Hey, this is great Cannon, and you're listening to y Combinator podcast. Today's episode is with teak on Burn Stamp. Tick On is a multi time Y C founder. The first time he went through, I See was the summer of 2006 with script and then five years later, during the summer of 2011 with parts. And given that we're about a month away from the winner 2018 application deadline, I thought would be cool for tea Khon to come in. Talk about his experience. Talk about his decision to do I see a second time, given that script had already worked out pretty well and, um, what his experience has been like as an investor for these past few years. As always, if you want to read the transcript or watch the video those air,

both that blogged out y Combinator dot com. And if you'd like to apply for the winner 2018 batch, that is that Why Combinator dot com slash apply Alright, here we go. So could you just start by explaining how you first found Y c

Yeah, I actually found Why? See, cause I was on reddit. I was I was in graduate school, which meant I had a lot of free time on DSO. I was red. It was super early. This back in like the top post might have 10 points, and this is like before it even had comments and Viet that I found Paul Graham's essays on How to do a startup and and to me, the idea of doing a company was basically impossible. This is after the bubble are after the dot com crash. Everyone had basically declared like the Web was over like that. That's all done now, Um, and so is very like Paul Graham's essay is. We're really the only source that I had found that kind of said that Actually,

here's here's a pathway to do it and like it can be done. And I was super interested in that. I applied to why Siano like, really as like, really on a long shot. I didn't think I'd get in, um, and so I interviewed in Palo Alto, and although the actual program was still back in Boston in Cambridge and I got in, so I just dropped out of graduate school. What

were you studying?

Physics, Actually, theoretical physics, but I studied computer science and e con an undergrad. So that was kind of a small change. And so yeah. So I dropped out of grad school and moved, moved to Cambridge. And so then you know me tripping. Jared probably worked on, like, screamed for released. Well, yeah, we worked on her for at least, like, a year and 1/2 before We got, like, real traction on it. So this is back in summer 2006.

And what was the initial pitch for a script, like in the application?

Well, yeah. So script was actually like one of those pivot companies where, like, we applied with different ideas. And then, like, much like a red, it was actually a pivot company where, like, it was actually applied for as something else like this. Like food delivery stuff. Really? Paul's like, Yeah, Paul's like, I love you guys,

Steven Alexis. But I hate the idea. How about this kind of thing? Steve's talked about that before on DSO. Similarly, like script actually was actually the merger of me trip and Jared like during why? See, they were working on some other projects on like it was like a Craigslist for colleges back then. Craig, this was super hot. So like everyone was trying to do. Much like nowadays, everyone's doing like uber for X. Like back then, it was Craig's list for Ex

glory days on

the Internet, but But then YouTube sold over a 1,000,000,000 people, so that was insane. You know? Oh my God, Google overpaid, which totally wrong. And so then you two became a hot one. So that then we said, like, let's do YouTube for documents like that that was literally like that. And I mean, we also noticed this problem Where trips Dad, Who's that? Uh, who's at the Stanford Med school was having trouble like basically viewing the documents like online that that, like he wanted to read on bike. Not he didn't have, like, the right reader on like sometimes I'd send my mom a postscript file should be like, How the hell do I open this?

People were just downloading it, and then they needed to download like acrobat,

if you want. Yeah, because back then, if you have, like Adobe Reader that I don't think that actually opened up like a postscript files back then Maybe it did, but a lot of default viewers didn't just dependent on your OS. And what what sort of defaults off where you had bundled? But anyway, we just decided, like, Why don't we allow the documents to be embedded inside of the Web pages? And we started off with FLASH. But way had always hoped that we could switch to HTML five, which we did much

later. Okay? And so what was the White Sea experience? And so summer of six. What was that?

Like it? It was great. This was back in Cambridge. Honestly, we would never have made it without that program. Um, and I think that's true of actually most of those companies on guy. I'd already probably most of the companies because without that community of like minded people who are highly motivated and working on, like the same general like pathways you and also like people who've done it before, like Paul Jessica J. Uh, Paul Jail, Trevor and Robert, who were basically there to like, kind of like know you guys were like that. That's stupid, like,

get back on course because sometimes we would just go the wrong way for, like a whole week before we'd see them. Let me show them. And they say, What the hell are you guys doing? And they were always right is the thing. So, like, it's I mean, it's saved us years and the company wouldn't have worked without them. Um, and so I'll always be grateful for that. And it was with all the batches were small back then. I think Screw summer 06 was the second batch. So still my best friends are the people from like the summer, 05 and Summer of six Batch in Cambridge like,

uh and that's like, so going on over a decade just because those were the only people I knew doing startups and like they were the people I talked to And it was great, cause like, one day you think with startups one day you think your company's gonna fail like, you know, you think you getting sued or something, Someone's threatening you. The next day, you think you're gonna sell the Google for a huge amount because just because someone some like person mm anna accidentally e mails U S O having other people going through the same thing. Like like that the twitch guys kind of working on their stuff, which took over a decade on DDE. Back then, it was Kiko which switched into Justin TV. But like having that sort of having those people around in that community and then kind of like the guidance of the partner's eyes, probably only reason that

we survived. And so, how much money were you getting from my see? At that point, it was not the same as it is

now. Yeah, Back then it was fixed. It was $6000 per person. So overall, we took in 18,000.

