Lessons from working with 600+ YC startups | Gustaf Alströmer (Y Combinator, Airbnb)

[00:00] if I drill down, like what, [00:01] Mix. [00:02] companies fail. It's quite simple. It's just like, [00:05] They don't talk to users, which means they don't find Progmogafit. [00:09] And if they don't find product market fit, nothing else really matters. [00:13] And [00:14] What mistakes do people make? It's all about that. It's all about talking to customers and learning that you're building something that's actually useful. Why is this headline is make things people want? And that's [00:25] It's still true and it's always going to be true. [00:30] - Welcome to Lenny's podcast, where I interview world-class product leaders and growth experts to learn from their hard-won experiences building and growing today's most successful products.

[00:39] Today my guest is Gustav Ahlströmer. [00:42] Gustaf is a group partner at Y Combinator, where he's been for almost six years. [00:47] Prior to that, Gustav was at Airbnb for over four years, where he started the original Airbnb growth team, and where I was very lucky to get to work alongside him for a number of years. Gustav is also at the heart of YC's increased focus on Climatech, and in my opinion is one of a handful of people who've had an incredible impact on the increasing amount of investment and people flowing into Climatech.

[01:17] Think about the space if you're hoping to make the jump. We also get deep into Gustav's experience working with over 600 startups over his time at YC. We talk about what are the most common mistakes that early stage startups and founders make, what advice YC partners give founders most often, the most common attributes of successful founders, the importance of having a technical co-founder and why that's the case, so much more. I guarantee you will leave this episode smarter and more inspired, and I can't wait for you to hear it.

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Epo lets you go beyond basic click-through metrics, and instead use your North Star metrics, like activation, retention, subscriptions, and payments. [04:00] the backend, email marketing, and even machine learning clients. Check out Eppo at com, get com, and 10x your experiment velocity. [04:12] Gustav, welcome to the podcast. Thank you, Lenny. It's honestly so great to see you. I'm excited to be talking to you. [04:22] I've been looking forward to this conversation for a while, ever since we booked this. [04:25] We worked together at Airbnb for many years. I was really lucky to get to work with you.

[04:29] before you moved on to bigger and better things at YC. [04:33] And speaking of Airbnb, [04:35] You once tweeted about how special an experience that was for you. [04:40] And I think even more interestingly, how [04:42] Many of the people that have left Airbnb, [04:44] I can't find another place that's as special. They just like that bar has been set too high. [04:49] And so my first question is just like, [04:51] What do you think it was that made Airbnb so special? Why was it such a [04:54] important experience for you and other people and [04:57] Even more importantly, just what is it?

[04:58] that you take from that experience that you bring to startups that you work with now. [05:02] Yeah, it's funny. I think this year, in a couple of months, will be 10 years ago since UNAMI started Airbnb. Wow. [05:08] It was 2012. [05:10] and [05:11] The reason I tweeted that was I asked everyone that I met after me because I had this experience of like, this was the highlight of my career up until then, at least being in a team like that. [05:20] And I asked everyone, have you found anything better?

And like, I haven't heard [05:24] besides maybe one or two people, I haven't heard anybody say that I found something better. [05:28] And they all miss that dearly. [05:30] and i thought a lot about why that was the case but i would say [05:35] Embiid did not feel like a normal job. [05:37] it felt more like a group of friends trying to just do something together and we were [05:41] friends and [05:43] We weren't like... [05:45] At least in the beginning, it did not feel like [05:47] this was a job.

It was sort of like a, [05:49] and ongoing projects. [05:51] an assembly of amazing people [05:54] And... [05:55] I think in the end, we managed to build two things, like a really successful company, [05:59] Thanks to Joe and Nate and Brian for starting this. Without them, there would be nothing to build. [06:04] And we also, I think people don't like to use the word family, but I feel like that way because when I go and meet with... [06:10] and be alumni from that team. We have a very special bond that reminds me of...

[06:16] close social connections more than anything else does not remind me of co-workers. [06:20] And I asked myself why this was the case. The best answer I have is probably like we brought in a special type of people. We had very diverse backgrounds. A lot of us was former founders. [06:30] Not many of us were [06:33] career people from the technology industry of the early days not many of us and i think that bar that we set like the first [06:41] I believe when I joined, there was probably five or seven PMs and there was like 30 engineers or something.

And you joined a little bit before me. [06:47] Those people set the bar or set the standard of what we're looking for afterwards. [06:51] And I think... [06:52] It took a long time to change that narrative. I mean, eventually you have to hire... [06:56] people that only had big corporation careers. [06:58] But I don't remember we did that for a long time. [07:02] And when I sent my, I actually read my goodbye note recently and I [07:06] By words there, it still means... [07:09] A lot to me. [07:10] And it means sort of like you're trying to reflect on exactly these things.

I'm like building a great company that became successful and [07:16] being part of this sort of family of [07:18] of really close friends. [07:21] So it sounds like if you had to kind of like boil down with, [07:23] Airbnb did right. [07:25] Sounds like hiring was the main piece that impacted the way it turned out, just like the founders being very specific about the type of people they were hiring. Absolutely. [07:32] Is there anything that's like, I don't know, a takeaway there of just what you recommend to founders? [07:36] Like, [07:37] Hiring, you know, people know.

Be very careful who you hire the first... [07:40] And on 10 people, it will impact the culture long term. [07:43] But I don't know. Is there anything just like abstracted away there of just like what to look for in that first batch of hires? It's a tricky one because like... [07:52] I would like to say that all the things that we did were the cause of the outcome of this. [07:58] But that's not really how the world works. Some of the things we did worked and some of the things we did did not work.

