Lessons from 1,000+ YC startups: Pivoting, resilience, avoiding tar pit ideas, more | Dalton Caldwell (Y Combinator, Managing Director)

Dalton Caldwell
Seeing everything people apply to YC, with people all kind of have the same idea. One of these themes is simple, pragmatic advice. Sell shit, make money. One of my mantras is just don't die. Being coached and being reminded of the fundamentals and basics puts you in the right mindset.

Lenny Rachitsky
You have this concept of tar pit. Ideas seems like an unsolved problem. You'll get all this positive feedback from the world and people have been starting that startup since the nineties. Recently you put out a request for startups, 20 categories of ideas that YC wants to fund. We're trying to mix up some of the information diet about what kind of ideas people might be contemplating.

They are currently a lot of people say you're the king of the pivot. A good pivot is like going home. It's warmer, it's closer to something that you're an expert at. Are there other patterns you find across startups that do well? There's a lot of founders that come this close to it, albeit over and through sheer will.

Dalton Caldwell
Kind of just keep it going.

Lenny Rachitsky
Today my guest is Dalton Caldwell. Dalton is managing director and group partner at Y Combinator, where he's worked for over ten years across 21 different y sites batches including working closely in the earliest days of Instacart, Retool, Brex, Deal, Doordash, Webflow, Relet, Amplitude, Whatnot, Razorpay, and 20 other unicorns. Prior to Y Combinator, Dalton was the co founder and CEO of imeem, which was acquired by MySpace, and co founder and CEO of app.net Comma, which was an early ads free competitor to Twitter. Dalton has seen and worked with more startups than nearly any human alive, and in our conversation we get incredibly tactical and deep on the startup journey. Why it all comes down to simply not losing hope and not letting your startup die what to do when your startup is struggling and how to know when it is time to give up what makes a great pivot and signs its time to pivot.

How to actually talk to customers why every single startup goes through a point where they feel like all hope is lost why investors say no to startups what most often leads to startups failing why you need to avoid overdelegating early on, plus startup ideas that you should avoid, and also 20 ideas Dalton is looking to fund. Also, so many great stories and lessons, this episode is action packed. With that, I bring you Dalton Caldwell after a short word from our sponsors. And if you enjoy this podcast, don't forget to subscribe and follow it in your favorite podcasting app or YouTube. It's the best way to avoid missing future episodes, and it helps the podcast tremendously.

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Thousand dollars off Vanta when you go to vanta.com Lenny that's vamta.com Lenny Dalton, thank you so much for being here and welcome to the podcast. Yeah, thanks so much Lenny. I'm really excited to talk to you today. It's been great. So to prep for this podcast interview, I asked a bunch of founders that worked with you during YC what advice you shared with them along the journey that was most transformative to the way they think about product, the way they think about building their startup, the way they operate.

And there's a bunch of themes that emerge, and I'm going to touch on a number of these themes one of these themes is just how often you get, like, very simple, pragmatic advice and how much of your message is just like, sell shit, make money, don't run out of money. Why do you think founders need to hear this advice, which is seemingly simple and obvious? Have you ever seen and like NBA basketball or college basketball, where they have the coach mic and it shows what they're actually saying in the huddle? You ever listen to what they actually are saying? They're like, okay, we need to really focus and get the ball and win this game.

Dalton Caldwell
Like, if you actually listen to what the greatest, smartest, most successful athletes are talking about, like, if you listen to what Tiger woods is saying to his caddy, it all sounds like pretty mundane stuff. It's not like what Tiger woods is talking about with his caddy is some impossible to decipher jargon. It's like, yeah, you really need to keep your head down on this one. It's things like that. And I think the reason this is true is that even if you're the best in the world, being coached and being reminded of the fundamentals and basics is what puts you and the right mindset, and that you already know everything, right?

You're at the top of your game. If you make it to the elite levels of being a startup founder or basically doing anything, that's really hard psychologically. And so, yeah, one of my mantras is just don't die. Just keep your startup going. Just keep going.

And I say that over and over again. And honestly, that is often what people tell me is the most impactful thing I said. It's not that I said some ninja 5d chess move that they never would have thought of before. It's just the constant affirmation that continuing to keep going and doing high quality reps is the game. I know that you'd give a talk that's exactly called that.

Lenny Rachitsky
How not to die. Just to pull on this thread a little bit more, what is the general advice you share there for people that also don't want to die? The way to summarize that is, if you look at all the startup stories that we have at YC and all the companies we funded over all the years, the underlying thing is that rationally, the founders should have given up at some point. And so again, let's talk about Airbnb. Obviously something you know a lot about.

Dalton Caldwell
You know, when they probably should have shut down like three or four times before they got into YC, it objectively wasn't working. They were basically ruining their lives. They were disappointing their parents. Everything was wrong. And it was a purely irrational act for the founders of Airbnb to keep working on their goofy startup.

And so that's just one story. If you look across the portfolio of YC and non YC companies, there has to be this irrational intention to keep going, even when the world tells you it's not working and you feel completely defeated and you likely have to go through this many times and have these near death experiences, and then you get lucky and then you look like an overnight success. Right. And so that is the theme. That is a summary, and I provide lots of data and lots of stories there.

But this is one of those things that the longer I had this job, the more I really, really believe this is true. What's your advice? Kind of on the flip side of that, where there's a lot of startups, especially these days, that are just super struggling, have been added for a while, their mental health challenges, they're really, they'd be very sad if they had to shut this thing down. But often it's probably the right move. What's your advice to folks of deciding, okay, actually, it does make sense to give up in this case.

I think this is a nuanced question and it's hard for me to say something on a podcast that will actually. Be useful to people. But here's a couple of thoughts. One, are you still having fun? Do you still enjoy doing what you're doing?

Do you enjoy spending time with your co founders? Is this actually a fun thing you're doing? And if the answer is yes, I would tend to lean on the keep going. And then if it's more of, wow, this is actually profoundly affecting me in a negative way in my relationships with people in my life and my team. You know, I don't really want to work with my co founder anymore and things like that, then I would lean on the probably don't do it anymore.

Something that a lot of the folks that turn it around have in common is they actually do love their customers and they love their product. And again, if you in the Airbnb story, again, you know it really well, but they really liked Airbnb, like, and they liked working with each other and they liked the first host that they met and they knew all their names, you know what I'm saying? Like, they were actually, they loved their startup even though it was going bad. And so that's kind of, to me, a signal to keep going, is that you really, really love what you're doing and the people you're doing it with and you love your customers and you love the problem versus when you're just like, yeah, I could care less about any of those things. I'm just having a bad time.

Harder to be encouraging in that situation, you know, and this is a fixable situation. You know, you can make it more like the thing you love, can't you? Yeah. This is actually very practical and great advice. This is something people can sense.

Lenny Rachitsky
Okay, am I actually enjoying this? Do I want to keep doing this? Versus like, man, such a drag that I have to keep running the startup? Is there anything you could say to folks that are just like, I can't stop because it'll feel like I failed. If it's really going poorly or if you're having a really bad time, it's no big deal.

Dalton Caldwell
No one will remember that you shut down your company probably in ten years or 20 years, like, time. As long as you have integrity, as long as you're an honest person, as long as you handle yourself well through good times and bad, people will remember you fondly. And it's, you know, better. We have such a short life. There's only so many years we get to have our careers doing something that makes you miserable.

And the only reason you're doing it is to avoid losing face and you know in your heart it's not going to work. I don't know, that seems like a pretty big opportunity cost on literally your life, right? Yeah, that's exactly what I tell founders all the time. Life is short. There's no need to force yourself to work on this.

Lenny Rachitsky
Yeah, and I really like your point of just like, is it still enjoyable? Do you like working with your founders? Kind of following the thread of the struggle train a little bit more. One of the founders that was, that worked with you during YC, his name is Danny Alberson, shared a story how during one of the batches of YC, one of the founders raises his hand and asked you, what is wrong with our batch? Everyone is struggling, nobody is doing well.

What did we done? What have we done wrong? And you shared a story about Brex that made everyone feel a little better. Does that ring a bell? And if so, can you share that?