Congrats. That's huge Way almost sold the company for that s O. I mean, obviously the money lasted. What did you do with it? Like people get way more now?

Yeah. I'm always amazed how much people get now because the seed rounds today are bigger than like the Siri's a that drop box an Airbnb did with Sequoia, which I think was roughly a 1,000,000 each like and so, like, how did you guys spend all that money? Usually when people run out, But back then we struggled. So for a couple of years, I was living on savings we were basically I was. I was basically living out of trips Parentshouse at Stanford, and his mom was getting irritated as I keep, like eating all the candy. And, like I was subsisting on top like top Roman and, like whatever food was available of their cabinets. So Tripp Jared and I worked for months basically out of out of his living room and without the generosity of his parents. Steven, let us do that on

Did you raise after Y. C

didn't know that a while. Back then fundraising was very, very different than it is today. Also, just the environment in Cambridge is so much different in the valleys. But back then, like, the mood was so gloomy and, like start ups are over sort of thing that, like it took a really there actually worth that many angels around there weren't that many people who have either gotten who had exited or like who wanted to do that sort of thing. I mean, now, demo days oversubscribed and such. But back then, it wasn't like back then. I don't think it was even like, ah, full room, actually on.

So you were just basically living off savings like script. Wasn't making a

K pretty guard far. Um, yeah. I mean, if you could Somehow it was long as you could get your rent low. You could live for a long time.

Okay. Do you know approximately how long that actually

went? Well, I mean, yeah, it was another year after Why? See? So, uh, way scratched by on that and not mean being being a wealthy grad student? No. So having zero savings, like barely any less? Because Tripp had just left Harvard. Jared dropped out of Harvard to do this. Um, s o we just really like we really tried. Make every dime count.

And so, um, how long did you

work on script? Yes. Oh, started. Like like I said, summer 2006. I left about five and 1/2 years later, I talked to the co founders. I said, Listen, I think like, if we're not gonna, like, go more B two B, like, like, more like enterprising.

Um, I think that I should probably go now. I'm really interested in doing something in that space. Um and so they were like, Okay, cool that they actually invested in my next company which was parse, which we basically actually. So it was actually two of us who left it was me and James, you from script. We James is actually, I think, our first hire at script. And so he'll keep. He and I were close friends and Mr Lar And so, um, we left.

And the very next day we were coding and working on, like, the prototype of, like, what was not part of something else

we want was okay. Possible was that idea.

Um, they're actually twelves. We made 12 different landing pages because with so a script, we would spend about one month on every idea and, like, build out a nap and then test it. And that's kind of what it might have taken longer with. Parsley said, Let's not waste a year. Let's make 12 landing pages like kind of launched them and see if people even give us an email

and B to B products. Yeah,

and things that made money like that. I think it'd be to see it's much harder to gauge whether you have a long term traction or not, or if your chat roulette or something. Um and so yes, so We basically had 12 different pages that we launched. Like what one was an a p I. For companies to send gifts to look their best users. Because that script I was like wanting to, like, send gifts to people uploaded like 100 documents would be nice to do that programmatically I don't think that even exist Still. So, like when we just looked, if people clicked on the pricing page and if they send up and put in the mail and and then anyone who protected their email, we wouldn't email them being like, Why did you sign up for this thing? Was a crafty landing page that we made in, like, two

hours. How are they getting to the landing pitch where you do like about marketing for any of this stuff?

For a Chen was basically, but this is before product hunt. So it was. It was mostly show h n. It was on Twitter.

You're doing show H n landing pages?

Yes, like show H end. This service exists, actually, Parse launched that way. Two parts launched as a landing page. Really? Yeah, Back then it was called the stack and we don't know in the parts dot com domain, which we only out later, thanks to the straight founders and strife CTO Um And so, uh, it was called Z stack. We watch the landing page again. Just we want to make sure people actually wanted this thing because we knew that from our own experience building mobile APS at script at other companies that everyone was sort of reinventing the wheel, redoing the same sort of like code that, like,

like, push notification type stuff that really could be generalized. And back then, like AWS was kind of just still very much in its infancy. But you could see the need for, like, Hiroko had just sold for 250 million to Salesforce. So, like the pitch of like Roku for mobile like kind of was like, very like I actually dislike X for y pitches now, like all these now.