And it's hard for us to actually disentangle what those things are. But I think we can talk about the things that we did. [08:08] First of all, we made sure we hired people that were really excited to be there. [08:12] They wanted to build Airbnb. [08:14] and they were really excited to work on Airbnb. [08:17] Like that was the most important thing. There weren't, [08:20] Of course, people had other offers, but I think you can kind of figure out from those offers, [08:25] Um, [08:26] Are you excited to be here or not?

So that was probably the first thing. The second thing I think is... [08:32] trying to understand the true motivations of the people that were there, [08:35] Like, "Lua, why are you here?" [08:37] And we did something we call culture interviews that I think the founders have written about, or there's probably... [08:42] content online about this. [08:44] We did a lot of culture interviews early on to try to figure out we got the people that were there that mapped our core values and were really excited to work on Airbnb. [08:53] And I think finally, I don't know how this happened.

Like we did pick people from diverse backgrounds. Like most startups... [09:00] don't have most of the PMs being former founders. [09:04] But I believe that was the case for the first 10 or 12 or 15 PMs that there'd be. A lot of us were former founders. And I think that that made a big difference for... [09:15] how you make decisions and how you [09:18] get started on things and i think i actually see this a lot in the airbnb founders they [09:24] really care about the time at YC and they tried to recreate YC inside Airbnb a couple of times with Demo Day, [09:31] and with new products completely isolated from the rest, starting with doing things that don't scale and talking to customers.

[09:37] So I think that that experience made a big impact on them. [09:41] But it's hard to say just... [09:43] these two things go and apply these things. It's actually kind of hard to say, well, that will work at Airbnb. I think that's a really tricky question to answer. The last thing I would say is like, [09:53] F&B had an incredible business model and incredible business from early on. [09:57] And it was hard to fail. And what I mean by that is it's hard to fail with a company. You can fail with individual things.

[10:04] inside the company but the company was still going to succeed [10:07] And I think we all felt that. And a lot of companies don't have the... [10:11] the ability to sort of like take risks like Airbnb, [10:14] be did early on because they don't have something that's so obviously great. [10:18] That's a really interesting point in the last piece that you may have the most amazing culture and hire incredibly well, but if the company doesn't work out, it's not going to be looked back as like, wow, that was really that was an amazing experience.

[10:28] but we failed. [10:30] Yeah, that's interesting. [10:31] So you mentioned YC, and this kind of is a good segue to [10:35] where I want to focus most of our time. [10:37] You mentioned that you've worked with over 600 companies at this point, which is absurd. Feels like you get the statistical significance on takeaways at this point of what works and doesn't work. So I have just a bunch of questions about your experience working at YC and all these companies. [10:52] The first is, I think about this quote that Elad Gill tweeted once, and he wrote, I think, a post about it.

[10:58] He like yells as legendary angel investor. [11:01] He said that starting a company is an act of desperation. [11:04] You're either... [11:05] desperate to [11:06] change the trajectory of your career. [11:08] or you're desperate to make a bunch of money, [11:10] You're desperate to achieve some kind of mission or build a specific product that you're just like, I need this to exist. [11:15] I'm curious if you agree with that sentiment. [11:18] And then I have a follow-up question around that. [11:20] Yeah, actually, I haven't heard it before, but you know me, I'm an optimistic person.

I think it probably reflects on my view of this question. But I would say desperation sounds like a negative place that you're starting at. I actually think that most people in our company start from a positive perspective. [11:32] place but the motivations i i agree with what he said [11:36] can be very diverse [11:39] for successful founders, right? [11:41] So we actually asked this in one of the early group office hours sessions. We asked them, why are you doing this? [11:47] And we don't want to hear an answer. It's like, I found this...

[11:50] niche of the market like that's not the why the why is like [11:54] Why will you come in? [11:56] and work late. [11:57] after four years when you have no money left and everything's going to shit. [12:01] Then the niche market is not the answer. There's something deeper than that. [12:05] And we've learned that [12:07] It varies a lot for people's motivations to start companies. Some of them just want to solve some technical problem that they feel they're passionate about solving. Some of them want to prove themselves in front of others or prove themselves towards themselves.

Some have grand, really important motivations to change the world. And they will say things like, [12:26] I want to give everyone water or I want to solve climate change or [12:31] I want to... [12:33] democratized publishing. You can imagine any number of large ideas, [12:37] And some people... [12:39] just want to start a big company and just want to be successful. [12:43] And it doesn't matter in my experience what your motivation is. I don't think either of these motivations, like it sounds like some of them would be better than others.

In my experience, it's not the case. [12:52] the motivation will change over time to [12:55] just running this thing right like like when something becomes big [12:59] It's hard to think every day about exactly why you got started because the motivation is like, it can be fun and work on boring things. [13:05] because it's fun to build something big. [13:07] Everything doesn't have to be shiny and big and grandiose. [13:11] because there are many ideas that are quote-unquote "boring." [13:13] but just the idea of running the company becomes the motivation eventually.

[13:17] That is really interesting that one of the main things you look for, it sounds like when you're interviewing, is how strong and durable is that drive to build this company? Is that what you're saying? [13:26] It's actually kind of hard for screen for motivation, I would say, in interviews because [13:31] The purpose of this kind of office art question is to highlight why someone is there. [13:36] and highlight the diversity of reasons people are there, and sometimes even highlight to [13:40] from one founder to another co-founder why they are doing this they might have never talked about this actually surprisingly often founders have not talked about why they're doing this [13:48] And just knowing why someone is here really helps with conflict resolution, for example.

