Y Combinator Startup Podcast - How To Earn Customers For Life

Episode Date: March 14, 2023

In this first in-person episode, Michael Seibel and Dalton Caldwell reveal how startups can gain a competitive advantage by doing something deceptively simple. They share compelling stories of companies that built loyal relationships and achieved success by making personal connections with users. In contrast, they discuss the traps early-stage founders make by trying to emulate big tech. If you want to build a business that customers love and that thrives in the long run, this advice on why caring deeply about your customers is key.Apply to Y Combinator: https://yc.link/DandM-apply Work at a Startup: https://yc.link/DandM-jobs

Can we take a big step back? Do you like your users? Do you like them? Yeah. And people think that's a weird, like, that's not what they expect you to say. This is Michael Seibel with Dalton Caldwell, and today we're going to talk about caring about your customers. Well, first, I guess. Yeah, let's be meta.

Here we are. Does this look different? Yes. We're in person. We're trying this. Where's your art? I know. But we are really literally in person.

Boom. This is us. We're in person. We're not avatars. We're not in the metaverse. We're not in the metaverse right now, people. Not maybe next year. We're upgrading. This is an upgrade.

Great. We had so much fun last year, we decided to do this in person. So let's set this up. We're in the beginning of a Y-C batch, and there are a lot of companies who are trying to get sales, trying to get new customers, always a good thing. And we might describe some of them as flailing. So what is the sign of a startup that is flailing when trying to get new customers? You know, it's like,

the old aphorism when all you have is a hammer, everything's a nail. And so they'll have a product that I have an idea. And they want to like bully customers or bag, some, some strategy to like cram it down people's throat. And they're like, why won't they take it? Why won't they take this thing that I'm trying to get them to buy? I'm trying to help you. Yeah. With my arms. I have this thing and it's good. Like, what's wrong with you? Yes. You're making a mistake to not want this thing. And so that's a lot of people's first experience with sales. That was my experience. These people are dumb.

Don't they realize how brilliant my software is? Or trying to get them to feel sorry for it. Just please use this. Like, if you could just use this thing, I'll be your best friend. And so that also translates into a lot of actions, right? Mass emailing, right? Mega spam spamming.

The, like, templated email with one word of customization. Yeah, just quick on that. Like, you should always say to yourself, if I received this email that I am sending, would I respond? Because hilariously, a lot of people send a lot of email that they themselves think is horrible. Like, they are positive. Like, when I asked this question, the founder,

would you respond to this email? They don't even think about it. They're like, absolutely not. I've regularly archive emails that look exactly like this. And we're like, I don't even know what's the next? Well, I think this is going to tie into the theme where I think it's, you don't think your customers are smart or something. Like, you're like, hey, it's not for me, but maybe they want it.

Yeah, maybe these. And if we were kind of unpacked the psychology of why people do this, like why they're making these silly motions, I think a lot of it is based on a lot of VC marketing. I think a lot of it is, customers are not an end. Serving customers is not the end of my business. Serving customers is a means to getting VC dollars. Yep. And we all know that VC dollars, that's the goal.

That's important KPI. That is... Right, that's where all we're here to do, right? That's all we're here to help you with, is how to get VC dollars, right? Customers. When we were in this situation with the founder, you know, very recently, this started clicking in my head where I'm like, oh, shit, like, can we take a big step back? Do you like your users?

Do you like them? Yeah. And people think that's a weird... Like, that's not what they expect you to say. No. Why are we talking about if I like my users? Like, where are you going with this? Where are you going with this?

These people who are trying to build things for. Do you like them? Now, you've brought this up. A lot of companies don't like their users, right? Any examples? Well, look, to speak from personal experience, Comcast, who dislikes their users so much, I think they renamed to Xfinity.

Like, that's part of the rebranding. Let's try again. No, no, maybe they won't remember. Every experience I've had with them, and again, maybe you have the same one. You can tell that the whole thing was designed with the implicit assumption that they don't like their customers and their customers are bad. And everything that you try to do, they want to make it bad. Yeah.

And it seems to be baked into the whole thing, right? It's pretty weird. Well, they don't have a lot of competition. We can talk about why that is. That's probably a different time. It helps that they're running a wire to your house. Right. That's a big part of it.

Yeah, I'm still a customer. Let's be real. I still pay for it. Yes. They figured out that their customer was the government that gave him monopoly. Yeah. So that's one example. Are there others you think about?

I mean, look, there's other stuff like that, like phone companies. But let's talk about another one we've used more often. Social media companies. Let's talk about Facebook. Facebook is known to do some user hostile stuff. Like there's even, what's the term for it? Dark patterns. There's a whole field of research.

Yes. And again, maybe someone would say watching this, oh, well, they kind of like their customers. How would you articulate? Well, I mean, I think what's funny is, one, it's not obvious who the customer is of Facebook. Right. And on one hand, you could argue their users are customers. On the other hand, the users aren't paying. And then you're like, oh, well, maybe they're really serving their advertisers.

But then you see all these stories about how, like, all the numbers don't, aren't real. Like, and so fake clicks. Yeah, all kinds of stuff. So needless to say, when you're big, you cannot like your customers. So what's the takeaway for founders? Well, the takeaway is you look at these big companies and you can easily decide to emulate this stuff. Yeah. Again, if all I'm doing is from first principle is trying to look, how do you know, how

How does the world work? Why does the world work the way it does? It's easy to look at these very successful, very valuable companies, know the story of Facebook, and actually attempt to emulate the end state of these companies, which they're so big. The people that work there are very isolated from their customers. The customers are sort of like only a small percentage of those companies employ people whose job it is to talk to their customers. And most people, if you work at those companies, you would never talk to the customers.

