0:00
I want to start with a quote by someone you may know, Paul Graham, "Much of what's novel about YC is due to Jessica Livingston.
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0:04
If you don't know her, you don't understand YC."
0:10
My three co-founders were deeply technical, but I would look at other things about founders.
0:15
All these little social cues.
0:15
Your nickname was the Social Radar.
0:19
Every interview, everyone always turned to you and they're like, "Jessica, what does their social radar say?"
0:22
I would look at, do the co-founders get along?
0:22
Are these people committed?
0:27
And if a founder would get defensive, that was always a bad sign.
0:33
Is there anything else along the Airbnb story that would be interesting to share?
0:36
He hated their idea, and Paul tried to get Brian and Joe and Nate to change it.
0:36
But I remember specifically Joe brought out the cereal boxes, the Obama O's and Cap'n McCain's, and I just thought, oh my God, they're going to work hard to do whatever they can to make this company succeed.
0:52
You just talk a bit about this idea of just making shit happen, showing signs of being hustlers.
0:55
Do you sort of need that desperation.
0:55
You have to burn the boat.
1:03
Today, my guest is Jessica Livingston.
1:03
Jessica is the co-founder of Y Combinator, the first and most famous startup accelerator, which since 2005 has funded over 5,000 companies, including over 200 unicorns now worth over a billion dollars, including companies like Airbnb, Stripe, DoorDash, Coinbase, Dropbox, Instacart, Reddit, the list goes on.
1:22
Jessica is also the author of one of the bestselling books about startups, Founders at Work, and hosts the Social Radars Podcast.
1:33
She lives in England with her husband, who you may know, and her two sons.
1:33
In our conversation, we dive deep into Jessica's superpower of being the Social Radar.
1:39
She got this nickname in the early days of YC because she can read people incredibly well.
1:45
This becomes a huge unfair advantage when you're evaluating and investing in early stage startups and founders, but also becomes useful in every part of your life.
1:56
There's actually a quiz that I'm going to link to in the show notes called Reading the Mind in the Eyes that I suggest you take to see how you do, and it'll give you a sense of how well you are at reading people.
2:05
Jessica got a perfect score, just as an example of her unique talents, reading people's emotions along with her superpower and tips on how you can develop your own social radar.
2:16
We also talk about her fabulous podcast called The Social Radars, some wild early YC stories, including how the interview with the Airbnb founders actually went down, and so much more.
2:27
If you enjoy this podcast, don't forget to subscribe and follow it in your favorite podcasting app or YouTube.
2:32
It's the best way to avoid missing feature episodes and it helps the podcast tremendously.
2:36
With that, I bring you Jessica Livingston.
2:45
Jessica, thank you so much for being here and welcome to the podcast. Thanks, Lenny. I'm glad to be here.
2:50
I want to start with a quote by someone you may know, Paul Graham.
2:55
So he wrote, "A few months ago an article about Y Combinator said that early on it had been a one-man show.
3:01
It's sadly common to read that sort of thing, but the problem with that description is not just that it's unfair, it's also misleading.
3:07
Much of what's novel about YC is due to Jessica Livingston.
3:12
If you don't know her, you don't understand YC."
3:12
I'm hoping with this conversation we help a lot more people understand you.
3:20
Kind of an implication of this quote that I wanted to ask you about is that there's an implication that you've never gotten the credit that you deserve for starting YC, for helping YC become what it's become.
3:30
I'm just curious what that's been like for you.
3:38
It's sort of a hard question.
3:38
It is true, I was one of the co-founders of Y Combinator, and yet I'm often sort of left out of news articles, Wikipedia people want to take my entry off of Wikipedia all the time.
3:54
I'm not as notable and I'm sort of like, "Gosh, I'm a founder of Y Combinator, author of a best-selling book on startups.
4:06
What does a girl have to do?" But it is what it is.
4:06
It's the external views, and it doesn't matter to me.
4:17
Do you know what I mean?
4:17
People within YC know what I've done, the Y Combinator alumni know what I've done, my friends and family and people I respect in the Silicon Valley community know what I've done, most of them do. So that's fine.
4:35
But it is true, I've often been sort of erased, and in some cases it's annoying because it's a lot of people who have a certain narrative about Y Combinator that don't want me to exist, I'm maybe making that up a little bit, or the people that don't want me to be part of the narrative are the ones that think that Y Combinator, it's run by white men, only invests in white men.