Dalton Caldwell
That definitely happened. And I think the story is the story of the winter 17 batch. And in the winter 17 batch I funded something like, I don't know, 35, 40 companies in my group. So we subset them into groups. So it wasn't like a lot of companies and I knew all of them really well.

And founders can't help but compare themselves with other founders all the time about who's doing well and who's not doing well. And there was this one company in my group, Dispatch, it was called Vyond. That was their name at the time. And it was like a VR headset thing from these Stanford dropouts. And they basically showed up to group office hours and were just ashamed.

And they're like, our idea is horrible. You know, we might want to shut our company down. This is like, really embarrassing. Like, they just, I had to, like, beg them to not give up, basically. And if you would have asked people in the batch what the worst company was, I think they would have said this one.

Not because, like, they were, like, bad people, but it was just like the founders themselves seemed, like, despondent about how it was going. And then funnily enough, this is in the story, too. There was another startup also in my group called Cashew, which was this p two p for the UK. P two p venmo, excuse me, in the UK. And it was going really poorly also, and not growing.

And so if you just took this snapshot in time in the middle of the batch of, like, who is definitely not doing well, it would clearly have been this vyond company and this cashew company. And so to cut to the chase, Vyond changed their idea and got really excited about it and renamed to Brex. And this was Brex, which is like a decacorn, and cashew changed their idea and renamed to something called Retool. And so out of my 35 companies, the ones that objectively seemed the worst in terms of, like, everything is going bad were by far, in retrospect, the most successful companies in that group. Wow.

Lenny Rachitsky
Oh, wait, so you're saying Brex was a VR? That's a company. They thought it was really high tech. They wanted to do a really high tech startup. And so they're like, we're going to build a new VR headset.

Dalton Caldwell
And they were good programmers, but they just didn't know anything about optics or the things you might want to be an expert in to build a headset. Wow, that's an amazing story. It's a great segue to another theme that emerged from talking to founders about advice that you've shared. A lot of people say, tell me you are kind of the king of the pivot of helping people figure out how to pivot. I'm curious.

Lenny Rachitsky
Just what you've seen makes a good pivot. Usually a successful pivot gets warmer instead of colder from what you're an expert at and somehow builds on what you learned on the prior idea. Right. And so in the case of Brexit, they had worked on a fintech company in Brazil when they were younger. And so I'm like, you need to work more on the thing you know all about and not the thing you know nothing about.

Dalton Caldwell
And that was what worked for them. In the case of Retool, it was the same thing. They built similar internal tools, both at their internships as well as for cashew. They had all these dashboards they built to like, operate their, their Venmo competitor. And so they knew a lot about what to build.

In the case of post hog pivoting into their idea, they knew a lot about analytics and had strong opinions about it. And so it was much closer than what the original idea is. In the case of zip, Rajul knows a lot about a lot of things, and he knew a lot about the crazy procurement process at airplane because he worked there. And so it was kind of like a good pivot is like going home. You know, it's warmer, it's closer to something that you, and it never occurred to you that this thing you know all about would be a good idea.

Or maybe you consciously you're like, I don't want to work on this because I'm burnt out on it. Like sometimes you have to, someone, someone has to get over this barrier they have on why they don't want to work on a certain idea. These are amazing. I like how modest you are, like, oh, here's a big idea. And then you just give very tactical items to look for.

Lenny Rachitsky
So essentially a good pivot in your experience is you're getting closer, warmer towards something you have actual experience in. And two, it builds on something you've done. Essentially the core idea of a pivot, right, where you're like, in the example. Of segment, which is obviously a really big successful company, they started with something to tell your professor. You were confused in class.

Dalton Caldwell
It was like software that they sold to universities, and then they ended up pivoting to something kind of like a mixed panel competitor after like two years. And it's because they didn't, they learned about how analytics works, running their first idea. Okay? And then no one wanted to adopt their mixed panel competitor. And so they were like, we should make this JavaScript thing that you embed on your website that can send events to multiple endpoints at the same time.

So that way people would be willing to try our mixed panel competitor side by side with mixed panel to show that it's better. And then they were like, oh yeah, no one actually wants that. They just want this JavaScript to send events to different locations. And so there's no way those founders could have started with the final idea. You get what I mean?

There was no universe where they would have made up the idea for segment because they didn't know anything about how analytics worked. But because they were grinding for multiple years and became experts on these things as a side effect of their earlier ideas, they ended up with really good, unique insights. I think that's a really important point there is. You don't need to necessarily have that experience before you start the company could come from trying to build the company. Exactly.

Lenny Rachitsky
A big question people are always wondering is like, should I pivot? Like, is this the time to pivot? Is this, should I keep trying this idea? What's your advice there of just like, okay, now you should really be thinking about something else. Again, this is one of those where I like to give very bespoke, nuanced advice on a case by case basis to the folks in YC.

Dalton Caldwell
But again, just to give you a preview of how I would think about it, um, I would look at how many more ideas the founder has on how to make it grow. Like, if it's not going well and you're out of ideas, that is usually a good time to pivot. But when there's a, you know, you have like half a dozen or a dozen really good growth ideas that you haven't tried yet. Try them. Right?

Like, hey, give it a shot again, in the Airbnb story, right? They tried all sorts of stuff, including serial and conventions. Like, they had a bunch of zany ideas on growth and they didn't run out of them. And so I think when there's still gas in the tank on an idea, that might be a reason to stay at the course. And when literally the founder's like, yeah, I don't know, I guess maybe we should pay influencers or something when that's the kind of ideas they're coming up with.

That might be a better sign to pivot. That is incredibly helpful. Coming back to zip real quick, they went through, I think, six different pivots before they landed on this idea that is now a billion dollar business. Is there anything from that specific journey that you found really interesting? Because they went in so many different directions, like accounting marketplaces and yeah, I.

Think in the example of the zip founders, they were both such great experts. And I knew Rajul really well. He actually worked with me at YC as a visiting partner. And so I was really close to Rajul, and he done this marketplace called Flightcar when he was younger, which was raised in series B. It didn't work out, but it was a really cool company.

And I had a lot of confidence in his competence on running a business and executing fast and just having great instincts. He really knows the fundamentals. And the problem was, they weren't as clear on what market to go into is still with me. And so I actually suggested to do something in their case. Again, this is very bespoke, but my suggestion was to start by looking at what companies are publicly traded and or owned by private equity that are large and that also are hated by their customers.

And to try to intentionally find where there's a knowable big market with an incumbent combined with the software is horrible. And they did that. They basically found out about all this procurement software and what the state of the art was, and that was the prompt. Again, maybe he told you this. That was basically the process.

Lenny Rachitsky
He did tell me that. I love that example and piece of advice so much. I don't know why more people don't do this. Basically find a large incumbent with very low NP's and try to disrupt them. So straightforward.

Dalton Caldwell
Yeah, I mean, I can't promise that works for everyone. But again, in the case, in the very bespoke situation with Rajul, it worked really well because he actually knew. Exactly. Once he locked in on that prompt. Oh, man, he ran a master class.

You know, like, they did. They did it. They did an a plus job. It was really good. Also, Lou, his co founder credit to.

Him, too, of course. Like, sorry. Yeah, we got to give Lou the shout out. Lou did an amazing job. I just didn't know Lou as well before he did YC.

But you're right. We got to give Lou the credit. I was watching your chat with Michael Siebel, talking about pivots, and either you or he used this phrase of, you want to move towards the mountains and the desert to find the gold of a new startup idea versus the middle of the city. You're unlikely to find gold in the middle of San Francisco. Is there anything along those lines that you can share?

Yeah, I think maybe this pertains into what we see from applications and interviews, which is from where I sit, seeing everything people apply to YC with and what they interview with and whatnot. People don't. People all kind of have the same idea. Like, basically, imagine this. Imagine your information consumption where you're listening to the same podcast.

Wink, wink. You're reading the same people on Twitter, you're reading the same blog post. Basically, you have the same information diet of all these other founders and your friends with all the same people. Does it seem surprising then that you would all end up with similar startup ideas or similar philosophies on what makes a good startup idea? Of course you are.