And most people work at the companies now weren't around in the beginning when those companies did like their users and did serve their users. Yeah. So they're not even getting a good pattern. So I think what's funny about this is that this opens up the opportunity for startups. Right? Like this is your secret sauce. Like even if you didn't believe us that it was just being a nice person, like being good-hearted would be to serve your customers. It's a competitive advantage to care about your customers.

Let's set this up. So check this out. A lot of folks, especially if they worked at one of these big companies, their first instinct, right when they start out, is to pretend that their startup is a big company, pretend that it looks like it has a bunch of employees, pretend that there's a customer support rep that's not them,

and recreate the whole weird Rube Goldberg machine of talking to customers that they saw elsewhere. Yes. Right? And again, it makes intuitive sense. But what if the opposite it or the case. And something incredibly powerful is that people like to talk to the founder of companies. Who knew? And they like to talk to the people that make software that they use. Yes.

And they like to feel listened to and they like to feel heard. And that's unique. And the big companies can't do that. Again, imagine you had some problem with Facebook and then one day, literally Mark Zuckerberg showed up at your house and was like, let me fix it. Okay, you wouldn't like But okay. No, I'd like that. I would, I'd be Facebook's biggest fucking. I'd be like, I don't know what you think about Facebook. You would want to tell people, hey, I actually met Mark Zuckerberg and he came to my house.

And I guess they really, like, it would be a story. It'd be a story. I was an early customer of Stripe at my startup. Yep. And it was invite only and very few people were using it. Yep. And my customer experience was Patrick, the founder of Stripe. I had a chat with him like in Google Talk.

It was a long time ago. Yeah. And he would message me all the time. Yeah. And they had a big mistake where they overcharged a bunch of my customers and it was a problem on their end. Yeah. And so what happened is Patrick DM'd me, told me that it happened, said that they fixed it and apologized. Do you think that I like Stripe more or less after that experience, even though they messed up?

Exactly. Exactly. Isn't that wild? It's wild. And what's funny is that sometimes big companies can pull us off too. I remember early days at AWS. We were blowing up. We actually, like, there wasn't enough time to buy and rack servers.

So, like, we literally needed to use EC2, and it was in beta. Like, you just couldn't sign up for it. And we randomly tweeted, can anyone help us get on to the C2? Just, like, into the world. And, like, this guy, Jeff Barr tweeted us back. I was like, yes. And it was like Amazon had a face and a human and a hero. And he hooked us up and saved our company.

And that's Amazon. They did it. You remember that. You're telling the story now. It's still telling the story. It planted in your head. So if you can create that experience for customers, oof. Yeah. If you can blow people away by how much you go the extra mile to care and solve their problems and not emulate the big company stuff, you're giving away your power if you don't do that. You've got to use that move. You've got to do that. Caring about your customer is a superpower. And I think what's funny, and you made this point, right, is that like it's really, really hard to beat a competitor who cares about the customer. more than you do. Yes. It's really hard. The customer knows in their bones that you don't give a shit. Yes. And I think that if we bring this back down to startups, one of the things that's tricky

is that, you know, you get into a startup for a lot of different reasons, right? And like, hey, Dalton, I'm building a B2B SaaS company for accountants. Like, I think it's really good. I have some experience doing accounting stuff at my previous company. But I don't love the accountants. Yeah, I'm just kind of like Going through the motions, I don't know. Let me tell you about my next startup idea after this. Like, you know, it's not great when they want to pitch you their next startup. Not good. But that's not a horrible starting point.

Like, what's the advice you give to that person who, like, thinks they have an insight, but, like, wouldn't say at this moment, oh, yes, I really care of my co-founder, about my customers. If I've learned from the folks that I think are best at sales, is they learn to break down the barrier between sales, person and customer relationship and actually genuinely care about the other person and their life and what they're doing. So say you're selling to small businesses, you're selling to coffee shops or something, if you actually care about the owner and you know their life story and you can see how the

software that you're selling them might help them stay in business longer or help pay their employees or what have you. And take it on a personal level such that even if you left that job, even if you sold your company or left the company, you would still remember fondly the people that were your customers and how you were able to help them. That's real. Yeah. And you can't fake that. I think a lot of founders, when they have competition, they think that whoever raises the most will win, or they think whoever is the most famous will win. Most employees. Sure, right? And again, I can't really quantify this, but if I think about the people you and I know that have done

startups. The people that care about their customers the most, that's, they won. That seems to be who wins. And so you'll have companies that raise less, that are less famous, like all those things versus other folks. But man, they just gave a shit. Well, it's so funny, because I love your point around, maybe you don't like coffee shops. Everyone can like people. Everyone can like helping another person. Like that's a, that's just a quality of humans, right? Do you like helping someone else? It feels good to provide service. And it feels good to, like, give someone something that, sure, you're making money from it because you're charging for it. But you know that the value that the thing is delivering is big.

Way more. You're getting a great deal. And you know in your heart they're getting a great deal. And not just like, hey, they bought the software. We know it doesn't work. We know they don't use it. But I hope they keep paying. They signed the LOI, so I was able to fundraise.

But we know the software sucks. Yeah. That makes you feel bad. That makes you feel bad. Yes. So if we're going to wrap this up, we've given a lot. of advice on how to do all kinds of things around our release stage startups. But one of the things that we probably should have emphasized more is it really helps to care about your customers.

And if you can use that as a tool, you'll learn more, you'll make more sales, you'll have more fun. And people can tell if you care. They'll want to tell you more about their problems. They'll give you the benefit of the doubt. They'll cut you slack. If they can tell that you care. and you want to actually solve the problems and not just get money. Raise VC dollars. With that, thank you very much. See you later, Dalton. Great. Thanks.