But you're riding those waves. Yes, I

am 100% guilty of doing those in the past. And so we actually I think I think the pitch like I used at Y c uh uh at the demo day. Waas. Yeah, it's Hiroko for Mobile was actually the title of What? What? The company

was okay and just stepping back a little bit. What made you decide to go with Z Stack versus the other 11?

Yeah, it was actually talking to the user's eso. We talked to the users,

but to be clear, there was no product for any of them. Parts

is more complicated. Parts parts is actually a merger of three independent entities. So Ilia was a solo founder in parse, working on like a find your friends up sort of thing, which was very popular Time and Kevin wasn't even in y c. Kevin emailed. Kevin had been y C previously and then was working at Google emails Paul and says, Listen, I want to get back into start ups like, if you have anything, let me know Paul E mails list like, Hey, there's this great guy, great hacker like you. I should, like, talk to him if you're looking for co founder.

And so James and I met with Kevin. William met with Kevin. We ended up all trying to work together for, um for for, like, a couple weeks and, like just to see if we harmonize, I mean, I don't advise people work with people they don't know. Um, but hey, worked for Twitch

it. For some people, it hasn't worked for a lot of people. Yeah, yeah. Yeah. Okay. So what were those two ideas on that merged?

Oh, yeah. So we were actually more in the payments space. More so. James and I were interested in, like, recurring subscription building space where people were people still have troll, like actually getting, like, recurring billing. Working. Um, I mean, it's getting better now, thanks to stripe, but so stuff for, like,

normal people basically take payments like that that were occurring. Um, I mean, way were still very much in the ideation phase where we were very happy to pivot to whatever was kind of whatever we felt would be, like the best type of business. And yeah, And then, um, basically, we also started working on parse. Uh, and we basically launched that landing page pretty quickly in tow. I see. On dhe, we launched it on hacker news. It was a show h n. It was called sea stack dot com, I think at the time.

And so what? We're like, what was the pitch?

It was literally a theme for a steaming like a $9 theme forest theme that has these hot air balloons on it. You can still diet today. Hey, hey. Just It was basically Hiroko for mobile. Like, basically, we're gonna take away the Dev Ops and, like, the back end like part of it. So you could just focus on, like, the lakefront and like, like, native, you know, code and not have to worry about thinking about, like, your database and all that stuff extracting it away. The RST case.

Yeah. I mean, I've used the product before, but just like to be clear for everyone else who's listening? Could you just give the quick explanation of what it

actually became? Yeah. Yeah. So parses a platform that helps you make mobile applications much, much faster. Way estimate roughly 10 x faster on DSO. Normally, if you're making a mobile out, you'd have to, like, write all of the code that like that, like the like native client interface on the phone that the person would play with. But then you'd have to think about how How does that app talk to some server in like, Virginia, and then what does it send. And then where's that data going? How?

My querying it, Calloway, what happens if that server goes down? So parts took care of that whole second part of this of the stack so that you just did the client stuff. You make up like a pretty native You. I We didn't believe much in the at the time, in sort of the like html five approach, which now is working better, but like the sort of phone gap type of thing like way believe that native after the time we're, like, definitely superior in experience on DSO. We just tried to, like, abstract away, like all. Basically, like the really hard, like kindling. 80% of stuff that people shouldn't have to know how to do them in order to make maps.

And had you guys decided that, like you wanted to go through, I see again.

Oh, yeah, We I talked to Paul almost immediately, um,

on leaving

script. Yeah, and I was like, Yeah, meet me and James have to have these ideas. We're not sure exactly which one we're gonna do on Paul's like, All right, Well, let's Let's do this again.

Okay, So you applied like, kind of flying like there's no product still

way agreed with Paul that we would focus on a company called Pint Pay, which was the subscription billing service back and suspect, then building and like, payments. Companies were super hot, like we pay. Just raised a bunch of money Strike that stripe was famously doing really well, but we definitely never wanted to be with striped eso. We were looking for other angles inside of payments, you know that you could do things like anti fraud type stuff on payments.

So basically, like, another idea was sort of funded through. I see. And then you just changed it and you brought people on in the meantime. Okay, that actually

happens a surprising amount of the time.

Yeah. Yeah. Um, answer by the end of the summer that you're Roku

were hurled. Coup for mobile. Yeah, R I later switched to aws removal, but basically, like an AWS tailored for developers of mobile applications.