So this is the metaphor on cities, is that if you just are following the same principles and have the same information flow into your brain, you're going to come up with the same ideas as everybody else. And so the prompt here is to try to go more off the beaten path, either from your personal experience, like in the case of Brex and retool or whatnot. There was no one else trying to build marketplaces for funko pops. Go deeper in your own personal interest or experience to find something that just your exact peer wouldn't come up with in exactly the same way. And again, the zip example, I don't think other people were trying to build wonky procurement software.

That was not an idea that we saw much of. And so again, the prompt to people is try to mix up what your information diet is or what areas of expertise you have and mine that well, versus just having all the same thoughts as everybody else. And so again, let me give you one more example. A few years ago, startups around trucking were super new and fresh because no one was doing them and they worked really well. And then it became completely conventional wisdom to do, like, trucking related startups.

I'm not trying to diss anyone, but you'll see things that become fashionable really quickly because someone found success in this unfashionable space, and then it becomes fashionable. This is a good segue to something I definitely want to spend time on, which is you have this concept of tar pit ideas, which are essentially ideas people all kind of gravitate towards and get stuck in and either pivot into and then can't pivot out of or try to pivot out of. And essentially, it's just like consistently bad startup ideas that people continue to try to start. Can you just talk about this? And then what are some, what are some examples of just like bad startup ideas that people should stop trying to start for?

People that are familiar with this terminology from us, sometimes they get defensive and don't get what we were saying. So let me. By definition, it is only a tarpit. If it seems like it's not like, like, if it's just a regular idea that is hard, that is not a tarpit. The weird aspect of what we call a tarpit idea is an idea that a lot of people come up with, and then it seems like an unsolved problem, and you get lots of positive feedback for.

Right. And you have a really good set of arguments that it's a really good startup idea and that's different than a bad startup idea. You get what I'm trying to say. A bad startup idea is like, I don't know, something that is obviously bad or something where you just can't get any positive feedback on. But some of the most common target would be something like building, like, an app to coordinate with your friends to decide where to go out at night or where to meet up with people, which is a really.

It's coming from a good place. Like, it's a good idea. If you ask your friends, hey, would you like an app for us to coordinate to hang out more so we can be friends? They're like, yeah, I would love that. You'll get all this positive feedback from the world.

And people have been starting that startup since, like, the nineties, and so you can validate it. Like, part of being a true tarpet is that you can get good initial validation. Do you get what I mean? And so anyway, and honestly, I worked on Tarpon ideas myself as a founder, which is a music discovery. This is something I did in my first startup that was that, you know, music startups are hard and trying to be like, oh, we're going to fix.

Music discovery is the most classic things where you can get lots of positive feedback and even get users to work on those things. But there are aspects of it that make it a very hard idea. So does that make. Does that make sense? Absolutely.

Lenny Rachitsky
I'm also guilty of this. I had this startup called Localmind that allowed you to talk to people, checked in in various locations around the city on Foursquare and Koala back in the day, and asked them, how's it going? And everyone, when they used it, they're like, holy shit, this is the most incredible thing I've ever seen. I could see what's happening at this bar that I'm about to go to, and then they never use it again. Jimmy, when four square clones was all.

Anyone worked on for, they told us, foursquare is going to own this. There's no way this idea, your building, is going to be its own thing. And now, yeah, Foursquare is a b two B business. Yeah. And all the foursquare clones, if they didn't pivot out of doing what they're doing, wouldn't have worked.

Dalton Caldwell
So anyway, that's, that's a tarpit is just something that's super appealing and a lot of people do it and that you can, you can kind of get validation. And that's why, that's why is a tarpet is it draws you in and you get stuck because it seems like it's like a good idea and you. Get all this positive feedback kind of along these lines. I was talking to a founder recently, and she's asking me what causes an investor to say no to you when you're trying to raise money from them. And I know there's, every investor has a very different perspective on what turns them off to a startup.

Lenny Rachitsky
But is there anything that you find is just like here, if you do these things, investors will say no? Maybe my best advice here is for founders to put themselves in the shoes of investors and just imagine what their life is like and how if you are in their shoes, you would make decisions. And so given this framework, a lot of investors just don't make that many investments. And as per what we talked about earlier, life is short. And so there's lots of things that an investor that in their hearts thinks is like, pretty good.

Dalton Caldwell
And they're like, I like this person and I like their pitch, but I only am going to do a few investments. And so even though I really like a lot about this, I'm going to say no. And I often think that founders think that there's some secret truth that's being held from them on why someone says no. Or like, they're, you know, like they want more feedback. I need feedback.

It's like, well, the feedback is, we didn't want to invest, and it really is just that. And so I think if you put yourself in the shoes of an investor of like, hey, I only could do a few of these a year, I have very limited budget. They're really just trying to pick the things that they're either personally most excited about or things that they think can be truly, phenomenally big in some way. Or again, I know you do investments, too, so it's that you only get so many shots as an investor. And so anything that doesn't seem like this is the one, this is the one I want to do is a no.

And that, that's actually why they're saying no versus this. You did, you know, oh, you, you had a bad zoom setup or something, you know, oh, we didn't, we didn't like what color your shirt was. We said, no, I don't think that's. I don't think that's how this actually works. You know, I think that's such a good piece of advice that it's not necessarily they don't believe in what you're doing, it's they have better options and they're waiting for something that hits the higher bar just because.

Lenny Rachitsky
Because they have a lot of options. Yeah, because again, and if you ask someone, well, put yourself in investors shoes, wouldn't you be making decisions the same way usually founders are? Like, yeah, like they come. If you, if you do that exercise, a lot of this starts to make. Way more sense, specifically when you're evaluating startups.

I wasn't going to go into this, but I think it might be interesting. Is, Mark, market size, how do you think about the importance of a large Tam as an investor YC? I think it really depends on what stage you're investing at, and it's absolutely critical. The later stage you get right. If you're going to invest in a very high valuation, it is really important.

Dalton Caldwell
The earlier you go, the less it matters. And some of the most phenomenally good startups, if you were really panamic about it, the tam would be like tiny. Like the Tam of Uber would be like nothing. Right? Like how the Tam of Airbnb would have been nothing.

The Tam of. I was a, I funded Razorpay, which is, I think, the largest payment processor in India. And the tam of that was tiny because no one was using credit cards in 2015 in India. So you had to believe that the size of the credit card industry in India was like 100 x. Well, guess what happened?

You know what I'm saying? And so I'm not saying that the. Having a large market someday doesn't matter. Of course it does, eventually. But trying to be super pedantic about market size when it's like a pre seed company or someone applying to YC is not, you know, it's just not something I put a lot of thought, and again, whatnot.

Oh, what's the tam of the collectible funko pop industry? I don't know. I don't think it's that big, man. I don't know if you did that house when you invested, but I think it's pretty small. But I wasn't worried about it.

That was like the last thing I was worried about. It makes so much sense that at YC you don't think about it that much because of, as you said, many startups pivot anyway, so if you like the team. But, and I'm not saying it's not important, I just. It's not. And the things I'm worried about, it's like, hey, how do you get users?

Hey, how do you grow things like that? Like, are you making something people want? Those are the things I'm really worried about. As opposed to, ooh, I ran an Excel model and I'm worried this might not be a big enough. Tammy, that's not at the top of my list.

Lenny Rachitsky
I think it's important to acknowledge, though, a lot of investors are very like YC, I think is unique in a lot of ways where you invest very early and you help people through this journey. A lot of investors are very focused on Tam. So you may find you're getting turned down because they don't think there's a big enough market for you to build a big business. Right, yeah. Or that you're asking them to believe a crazy leap of faith that again, they could say, well, it's theoretically possible you'll be able to sell more than funko pops.