[13:53] really helps with sort of like, [13:55] understanding why someone is there on a certain day or something like that. [14:00] So it's not something we screen for as much as I think we try to help founders discover this among themselves. [14:06] and really know this about themselves, [14:07] And I've just accepted that the motivation to start companies is widely diverse. [14:12] Do you ever discourage founders from starting a company when you see that maybe it won't be a durable kind of lasting? [14:18] Motivation or whatever other reasons just knowing how hard starting a company ends up being

[14:23] it's a good question i would say sometimes if someone doesn't have a motivation or don't know why they're doing this they're doing this because they [14:29] read that it would be a natural career step. So like a good reason to not start a company is if you think of starting a company as a career step. [14:35] Well, it is not. [14:37] Because if it's successful, it'll be your entire career. It'll be 10 years, most likely. [14:42] And if it's not successful, then it's not something that people generally aspire to, to start non-successful startups.

[14:50] So I think people start companies because this is something they want to put on their resume. [14:54] They have not understood what startups are or why you should do them. [14:58] Sometimes you can screen and kind of figure this out, but sometimes people don't even know [15:02] why they're starting a company when they get started and he kind of [15:05] gets figured out along the way, [15:07] And that's okay. So I don't want to discourage people who don't know exactly why they're starting this company to start a company. They might figure it out along the way.

[15:14] and find [15:15] find the true motivation, sort of like, [15:17] after doing this for a little bit or finding that it's really fun. So [15:21] I think... [15:22] I discourage people to start startups [15:26] If they have so many other things that are important in their life that are more important than the startup. [15:31] So, [15:32] If there are financial constraints or family constraints or relationship constraints and they are going to trump this. [15:40] that yeah you should think [15:42] a second time perhaps because startups are hard they're much harder than a normal job like equally hard if they're successful or failure right they're not actually there's no middle way we're like oh [15:52] My company is doing great so I can chill.

That doesn't work that way either. So I [15:58] I don't really discourage or encourage people. I just want them to have all the information. [16:03] You mentioned YC office hours. [16:05] And I had a question around this. I'm working on this piece where I'm interviewing a bunch of [16:10] B2B. [16:11] founders of companies that are doing super well. [16:13] And I asked them a few questions like, how did you come up with the idea? How did you find your first few customers? [16:18] And it's shocking how many of them bring up a conversation in YC office hours [16:23] as the most pivotal point that set them on the trajectory that they are now.

[16:28] and [16:29] I'm curious what... [16:30] What happens in these office hours? [16:32] What are the most common... [16:34] pieces of advice that you give or maybe most surprising pieces of advice that you give in these office hours. [16:39] so that people can get maybe a glimpse into these conversations you have. [16:43] So at YC we have two types of officers, two of the common ones. We have regular officers, which is usually a one-on-one or... [16:50] Basically, the founder is talking to me or me plus another partner. [16:53] And they happen every week or every other week throughout the entire program.

And they happen years after the program on a regular basis. [16:59] Then we have group office hours, which is [17:01] you and like six or seven other startups talking to us. [17:06] And they have a little bit different purpose. So the goal of the regular office hour, [17:10] I always ask the question, what's holding you back from moving faster? [17:14] And we don't want to hear updates. [17:17] We don't want to hear... [17:19] strategy questions. [17:21] We want to understand what's slowing you down or what's holding you back from moving even faster.

You generally have a specific goal. And I think that question, like what's slowing you down or what's holding you back, [17:30] crystallizes like the priorities. [17:32] There are only so many things you can do as a startup and [17:35] There are only so many things that matter at that stage. And by asking that question, we can start digging into, okay, what's the goal? What are the things that drives towards that goal? [17:44] What are the things that are slowing you down towards that goal? [17:46] And, [17:47] Usually, [17:49] The founders don't know what's slowing it down.

So the conversation and us probing questions actually leads to [17:55] us or them discovering what it is to slow them down. [17:59] In the group office hour, it's a little bit different. Group office hour, it holds a couple of different purposes. One of them, [18:05] is [18:06] If I think back on the Paul and Jessica's motivation to start YC, this is a surprise to them, but starting a company is incredibly lonely. [18:15] You can't really lean on your employees and say, hey, I'm feeling really shitty as a founder today. Like everything is going to shit.

[18:21] employees isn't going to tick that well. [18:24] So you lean on perhaps your investors, but they're not really available. [18:28] But what you can lean on is other founders because they're all in the same situation. [18:32] And it's sort of like when you ask your founder the question, how are things going? [18:35] It's so emotional for them to answer that question because it's never going well. It's never like, oh, everything is going fantastic. They might say that, but everybody knows. All founders, when they look each other's eyes, they know that's not the answer.

[18:48] So founders have infinite number of problems that they're thinking about all the time, which is why they're allergic to the question, how are things going? [18:55] But when YC started, [18:56] We put all the founders in a group together in a room, and they started learning that all founders... [19:01] all companies are broken in some way, right? They're all having these massive problems and they're all feeling that anxiety when they hear the question, how are things going? [19:09] and just hearing other founders [19:11] explaining their problems, perhaps solving their problems, is a really good way for yourself to both feel motivated to do it yourself and see how problems get solved when other companies are having similar problems.

Nowadays, [19:22] Because of the scale OIC, we group companies together that have the same [19:26] problems or the same area that they're operating in. [19:30] And the second thing that group officers do well is accountability. We ask you, "What are your goals?" [19:35] and what were goals for the last two weeks? Did you hit them? And then, [19:39] that gives founders accountability because they, [19:41] Founders are competitive. They don't want to look bad. They don't want to come back after two weeks and say, [19:45] nothing worked or at least we didn't learn anything.

They want to learn something and make progress. [19:51] whether it's positive or negative. [19:53] And group office hours to me is the most magical moment because [19:57] it really creates this very... [20:00] intense three or four month period and founders often come back to us after i see and say hey we want to [20:06] do that again. We're going to have this really intense, really productive period. [20:10] And we don't have... [20:11] a program exactly like we see, we have other programs, but we don't have anything exactly that mimics that experience.