Okay. And so why did you want to do it a second time? My c

o. I mean Well, okay. First off the first time, we would never have made it without y c. And that's likely true. The second time is well again. It's largely for the same reasons as the first time. I still don't think I know anything about start ups like the more and more I do this, the more and more I'm convinced how, like how little I know on DSO like having that sort having that like community of people, like who are a highly motivated having my first customers. They're right there in the batch where I could say, Hey, like like you're making a mobile app. Use this like that's really, really helpful because then you something get feedback and then every every dinner every week you go to them and say,

Hey, I watched this new stuff. Check this out and then, you know, we bring our laptops and show what we're doing. And then, like, half the time, it was stupid and that people told us that way. Then we stopped, and then the other half they're like, Well, why not, like, expand on this that way? Oh, because that's the problem you're having in Mobile. It's

not that. How did you start getting customers afterward? Because it makes sense, like when you're surrounded by startups you could just grab a ton of people. And I found parts by going to Hackathons because people were using it all the time. Um, but how did you get people who would pay for it?

Yeah, so we didn't have pricing for actually quite a while. It was a free service. We didn't know howto do pricing properly back then like, and so we were mostly focused on. Can we get our remit making something that's making a few people really happy? Like so we would talk to the developers, like, who had signed up and who started using our like, beta, you know, which started. We started off just basically like sending data to the cloud like to like, s3 say, and by talking to the developers and seeing, like, do we have a product where people are really disappointed if we just,

like, went away, which I think is a really good test if you if you can't find some niche that is absolutely like a fanatic about your product, um then you likely don't have strong product market fit. And most of the times that I've failed in startups was basically trying to push growth before I had product market fit on DSO. We found this course segment of developers who really wanted to make native as much, much faster, ranging from like agencies who were making maps for everyone from the Green Bay Packers toe, like the Travel Channel Weather Channel in Cadillac who actually all in abusing parts. But, like we found people who really cared about this like this makes my life much, much better. And then we actually talked to them and, like use that we use their feedback to kind of make the product better in in the ways that, like it should be better and way actually really fast. All four of us were coating on dso we we worked,

and we kept kind of launching features constantly on dhe. We got the parts dot com name Thanks, Thio Greg the cto of stripe Because I asked, I was over at their office and I asked what was your guy's second choice? Because extracts an awesome name and they're like, Well, if directed at work, we're going to party like that, like that's

available and I just gave it to you. Well, they

think they didn't own it, so they had they had written a script to email all the owners of, like, one word of English. One syllable domains like striped parse things like that, um, and asked them like, Hey, we're a couple of people were going to start up, you know? Are you interested in selling? Most never replied. But like Parsons stripe owners did, uh so I won't say how much strike cost, but parts was only 15 k parts dot com

pad. Yeah, all things considered. And so, um, so going through. I see the second time, like what became valuable to you, I assume it was different than the Well, First of all, it was like way more people write in summer 11 right? But what was valuable the second time?

Well, again, like having, like, cussed customers, or like, or the actual users like, inside of the batch record, like talk to them having that community because it actually gets quite lonely when you're just sitting there like coding like, you know, 16 hours a day were like like even if you're with with the same three people every day, like, it's nice to have that community of other people who are doing the same thing. The partner smacked us around a bit like No, no, you guys, like,

are going the wrong way. And that they were They were almost always right. Um and so we got a lot of good. Like it kept us honest about shipping every week, like shipping new stuff. Not not not being embarrassed to ship to early, which is, like, really, really common, Especially amongst, like, developers who just want to keep coding instead of shipping. Um, and so the partner's advice is priceless, but and then a demo day.

I mean, fundraising was fat was next. Easier. I can't imagine the fundraising minus the y c Demo day we raise were wildly oversubscribed, but we only took 1.5. We stopped there for our seed round. And, like, we really were able to get some of the most, like, some of the best investors and some of the most like, like, kind of, like, famous like valley type people. And it was like it was really it was really awesome.

Yeah, And then it was like two years and then Facebook required you guys. Yeah, something like that

s So we started Parson, 2011 Facebook acquired the company in 2013. We'd actually had emanate discussions with several other companies along the way, like in 2012 and early 2013. But we way actually raised our Siri's a like right after dinner today, we basically went and started like rays are a because we actually thought we already had basically like enough traction to start doing that. Um and we added, That actually is a fairly fairly quick process. We raised 5.5 million from ignition, so total race seven million happened on. Then we started hiring and we kind of like we were able to recruit some amazing developers. A lot of people off the Google search team, for instance, people. A lot of developers were passionate about the problem and like like working on the tools that solve their own problems, so that was helpful. And being such a developer focus brand also helped us on by sea was great for that being able to like, kind of post like pay like we're hiring, like on hacker news back then,