5:04
And gosh, if there was a woman on the founding team making choices of who to fund, that would undermine their narrative.
5:10
So I think sometimes that's what happens too. Fascinating.
5:15
Just a convenient story to tell sometimes.
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7:53
So at YC, your nickname was the Social Radar.
7:53
Your podcast is called The Social Radars.
7:59
I haven't seen you talk too much about this skill anywhere else, and that's what I want to spend our time on together to better understand the skill that you've built of being this social radar. How does that sound?
8:10
I will try Lenny, I will try.
8:10
I don't talk much about it because it's hard to talk about. I don't understand.
8:16
It's hard to put into words exactly what it is about me, but it's true that my nickname at Y Combinator was the Social Radar.
8:31
And I think it was because my three co-founders were deeply technical people, and I was not.
8:38
But I would look at other things about founders.
8:38
When we'd have these 10-minute interviews, I would look at, do the co-founders get along?
8:45
Are these people committed?
8:45
Do they really know about their product? Do they care?
8:56
Are they going to quit their job?
9:01
Or are they telling us that they are going to quit their job, but really aren't?
9:01
All these little social cues that I'd try to pick up on.
9:05
And in a lot of cases, red flags about them that I'd add to the decision-making process.
9:13
And so that's why they called me the Social Radar, and it just sort of stuck.
9:19
And it's because I love people and the dynamics and understanding what's motivating people.
9:26
I just love it and I love founder psychology, founders personalities.
9:34
I am absolutely fascinated with it. I love it.
9:34
Okay, so we're going to try to unpack as much as we can with the context that you're not exactly sure if you're able to articulate exactly how this power of yours works. Yes.
9:48
There's this line you wrote somewhere, and Paul's written this, and other people, that every interview that you all did early on at YC, everyone always turned to you and they're like, "Jessica, what do you think?
9:57
What does their social radar say?"
9:57
Can you just talk a bit about that role that you played in the early days of YC of kind of seeing that side of candidates?
10:06
Well, in the early days, especially before I knew a lot, as much as I know now, about startups and founders, early on, I was learning a lot in the first few years.
10:13
And in the first few years, it was just the four of us.
10:19
So I would be in charge of going out telling people, "Wait here while we do the interview, come on in."
10:25
I'd be in charge of the stopwatch that would time us.
10:31
And I'd say, "Okay, our time's up."
10:31
And it was very administrative, and I would observe.
10:31
Paul, Robert and Trevor, my co-founders would be asking them all sorts of questions about their product and their technology and blah, blah, blah, blah, blah.
10:44
I would occasionally ask questions, but I'd usually remain pretty silent.
10:49
And so I don't think people even really noticed me.
10:49
But I would be just watching them and sort of trying to observe as much as I could, not understanding sometimes even the technology that they were talking about.
11:01
I let my co-founders do that.
11:06
And then after, we'd be talking, they'd look at me and they'd be like, "Should we fund them?
11:06
Jessica, should we fund them?"
11:12
And sometimes I could tell based on the conversation whether they thought that the technology was good or how they felt, and sometimes I'd say, "Absolutely we should."
11:24
Or sometimes I'd say, "Guys, I'm a little nervous.
11:24
Did you see how that founder interrupted the other founder and wouldn't let the other founder talk?"
11:30
Because my three co-founders sometimes wouldn't notice this.
11:36
They'd be so caught up in the conversation they were having about the technology, especially Paul.
11:42
Paul would get really into things.
11:42
And sometimes I always tease Paul, because one of his defining qualities is that sometimes someone would have an idea that he'd get so excited about that by the end of the interview he'd be giving them ideas about how to grow their product and what they could become.
11:58
And they'd sit there saying, "Yeah, yeah, that's a great idea."
12:04
And then he'd say, "Fund them."
12:04
And I'd say, "Whoa, whoa, whoa, Paul, you can't just fund this because you love the idea.
12:10
Let's take a step back and let's look.
12:15
Like these two founders are working at Google and they don't say they're going to quit. That's not good."
12:21
And I'd point out these things that I had observed.
12:21
But I mean, we always agreed.
12:21
It was very rare that we wouldn't agree on funding something.
12:26
We were usually on the same page. I see.