But we do encourage founders to continue with group office hours. [20:20] after YC and many of them do and many of them ad hoc continue to meet for years. [20:25] in this group setting where they ask the same kind of questions to each other, to hold themselves accountable, to learn from each other, [20:30] and to just have someone else to lean on. And I think, [20:33] This was unknown and somehow the world didn't know before that starting a company is super lonely and you have all this anxiety. [20:41] By just talking to other people who have the same problems is just one of the best things you can do.

[20:45] There's so many things that come up when you talk about this. One is I worked at a startup at one point and we worked in the coworking space. [20:51] And we joined the co-working space because we're like, oh, we'll meet other founders. It'll be social. We won't be all alone. [20:56] But it turns out everyone's just like heads down, headphones on. I just I don't have time for anything. I just need to work. [21:01] And it's like a microcosm of that experience that even if you're surrounded by founders, no one has time to do anything.

They're just... [21:08] They're working. You got to schedule it and force it and put the laptops on the floor and the phones on the floor. And you just like sit there with a pen and paper. [21:15] That's how you have to do it. [21:16] And we tried to mimic that as much as we could over Zoom. But honestly, the best experience of this was in person. [21:21] in a ring in Mountain View, [21:23] with no computers, and everyone just paying attention to everyone. That was the best experience. And, um, [21:29] Yeah, that's what I remember is one of the most meaningful parts of YC.

[21:32] I didn't have it myself when I did my seat, but... [21:34] Now everyone has it. [21:36] The other thing this made me think about is someone tweeted once, [21:39] Don't ever ask a founder how they're doing or how it's going. It just creates all this anxiety. [21:43] Because nothing's ever going to do it. [21:46] Everybody looks at each other's eyes and they know that they're alerting to that question. [21:50] That's hilarious. [21:51] So just to summarize the questions you said you asked, the one is in the individual office hours, what's holding you back?

[21:58] And then in the group setting, what was the question again that you asked? What are your goals for next two weeks? And what were your goals for last two weeks? And did you hit the goals? And if you didn't hit them, like what came in the way of hitting the goals? It's very simple. [22:09] And that can uncover lots of problems that other founders are having. [22:14] exactly in the same way [22:16] And, [22:17] just by talking about the things that held you back or the things that allowed you to hit your goals [22:22] uncover something material for the other seven companies sitting in the ring.

[22:26] If you kind of zoomed out a little bit and thought about the startups you've worked with, [22:30] What would you say are the most common mistakes that early stage startups make broadly? There's so many. I mean, like this is how I initially learned about startups by going searching for that on Google and landing on Paul Graham's articles because he kept... Wow. [22:45] I think I've written many articles about this topic because it is so... [22:49] It is so common. So, [22:50] this topic can go on forever. [22:52] But if I take the most recent experience of how to NYC, [22:56] I would say...

[22:57] Startups fail. [22:59] One, because they don't talk to customers. [23:01] If you don't talk to customers or users, you don't actually know what's important. [23:06] And if you don't know what's important, it doesn't matter what you build. It doesn't matter kind of what ideas you have in your head if you don't actually know what it is that you need to build and you don't validate with customers. [23:16] That's where a lot of the failure stems from. And a lot of early YC for us, or early part of the program is us, [23:23] pushing and probing founders to be like, "Tell us about the conversations you've had with the customers.

What did you learn?" [23:28] Can you show us the organization sort of like all these questions like, [23:31] What other software are they using? What are they paying for? What problems do they have? How are they describing the [23:38] intensity of that problem. [23:39] So that's what we spend a lot of time early on on NYC. [23:43] After that, I would say, [23:45] one of the common mistakes in twice i'm not talking about generally startups here i'm talking inside yc [23:50] The second most common thing I see in NYC is people are just afraid to talk to customers.

So once they [23:55] They're just not trying hard enough to... [24:00] to get in front of customers. And [24:02] I think this... [24:03] comes from [24:05] Technical people tend to think that software is just sort of a solution to everything, but really what you should do... [24:10] need to do is to talk to someone over Zoom or over phone or in person even better [24:15] And people are just afraid of doing that. And they're afraid of being rejected. They're afraid of [24:20] These are common people that want to build good products are just really afraid of people saying no.

[24:25] The problem is, which... [24:27] Anyone who hasn't done sales before that joined YC, they realize this, is that [24:32] If you take the average customer, [24:34] group in the world. [24:35] 90% are not early adopters. It doesn't matter if you have something new and cool that is not interested. They are not incentivized to take risks in their job to try something new. [24:44] They are just incentivized to not take risks and just continue what they're doing. [24:47] And those 10% of the early adopters are the ones that you actually want to reach.

[24:51] But that means you have to reach 10 to find 1. [24:54] And they have convinced that one person to get on the phone or a video call with you. [24:58] And that takes work and it takes a lot of work. And I think people don't really think of this. This is [25:03] Common knowledge, basic stuff for salespeople, but founders who have never done sales before just get surprised by the percentages and what it means to do this. [25:12] If I think of more generally, [25:14] outside of YC. So these are two kind of [25:16] things I experienced with NYC.

[25:18] I think generally, as a YC, I would say, [25:20] The two most common problems, the same one is not talking to customers. The other one is not being technical. [25:26] and not knowing [25:27] what it takes to build a successful technology company. [25:30] and it means having technical founders, and it means being able [25:34] to build the first prototype. [25:36] And [25:37] This is something we screen for when we interview people at NYC and we aren't accepting a whole lot of team that are [25:42] don't know how to [25:43] build or get their first prototype built themselves, because we know it is a super common failure pattern.

[25:49] and I can go on and on and on and on for this one. [25:53] But honestly, if I drill down, like what makes... [25:56] companies fail. It's quite simple. It's just like, [25:59] they don't talk to users which means they don't find Progmog or Fit [26:03] And if they don't find product market fit, nothing else really matters. [26:07] And, [26:09] What mistakes do people make? It's all about that. It's all about talking to customers and learning that you're building something that's actually useful. YC's headline is make things people want.