I mean, because that's always a question like I wonder right, because people are looking for those jobs, but you guys are also just looking to find people. So, like, what was the effective? What were the effective strategies for finding developers to come work on parts? You just make a cool product or or

what? Well, we often we would talk to a lot of our actual users like they were so amazing, like engineers who were using parts. And so even if we couldn't hire them, we could talk to like their friends. But also, once we kind of got, like a couple amazing hires out of the Google search team. We just kept asking every way asked every single higher, like Who's the best person you worked with? Like, who would you co found a company with? And then we would just go to that person saying that I'd ask the same question like that person. And even if I couldn't get like that individual, I could You just kind of kept moving down the tree. Yeah,

and so that actually worked really, really well on. We were able to hire, like, a lot of, like, friends or people we worked with previously, so I think I can. Kevin had worked with, like several of the Google folks previously on DSO like they already knew and trusted, kind of like like us. And we already had. We had kind of a good friendly group that wasn't all just kind of strangers on. We were, but But eventually we ended up hiring everyone from, like,

way hired. Some of our best people were actually users of parts, like the guy who ran all our community and such was actually making car steps. He just graduated. And, uh so that was actually another great strategy. Hacker news jobs post was a really good one. Um, and I guess that alone actually worked really,

really well. And so now parses like, shut

down, right is yes. Oh, just the other day, I think. End of January, Facebook. Finally eso Facebook open source the entire project. And now they're actually little companies that, like, provide parts hosting

much like oh, man, really? Yeah, much like that. It's eight of us for parts.

Well, because there's actually very little profitable businesses. Like all those folks who host WordPress for businesses you know they can like because we're press is an open source project now parses to So there are people who just took over the hosting part of it. And so but the parts team, to their credit like they kept building and working and adding, features the open source project. It's really, really good. And so there's a lot of people who switched over who, like we actually helped everyone migrate over from, like, from using like our servers over. It's like the open source project and like how to do that. The company did an amazing job with that. I think it was one of the best shutdowns of a company that I've seen so often. Users are really angry and like, but this was a really graceful, long over a year notice that we were gonna be shut down. Open Source Didn't migration TOOLS. Too many startups end up just kind of like closing like

Oh, for sure, Yeah, it's happened. Do you think there's another part's coming down the pipeline like someone's going

to try it again? Well, fire basted, right? So that they were actually in our batch. They were a different company at the time. They were doing like basically chat for every website, so, like, you know, how upset like like how a Catholic how Twitch has like a chat little box. They were trying to do that for everyone. And they ended up pivoting later into doing basically course again. So there and then Google about them. So Google Google has their own farce. And then Facebook had one

s so you can use fire base, I guess. Or Parks. This is great, actually. Yeah. Um okay. So you didn't go to Facebook, right? Okay, So what happens after

parts? What do you do? Yeah, so I was, like, fairly burned out after I had no break between script and parse, like, literally. It was like, the next day, I just sort of working again. So after after many, many years, I guess I always want to travel. I have never done so on dso extent about two years traveling backpack in South America with without a computer, which was grace that, like,

Yeah, um, and, uh, lived in Europe for a while. I did a lot of speaking at conferences back that sort, and I tried to learn more about the international startup scene. It feels like every every city internationally are a lot of them think like, how do we build the Silicon Valley of like South America. How do we build the Silicon Valley of like Peru? And it's like That's not really the right approach. I don't think they'd be better off focusing on being really friendly, like one niche. Like we're like, we're gonna be really friendly the Bitcoin people like we're gonna make the banks be friendly, the Bitcoin startups and,

like people, you might get more people going there and not dealing with all like this. All the difficulty that say, like, drones have here, like all the regulations you could see. Like a drone Valium, like a Bitcoin valley. Mark,

I completely agree with you, though, right? Like, there's no reason why I like, you know, all the pharmaceutical startups couldn't be in Germany or something. So what did you learn from like So you're speaking in all these conferences and stuff, and you eventually stopped doing all that speaking, right? Did you pick anything up along the way?

Yeah. The number one question that I got was how do we raise money? How did you do that? Um, and it's really unfortunate because, like much like that, like the angel ecosystem that had toe build in Silicon Valley like it took a long time like back in, like, even know six. There were not that many investors and, like terms were not good. Like I mean nowadays, the typical seed round out of Y C is higher than the Siri's, a post money that's equated in Dropbox and an Airbnb. So you have to envision, like, this client was completely different, like there was not this, like, flood of capital chasing like every good start up. So that's kind of how it feels most in most international area.