12:33
It's interesting that you talk about these behaviors, co-founders interrupting each other, or being kind of aggressive here and there.
12:39
Some people believe that's okay for founders to be like this.
12:45
A lot of successful founders, Elon, for example, Steve Jobs, who are kind of assholes a lot of times, I imagine, and I've read part of the reason you thought about just the type of person is you're trying to build a specific culture in the early days of YC and you're going to be around these people.
13:01
So maybe can you talk a bit about just why those elements were important to you and why'd you look for those?
13:05
I've definitely heard that Steve Jobs could be an. I've heard stories.
13:11
But I think I would've funded him because he's so incredible and he was so smart and so interested in the product and knew...
13:19
I'm very persuaded by people who know what they're talking about and love their product and are domain experts.
13:26
But I did consciously, especially early on, less so later on, early on, I did sometimes tend to say, "I really think this person's an asshole, I do not want to fund them." And we often wouldn't.
13:41
And very early on when we were just funding 10, 20, 30 startups a batch, sometimes I have been known to say, "I don't know if I can have dinner with them every week." It was that point.
13:55
And I don't think we've ever regretted any of those.
14:02
It didn't happen all the time, that was rare.
14:02
But life's too short, and I wanted to be able to work with these founders.
14:13
And as it turns out, it was sort of important early on in weeding out explicit assholes because that was the basis of our Y Combinator community, which is now thousands of founders.
14:26
Now, of course, all the founders aren't all running their company anymore, but I would say most all of the founders bring something useful and valuable to the table.
14:41
So if you ask a question on Bookface, on our forum for founders, someone is going to be there to help you. And it's amazing.
14:47
And that all started very early on, there was this culture of older batch mates helping newer ones, and this pay-it-forward mentality where everyone helped one another and rooted for one another and made introductions for each other.
15:02
And I think it's a big part of our Y Combinator community now.
15:08
So I wrote down a few of the things that you mentioned you look for, and you looked for in the early days.
15:13
So let me just share a few of them and let's spend a little more time here.
15:17
So you looked for, did the founders get along?
15:20
Are they committed to the idea?
15:20
Are they ready to quit their job? Are there any red flags?
15:29
So is there anything else that you remember you spent a lot of time thinking about or looking for then or even now?
15:33
There's looking for in the application and then there's looking for in the interview, and now we have software that looks for all of the red flags in the application that I used to do by hand.
15:47
In the application, I'd look for just weird things, like was there a huge gap in the equity allocation?
15:55
Did one founder have 99% and one founder have 1%? That's weird.
16:03
I'd want to dig in on that. That doesn't feel right.
16:09
Are they going to quit their job?
16:09
Are they going to move to Silicon Valley?
16:09
What are their current shareholders?
16:17
Is like 90% of their company already owned by someone else?
16:17
There all these weird things that we like to just flag.
16:22
And we wouldn't necessarily not fund someone because of them, but it's just more data.
16:28
So that was in the application that I'd look through all of those.
16:33
But in the interview I definitely was sort of, one thing I remember I would always look for was, when you'd have a conversation with us, a lot of times, Paul especially, but Robert and Trevor, would really be getting right into the idea and questioning you, and how do you know this? And what about this?
16:53
And if a founder would get defensive, that was always a bad sign, always a bad sign.
17:00
The best founders would say, "Gosh, I have thought about it and here's what I figured out."
17:06
Or, they just have this almost a tennis match and a conversation rather than closing up and feeling like, oh, this person's interrogating me.
17:17
You could just sort of, the open-mindedness, the flexible-mindedness of people was really important.
17:23
I'd get really excited about domain expertise.
17:23
Like my co-founders, we all loved that.
17:30
If someone was fixing their own problem in a broken industry, we loved that.
17:39
Definitely, I'd look for co-founder relationships.
17:39
And again, I'm not saying I was always right, but you could tell if...
17:44
One founder, I'll give a story, one founder, once we asked a question and one person started to respond and the other founder put his arm in front of him and said, "I'll answer that question."
17:59
And it was just so weird that he wouldn't let his co-founder speak.
18:07
We'd have situations where we'd call people like hackers in a cage, where it's kind of obvious there'd be a business founder, business person, who had clearly convinced a programmer to join the team.