[26:20] It's still true and it's always going to be true. [26:22] This is really interesting and good advice. [26:26] It's interesting that, like, talk to customers. People hear that all the time. They're like, of course, we're going to talk to customers. We're going to do that, of course. And your experience is they know this, but they just don't do it. [26:35] Probably because they're afraid. Yes. Maybe also because they think they already know what they need to build and like, yeah, we're good. [26:41] And you have all these validators, right?

So the people are validating that even if you don't talk to customers, [26:45] why has he accepted you this investor invested in you [26:49] This investor said you were great, like blah, blah, blah, like all these different [26:53] validations, [26:55] that you confuse with product market fit. [26:57] Right? [26:58] We have to remind everyone on the first AYC, none of you have product market fit. [27:02] Because you probably don't, right? Almost nobody has. [27:04] Because people confuse this external validation, [27:07] with [27:08] the thing that matters the most, which is talking to customers and learning what matters.

And people just don't, [27:13] It's just like a thing that just keeps coming back. Some get really good at it. And that is the source of successful startups is when you really get good at this. [27:22] It reminds me, coming back to Airbnb, one of the most important moments in Airbnb history was Paul Graham telling the founders of Airbnb. [27:28] Where are your customers? And they're like, oh, they're in New York. And he's like, why are you talking to me and not in New York right now talking to them? [27:33] They talk about that all the time.

[27:35] Yeah, it's absolutely true. I think he wrote the article, "Do things that don't scale" as a learning. The learning there was the Airbnb founders doing the trips to New York and learning about how to build Airbnb, which is a very counterintuitive idea. [27:47] which is when you have to spend the most amount of time with your customers. And I think [27:51] MB is sort of like the [27:53] One of the best stories inside YC of doing this well. [27:57] This also reminds me, I've been talking to a bunch of founders recently, [28:00] I asked them, how many customers have you talked to to help figure out this idea?

So just the other day, it was 150 people. [28:06] financial CROs that they talked to before they actually started raising this round. [28:11] another company, actually two Airbnb guys that started, they actually like, [28:15] ran ads, I think, on LinkedIn to find specific people to talk to in that specific role. And they talked to probably at least 100, maybe 200. [28:23] So there's a strong correlation there. [28:25] Yeah, I think that's the volumes that people don't expect. Like, they think they might have to talk to five. [28:30] But I think you have to talk to like 25 to 50 people.

[28:33] That means you have to reach out to a lot more to be able to get to people that [28:36] are potentially early adopters. And those ones you talk to are also the ones that become your customers. So you're already doing most of the sales by just doing this work anyway. [28:45] Do you have maybe like one tactical tip you could share of just either getting over your fear? [28:49] of talking to customers or just like holding yourself accountable to actually doing it. [28:55] Yeah, I tell this story. I actually told this story yesterday.

[28:57] So, [28:58] Remember when you sign up for a service that's a cool service and you hear about it on TechCrunch or something like that? [29:04] And then you realize you already signed up a year ago. [29:07] Right? [29:08] And then you're like, [29:10] From the founder's perspective, you sign up to something, you never used it. So the founders to build those services, their inclination to think is that everybody hates me because they signed up and they never used the service. [29:23] And, [29:25] The fear of that is basically the fear of rejection.

So if I put my thing out there and most people use it, [29:31] and they will tell all their friends how shitty this thing is. You should never even sign up for it. That's the fear people have. [29:38] But the truth is that people start afraid of me like, oh, I'm busy. I got something else to do. [29:41] and they actually don't remember or care. [29:43] So whenever you sign up for something that you signed up a year ago, [29:45] Think of yourself as that is the common customer experience, which is that you do sign for a lot of stuff you don't even remember.

[29:52] You never have this, like, "I hate this thing." [29:55] reaction you always have this like i'm [29:57] I'm indifferent to this thing. I don't actually care to even like, [30:01] complete the sign-up flow or try it out, right? [30:04] And I think that's the thing that people need to remember is that [30:07] that the worst thing that can happen to start up is not that people hate what you're doing. [30:11] is that they're completely indifferent to what you're doing. [30:13] Sorry, not the worst thing, but the most common thing that happens is people are just indifferent.

[30:17] But it doesn't give you a second chance. Let's say it always gives you a second chance. [30:22] and you really need to internalize that [30:25] People have busy lives and if people don't actually use what you're building, that's fine. You can reach out to them a year from now or six months from now or two weeks from now. And they probably will if you make some improvements. [30:37] And I think people just have this fear that if I get a lot of rejection, that means everything is bad. [30:43] The rejection should be put in context to [30:46] the early adopter idea and that most people don't care are not early adopters don't want to dig into new things [30:52] And the more narrow [30:55] of a solution you have to a specific problem, the fewer people actually want to dig in.

[31:00] But that's where you have to start because you cannot build the whole thing right up front and [31:04] and make everybody loves you that doesn't really work that way [31:07] Even Airbnb was like, [31:09] air mattresses or staying in someone's homes when they're home. That was not the complete solution of Airbnb. [31:16] But there were early adopters who dug in and be like, yep, I like that. I like those two things. I want to have people say, am I? [31:21] in my living room on an air mattress. But that's not what Airbnb is about today, and a lot of those things were unknown at the time.

[31:28] But I think people are just afraid of... [31:30] rejection and you just need to overcome that fear and just [31:34] learn that there's nothing that's really that bad that can happen when people don't use your service or sign up and don't care. It's not really that bad. [31:41] It reminds me of a quote that I love from Marc Andreessen that, [31:45] Everyone's time is already allocated. [31:47] They don't have space for your product right now. [31:49] They already have plans for their day. [31:51] And it takes a lot to convince someone to change their...