So what do you tell people come

out here? What I was telling folks Yeah. I mean, I I said, if you can like raising out in the Valley is, uh I mean, like like, for instance, like algo Leah was in Paris the same time I was there and they ended up moving here from tap from Paris. Also moved here where I'm an investor in, um And so the honest truth is like I still think living and doing a start up here is very beneficial and has certain downside is very expensive here, But in terms of fundraising, that certainly helps also investors are largely averse to like non Delaware. See, corpse, which a lot of these companies outside of the U. S.

Are like, for instance, I as an investor now in like, over 60 or 70 cos I don't understand like the legal ramifications of investing in like a company and, like, you know,

South America. So you basically just avoid

them. Well, it just it would be a large, like legal headache to think about to go, have lawyers review this and see because yeah, so with the Delaware PSI Corp stuff you would have figured out. So I actually encouraged folks looked like apply like y Combinator. Or if they can't get into why, See, applied, like 500 startups, whatever. But like these, these programs are so perfect for people internationally on guy love. What Stripe is doing with Atlas, like helping people that they're letting anyone be an entrepreneur like around the world. That is such awesome,

ambitious goal and solving that problem. So I think things have gotten much, much better than back when I was, like, back in, like when I was hearing that 20. Like 14 largely due to the efforts like that and, like, why? See, there's a really good job of taking like there's a great company called Razor Pay that I'm an investor in. That's kind of like strike for India and, you know, they, like, why See? Helped them with the whole transition.

It's super valuable. And so that's probably a good transition. So you said, like, 60 angel investments. At this point, you have a particular strategy and area you're focusing on. How's

it going? Yeah, so I'm I'm I'm so far invested in like Cruz just sold a GM uh, gusto. Lend up checker optimized. Lee read it things like that for me in the early stage, investing I really prime. The first thing I'll look for at least is like like it. Is there a large market? Because without a market, it's really hard to be successful even if you build a great products and so is there a large market? And are these founders like I really like relentless team that is, like determined or like, I actually have this joke question I'll sometimes like, kind of. I don't actually ask founders this, but like I'm like,

Hey, you know there's this conference and like you know, like in like the u A. And someone just dropped out. You want to give a talk? It'll it'll take you Ugo on DDE They were kind of like the conference is that I was actually going to

and I guess you were found her at the time,

but still go. Yeah, but like often, if Founders were willing, take long destructions and doing things that are not relevant to their cos that's a bad sign on. And so you kind of learn to identify the folks who are relentless,

like, what are other signals you see in people?

I actually like solo founders. I know that's an unconventional thing in the Valley, but Drew was initially a solo founder with drop box on. A lot of other great companies were as well or had one founder who really drove the project through. Um, so I think people who are willing to go through it solo, it's already hard enough people who can persevere for, like, a year longer by themselves. I kind of really admire that you can kind of I mean references in some sense, like, you know, like if you ask people like you were the best people you ever worked with. And they named someone. That's probably someone is pretty good

as a technical person. Do you? That the product like the tech side of it all?

Yes, but I kind of believe on. I'm stealing a lot of this from Mark Anderson, but that a really strong team in a really great market will eventually build the right product and, like, they'll figure it out because the market will drag the white product out of them, whether they whether it's kicking and screaming like Docker came out of dark Cloud. You know, there's lots, lots of twitch command, Justin tv. Justin TV was actually had this one vertical like gaming that was really growing. And they actually ditched the rest of it and just ID the gaming vertical and so often, like good markets, will actually, good growing markets will actually eventually steer you in the right direction.

So, as an investor, have you been burned yet? I mean, you've only been doing it for a couple years, right? Um, are there any, like, hard lessons you've had to learn?

I think one good thing. Well, I think people complain evaluations Every single year. I've heard this since 2005. I remember when optimized the seed round was at four and people like that so expensive. I'm never gonna pay that. Like, you know, now it's fun. It's fun. Multibillion. Our company, um, so I don't listen to that anymore. I think a lot of the best deals can feel expensive. A scary tan recently said, Um,

you kind of investors make their money basically on being on being in the deal everyone wants to be in or being in the deal nobody wants to be in. And I think that's largely true. Um, like, if you look at likes a drop box and Airbnb, they took over a year to go from Demo Day to their Siri's A so that you don't have to actually rush into things that demo day. There's a lot of room in the post seed world where you can kind of invest, like maybe at a slightly higher evaluation. But before the Siri's egg on DSO, I've done a lot of that

as well, and how are you finding those deals?

Um, they're either often their products I use are often they're things that actually solve problems that I had. Like like in terms of areas I focus on. I guess I should I should mention ah, lot of B to be like enterprise. A lot of autonomous vehicle tech, like, much like cruise, um, and a lot in, like marketplaces. I'm still bullish on Alec on. I don't think they're enough marketplaces for all the different verticals yet.