18:22
They were given, the programmer was given, very little equity and just we called them programmers in a cage, like hackers in a cage.
18:29
And sometimes that works out, I'm not saying it doesn't.
18:36
But I'd always try to observe, okay, does this hacker in a cage have any say in the company, the direction of the product? That sort of thing.
18:44
Because the programmer needs to have opinions. It's so funny. I love this metaphor.
18:50
And I totally get what you mean.
18:50
I want to unpack a couple of these, because this is exactly where I was hoping we'd go.
18:56
So this idea of looking for defensiveness and being open to change and being flexible, why do you think that was so important to successful founders?
19:06
Why did you look for that?
19:06
Why was that a predictor of success? Several things.
19:10
First of all, being defensive is really bad, if you're a startup founder, because you're always going to get people who question you.
19:16
And it's your job to educate them, if it's a new area, you're doing something presumably pretty new, you're always going to have people who question it or say, "That product's already out there, why is yours better?"
19:34
You have to educate them.
19:34
You don't want to be defensive about it.
19:34
Also, a lot of times, the first idea isn't bang right on, the right idea, and you have to be open-minded and maybe adjust it in a certain direction.
19:47
The famous PayPal story, how it started off being the PalmPilot, or money transfer.
19:54
And money transfer between the PalmPilots or whatever.
19:54
And then all the customers were using a janky version on the web, and they were begging for this to be on the web.
20:10
And finally, the founder said, "Oh, I see what most people want this for."
20:10
You have to be open-minded to see what direction really is what your users want.
20:15
And so if you find someone is defensive, usually they're not open-minded.
20:22
The other thing is that the best founders will want to learn from other people and listen to other people.
20:30
You talk to the Collison brothers and say something, they ask you a question, they're listening to your answer.
20:38
So many founders think, oh, I can't learn from anyone.
20:44
But the best founders are always listening and having spirited debates about things.
20:51
I mean, that's part of the process.
20:51
And so I think when someone's defensive, it's just a bad sign.
20:57
So I would look for that.
20:57
I loved when I'd find someone sort of showcase that they'd make something happen no matter what; they're scrappy, they're hustlers. I remember...
21:10
Can I tell the story about the Airbnb interview? Please.
21:17
Okay, because that was definitely one I'll never forget.
21:19
That was one that was clear the founders were really good.
21:19
The market had just crashed basically with all the banks going out of business and everything.
21:26
And so we were only funding startups that we felt had really scrappy founders and could be cockroaches, meaning could live off of very little amounts of money, or could charge customers and make money.
21:40
And we didn't fund that many people in that winter '09 batch.
21:45
So we're being very strict with ourselves, very disciplined about things.
21:50
And the Airbnb guys came in, and I just remember they had a contagious amount of energy.
21:59
They just had an energy about them the way that they talked about their product, which was crazy at the time, staying in someone's bed or airbed.
22:07
In fact, it's a famous part of the story, we hated their idea and Paul tried to get Brian and Joe and Nate to change it.
22:15
So we didn't even like the idea.
22:21
But I remember specifically they brought, at the end, Joe brought out these, the cereal boxes, the Obama O's and Cap'n Crunch's or Cap'n McCain's or whatever. Cap'n McCain's, yeah. Yeah, Cap'n McCain's.
22:33
They were saying that they went to some Costco or something and bought off-brand Cheerios and off-brand Cap'n Crunch's, took them out of the box, put them in this new box, glue-gunned it shut.
22:48
And I just thought, oh my God, these guys are really going to great lengths for this.
22:54
And for some reason, it was silly, but it really appealed to me.
23:00
They're going to work hard to do whatever they can to make this company succeed.
23:04
And even though we were skeptical about the idea, I think we definitely made the right bet on the founders, and it was just very clear in that interview.
23:16
I'm so happy you shared that story, I was definitely going to ask about it.
23:19
It's so funny because I've heard that story at least a hundred times working at Airbnb, they tell the beginning of Airbnb every chance they get at every all-hands.
23:25
It's like a recurring theme.
23:31
And it's great to hear that basically it went exactly the way they describe.
23:31
Oftentimes, there's a myth around what happened, but that's exactly how they describe it.
23:40
No, it was definitely a whole crazy story and how Paul called them to accept them, and they were on the 280 or something or the 101 and the reception went down.