Dalton Caldwell
And I understand that that is your pitch, but I have other opportunities that are less risky. You know what I'm saying? It's not because a lot of founders make the argument that the Tam is big and you can say, wow, that's a really interesting argument, and I'm not going to argue with you about it, but no, I'm not going to. And so again, it's hard to get someone to engage in a debate about tam, even if you have, even if you have some proof points. Ultimately, a lot of investors just don't like that risk.

Fair enough, fair enough. Going in a slightly different direction. So someone else that worked with you, another Lenny, Lenny Bogdanoff, who started a company called Milk and then he was head of growth at OpenAI for a bit. He asked me to ask you about things product leaders and startups should watch out for. Does that ring a bell?

I don't remember the specific office hours, but I understand the question. And of course you remember Lenny. I think that the advice that he's referencing here is just how important it is to not over delegate and for the founders to stay close to things, as well as watch out for the trap of hiring super senior people with fancy resumes really early at a startup. I think that's what he's referencing there. And again, this is definitely one of those very basic things that we find ourselves repeating a lot, where they're like, yeah, yeah, I get it.

Don't overdelegate. We get it at Dalton and then two years later, they're like, wow, we overdelegated. We need to go clean that up. So that is probably the best product advice. And the folks that are really great at product, the founders that are, are always deeply in the weeds on product and still care a lot and are still talking to customers no matter how late stage it gets.

Again, I'm sure you experienced this in Airbnb culture, but you can't delegate caring about your users, and you can't delegate caring that the product is great. That is so critical. To make this even more real, what is it that you see them? Do? They hire a PM too early?

Lenny Rachitsky
They hire a senior salesperson too early? What are the, yeah, I think, I think that you get pushed often by investors to hire executives or scale the team or we need, you know, we need you raise all this money, you got to spend it. You know, we got to, you gotta show you're serious about growth and building a world class organization, whatever, stuff like that. And so you end up with super nice people with super shiny resumes from big tech companies. Oh, wow.

Dalton Caldwell
They did this amazing thing at Google, and then you hire them and then you wake up one day and you're like, oh, wow, everything went wrong. It's not really anyone's fault. It's just that you took your eye off the ball and this is what happens, um, to first time founders a lot. How do you as a founder then have time to do all these things? Is there any guidance you give?

Lenny Rachitsky
Just like, don't overdelegate, don't over hire, but also you need to, you'll have 24 hours in a day. Is it just find the time, prioritize well, or is there more to. I think if you just care a lot about your customers and you care a lot about the product, your instincts are pretty good on what to spend time on. And so, for example, spending tons and tons of time, like hanging out with investors and networking. Probably not.

Dalton Caldwell
It's probably the thing that I would be cutting, you know what I'm saying? It's what we talked about earlier. If you really love what you're doing, no one needs to tell you how to reprioritize your time. Your intuition will be correct on what you should be spending all your time on, which is being obsessed with product. I love that advice.

Lenny Rachitsky
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Gustav was on the podcast previously. His episode is, I think, the fourth most popular episode of all time currently. So no pressure. Oh, cool. I don't know if I can feed that.

All right, I think you can. So I asked him, what is often the most common reason a startup fails? And his answer was, they don't talk to customers. They don't find product market fit. Nothing else matters if they can't do that.

And so his advice is, talk to customers more often. So two questions here. First of all, just, is there anything else you would add to why do startups fail? I know we talked about some of these already, but just what comes to mind there. I completely agree with what Gustav said, but to look at this from a different frame, I think, is that the founders lose hope.

Dalton Caldwell
And when you and your heart is like, yeah, we're failing. Like, once I can see it when I'm meeting with a founder, when they've resigned themselves that they're failing, versus when, like, we got one more move in us, we got one more try. Like, you can see in their eyes when they feel like there's more ideas or there's some last ditch Hail Mary thing. Um, it doesn't always work. But it's, it's almost like you have to not accept that you're going to fail.

And as long as you don't accept that that's going to happen, there's usually a lot more moves you can try to save the company. What? Maybe it's to get profitable. Maybe it's to, like, do some other zany thing. Maybe it's, you know, to launch a new product.

And so it's pretty rare. I would argue that the cause of death is that they had lots of firepower and they were feeling really positive and they just ran out of money. That's actually, like, more rare than founders think. It's much more common that they still have some money left. I'm not saying a lot, but some money, and they're just like, yeah, I'm done.

I'm out of ideas. I don't want to do this anymore. And again, fair enough, but do you get what I'm saying? I think founders are afraid that they're going to run out of money, and that's why they're going to shut down. And it's way more common that they, like their idea, doesn't work, and they have a big fight with their co founder, and then they can't agree on what to work on, and then they just like, are like, I don't want to do this anymore.

And they shut down. That is the most common cause of death is something that sounds like that. Story that is so interesting. And again, this comes back to your core advice. Don't die.

Lenny Rachitsky
Just don't die. We talked about this already of just, like, sometimes it's actually okay to die. And I guess just to refresh that lesson is, if you're not having fun anymore, maybe, yeah, you're out of ideas. You're like, I'm just, I'm done. Like, if you know in your heart that you're done, you don't have to keep going through the motions.

Dalton Caldwell
No one benefits from that. Right? And you've also seen enough cases. Now, you've shared a few of these where they're all hopeless, potentially lost, but they kept going, and then they turned into a huge success story. And I think most people don't see those examples, I guess.

Lenny Rachitsky
Is there anything you can share? Just, like, how often that happens? How often you see that turn around? I would argue that if we define it as the company had a near death experience where it was going poorly, and the founders seriously wondered if it was all going to be over. 100% of the time, people go through that you know, where the founders like, yeah, I guess we're done.

Dalton Caldwell
I guess we should pack it in. And at least you feel that way at some point in your startup journey, man, everyone goes through that. And again, there's gradations, people that actually truly got down to very, very hard situations. It's still a high percentage, like maybe 50%. I mean, you can ask founders.

There's a lot of founders that come this close to it all. Being over and through sheer will kind of just keep it going. You know, that is really empowering. I imagine for many founders hearing this, of just knowing every single founder goes through, okay, I think it's actually over. Yep.

Lenny Rachitsky
Following on this real quick the advice that Gustav shared, which is about talking to customers. I'm just going to keep trying to pull wisdom out of your head. Do you have any advice for just how to effectively talk to customers? We're always hearing, talk to customers, build things they want. Easier said than done.

You get a lot of asks. You get one customer asking for a lot of stuff. There's a big company that's like, build this thing. We'll buy. You pay a million dollars.

Just, do you have general guidance of just, like, what to pay attention to and what to build versus avoid? Yeah, I think when I talk to aspiring founders about this a lot, they're like, yeah, I talked to customers. We get a cool. And I'm like, cool? Well, how many customers do you talk to?

Dalton Caldwell
And they're like, wow. And they get really quiet. And so I think this is one of those things, like, hey, you should have a healthy diet and exercise every day or whatever where people know it, and that doesn't mean they do it. And so I think to start with, you have to get out in the world and talk to people in person. And you can't just hide behind your keyboard and call that talking to customers.

Right. And I think a lot of folks, their inclinations are to, like, you know, build a landing page and buy some Instagram ads and try to get people to sign up for something. And maybe that's something. But I think a lot of the reason people do that is they're just shy and they don't want to put themselves out there because it's a little awkward to go talk to people. And you kind of have to psych yourself up to go out in the physical world, get people to meet with you, get them to take you seriously, show them a product you're building.

And so, again, to be very tactical here, you can do a self assessment in the past month, how many in person physical meetings have I had with potential customers? Maybe you've done a lot. I don't know, listener. Maybe you have. But it's shocking how many companies I talk to.

They're like, well, we're focused on raising our pre seed round before we talk to customers, things like that. I think the core, core thing going on is just social anxiety and, like, looking stupid. And I think you just got to get past that. You know, you just got to start doing it until it doesn't feel bad anymore, you know? Think about how stupid the Airbnb fighters must have felt.

They were like, hey, you should rent out your house, and I'm going to come and sleep in your house, and here's an airbed. Like. Like, it's. The whole thing is a little awkward, right? So you got power through the awkwardness of talking to people, and once you start doing it, it's actually kind of fun.

