Y Combinator Startup Podcast - Stop Innovating (On The Wrong Things) | Dalton & Michael Podcast

Episode Date: March 15, 2024

Startups need to innovate to succeed. But not all innovation is made equal and reinventing some common best practices could actually hinder your company. In this episode, Dalton Caldwell and Michael Seibel discuss the common innovation pitfalls founders should avoid so they can better focus on their product and their customers. Apply to Y Combinator: https://yc.link/DandM-apply Work at a Startup: https://yc.link/DandM-jobs

headline ripped from the news is people looking at the corporate structure of open AI and being like, oh, this is an interesting. This is an instruction manual. All right, welcome to Dalton Post Michael. Today we're going to talk about how do you avoid innovating on the wrong things. So to set this up, right, we're in the innovation economy. Oh, definitely. We're a major innovation. It's right here, innovation economy. That's what's happening. We encounter a lot of of founders who believe that they need to take what I call innovation juice and spread it across innovation juice. What I'm trying to insult it.

What I'm trying to insult it. And they have to spread it across every fricking problem they encounter. And I think that there's only a limited amount of innovation energy that any company can have. There's only so much juice is what you're saying. It's like I set that up. And we have maybe encountered. some places where you should maybe just use the best practices. Yeah, what do you think about this?

Making a startup work is a miracle. Yes, yes. And the fact that you got product market fit and made something people want, you literally performed a miracle to do that. It is amazing. People would, or so, you know, people would die to get where you got. Now the odds that you were going to be able to perform, five miracles at once,

it wants is much, much, much, much lower. Much lower. And so you want to focus the miracle juice on the single miracle, which is making something people want and making a product, right? Yes. You see what I'm saying? Solving real customer problem. And then all this other stuff.

Yes. Yeah, just do best practices. Please don't innovate. Yes. Like you don't need to have a low likelihood of success miracle. Like you don't want to have to be right on these long shot bets. Yes. In five different ways.

Yes. And I think it's interesting because I think that I encounter some people who somehow are more religious about these side bets, right? It's like, well, I'll only do a startup if I can locate it in bumble fuck nowhere. Or I'll only do a startup if I get to do this weird corporate governance thing. And I'm like, what you're really saying is like, I'll only serve my customer. and help them with a really important problem in their life if I get this other random thing that the customer doesn't give two shits about. Right? And it always kind of blows my mind. It's like it's, in some ways, business is really about being selfless and like putting your customer

first, but it's like, I'll only put my customer first if I get to locate this startup in New York. And I'm like, that's obviously putting yourself first. I think let's start with the most common anti-patterns we see. Sure. Right? Like, what is the, What are the ones you see the most, man? What's offender number one of where people are trying to innovate where they probably shouldn't be? I would say one that I see on the YC application that I love is when it's like some kind of weird incorporation.

Yes. So, you know, we incorporated it as a Wyoming LLC. And I'm like, this was a voluntary red flag. Like this is like, why would you do that? And like sometimes it'll even write, well, because like, da-da-da-da-da. And you're just like. Well, I think.

My theory is there's a lot of smart people. Again, they want to innovate in different ways. Sure. And they'll look at something like corporate law and the existence of the Delaware C Corp and be like, I, someone that knows nothing about this could do better. Yes, yes. Obviously so. And everyone else is doing Delaware C Corps.

Yes. That's not for me. I'm going to do a, and then crazy things happen. Yes. Right? And so probably corporate governance is not the best place to innovate. One thing that's been funny. headline ripped from the news is people looking at the corporate structure of open AI and being like, oh.

This is an interesting innovation. This is an instruction manual. A nonprofit that owns a for-profit. Would not recommend that strategy, even the people that working there. I mean, even Sam himself has suggested that that was perhaps not the wisest choice. And so again, the point here is the miracle of making something people want is the hard part. Yeah. But if you're just doing like a startup, you know, Delaware C Corps are pretty good. Yeah. You know, I see another one because, you know, corporate governance, that covers, you know,

your investment docs and where you're incorporating and all that kind of stuff. Your vesting, blah, blah, blah, your classes of shares. Like I sometimes see founders doing crazy stuff. I see another one that you brought up, though, which I really love, is the, like, I'm going to make this startup, but I'm also going to disprove every piece of startup advice. Like, I love this. It's like, I'm only willing to help my customer if I can simultaneously prove that all of the startup advice is incorrect. Yes.

And it's like, what? And so, yeah, so the example of that is just to take something that is like widely considered useful or true. Yeah. And try to prove the opposite of it. Yes. You know, like my thing will be reliant upon making the small town that I live in the center of the startup ecosystem or something. Like somehow there'll be other, some other bet they're making. that involves a super contrarian thing that has nothing to do.