23:47
And so he didn't hear if they were accepted or not. Did he tell that part?
23:53
No, I haven't heard that part.
23:58
Oh yeah, that's part of the story.
23:58
And they had to keep driving to get to talk to Paul again and find out that they were accepted. Oh, yeah.
24:04
It was just a crazy interview.
24:10
The element of the story I'm also curious about is, the way Joe tells it, is he had the box in his backpack.
24:14
And as they were walking out, Paul or you is like, "Hey, what's that?
24:14
What's that cereal box doing there?"
24:19
Is that how it went, or is it more like, "Hey, we have this cereal thing." ?
24:24
I don't think Paul and I looked in his backpack and asked.
24:24
I think there was definitely some pressure on Joe not to show us the cereal boxes.
24:31
I think Nate was really down on that, especially.
24:38
And I think they were walking out the door and they're like, "Hey, we just brought you a little something."
24:42
I think Joe did pull it out, and we had an extra minute or so around the cereal boxes.
24:49
That's how I heard about the glue gun story and everything.
24:49
But I think Joe had been reluctant, but he did it at the end and I think it was a good call. That's so funny.
25:00
And after that meeting, what was that conversation like between you and Paul?
25:05
Was it just like everyone's like, "We definitely got to do this." ?
25:05
Or was it like you being like, "Hey, these guys are really interesting." ?
25:08
No, I think we all liked them. We all liked them.
25:12
But I remember saying, "We have got to..."
25:12
I just remember being like, "We've got to fund these guys.
25:17
I don't know about the idea.
25:17
Maybe they'll change their idea, who knows?
25:17
But they seem really great."
25:23
Again, the energy level and the passion with which they spoke about their experience hosting, because they'd been around struggling, but had been a company with an idea for a little while before they applied to YC.
25:36
We were there basically their Hail Mary, their last resort for them.
25:42
And so they could tell us about their story about how they hosted the people at a conference, and there was definitely some magic to it, which was convincing.
25:57
Is there anything else along the Airbnb story that would be interesting to share while we're on that topic?
25:59
I mean, the only interesting thing as it relates to being the social radar is that there were just some interviews that I remember because I just thought, this is great.
26:08
These founders are so good. I'm totally convinced.
26:08
What they're working on might not work, but I feel like it's so worth the bet based on these founders. And that happened.
26:22
There were definitely a couple other of our most successful companies that I clearly felt that way about.
26:28
You just feel like they know what they're talking about, they thought about the problem.
26:32
They're not solving this problem because it's sort of the problem du jour or fun and exciting.
26:39
Some are very unsexy problems like when Parker Conrad applied with Zenefits, unsexy HR stuff, benefits stuff.
26:48
But he knew how broken it was and was trying to fix it.
26:57
And I love stories like that.
26:57
There was one story in terms of...
26:57
The one time I did sort of persuade the rest of the group to fund someone was, do you know the company GOAT, the sneaker? Absolutely. Okay.
27:13
When Eddie and Daishin applied, they were not doing the sneaker company, they were doing this group sort of book-a-group-dinner at a restaurant with people you don't know as a way to meet new people.
27:26
And for some reason, I loved the idea because I thought maybe it could be a secret dating, like a Trojan Horse for a dating sort of site.
27:35
But I really loved the two founders.
27:35
And one of the reasons, again, they had this passion about their idea, but they had had this cream puff company before that they had run, and they just told these stories about how hard it was and all this stuff.
27:50
And I, for some reason, just thought, these are hustlers. These guys are scrappy.
27:55
They're going to make this succeed.
28:00
And they didn't make that company succeed, but they pivoted and made GOAT succeed and it's doing really, really well.
28:08
And I remember that one I definitely had to convince...
28:08
I mean, not that Paul, Robert and Trevor didn't like them, but I think they really didn't think the idea was that great or just sort of were meh.
28:19
I was like, "We have to fund them."
28:24
I love sharing these stories.
28:24
If you have more to share, please keep throwing them out there.
28:27
So a few things I've noted so far, of things that you look for, and I think it's important to note this is very early stage evaluation where the founder and the team is, it's incredibly important, because the idea often shifts. Oh, yeah.
28:38
This is as early as it gets, Lenny. Yeah.
28:44
Oftentimes, just an idea, I imagine. Yes.