And so once you get used to overcoming this awkwardness, I think people do much better at talking to customers. When someone does this self evaluation, is there a heuristic that tells you this is enough? What do you look for? Is there a number? Like, how many per week?

Lenny Rachitsky
How many per month? Yeah, I don't know if I know a good number. I think it's. Look at your calendar, and there should be, you know, 20 or 30% of your time that the calendar says something like customer meeting, customer call, like meeting with Foo, meeting with this person. And when the calendar is not that or it's all, you know, again, what you're actually doing is just buying ads to try to validate your idea that I don't.

Dalton Caldwell
I don't think that's talking to customers. You know, I think that's something else. That's an awesome heuristic. So roughly fifth of your time, at least, should be talking to customers. Yeah.

And again, it depends on the idea. Space you're working on. Some are more, some are less. So, yeah, I just. It should be a fair amount of time, and nothing substitutes for an actual conversation versus just staring at analytics dashboards.

Lenny Rachitsky
Makes so much sense. So the Airbnb is a classic example of they went to New York and talked to their host and things like that. Is there another startup that comes to mind that did this really well? I found just a really cool way and hustle to talk to customers. Well, again, if you.

Dalton Caldwell
Some of the companies we talked about, I mean, for Brex, they were just talking to other people in their batch, and that worked extremely well. Same with retool. Is they just sold it inside of the YC network, I think with zip. They were just beasts at getting companies on calls with them to ask them about procurement. And I think they had way more than 20% of their time.

Like when you looked at their calendars, oh man. I think they were doing, they were talking to customers a lot to build their first product and kind of pre selling it before they built it. Same with postdoc. I guess that's a different go to market. They launched this open source thing to start with and it was, their calendars are filled with people that were trying to implement the first open source version of postdoc or so excited about it.

And people on hacker News were excited about it. And they had this huge influx of people that were excited that post hog exist and had lots of feedback and web reports. It wasn't always positive, but they never lacked for people that wanted to talk to them once, once they launched that, which was very helpful on zip. I actually have a lot of their story in one of my series on how to build a b two B startup. And what they did actually, as you know, is they just called DM'd people on LinkedIn and asked them for advice on, hey, we're trying to understand how you enjoy your current procurement products.

Lenny Rachitsky
And then they ended up being early beta testers. Anything did. And I think they did a hundred, like hundreds of these. They just, oh yeah, no, it was a numbers game. They were just grinding at this.

Dalton Caldwell
And so, yeah, that was very good. The other classic YC story is the Colson collision, I think it's called, or the Callson install. Oh, Callson install. Okay. Can you tell that story briefly?

The Collins and install is, what often happens with customers is that they say, yes, I want to buy your product. And then they do not implement it. They just go quiet. They're like, there's no implementation and this is very bad. If you're selling software to someone, if they never implement it, they're going to churn and you're not.

You know, you basically failed on the, on the 1 yd line. Okay. And so they kind of developed this tactic to be like, oh, well, you know, I'm in the neighborhood, you know, I'll drop by your office to help you implement stripe and kind of just like create again, it was a little awkward like we talked about earlier, but you'd be like, yeah, I'm in, I'm in the neighborhood. Like, how about I drop by? And then they would show up and they'd be like, cool.

Cool. Can you, like, pull up your text editor? Oh, yeah. Cool. All right.

Hey, can I drive? Can I have the keyboard? And they would just sort of install stripe into the customer's website, smiling, being like, charming, charming guys, and then be like, oh, that's cool. Okay, well, can we roll out the website now? And they basically would kind of not go away until you finish the implementation of stripe.

And again, it was actually helpful because they were doing all this white glove service to get it implemented. That was very effective. And I think the takeaway from that story is even when you get a yes, you're not actually done with sales, you have to finish the last mile to get the thing implemented. And they were very good at that. That was an incredible story.

Lenny Rachitsky
And now they're like, I don't know, $100 billion in business, and that's how it all begins. Yeah, I was an early stripe customer at my startup, and, yeah, Patrick would, like, we used Google talk at the time. Patrick would be sending me messages, like, on a weekly basis, just, like, checking in. And so it's funny how successful these folks get. But, yeah, Patrick was very hands on with all of his customers and was extremely available.

Dalton Caldwell
Like, I can say that because I was one of them. Yeah. And I'm sure he had social anxiety going through all that. That wasn't a comfortable thing to do. Just, like, keep pushing people to install your software and deploy.

Oh, surely not. It's just you got to do, like, if you want your startup to work, this is just what you got to do, you know, comes with the territory. This is going to be just a way broad question, and I don't know if you'll have an answer, but just. Are there other, just patterns you find across startups that do well? This is like, maybe the 64th million dollar question of just founders and what they do that ends up leading to success.

I don't think personality types matter as much. I've seen very quiet people, very extroverted people, very, you know, you name it, I've seen all sorts of personality types. So for me personally, I don't think that there's a right or I don't think there's a personality type that people should copy and be like, I need to be like this person. You know, I need to be like Steve Jobs. I need to be like Elon, you know, I don't really believe in that because there's just so much variation.

Like, Tony from DoorDash is so different than a lot of folks, and Rajol is so different, and grant from whatnot. These are all very, very different people. Patrick is a different kind of person. Ryan from Fluxport. Like these, these are just very different personality types.

But the thing that I would argue folks that build really big companies have in common is they just really want it, and they really believe in themselves, and they really believe they can make it work. And that somehow, deep in their internal psyche, there's something that's like, I'm the one, and I won't take, I won't accept this not working. And even though objectively, there's all this data coming in, this isn't working. This is bad. My employees want to quit.

My executives want to quit. Whatever it is, somewhere deep down in there, they're like, oh, yeah, I'm going to make this work. This company is going to be big, and they just believe, and it's almost like that internal gravitational force inside of them is so large, it kind of warps the world to bend to that will. And people start to believe it because they believe it so much, and they convince their employees to believe it, and they convince everyone around them that this is going to happen for them. And so, again, this is not a personality trait I'm arguing.

This is like a core belief. So interesting, and it connects so much to what we've been talking about. Just don't die. Don't lose hope in what you're working on. A founder hearing this might feel like, man, I don't know if I'm, like, so convinced this is going to work.

Lenny Rachitsky
In your experience, how much of this is internally they're so certain and convinced versus externally they need to show this confidence? Well, I think it's internally they're convinced. I'm not sure it's external, but, and this is the big but, no one has this at the early stages when they don't have a good idea and they don't have customers, and it's objectively not working. And so, again, I know a lot of founders, like, well, I don't feel that way. Oh, no.

Dalton Caldwell
Maybe I'm, you know, maybe I'm an imposter and I shouldn't do a startup. Well, of course you don't feel that way if you haven't talked to any customers and haven't built a product, like, you know, but what usually happens is you pivot to a good idea, or you start with a good idea that you care about and customers you care about, and you launch it. And the better the product does, the more obsessed you get with your own company. Like, I think in the case of Stripe. I don't want to tell Patrick's story for him, but I recall him saying at some point he wasn't assured that Stripe was going to work until they were like a year or two in.

And then once it started working and then he, they really believed in it. But it wasn't like he woke up one day and like, stripe is the thing. It's going to be, it's going to work. I think you build conviction and you have this network effect virtual cycle where you get more conviction, the more customers reflect back to you and data reflects back to you that you're on the right track. This is exactly what Scott Belsky shared in our episode when I asked him when to pivot is do you have more conviction this is going to work, or less conviction over time.

Lenny Rachitsky
I like that connection we just made there. Okay, so we've talked about all these way startups fail, bad ideas, tarpet ideas. I want to go to the flip side and talk about good startup ideas. So recently you put out a request for startups, which is essentially 20 categories of ideas that you want to fund, that YC wants to fund. Can you share some of these ideas that you're excited about and basically you're looking to fund and looking for founders to work on.

Dalton Caldwell
Yeah. And so we put out the request for startups just to inspire people to maybe apply with ideas that aren't the ones that we always see. It's not like prescriptive, like we will only fund ideas on those lists. It's not that at all. It's just sort of remember what I talked about earlier with information diet?