[31:55] to pay attention to anything. [31:57] And I guess that just comes back to why it's so important that your product is solving real pain and not just like a nice little toy that, you know, is like better than what's out there. [32:05] but not so much better that you're like, I need this right now. [32:08] So maybe just along those lines, do you have any thoughts on just like the importance of that pain? [32:13] and just how critical that is. [32:14] I actually recorded... [32:16] I'm happy about these videos, but I've recorded two videos on YouTube as part of YC Startup School last fall.

[32:24] and you cannot go watch them on YouTube right now, [32:26] One of them is how to talk to users and the other one is how you sell or how you do sales. [32:32] and [32:33] The one about talking to users, I think there's a difference between [32:38] in asking someone, do you have a problem with XYZ? Is this podcasting setup working for you? [32:44] And people say, yeah, it's kind of working. [32:46] But if you are a podcasting setup expert and you watch people use some other thing that's really shitty, [32:53] They might also think that is pretty good.

[32:55] But you have to watch them do it. [32:58] and the best way for you to figure out what is the intensity of the problem is not to ask them but to watch them. [33:04] or to watch them solve the thing that they do. You know how like, [33:07] a lot of non-technical people, [33:09] don't know how to automate things. So they will do the same thing in like Excel like a million times, like by just like tabbing. [33:15] Because that's the only thing that they know. And they're not technical enough to write some kind of script to do it.

[33:19] And you just have to watch those people to just feel the pain. You can't actually ask them, [33:25] How difficult is it to do XYZ? Because they won't even know that it's that difficult to them. [33:30] So the best thing I've learned about how to discover the pain is to watch people, have them screen share. [33:35] have them walk you through their daily workflow about the area where you're doing some discovery [33:41] That is the best thing. And I'll give you another example. So there's a bunch of ways companies that are doing EV charging for electric cars.

[33:48] And they're like, what are the problems of EV charging? And I was like, you know. [33:52] Just rent an EV and go and charge at all the non-Tesla chargers. [33:57] and see what they say. [33:59] or see what you experience. And the truth is that it's just like, [34:03] Garbage. A lot of EV charging systems are just so shitty. [34:07] and the apps are [34:09] like terrible. You just have to just use them yourself to know how bad it is. [34:13] It's cool how often it just comes back to just like, go do the thing.

Like, do things that don't scale. [34:18] Classic YC advice. [34:21] I wanted to come back to something you mentioned that I want to pull a thread on as the technical co-founder being technical early on. [34:27] Just to kind of cover that. [34:29] So I know YC looks to [34:31] Having a technical co-founder, it's an important variable when you're deciding to accept a company. [34:35] Say someone doesn't have a technical co-founder, do you have any advice for what they could do? Like what often can work? [34:41] Yeah, I think the first thing, [34:44] is to understand the value of a technical co-founder.

So some people are in this trouble or in a situation where they have an idea of something they want to build and they don't have anyone to help build them. I had a friend, Paul, who gave this incredible quote. He said, [34:57] I have an idea for a song. I just need a musician to help me. [35:00] make it right that's kind of similar to how it is with engineering [35:04] And if you view... [35:06] output of engineering as like [35:08] I just have an idea for a song, I just need someone to actually make it for me.

[35:11] then you're not valuing software engineering or mechanical engineering or any engineering skill set deep enough. The truth is that the engineering part is the really hard part. [35:20] And... [35:21] The first thing I would say is you need to learn how to value [35:25] the engineering piece, [35:27] And let me give you an example of how you don't do that. You apply to YC and you have [35:31] 90% for yourself and 10% for the engineer. That's [35:34] You're basically saying, "Oh, the engineering part of this company is only worth one tenth of me.

I'm the non-technical person." [35:40] So that to me is a signal that you're not really value engineering. [35:44] Okay, so how do you go out and find someone? Well, the truth is that there are a lot of technical co-founders, technical people that also want to fund business co-founders. They don't want to do the other part. They don't want to do sales. And they actually don't really care that much about fundraising. They just want to solve the problem. [35:59] And that's fine. And we built something called co-founder matching where those funders can meet.

[36:04] But if you don't participate in that, you can just... [36:07] Start by... [36:09] asking the best technical people that you know, [36:11] Are you interested in starting a company with me? [36:13] You know, [36:14] Same thing with rejection. Many of them will just say, "No, I have a great job. I'm really happy." But some of them will [36:19] will have thought about starting a company for a while and was hoping that someone would come and ask them to do that. [36:24] So you have to kind of like remove your fears and go and ask the best people.

[36:29] The reason you want to have a technical co-founder and not a hired engineer or not a hired contracting team [36:34] is because [36:36] So many of the decisions you're going to make, [36:38] are technical, [36:39] and so many of the iterations you're going to make relies on engineering. [36:43] And if you don't understand that, you won't actually make the right decisions anyway. It's not like Starbucks, you have an idea of a product, you build a product and you're done. [36:50] There's infinite number of iterations in that process. [36:54] And then finally, I would say, [36:57] A lot of people learn how to code themselves.

[36:59] So there are a lot of places online where you can learn the skill set that it takes to build a prototype. [37:05] You might not be the best engineers. And there are many successful startup founders who are not the best engineers because they [37:10] They stopped coding when they hired three or four engineers. [37:13] That's fine, but you need to... [37:15] be sufficiently good that you understand the value of engineering, [37:18] And you understand that the best way to solve most of the problem is with software. [37:23] And there are a lot of founders who just...

[37:26] for whatever reason. [37:27] Study something else. That doesn't have to be a conscious or very precise reason that you had when you were 18 or 19. [37:34] And then you're 25, you know, like, I wish I had to code. And then just learn to code. And they learn how to code. [37:39] Like, it's like... [37:40] Not that more difficult than that. [37:42] Have you ever seen a startup work out if they had a contracting firm, like engineering firm, build the product? Like, does that ever work? Or were you just like, no, do not ever do this?