28:48
So a few things, so far, things that you found to be really valuable to look for.
28:48
One is this idea of just making shit happen, showing signs of being hustlers, just getting shit done, Obama O's, things like that.
29:00
And then I think along the same lines, just passion for this idea and just like almost charisma.
29:06
Is that how you think about it? Or is it just like...
29:11
I hate using the word charisma because there are a lot of charismatic people who are full of baloney, and are just doing a startup because it's a cool thing to do now.
29:21
And I wouldn't want anyone to get fooled by charisma.
29:26
There has to be some substance behind that charisma.
29:26
Of course, we all love talking to more charismatic people than less, and I've certainly talked to my fair share of totally uncharismatic people, but sometimes they're really good founders too.
29:44
If they know what they're doing and care about the user and are fixing a problem that they have a deep connection to.
29:52
So I don't want to say someone who's charismatic, but it definitely helps because, as you know, as a founder, you have to do a lot of sales and you have to recruit people and you have to convince investors to fund you and you have to convince users to use your product and all of this stuff.
30:10
So it does help being charismatic, definitely. Okay.
30:18
So there's being super hustler, making shit happen.
30:18
Domain expertise, something you've mentioned a few times.
30:23
Just like having deep domain expertise in an area, and I think that's probably where they probably don't pivot oftentimes, where they've actually have experience in that specific problem.
30:31
They might pivot a little bit, they might pivot a little in terms of the actual solution.
30:35
They might be trying to solve a problem and the first attempt doesn't really work.
30:40
I haven't mentioned earnestness though. Oh, do tell.
30:45
Earnestness is one of the most important because earnest, sort of to me, is bucketed with authenticity.
30:48
And to be a successful startup founder, you have to care so much about the problem you're trying to solve, the users you're serving and being earnest about it is so key to success.
31:04
There are so many wannabe founders, so many people doing it because it's cool or they think this idea is cool, but they don't really, deep down, have what it takes.
31:22
And I think we always try to fund earnest people.
31:29
What does earnest look like in practice?
31:29
And how does that come across?
31:33
I think it means being sort of humble about...
31:33
And if you get asked a question in the interview and you don't know the answer, they say, "I don't know the answer to that.
31:41
I'd have to think about it."
31:48
Or, "I don't know the answer.
31:48
I've given it some thought and here's what I have come up with."
31:48
And they're just honest about things, and they're not trying to do the whole smoke and mirrors thing, which we've definitely gotten people like that, that avoid the question or are doing it for the wrong reasons.
32:03
I remember there was one group that were 45-year-old men and they were building an app for teenagers in fashion.
32:12
And I remember just thinking, we were asking them, "Why have you chosen teenagers in fashion?"
32:21
And it was so clear that they thought they could make easy money, and it wasn't because they cared about fashion.
32:33
It wasn't because, "Oh, I have a daughter who's really into fashion and I've seen this need."
32:33
It was just like, they made up the idea.
32:39
And that is not earnest, that is not authentic to me.
32:47
You talked about it, so there's this earnestness you look for, also not being defensive.
32:47
There's this also spectrum of confidence and people believing in what they're doing.
32:52
Do you have any thoughts on just how to find that?
32:56
What does that look like when they're too defensive versus they're just confident and then they know what they're talking about? Confidence is good.
33:03
You definitely want confidence. It's hard to...
33:03
I think you can see it when you experience it.
33:09
Like someone who's confident in answering your questions but isn't defensive, there's definitely a difference.
33:17
And I don't know, this is why I'm saying it's sort of hard to articulate these things, but confidence means you can say, "I've thought about that and I don't know the answer." That's confidence.
33:27
And they'll say, "But here's what I do to try to figure it out.
33:32
Here are my plans to address that."
33:32
Confidence, I should have put that upfront because that's very important, especially when it comes to fundraising, you cannot go into an investor meeting lacking confidence.
33:47
You can come into YC's interview lacking confidence, but we will then help you in the next three months to gain more confidence.
33:58
And by the way, one of the things we do to help people gain more confidence is to make them believe that their startup is a great investment, to help them create a startup that truly is possibly going to make money or at least worth being a good bet.
34:10
That's the thing, early stage, the best you can offer is like, "I might not succeed, but I'm definitely a good bet."