We're trying to mix up some of the information diet about what kind of ideas people might be contemplating. They aren't currently. And so a couple of the ones that we put out there, one of them I made one about erps, which is enterprise resource planning software. And I did that because I get so few applications on that and they're usually pretty good. And I just would love to see more people look at that and learn about what erps are, just because it's so rare that people apply with that.

And now I have a feeling we're going to see a lot more applications working on that. It worked as intended, which is to introduce this idea space to founders that didn't even know what an ERP was. Now they'll go learn about it. Another one is we'd like to fund open source companies. That's one of the RFS where, you know, if more people applied to YC with open source ideas.

I think we'd be pretty excited about that. And that might, maybe founders didn't realize that would be somebody we want to fund. Same with space companies. Yeah, we've had a lot of success with space companies. Several of the folks that are actually going to space right now that aren't SpaceX or YC companies.

And so I think sometimes founders feel like those ideas are too bold and ambitious. But no, you know, I love more people applied with space companies. And so think about it that way, where we're just trying to put out, we're trying to plant seeds of idea spaces that perhaps someone subconsciously filtered out is what might be a good startup idea. And hopefully that creates a new set of startup ideation for the person. And we're going to link to this page in the show notes for folks that want to explore.

Lenny Rachitsky
I'll give a couple more real quick, a way to end cancer. No big deal. Spatial computing, new defense technology, bringing manufacturing back to America. So a lot of like hard science, deep tech stuff, which is maybe a new, I don't know, I imagine you guys have invested in this in the past, but it feels like we totally have. Right?

Dalton Caldwell
So these aren't like, oh, we've never invested in these before. It's more of like, hey, it'd be cool if we saw more applications along these lines. It would be nice because it currently feels a little bit under.

There could be more startups working on this stuff. Yeah. Instead of the tarpit ideas, a couple more real quick better enterprise glue. Yep, I like that idea. Say more about that.

Lenny Rachitsky
What does that look like? The software to connect all these business systems is usually pretty brittle and janky, and there's been lots of good startups founded to solve this problem. I think there's still a lot more room for improvement and likely olms will improve. Like we'll probably be able to create better and better blue so all sorts of software systems can talk to each other. So again, very broad idea, but yeah, I think we'll see a lot of very successful companies where that's the kernel of the idea they start with.

Awesome. One last one. Small fine tuned models as an alternative to gigantic generic ones. Yep. Sweet.

And so we'll send, we'll include this link in the show notes and folks can click on each of these. And you basically there's a lot more explanation of what it is you're thinking about there. Awesome. Okay, just a couple more questions. Yep.

One is just your background. So from what I've read in the early two thousands. You were basically hanging out with some of the biggest success stories of today. Folks like Zuck and Reid Hoffman, Sam Altman, Elon, Sean Parker. This is before they really became anyone and they all became very successful.

I'm curious just what, looking back at that, what you've noticed is consistent across these folks that end up being really successful over time. Back in 2003, being in Silicon Valley and being interested in startups, it was a really small space. There just weren't that many people that were into this stuff. And so I remember I cold emailed Reid Hoffman when LinkedIn was like twelve employees and he just responded and he's like, oh, let's have lunch.

Dalton Caldwell
It wasn't, he was just like a guy and everyone else that was doing, I guess you could call it social networking. That was sort of the people that I knew. There was a few conferences you would go to and there'd be like 30 people there. It reminds me of stories about the homebrew computer club. I'm not saying this is cool, but when I read stories about what it was like when, when the homebrew computer club existed, it was a very small number of people that all knew each other that were real, like weirdo outsiders that were into this stuff.

Okay. And so that's what in the post.com boom Bay Area startup scene, that's legitimately what it felt like. And so I didn't think a lot about the personality traits of these people. They were all, again, they were all pretty different people, but what they had in common is the folks that are now the really big names just had a lot of staying power. Right?

So when I met Sam, he had dropped out of Stanford to work on looped, which is hilariously a way to find people around you to hang out with. Interesting theme here, huh? He was cool. He's just, he was this really young guy and he just kind of did that. It wasn't huge.

And then he got into other stuff and ended up working at YC, ended up getting involved in hard tech and is now kind of like reinvented himself as the big mind behind AI, which is which, again, awesome. But if I think about who he was back in the day, he was, yeah, he was like a 23 year old working on a thing for feature phones to find friends in your neighborhood. Their customer was boost mobile. I bet you could go find the commercials for loops that boost mobile put out on YouTube. Those are actually pretty funny.

Have you seen those commercials? No, but I'm going to go check them out anyway. It's pretty funny. So, yeah, like, that's, that's the real story. Um, and then, yeah, I remember I was in downtown Palo Alto at the time.

And, um, some of the folks I was friends with were friends with Sean Parker. And this was actually before Sean Parker went to Facebook. He was part of Napster. And so one of my friends was like, oh, we need to get my friend a ride to the airport. And so I ended up giving Sean Parker a ride to the Oakland airport.

And again, what was he like? I don't know. He just basically sat in the backseat on the phone the whole time. But again, my point is I wasn't like, wow, these are going to be really big, successful people that one day will be important in the world. It just felt like a bunch of nerds that really liked the Internet and computers kind of doing things that they were interested in and were just obsessed with this.

Like, there was no, they weren't like, gee, should I move to New York? Or, gee, should I? Maybe I should go to law school. Like, it was people that were very bought in to staying working on Internet companies. And so you'll see these folks just reinvent themselves.

Multiple eras, right? Okay. Like Reid Hoffman, right? He worked at PayPal, right? And then he did LinkedIn, and then he was like a VC.

And like, like, he's kind of had like all these different eras where it's the same person, but it's almost like a different figure. Right. There's a lot of interesting lessons there. One is that your career is long and you will have the opportunity to do many things and you can continue to shift. Like in my example, this is my fourth career, I realized I was in engineer, then a founder, then a product manager.

Lenny Rachitsky
Now, whatever this job is, and I think that's really common. I think the other, again, is the personality types point, which I didn't comment on, but I think it's so important that you can be super introverted and be super successful. You can be super extroverted and be very successful. And I think the key there is use your skills and strengths to achieve the same things. You don't have to be the amazing presenter on Steve Jobs type stage.

You can do the same thing in a different way. And then the other point there is, again, coming back to, you just need to be really excited and enjoy the work you're doing because that'll drive you forward and make you be successful. So I like that, that the story is kind of a summary of so many of the things you've shared so far. There's other two other fun stories, maybe pick one. Or the other one is you sold your startup to MySpace, and your job was basically to save MySpace.

And then the other is you're the reason Andreessen Horowitz missed out on Instagram. Yeah. Couldn't invest. So which of those would you want to share? Well, it's.

Dalton Caldwell
It's kind of the same story. Okay, great. And the way that it's the same story is my second company, basically, I sold my first company in my space. It was the music company that I worked on, and they recruited a new CEO who was formerly the COO of Facebook called Owen Van Naught. So, again, hilariously, part of the same little circle of people.

And Owen was like, okay, we need to fix MySpace. Rupert Murdoch's got the juice. He wants me to fix it. We're going to do it. So come up with some ideas.

And kind of the best idea that I could come up with at the time was doing something around mobile photo sharing, something kind of like Twitter, but for photos. And I figured with MySpace's user base, that would work pretty well. This was, like, in 2010. So it was right as the App Store was getting big, and I had a lot. I had a lot of success in the App Store with Ineem.

It was one of the top downloaded music apps. And so I was like, wow, the App Store was really good. And I was really into apps being the thing. And at this time, Facebook was a little early on, they were trying to do cross platform mobile apps, if you recall, and their apps were not great. This was, again, ancient history.

And so that was sort of, like, my plan. And then immediately, Hoenn Van Nada was fired. And so I didn't even really get onboarded. And so I just, like, left. I think I worked in my space for, like, a month because the person that acquired my company got fired.

And there was, like. I think the whole workshop got fired. So I don't even know. I didn't even know who to talk to. It was really great.