[37:53] Basically, I can't recall any specific ones where people have a contracting firm, but I recall founders where, let's say you had two non-technical founders. [38:01] But they valued engineering and they had an ability to, [38:04] to build a team of great people that were not co-founders, [38:07] and they gave them equity and they become successful. There are many examples of that, I would say. [38:13] But. [38:14] I don't remember any specific examples where you had a contracting team building the whole thing. [38:18] And I think... [38:20] The reason for that is it takes more than just sort of like writing a spec to build a product.

You can't actually spec yourself to a great product. You have to just like... [38:28] be part of the iterations yourself. [38:30] And that's why I think someone being the engineer [38:33] Having the idea of what the iteration looks like and just doing it is how you do things. [38:37] And I think that the cases where I've seen non-technical founders [38:41] make this work is that they have it [38:42] really good engineering teams who feel like their founding team. They might not be co-founders per YCZF definition of having 10%, but they feel like they're [38:51] the bounding team.

[38:52] This reminds me of a story of just a recent podcast interview I did with the CPO of Calendly. [38:57] She talked about how when Calendly started, they actually had a Ukrainian... [39:01] Dev Team built the first product, [39:03] And not only... [39:04] Did they help them build the first product? [39:06] They actually ended up [39:07] driving the first [39:09] all the growth initially because they saw Calendly and started using it within their firm. And then everyone that they knew started using it and spread within Ukraine. And they actually continue to work with that firm.

They're still the eng team for Calendly. [39:21] or some part of it. [39:23] Wow, that's cool. I mean... [39:26] I would say it's certainly the case that in some countries, [39:29] people have other jobs while they start the startups. So like the engineers, like in Ukraine, for example, or in Eastern Europe, it's very common that if they start their own startup, they actually have a full-time job as a contractor while they're starting a startup, because that's how you pay the bill. [39:42] Because often you can't raise money. [39:44] And that's fine too.

[39:45] Amazing. [39:46] Just that's that's some hustle. This episode is brought to you by Pando, the always on employee performance platform. How much do you love the performance review process? Yeah, it's time consuming, subjective, biased, and there's rarely any transparency. With the rapid shift to distributed work, it's a struggle to create the structure and transparency that you want to help your employees have the highest impact and growth in their careers. Pando is disrupting the old paradigm [40:16] a continuous employee-centric approach so employees stay engaged, see their progression in real time, and know exactly when and how they can level up.

With Pando, managers can leverage competency-based frameworks to effectively coach and develop their teams and align on consistent growth standards, resulting in higher quality feedback and higher performing teams. Visit com slash Lenny for more info and get a special discount when you sign up and reference this podcast. That's com slash Lenny. [40:47] I want to zoom out a little bit and ask another big question and see if you have what answer you have for this. If you just think about the most successful startups, [40:55] NYC or even just the companies you worked with, if you had to pick just like one or two attributes of what's most common across successful companies, what would that be?

[41:04] I would say the most common reason that I've seen founders succeed or companies succeed, it comes down to the founders and characteristics of those individuals. [41:13] The most important characteristics of those individuals are [41:17] They're really determined to win. [41:20] and they don't give up when things are hard, [41:22] And they have an internal motivation that's just really... [41:26] infectious to people around them. [41:28] which is how they end that building. [41:30] really good teams around them. People are actually going to want to go and work for them. [41:34] And I have numerous examples of people like this where they...

[41:38] The CEO or one of the founders are just really inspirational people. [41:42] The second thing I would say is they are technical. [41:45] So that's kind of like they're technical enough and if I would grade companies on a scale of technical to less technical, [41:53] more technical founders, [41:55] are more successful, are more likely to succeed, I would say. [41:59] And then I would say they figure out how to talk to users and move fast early on. [42:04] They don't wait for permission from their investors or from YC or from someone else to [42:09] to make progress that like every day or every week there's [42:12] continuous progress, [42:14] And they're not...

[42:15] doing this for someone else they're doing this for the customers there's no one else that's like actually the [42:20] They're not doing this for the investors, that's for sure. The investors are sort of like, [42:24] in the way more or less and and they're just naturally focusing on the customers [42:29] Finally, what I would say is the skill that's really attributed to great founders is the [42:34] Excellent communication skills. So [42:36] the ability to [42:38] communicate, [42:39] really complicated ideas clearly, [42:42] to enjoy the communication part, right? Enjoying communication is often kind of correlated with enjoying [42:48] doing fundraising which is an important part of some companies success not all of them but for some of them [42:52] And I would say, [42:54] Communication and storytelling is part of the same arc, right?

And those are [42:58] part of the same thing that actually motivates people around you. [43:01] If you can communicate what you're building and why it's important to the world, tell a story about that. [43:07] that can motivate people around you just want to follow you and and i think [43:12] It's rare that I've seen founders succeed where the founder isn't in some way an inspirational person or someone that is a good communicator. Like most of the time, like you. [43:20] you. [43:21] at least have [43:23] respect or you have you somewhere know that they're going to succeed.

[43:27] And that is what inspires you to be around them or be on their team. [43:32] That is a really cool list. So just to kind of summarize-- [43:35] One, they have the strong will to win. And with that, they're inspirational. They kind of pull people along and get people really excited. [43:42] Two is they're more likely to succeed if they're technical and can build the thing. [43:47] Three, they figure out how to talk to customers. Don't wait. [43:50] Just start doing it. [43:52] and they're just obsessed with that versus what investors want them to do, and they kind of [43:56] Don't want to talk to the investors.