34:25
And we help them with their product, we help them with their ideas, and we help them that, by demo day, they can get up on stage and legitimately say, "We're a good bet and here's why.
34:37
Let me tell you about our idea."
34:37
And so we definitely help with confidence. Awesome.
34:43
A couple other things you mentioned earlier, just to unpack a little bit.
34:43
So being committed, something you look for, and co-founders getting along.
34:47
In terms of committed, I imagine, these are very practical things.
34:53
How are they actually going to stick to this?
34:53
Are they actually excited to work on this?
34:57
Maybe talk about that a little bit.
35:00
We all know how hard startups are, but I think you don't really know how hard it is until you actually do it.
35:06
A lot of people would start a startup still having a job at Google or wherever, and they do it on the side.
35:12
I do recommend, if people are just getting started and don't want to raise money yet, starting it on the side is a great way to get going, but at some point you have to commit, you have to burn the boat, because we found that founders who were still getting a paycheck and health insurance, once the going got tough, they did not quit their job.
35:34
And you sort of need that desperation like, "I have to make this startup succeed because it's my job."
35:44
Not like, "Oh, I'll just stay at Google." You need that.
35:44
And we found that founders who weren't leaving their jobs, it was just not working out.
35:51
Or that co-founder would always wind up leaving the company because they didn't want to actually leave their job.
36:01
And that's fine, there are people that can't leave their jobs for financial reasons. That's fine.
36:07
You just shouldn't be starting a startup if you're not going to be prepared to leave your job.
36:12
So that's the leaving of the job thing.
36:12
And the co-founders getting along, oh my.
36:12
I spent a lot of my time at Y Combinator when I was there all the time, full time, mediating co-founder disputes.
36:28
And so many startups died or had near-death experiences because the co-founders didn't get along or broke up.
36:35
It just happens all the time.
36:35
And so that's why I think, during interviews, I was desperately trying to search for any clues that the co-founders didn't get along, or if they blatantly contradicted each other.
36:48
But you could also tell if they were answering, finishing each other's sentences.
36:55
I love co-founders that have a history together; either they went to school together, they went to college together, work together, maybe they're siblings.
37:08
Because when you have a long-term relationship, you trust each other and you know each other's weaknesses, and you're usually on the same page with your aspirations and everything.
37:22
It's really scary when two founders get together just to start the startup and don't have any history. Massive red flag.
37:28
Sometimes it works out like in the case of Dropbox, Drew and Arash both went to MIT, but I think they didn't know each other before they started Dropbox, and it worked out.
37:42
But most of the time it doesn't.
37:42
So we've talked about co-founders getting along, looking for defensiveness, domain expertise, the sign of making shit happen, earnestness.
37:54
Is there anything else that we've missed that you look for in the founders that tell you maybe we should, maybe we shouldn't?
38:00
Relentlessly resourceful.
38:00
Paul wrote a whole essay on that.
38:06
Every founder is different, I never try to say, "Oh, this person doesn't have this.
38:11
I'm not going to fund them." You always have to... Everyone's different.
38:16
But I mean, you're an investor.
38:16
I'm curious, do any of these things surprise you or do you care about these things too? No, absolutely not. Absolutely.
38:21
And I actually try to avoid pre-seed and early stage because I'm not amazing at it, maybe.
38:27
This is why I want to learn how to build my social radar skill. Oh gosh, okay. Yeah. Tough. It's so tough.
38:38
It's like so few things actually work out.
38:42
Well, it's because you don't have a lot of data.
38:42
If someone is just applying with an idea, you have very little data.
38:47
You can look at where they went to college, what have they built in the past, that's always a great predictor of their ability.
38:53
And so on the YC's application, we ask them, "What project have you worked on before?" Or whatever.
38:58
But it's really hard to tell when you're the first investor.
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39:55
When did you first notice that you had this social radar-ish skill and you're better at this than other people?
40:08
Paul used to always call me Detective Livingston.
40:08
Before I was a social radar, I was Detective Livingston.
40:13
I cannot help myself noticing weird things, just dumb things, like if Paul had on a yellow T-shirt and then an hour later came in with a blue T-shirt, I'd be like, "Why do you have a blue T-shirt on?"
40:27
I have to understand what happened in that hour where that T-shirt is different.
40:33
Or people's what, their relationships, what drives them?