It was a great experience. You know, I'm saying, I wasn't really sure who my point of contact was at that point. I don't think they knew either. It was just a message. Just Tom.

Lenny Rachitsky
Just message Tom? No, no, he was long gone. Serious? I know you're kidding, but no, like, literally, I don't know who was left at that point. Tom was long gone.

Dalton Caldwell
And so I was like, well, I should just do a new startup, and I should work on something like what I was thinking about. And I ended up yeah, starting the company and quickly was able to raise an angel round because people remembered my company from the first one. And the major investor we had was Andreessen Horowitz. This is one of their first board seed investments. Like, Marc Andreessen was on my board, and I have my own set of stories about that.

But it was interesting experience, and we launched it, and I think we got half a million or a million users. You can go find tech range articles about it. And we launched on Android and iOS, and it was mobile photo sharing and actually was growing pretty well. Then what happened is there was another portfolio company called Bourbon, which was originally a foursquare clone that was built by these two guys, and they decided to pivot out of that and into what, which was pretty similar to my thing. Again, fair enough.

That's just how this works. And they did something smart. Again, this is me talking. I don't know what their version of the story is, but what I think they did that was smart is if you looked on the paid App Store charts, the number one app was hipstamatic. And hipstamatic cost money.

And what do we know about what people want? They want things that are free, that cost money. Right. They basically built a pretty legitimate knockoff of the hipstamatic filters, combining it with a social graph, and they launched it, and it pretty quickly took off. So, of course, this is Instagram.

It took off really quickly. And that was a wild experience for me to be like, oh, this seems familiar. And basically because Andreessen Horowitz had invested in my company, was on the board, even though they were investors in Instagram, that was, like, a conflict, and they didn't do the deal. And then, for whatever reason, this became a big source of Silicon Valley gossip, which is like, wow, I can't believe this happened. And so it was just a really weird experience for me, as a founder, to be right in the middle of something that became culturally so important.

Lenny Rachitsky
I imagine there's a bullseye in your back from a 16 z for a little bit. Oh, I don't actually think they care. I don't think they held it against me because, like, what did I do wrong? It's true. I started a company, like, you know what I'm saying?

Dalton Caldwell
Like, obviously there was some frustration, but I was like, I was a guy who had a company that they invested in. I don't know. I didn't feel like they. I didn't feel. I didn't feel much higher for them.

I think it's. This is just how. This is just how life works. Yeah. I wonder if they changed their conflict policies after that at all.

I don't think so. I think this has happened multiple other times, but those aren't my stories at all. And by the way, I don't know if you mentioned the name of your startup. It's called pick please. Yeah, it's called pick please.

Yeah. Great. Okay, so for the final phase, before we get to our very exciting lane ground, I have these two segments, recurring segments. I have failure corner and contrarian corner. We can do both or we can pick one or the other.

Lenny Rachitsky
Failure corner, share a story of something. A time in your career where you failed and when you learned from that experience. Contrarian Corner, what's something you believe that a lot of that most other people don't believe? Yeah, I think for contrarian Corner, I know where I would start and I think it's relevant for your listener. Like, I think this is relevant to this.

Dalton Caldwell
And so maybe, and you could argue this isn't contrary, but here is, here's what I think. I think growth and growth hacking and doing all this analytics, a b testing stuff is a total waste of time for very early startups. And that one of the weird things about having lots of startup advice on the Internet, again, this is one of the reasons we started making videos at YC, is a lot of the advice was catered towards later stage companies like, oh, here's how you set up your board and here's how you motivate your sales team. It was all aimed at series A, series B founders and not for Seed stage founders. The problem was seed stage founders would consume all the later stage advice and get really confused.

And so the anti pattern I see is there are lots of founders that are very familiar with your awesome work, which again, I really recommend. I like it. But when you have no customers and you're reading Lenny's guides on how to set up split testing and how you did growth at Airbnb, oh man, that is so dumb. That is so not helpful. And so you see this inclination away from getting a first customer, getting one customer and talking to that person, and instead they have like all this really complex growth hacking theory.

I think this also happens if you worked in big tech where your product already has scale. And so if you work at Facebook and your job is to launch new little features, yeah, of course you should make heavy use of analytics and a b testing and split testing and feature flags. Like, yeah, yeah, yeah, it makes sense. But when you have no users, what are you doing?

So do you think that's contrary. What do you think? I'm just trying to argue this advice applied to a startup that's too early is actively not helpful. I think it's contrarian for many people. 100%.

Lenny Rachitsky
I also 100% agree with it. It makes me feel like I need to at the top of my post share. Here's who this is for. If you're earlier than this, ignore it. If you're later than this, ignore it.

Dalton Caldwell
I mean, again, I'm not saying you're doing anything wrong, but imagine if the OG Airbnb founders took all of your current advice and applied it when they had like four users and they knew their names and they were like trying to run complicated growth hacking split test things. Yeah, maybe. Just to clarify, when you talk about growth, growth hacking. So obviously when you're starting something, say a consumer app, you need to get a bunch of users somehow. What's your sense of just like when you say don't do this sort of thing, but this is okay, it kind of falls in those buckets.

I think it depends on the idea. I think in the case of whatnot, they obviously it was consumer app and they needed to get users, but they were very intellectually honest on the metrics for how you get a marketplace off the ground. And they didn't just go dump all their money into Instagram ads and like, they effectively knew they needed to focus on buyers and on the buy side and build momentum on the buy side. They really understood marketplaces. And so for consumer, I think it's having a sophisticated view of how you get the consumer company off the ground.

I think if you look at the Facebook story, them getting 100% penetration on the Harvard campus first instead of launching overall. Again, good strategy would recommend that strategy. So again, the way to extrapolate that is, know what your comps are of what companies your archetype is, and then look at what they did on the zero to one and ignore what they do today. Right. Don't pay attention to what Facebook does today.

If you're a brand new startup founder, pay attention to Facebook. When they were getting their first thousand users, what were those tactics? I feel like this should be its own episode where we just go into how to get your first thousand users. I know there's a video, actually, we'll link to that gustav made with YC's advice on how to get your users. Did you want to visit failure corner or not?

Lenny Rachitsky
Or shall we move on? I failed at tons of stuff as an investor. I make lots of bad investments as well. As good ones. I think in my startups I pivoted a lot, and a lot of things I did didn't work out.

Dalton Caldwell
And so again, I just gave you a specific story with pick, please. You just heard a specific story there. I guess what I learned is that you just can't let it get to you too much and you got to keep going. And that if you keep going, no one really remembers those as much and it doesn't really define you, and it shouldn't, you know, fear of failure shouldn't dominate all of your thoughts, and instead you should use your energy and positivity to keep trying to do good work. Right.

Because back in the day, if I would be like, well, you know, I guess startage aren't for me, I guess tech isn't for me. I wouldn't have had a career doing any of this stuff. I wouldn't be working at YC, I wouldn't be advising companies, right? So I always had to have in my life a lot of optimism and energy and use that energy and motor to keep me going. And it served me really well.

Right? Even if lots of stuff I tried didn't work and continue to not work, you know, again, obvious stuff. I know, but, yeah, that doesn't mean it's not true, even though it's obvious. I feel like that's a recurring theme here, and I love that it's another version of just how not to die. There's like the startup itself that shouldn't die, and then there's your just drive and motivation to keep going and try new things when things don't work out.

Lenny Rachitsky
I love all the recurring themes and messages for people here. Dalton, is there anything else you want to leave listeners with before we get to our very exciting lightning round? Yeah, I guess the final thought is if someone wants to do a startup and doesn't know where to start, just to give you permission to talk to potential customers and try to pre sell something before you write code and have those conversations. I think so many folks don't know where to begin on starting a startup, and my tactical advice is start doing customer validation first versus building a PowerPoint deck, versus trying to raise money versus, like, all these other things. I think a lot of people don't use that strategy.

Dalton Caldwell
And basically, if you, if you find people that are really excited and you, you do line up customers, that is a great green light that it is time to do a startup, right, that can get you down the path. So, yeah, I think that's my final advice. And then with that when does the building come in? Is it build it while you're talking? Build it before you?