[43:58] to make time for the customers. And then excellent communication skills, which kind of comes back to the first. [44:03] They're able to story tell and get people excited. [44:06] I would say those are the attributes of successful things. To be a [44:11] super successful company, there's something else that about to happen. And those things are not things you can put on a list because they're [44:18] they are the outliers. If you look at startups, [44:22] On a typical YC batch, there'll be a couple billion dollar companies. Those are the outliers.

[44:26] almost certainly have all the things that we talked about. [44:28] And many other companies in the batch will have that too. But then what makes someone a true outlier is something that is unknown. That's why so many investors said no to Airbnb when they were not trying to raise money because that was an outlier idea. [44:39] Like it was an idea that was [44:40] not logical and did not make sense to most people and [44:44] those kind of ideas like the ones that end up succeeding often don't make sense to people and there's something [44:49] There's some reason that no one has done this before because they're just not natural next step of the world.

[44:57] That's a great segue to a question I've been meaning to ask, which is, [45:00] How good are you at predicting in a batch? [45:03] which startups are going to be the monster hits [45:06] So maybe like you and then just generally YC, like how good are you all at knowing what's going to work out like is going to be the next Airbnb or. [45:13] Dropbox. I think the truth is that we're not very good at knowing what's going to succeed. We're not certainly we cannot figure out who's going to be the realest successful company in the batch.

Like that's not possible. [45:23] What we're good at is knowing what failure looks like. [45:26] And what we sometimes like to tell founders at the beginning of the batch is like, if you fail, please do it in some new, exciting way. Not one that we've seen a hundred times. [45:35] Because we have seen... [45:37] People fail for a large number of reasons, and [45:41] And the best way for us to make [45:43] to sort of like. [45:44] not predict, but like the best way for us to make more companies succeed [45:48] is to tell them [45:49] how they might fail, right?

Be very direct and honest with them. [45:53] and say you're doing these three things. These things are [45:56] Likely, [45:57] going to lead that you won't succeed. [46:00] And if we do our job well, most people get that feedback and they're on the track for succeeding. [46:06] Now, which of those companies end up becoming the best? [46:09] There are so many things that are uncorrelated. [46:11] to being the best. And it's the things that people don't like [46:16] I'm in a hot industry. I was written up on TechCrunch. Like, this investor stopped talking to me.

[46:20] You'd be surprised how many of the things I just mentioned are uncorrelated to outlier success. Right. And that's why it's so hard to to actually do this. And I think. [46:30] People really want these questions to be answered. People really want to believe that you can pick really great companies at the seed stage. [46:38] But everything I've learned from the plus 600 companies that I've worked with is that it's just not that easy and it's, [46:45] maybe not even possible. [46:46] and certainly not possible when you talk about finding the outlier companies.

I don't think it's that easy. [46:53] And... [46:54] If it was easy, then we would accept a lot fewer companies. We just accept those ones. [46:58] But it's just not that easy. [46:59] Do you have a sense of which ones are likely to work out better than others? Or is it just like we have 150? [47:06] Really unclear, but one of these hopefully. [47:08] One good indicator is if each new office hour there is really exciting new stuff. [47:16] We're not talking about the same thing we talked about two weeks ago or four weeks ago.

[47:20] They've already done that stuff, right? Like, oh, [47:23] I was trying to sell to these three customers. Well, they already bought it. I'm not actually talking to seven others. And now we are talking about a different price and different product because they're like, they want more of what we're doing, right? [47:33] If I'm experiencing that, and that's like a consistent trend, [47:36] than [47:37] When people draw this revenue graph, this 10% weekly growth rate kind of situation, [47:43] Those are the companies that we attribute that to. [47:46] If you're able to make that progress on that short amount of timescale, [47:49] you're on track to do something well.

Now, a lot of other things have to go well for you to [47:54] be ultimately be able to succeed. [47:57] But progress? [47:58] on this like weekly or bi-weekly timescale [48:01] is a really good indicator of someone who'll succeed. [48:04] to me, much better indicator than [48:06] I am in this market or I'm talking to this investor or something like that. But those are much worse indicators of someone succeeding. [48:12] than I'm making money. [48:14] progress and it's a pretty fast clip. [48:17] Interesting. And so what I'm hearing is at the beginning of a batch, we're just like in a bet on a bunch of companies that have a lot of potential founders, technical, maybe.

[48:25] They have the strong will to win and all these things. [48:27] through the batch. [48:28] you're looking at the companies that are exceeding your expectations week to week in terms of progress that they're making. [48:34] I mean, sometimes it could be different reasons for people not making progress, but if you're making continuous progress, and I think, [48:39] Paul and Jessica said this was true early days NYC. [48:43] If you are... [48:44] hitting your goals and you're making progress like continuously if that continues like that's a really strong correlation to you [48:50] some success but again going back to the question can we predict who's going to be the best ones [48:54] No, and that's why we really focus on trying to make people not to fail, especially good teams can't fail.

Like if you have a really talented team, [49:01] team who's really technical and know how to build product, but they make some other basic mistakes. [49:06] like not talking to customers or something like that or [49:08] trying to build everything all at once. [49:11] I feel like it's our responsibility to make sure they don't make the basics mistakes that we've seen many times. We need to... [49:15] Help them. [49:17] at least make some spectacular mistake that we haven't seen before. [49:22] That's a high potential team. If someone is on a good track for a decent idea, but they're still early, that's really good potential.

[49:29] I have kind of a fun question that I wanted to try. [49:32] which is kind of connected to this idea around attributes of successful founders and companies. [49:37] So this founder friend named Flo, and he was asking me recently, if you had to think about the most successful founders, [49:44] Which attributes do they have? And he kind of gave me this list. [49:48] And it's kind of like two ends of a spectrum. So I thought it'd be fun to just go through this list and see... [49:53] In your experience, which end of the spectrum, if any,