Like, for example,

Um, okay, I'm an investor in court. See, which is actually which is a great start up? Just did their Siri's be on and they are bringing for for life science Laboratories, like universities are saying, like, Genentech, they're they're they're uniting like they're fixing the whole like inventory system problem. Like because most folks just have, like, other, like, a chalkboard with, like, writing down what they have Or like what?

Whatever. Or, like some paper binder. So they are uniting the life science labs with the suppliers on, and that's very valuable And much like Airbnb, like a lot of people said, like, why do we need Airbnb? We already have craigslist, but often these thes experiences are much better when they're custom tailored.

Um, yeah, yeah, I think it was Chris Dixon, who, like made that graphic awhile ago of like breaking Craigslist out into, like, all these $1,000,000,000 companies, something like that. Um, yeah, I think it's true. It's there. So many companies that are just like we see it with Y. C. And Jarod actually wrote a post about it last year. The startup zeitgeist. Like all the trends, people often don't pay attention to the unsexy. But like giant markets on

does are often the most interesting ones in terms of like investments on DSO. A lot of my investments didn't didn't didn't seem sexy at the time, but it worked out

on DSO like where the markets. You think that, like people in addition to those marketplaces like people ought to be paying attention to? Because right now there's a lot of noise around, you know, say, for example, like V R or machine Learning A. I stuff. Do you think that those things are are worth startups going for right now? Or are there other things that you think are good, good opportunities?

Yeah, so I actually really like existing huge markets that are growing. This is not not everyone agrees with this. Some people say look for a small market and, like, expand it like I think that's kind of I think I think it. 01 Peter Thiel kind of talks about this, that that certainly can work. But I think a lot of the drop boxes, like a great example of a lot of famous investors I won't name passed on drop box at a $2 million valuation, saying the space is too crowded. But when you see a huge market that's fragmented with lots of like companies, like many where public already doing the same kind of thing just badly. If you can make a 10 X better product like you could really win and there's room for lots of winners, right boxes public, they, you know,

they started, like roughly the same like era. Dropbox is doing really, really well Think they just hit a $1,000,000,000 run right or something and there's room for lots of winners and huge markets. And so I I I'm guilty of following like trends and like saying Oh, YouTube was hot. Let's do like YouTube. Perec's like Oh, like Cruz, you're acting do that, Yeah, don't thio because that that's rarely how the best companies were formed like when stripes started. Everyone said why another payments company? Everyone already has a payment system, but they made a 10 x better product that developers loved. They found a knish,

A people who loved what they were doing. Developer friendly. And they signed merchandise on the fly. That was huge. Dropbox have, like, the same kind of reaction. Every N B. I mean, a Sybil posted, like, you know, all the famous investors passed on that. Like, cause they didn't really? Well,

they didn't necessarily understand the problem with you. No. Why would I rent out the living room of my brownstone in Manhattan? I don't know. Uh,

do do you think it is an education problem? Because that happens with Y C a lot, right? Like there were people that air seemingly entering a crowded space. But in actuality, like, they are going to be the winner, right? So if you are the founder of that company, how do you educate people if you do in fact need money from them? What do you Is it or is it just about education?

I think why sees actually, like done in a really admirable job and just picking relentless individuals like the Airbnb got like the Airbnb team, which was like a team that just was never going to give up. And even when they're not sure about the market or idea will bet on really amazing people who are relentless. And I think that's one of the genius parts of life seen why C has worked out so well, I suspect nowadays I think you kind of have to ship at least part of that 10 x better product just because Africa application nowadays, I don't think I would even get into why. See if I have glad right now, Um, but because it's much harder to get into their just more applications now than there were back then. And so I think if you can show some traction or some product market fit in a large market, that's always good. Um, but in terms, I just think investors over. I think a lot of investors are wrong on this, and I think a great way to find startup ideas is to look at the Ink 500 magazine,

you know, and it shows the fastest growing startups, like in terms of revenue like, say, like you every year, or like over three years, and then just look at those markets and then see if you have found a market fit in any of them. Do you know any of those markets really well? And then if you, you know, have a secret, as Peter Thiel would say, like if you know something about like if, like Like much like the way like Drew knew that, you know, we can make a much better backup cloud storage type product like than this and like it's ridiculous.