Lenny Rachitsky
It depends on basically build it once. You have some conviction that you're like oh, I think I would have a customer. I think at least one person would use this thing. I want to build at least one. I love it.

I love the simplicity and pragmatism of all of your advice. Dalton, welcome to the very exciting lightning round. I've got six questions for you. Are you ready? Let's do it.

What are two or three books that you recommend most to other people? I think a lot of founders are afraid of doing sales and they don't know how to do sales and they think they need these really experienced sales coaches and they need all this training and ill be like well go onto Amazon and find the most popular sales books, like getting to yes, that everyone reads and just read those and thatll get you 80% of the way there. You know, im saying like they want to hire someone for millions of dollars to give them sales coaching. Im like well have you read these really basic sales books? And theyre like no.

Dalton Caldwell
And so I think thats a low cost way to go on Amazon getting to yes and a few other of the top sellers. I forget the names and just read those. And that is your crash course on how to be great sales. Awesome. There's also this book called founding sales that I imagine you're familiar with.

Lenny Rachitsky
Pete Kazanji was on the podcast talking about that and that's something I always recommend because it's just like how founders can do sales. Start there. Start there. Great. We'll link to that.

Do you have a favorite recent movie or tv show that you really enjoyed? This may be warping what you're asking for, but I like to watch old shows a lot and so I keep rewatching like the Sopranos on the wire and it always is different to me every time and I, you know, things like that. I think. Here's a silly answer. I've been really enjoying watching old episodes of Columbo, which was a television show from the seventies and eighties.

Dalton Caldwell
I don't know why, I don't even know if this is instructive but it is for some reason. I'm really into that right now. It's very old episodes of Colombo. You're an old soul delta, I guess. I don't know.

It just feels like a time machine to a different time when I watch these things. Definitely maybe one of the most unique answers yet. Fair enough. Columbo. Well again, I guess I'm not trying to give you an answer where I sound super clever.

I'm just. I'm actually telling you the real answer. So that's actually what I'm watching. It does actually sound very sophisticated and clever. Do you have a favorite interview question that you like to ask?

Lenny Rachitsky
I guess founders in this context, I. Don'T really believe in trick questions, and I think I just start with, hey, so tell me about what you're working on, or what have you learned since you started? None of these are trick questions, but I think you can get the most honest and interesting answers by asking the most straightforward basic things and having that be like a blank slate for their answers to draw on. You know what I'm saying? So I like the most simple prompts and let them take the conversation where they want to go.

I know this probably is a very big question, but just what do you look for in their answer that gives you a sense of this is a good or bad answer for YC interviews? Yeah. And I know this is like its own podcast episode, I think evidence that. They actually have thought about it. Like, as per I said earlier, that they've done research, that they have opinions, that they care about it.

Dalton Caldwell
Right. Sometimes when people answer questions, they're like, you can just tell that it's really superficial and they haven't put much care or soul into their answers, you know? Awesome. Do you have a favorite product that you've recently discovered that you really like? I like my oura ring and my apple Watch and all that good stuff.

Like, I've been a fan. There's a wise equity called syphox. S I p h o x. I just signed up for. And they do at home blood testing.

And basically I'm trying to sync that at home blood testing thing into all my other devices, I think. I don't know. I really enjoy all the stuff that Apple and other startups are working on and YC companies are working on around personal health. And so, yeah, those are products. I'm into syfox.

Lenny Rachitsky
Okay. And wait, then you do like a needle and stuff, and you take your own blood. It's this little tiny needle. It doesn't hurt at all. And it takes a few drops of blood, and you do it at home.

Dalton Caldwell
You mail it in, and then it has all these blood tests. It's actually really cool. Yeah. And that's. I just discovered that it was one of those cases where I saw it, and then I later was like, oh, wait, that's a YC company.

Like, basically, I became a customer and was pleasantly surprised that it's a YC company. And I think I found it. So it's siphoxhealth.com dot. Yeah, it really rolls off the tongue, right? Yeah, that's the name of it.

Lenny Rachitsky
Very cool. Okay, I see this. The little needle. Okay, great. Go scifox.

Okay, two more questions. Do you have a favorite life motto that you often come back to find useful in work or in life? Share with friends. Just check in with yourself that you're having fun and that you enjoy what you're doing. And if you don't, you should probably make a change, whatever that is.

Dalton Caldwell
And again, if you're a founder, you're in control, right? You can change your own company. But I think a lot of people go through life and they don't ask themselves this question like, am I having fun? Am I enjoying, is, do I value what I'm spending my time on? And I think that you just can go back to this over and over and over again as a good prompt on how to decide what to do with your life.

Lenny Rachitsky
Easier said than done to change that in many cases. But it always starts with realizing, okay, this isn't actually what. Yeah. Admitting to yourself, yeah, I'm not really enjoying this. And then trying to be like, well, how can I fix it?

Dalton Caldwell
Having that conversation with yourself. Yeah. It reminds me of a Steve Jobs quote where if you wake up day after day, like, it's okay to wake up some days being like, I don't want to be doing this. But if it's every day and continues to happen, then that's a sign you should change it. Exactly.

Lenny Rachitsky
Final question. You and Michael Siebel have been doing this incredible podcast together. If somebody wanted to check out the podcast and dive in, is there an episode that you love most that you think they could start with? It depends. Some of the episodes are more for folks that already have a startup and they're dealing with problems.

Dalton Caldwell
I don't know, some of the episodes about investors or things like that, it's very clear that the audience for those is current startup founders. And there's a lot that are just more life advice, how to make decisions and think about. And those have strangely become very popular and got a lot of views with non startup founders, which is a pleasant surprise. And so I'd recommend those for folks in the audience that are not currently startup founders. I don't know.

Life tips from top founders I think is from billionaires. Yeah. Yeah, I think that was pretty popular. So what I'd be looking for is diagnose. Am I a current founder?

And I have founder problems. Where am I? Just looking for general philosophy type questions. And I really like those philosophy ones. We have one for high school students and it's aimed the audience is.

Here's advice for high school students that are interested in startups. Here's some tips that you should be thinking about. Again, pretty narrow target audience, but I love that episode because we're really trying to speak directly to that audience. And, you know, I think it's pretty good advice. Dalton, you are wonderful.

Lenny Rachitsky
Thank you for sharing so much wisdom. This is action packed. I'm really excited for founders to listen to this. I think it's going to make a big dent in a lot of people's lives. Two final questions.

Where can folks find you online if they want to reach out and follow up on some of this? And how can listeners be useful to you? I am on Twitter x.com daltoncast. Um, is my username and also my LinkedIn is pretty good. It's.

Dalton Caldwell
It's pretty popular. I don't know, just search for my name on LinkedIn and yeah, I love to see you all there. And then how can folks be helpful? I mean, honestly, it's just great when folks want to apply to YC and do a startup. And so feel free to dive into other videos and apply to YC.

And something that's really special about my job is I get the privilege of getting to fund companies that they already know me from videos, and they're shocked that I'm exactly the same as effectively, they're like, wow, you're just that guy from the videos I've been watching. And it's so cool that you're just exactly like you seem in the videos. And so basically, yeah, if people like what I have to say and they like the videos and apply to, I see, it'd be, I would love to fund their companies. Dalton, thank you so much for being here. Sure thing.

Thanks so much, Lenny. Appreciate it. Bye everyone. Thank you so much for listening. If you found this valuable, you can subscribe to the show on Apple Podcasts, Spotify, or your favorite podcast app.

Lenny Rachitsky
Also, please consider giving us a rating or leaving a review as that really helps other listeners find the podcast. You can find all past episodes or learn more about the show at Lenny's podcast.com. See you in the next episode.

Lessons from 1,000+ YC startups: Pivoting, resilience, avoiding tar pit ideas, more | Dalton Caldwell (Y Combinator, Managing Director)

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1: Introduction

2: The Concept of Tar Pit Ideas

3: The Art of Pivoting

4: Engaging with Customers

5: Survival Strategies

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