or like sales type things. And it's like honestly, it's a lot harder to. 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 at this point. 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 you. So when I think about doing the pitch, these are the things that actually stand out to me. The first thing is clarity and consistency. 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 C, it even series A. So one, clarity and being concise. I really think most startups can be explained in three sentences. Two, don't start with your background. Like, you're telling a story and oftentimes people default to telling a story chronologically and argue that like actually, like, should be thinking a little bit more like Pulp Fiction.

Like, tell the interesting parts of the story first. Get me hooked. Oh, totally. Yeah, yeah. And your background, if your background isn't one of the top three most interesting things happening in the startup, then it 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.

Yeah. Yeah. I think the other thing that's important is that the investors that clearly understand the problem you're trying to solve, clearly understand it. I think so often founders want to get 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 web pages that are relevant to what you typed, popped in. 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? Is it growing? You know, anything like that. I want to know that you have tech on your founding team. And I want to know why, what's the problem that you're trying to solve and why you want to start to solve it?

For me, those are the things that, like, if you can get out in the first 30 seconds, I can engage in a conversation with you. 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, like, 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 smarter. That's true. That's true. Maybe I am dumb. You just don't get it. Unfortunately, you're asking me for something. You got to 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. First, you always have to throw away your customer pitch. The investor is almost never a customer. And so what works on the customer is almost the exact opposite of what it'll work on the investor. Second, you got to throw away jargon, right? What makes you sound smart amongst you.

your peers makes you un-understandable by someone who's not one of your industry peers. And so I think there are all these 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, like, fundamental for me on the blog, all of this stuff. I was like, why are you complicating? No, no, no, 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 brainpower I have to use to figure out what you're saying. Yeah. Like the more, the less viable conversation is going to be. Mm-hmm.

So. 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. And for that reason, 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. Yeah. Right. Like you got one of those two things. Like you deserve to be confident. Totally. So, you know, for first time founders, the number is helpful. And I would underscore this for. for international founders, I think it's really, really hard to clearly communicate what living in another country in 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 invested a bunch of companies out of Nigeria and, you know, when they explain 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. So you now have to pay your hotel bill in cash. You're like, oh, if that happened, I'd be super paid.

Like, you know, right? As opposed to saying, oh, credit card processing doesn't work in Nigeria, right? Yeah. It's like, I'm sure it kind of work. 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 10 seconds to paint that picture in a hotel.

And I get it. But you get it, right? As opposed to, let me tell you. tell you about the history of credit cards in Nigeria, right? Like, Jesus. I'm going to sleep now. Yeah, I mean, and by the way, Nigeria is 200 plus million people. Exactly.

Another thing that, like, I didn't know until I see. Actually, that's a really important thing, too. Facts are really important. One of the things I think is interesting about a lot of investors is that they know, like, two inches on a lot of different subjects. And, like, if you know, like, six inches, they will think you're very smart. And if you know one inch, they'll think you're very stupid. Yeah.

And so, like, just doing some friggin' research. And, like, when you talk, like, 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, like, just say some facts. Oh, it's great advice, man. That's awesome advice. So do you, this is related. So David Chen asked, how do you find mentors and advisors? But when you're pitching your company, are you pitching it to mentors and advisors to get warmed up?

Are you just pitching it to random people at Starbucks? I think that, like, one piece of advice that Justin Con 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 send to 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 that doesn't serve them well. And so I think practice is really, really important.

On to this thing about mentors. So I get asked five times a day, can I be a mentor to a company that I would consider? I've never met them before my life. 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. where like you actually needed someone like you're not a blacksmith like someone has to teach you that shit or else you will not be able to do it like well you can try you can't go on the internet

and Google search blacksmith and just like you know it's like and and I feel as though for some reason and and by the way I think in corporate America um mentors are probably extremely helpful I don't know I'm not really been a bunch of more corporate error 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 asked 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 when someone asking me to be a mentor, I'm like, oh God, well, 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? Yeah. It's a little, right? And I also, I always feel like when those people, if they just emailed me a question of me, like what question do you want to ask you about? Let's just put. 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, they're like, that's silly. Who cares, right? Like no investor is going to be like, oh, well, because Michael signed up as your mentor, I'm going to invest. Like no. No good investor will say that. But I think what a lot of founders have found, both in YCNA is that if they ask 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 from some. 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 talk to them and they say you're one of your mentor. They never asked, right? Like, they never asked, right? They just, they just asked for help. And I was happy to help them. So don't raise the stakes of a new relationship. Just, just ask for help. And you don't, 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, it, like, it, advice is one of those things, right? Like, take it with a grain of salt. So, um, I don't think there was nobody who I felt fulfilled a traditional mentor role in my time at, at, at, uh, 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. Um, a lot of people helped. A lot of people when I asked helped, but nobody, I almost feel like a mentor in some ways is taking responsibility for your success. Yeah. 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.