People are using USB drives for backing up stuff like, And that's because all products suck, even though there are public companies in this space on that. So he just sat down and built the 10 x better product. So I really like looking at the software that you use every day and seeing which one's annoy you. Which ones make you like, really cringe on guy? Always write those down because if you're using, that means it's probably one of the better products are. It's what people are forced to use. And if you can build 10 x better product, people will switch

totally. I think paying attention of market size makes a huge difference. I'm I'm still shocked that there aren't more like not Cruz lookalikes. But self driving in general, like personal transportation is so massive that, like there's room for like, 10

of them. Yeah, Sebastian through and recently was, I think he was quoted saying, basically, roughly a self driving like kind of like engineer type person is worth roughly, like, $10 million. I like him like an acquisition. Or like in, like, m A. I mean cruises 50 people in Seoul for a 1,000,000,000. But keep in mind, GM stock price actually went up on the news. So, like the market,

actually, I think of you is positively because GM a drink Will GM wisely noted that they were gonna either kind of software technology company or kind of become a dying dinosaur relic. I believe it. This is just his troop. All companies, like all companies, will either become software companies or they're gonna die.

Um, as an investor. Now, do you have just a fear of choosing the right idea? If you were to do start up again like, are you scared of doing one, or would you want to

that such such a great question. And that's okay. Yes, absolutely. And I actually think repeat founders or something. That's actually a disadvantage in many ways because you feel this pressure to come up with some genius idea when usually the best start ups are not a genius idea. They're not some brilliant flash in the pan. It's just doing something that, like Facebook MySpace were existed. Friend story already existed, but like Mark just really nailed it. He started with colleges. He built awesome that people loved on. So I think often just doing things better is like not a bad strategy. But a second time founder, I, 1/3 time founder.

I feel a pressure toe like It's like the sophomore slump that Richard Feinman talks about physics, where he wasn't allowed to work on small ideas anymore. He had to work on some gigantic thing. But all the best discoveries in physics came from like, kind of that doesn't seem right, like, you know, it's kind of odd, uh, that Maxwell's equations say that like speed lights always constant.

So what do you do to, like actively combat that in your brain and just the people around you as well.

I think you have to go. I almost want to, like, not not work in secret. But, like, I wouldn't even talk too much about my idea. Probably because it sounds so stupid. But the best that I think the best companies do sound like kind of dumb, um, and also being willing to experiment with lots of kind of dumb ideas and maybe focusing on markets where there already is the so called winner. I think there's room for lots of winners and lots of

markets. It's really tough to because I know I know tons of successful people that work on all these little side projects but are embarrassed to put them out because they're just like, stupid little toys. And like, you know, it would be of no inappropriate or just not cool for them to put out some, like chrome extension

that they just built for themselves. And then this actually gets worse. Then you kind of get tempted to, like, take the money people offer you because whatever in fund raising you like Okay, I'll take a couple $1,000,000 just like a seed round. But then you're suddenly almost stuck in whatever market and product that you kind of picked and you've probably picked wrong, just like we did, Just like I did every time eso knowing that you've picked wrong like you kind of get stuck in It's too awkward. Tell your investors that you're changing and pivoting. And so I think second time founders raised money too fast. But I'm not gonna raise money until I have strong product market fit. And I know what I'm doing. A friend of mine who actually raised money to early was just lamenting how that probably killed his second company,

man. And what about those people who were successful and then decide that they want to create, like a lab where they have, like, seven startups to them to their own?

Yeah, that's like, really interesting, right? Like Max Max elections on really well with that kid Yelp come out of that slide, which he sold to Google. You know, I think a firm. And then there's some great ones that models really worked out for him.

Um, feel like he's an outlier. Yes. Um, but I don't know Thea, other

labs, I don't think I've seen be as successful like, I think, like y Combinator used to not like being called an incubator because, like, uh, the most incubators haven't really worked out that well, Max is aside. I think it's hard to really, honestly focus on that many different ideas that are all in progress. I mean, landing pages or one thing, because their eyes, they're all the same template your modifying text effectively like often. But like building having teams that are working on, like 67 different projects, it's hard to figure out that that really strong product market fit, which is what most startups fail most arts fail because they never get strong. Product

market agreed. Okay, so kind of like wrapping up. If you as a multi time founder, you're to give some advice to someone who is starting their first company. What would you tell them in terms of like, don't spend time doing this, Spend time doing that.

This is to a first

time founder, Uh, why don't we do both, like the first time and second time or

whatever Everything that's not working on your product and finding product market fit is a waste of time. But that's the only thing that you should be doing. Don't Don't worry about fundraising. Don't worry about everything else. Uh, if you, the folks who do fund raise too early, typically get into real trouble because they never are able to get the product market fit, really? Focus on funding that huge market. Go to go to that ink. 5000 lists find the fastest growing companies find a market that you no, really, really well, but better better than anyone else. So have founder market fit and like, make it a big one that's growing. And then just build a 10 x focus on building a 10 x better product in that space.

All right, thanks for listening. So, as always, please rate and subscribe to the show. And if you want to read the transcript or check out the video, they're both that blogged out y Combinator dot com. Okay, See you next time.