Actually, I can think of an example of these, by the way. One of these was, I remember a founder doing something unrelated, again, I'll keep this anonymous. But they were like, the real thing, the real bet we're trying to make is the hydrogen economy. And that no one will use gasoline or solar or wind or or, but then in the future, we're going to use hydrogen everywhere. And I was like, hey man. Maybe you don't mention that. Like, we'll keep this between us. Maybe when you're...

That's the real secret sauce. Maybe you should keep that. Maybe you should keep that on the download. Again, like, in the case was like, maybe he's right, but that had nothing to do with the actual bet of the startup. No. And to try to throw in this long shot bet that we're all going to be using hydrogen for everything.

Again, maybe he's right. I don't know. That seemed like a completely unnecessary risk or thing to innovate on. Yeah. And I think that what's... so sad about these things is that I think there's a misunderstanding of how hard it is to make something

that people want where people think that they have these extra points, this extra juice to spread, to do other things with. And I just, I always like to tell people it's like, this game is so hard without this stuff. I'm like, why do you want the game to be harder?

Like I never understood that. Is it fun? Yeah. Okay, let me do the example. I mean, that's fun. Okay, sure. Like nerd bait. kind of stuff. Sure. Again, this is my recollection, but my recollection is that when, I believe it was Asana, when they started, they wrote their own programming language first.

Of course. Of course. And why would you do that? Because it's fun. I believe they back that out. Again, someone will correct me if I'm wrong on this. But a lot of times choosing very idiosyncratic programming languages or text acts, people choose to do it because it's fun.

And who am I defaulting for that? But like that's like they're optimizing for like, wouldn't it be cool if we wrote our entire thing in this new idiosyncratic programming language? Yeah, that's such a weird. It's like I get it on one hand and your startup should be fun, right? Like you're doing it for a while. I get it on one hand, but I've never seen a founder who didn't have the most fun by helping their customer. Do you remember in the Reddit versus Dig Wars? Dig made a lot of technical bets along these lines.

Meaning, like, they made a lot of very high-risk technology choices, while Reddit was just like not. Let's make a social news site. Well, I don't think they were taking any high-risk technical choices. So this, again, is an example where Dig was taking on all this extra risk on something that had nothing to do with dig.com loading news stories. It was literally about the technologies they were choosing to power the website. Yes.

Well, and the one I remember was when they did the revision and they couldn't roll it back when the site didn't work. Yes, that is correct. Yeah, they redesigned everything all the time. It was really impressive. I think the other thing that comes up a lot around innovation is business model and pricing. Yep. And I think this, once again, is not putting the customer first. You know, hey, let's say you're selling cloud compute, right?

Your customers have probably bought the AWS before. Maybe you should charge. like AWS does, right? Because maybe your customers will recognize that, and that will give them comfort. Yep. No, that's wrong. We hate AWS.

We can't do anything like AWS, including pricing. So now your customer looks at this pricing thing, and they're like, well, I really like your product, but I don't understand. Your pricing page doesn't make sense. Yeah. It's not even that they don't want to pay. It's that they're like, I don't understand what you're saying

or how this works. No. I have to buy flusels and then I get credits for flusels and then I transfer them into the, like super. Yes. And by the time I'm at that page, I just want to know what it costs. And if I can't figure out what it costs, like, how do I, you, I'm walking, you invited me in your home and then you've shot me in the lap. No, you invite me your home and I can't open the front door. Like the door handle, like I don't, I don't know how to use your door handle.

And I really wanted to come in. I did. I was gay. I had my money. I was ready to buy something. So I think that like so much of this kind of pop entrepreneur shark tanky advice, right, I actually think comes from a different place. I think it actually comes from like weird branding. And like I think that like in the branding world, like being different, being unique, like that is like a very, very important. thing and like a lot of the examples in the branding world are people who did things like

radically different and then like became successful. What I find funny is that a lot of the examples in the technology world are people who did things 80% the same and 20% different. At least 80% was the was the minimum that they copied. Yeah. And so I think one of the things that founders screw up is when they take advice that might work in fashion and apply it to software. Because, yeah, this might as big usability. If people can't use your thing, like I remember back in day, people would try to innovate on the website design and how the cursor worked and like how you would even click buttons.

And that was an example of probably not helpful innovation. No. And so watch out for unintentionally creating risk that you don't need to create. Yeah. And I think that if you put your first, your customer first, second, and third, you might look at some of these other things and say, do I really need to do them? Or better yet, let me do it on my second startup. Let's get one successful startup out of the way. And then I can make programming languages.

I can hire people all around the world. I can do all kinds of crazy things online. I can build rockets. I can do all kinds of cool things. Startup number two. All right, Dawson. Good chat. Thanks.

You know.