Yeah, exactly. After enough years, you'll like meet up just because. Yeah. Yeah. Which is great. Yeah. All right. Let's go to another question.

So I just want to clarify this one on the first page. Building Eat Neat asks, what if anything, are you looking for in a startup that wants to be part of startup school? anyone can do startup school. Anyone can do startup school. There you go. I think we designed it, like to be extremely explicit, 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 there will be these grants given out, but that's going to be decided after the fact. Yeah. Or I guess at the end.

Ryan Carl Mercer, a frequent podcast question asker, asks, what's your preferred way of organizing your time? I hate giving advice on this because I don't think I do it particularly well. I have like an email. I star important emails and I use a to-do list. You know, that's it. I think like probably the biggest time hack I've had has been since I've had a kid.

I think the biggest time hack I've had is that I've been one lucky enough to have my parents close 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 a model of organization. Let's go to the next one. So John Riggler asks, can entrepreneurship 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 have vague ideas about how to signal and organize other like-minded folks within the company. Could this path sabotage my dreams? So I'm going to 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 entrepreneurship. 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. Okay. Horatio Chavez asked, how would you approach an investor who says, I won't invest in you unless you have a patent? 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 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 nicely. Sure. I mean, but that's a bad way of saying no nicely. Like there are better ways to say no nicely.

Yeah, yeah, I agree. All right. So Yaha Elam Rani asks, why is it just, we're going to have relationship questions now. Yeah, right. Why does it feel like entrepreneurs aren't marriage material? Should an entrepreneur look for an entrepreneurial spouse? Aren't marriage material? 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 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 the people. Back then it was just in TV actually. Oh really? Yeah. Yeah.

Yeah. Yeah. It was a long time ago. 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, 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 relationship, some people aren't that way. Yeah. You know. But I don't think, uh, 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. Yeah. And that second question, uh, 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. All right. Yaha asked another question.

How intense do you really have to be to found a startup? 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 shared 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. So we worked, you know, when we were at home. And our roommates were with people in the company. So, you know, that was, you know, that was that part. And then moreover, the building was full of other startups. And so our friends were startup founders. And we were going through YCE and, you know, so 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 didn't see it as that different. Now, what I will say is that like, so I think when describing the steady state, I didn't think of it as like this like massive intensive like thing. What I will say is that the lows are low. Yeah. Like when people talking about emotional roller coaster, I like, 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've thought pack it up last five years of your life down the drain. There have been times what 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, but 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 of 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 startup should be the thing you like to do. Hopefully, yeah. Yeah.

I think the, I think intensity can be used as a, synonym for like asshole guy and that I would just want to dispel that like that is absolutely not true nobody likes assholes no just don't be an asshole no and but but like I 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 don't get distracted I don't like the word intensity because I feel like it's like morally ambiguous like I would say like passionate yeah like you know passionate yes asshole, no. I feel like intensity could be passionate or it could be asshole.

I just have this horrible image of like, hey, I'm like the intense hustler. Like, I just get shit done. Yeah, I don't know, man. People don't like sales people as well. It's weird to like talk about this world, but it's like when I was at Justin TV, we were just starting. I was three engineers in me. Yeah.

Right. Like it's 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, people 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 like or it's a stereotypical salesperson. Yeah. The kind of cartoonish kind of televisionish salesperson. and 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, no, no, no, no, no. Don't wear a suit.

Yeah. 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 matter? You know what's funny. I always get this question in the context of applying to YC. Yeah. And I always tell founders it's like sometimes people phrase applying to startup school or applying to YC as if we were charging $50,000 and it was a 10-year life commitment. It's free.

Yeah. Like 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'll learn more.

Like, like, try startup school. If you like it, great. If you don't, like, don't. Like, talking yourself out of free things is, like, kind of weird, right? Like, you, yeah. I remember Kevin Hale used to say it. 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, at some amount of just do. And if you find yourself talking yourself out of things, like maybe you're going to talk yourself out of the thing you should be doing right now. Yeah.

And so, yeah, there's no contract. There's no like, we're not going to come hunt you down. If you want to apply later to YC, it won't count against you. There's really no cost. Like in any financial, moral, business. Reputational. Reputational. All of the potential costs.

There's no cost. 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? I think that the way to 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.

Don't think of this as a program where you sit there and you're going to 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 who get the most valuable. If you can move two times faster to get to your MVP, you to get to launch, get your first customers because you're in startup school, you got a great

service for free. And it's way more, it's way better than, you know, whatever lectures we could do. Yeah. All right, man. Thank you. All right. Thanks much. All right. Thanks for listening. So as always, you can find the transcript and the video at blog.combinator.com. And if you have a second, it would be awesome to give us a rating and review wherever you find your podcast. See you next time.