40:33
I was always like this, and I think it goes back to my childhood.
40:41
I spent hours and hours on the phone with people, with my girlfriends, dissecting situations, and then all through high school, and college, I mean the amount of time we wasted discussing social matters with people, and boys, and things like that.
41:02
It was just frightening how much time I wasted, but I just was genuinely interested in it.
41:08
And what drives people and why did this happen?
41:08
I don't know if I ever noticed I did this, but it was just, my point is, it's always been a part of me.
41:14
And I definitely notice and having an aversion to phony people. I always have.
41:20
I've never been one to fall for someone who's super phony and tried to have them as a friend or anything.
41:28
I just can tell, and ugh, I hate it.
41:34
Do you feel like it's almost all genetic or do you think there was something in your childhood that pushed you to be good at this? I don't know. I really don't know.
41:38
So this is why I think I'm going to be a bad guest, because I can't give a practical understanding.
41:45
I mean, I don't really think...
41:52
I can't say other people in my family are like that, and I can't say that it was part of my upbringing.
41:58
I just notice these things. I don't know.
41:58
I should be paying attention to other things, but I'm not, but I'm paying attention to this.
42:05
I'll give you an example with you. Please.
42:13
So I looked up your bio to read a little bit about you, and I loved the Dalton Caldwell Podcast. I listened to that.
42:20
Fourth most popular of all time. Dalton's was? Yes. Oh, go Dalton. That's awesome.
42:28
Yeah, it was really good. I learned a lot from it.
42:28
I love listening to Dalton.
42:34
But what I really want to know about you is, on the release that you sent, or on the instructions for this podcast, you said, "There might be some edge cases where your podcast isn't good enough to go out.
42:47
We just want to warn you."
42:47
And all I could think of is, what prompted that?
42:53
There has to be a story of what prompted that.
42:53
No one else would pay attention to that, but I'm just so curious. It's so weird.
43:00
I'm just a weird person like this. Yes, I did add that.
43:08
There's a story, basically, it was just an episode that wasn't amazing and we didn't have that caveat in the prep beforehand, and it felt bad to tell the person. See, I knew it.
43:19
I knew that that had happened. That's exactly right.
43:19
Is there kind of a way you've thought about honing this skill over time?
43:25
Once you kind of got a sense, "Hey, people keep telling me I'm really good at this."
43:30
Is there something you've done to help strengthen it?
43:35
No, but one of the things I do try to do is sort of reinforce.
43:35
Sometimes I'll have a feeling about someone, maybe we fund them, maybe we don't.
43:45
I'd sort of like to know what happens a few years later. I like to follow up.
43:52
There definitely have been some situations where I haven't liked someone that we funded and it's taken 5 to 10 years before they failed.
43:59
And in some cases, for a bad reason.
44:08
Where I'll say, "Oh, thank God, I was right about that.
44:08
I did have this feeling."
44:08
Or, "I knew they'd be successful."
44:16
Like the GOAT guys who I was saying before, there was definitely a period when Grubwithus, their first startup wasn't doing well, and they were starting, that maybe some people would've given up on them.
44:28
And now I can say, "I was right about them. That feeling was right."
44:35
So I do try to sort of follow up with some of the really strong gut instincts that I had, to see if I was right.
44:42
Often, when I have a gut instinct, it's like a negative thing.
44:42
So we wind up not funding someone.
44:48
So I really need to know if that person went on to be super successful.
44:56
And I will answer your question right now, there's no one that I had a strong dislike for that I sort of said, "We should not fund them," that has gone on to be a super success. Thank God. Wow, interesting.
45:10
I mean, it doesn't happen all the time that I really put my foot down, but sometimes I have.
45:14
And this feeling, is it like a visceral body thing for you?
45:21
Or is it like intellectually, you notice, "Hey, this guy's interrupting her and this person doesn't..." ? More intellectual.
45:25
But it does come from inside.
45:29
I don't know how to hone it.
45:29
It has to come naturally.
45:29
You have to have a natural interest in people.
45:36
And so I'm sometimes not listening to all the words and I'm sort of just observing them, I don't know.
45:43
Have you ever been tricked by someone where you didn't see something you should have seen? Is there anything there? Oh, yeah, for sure.
45:52
I can't really talk about the times I have been tricked just because I don't want to say anything really negative about people, but...
45:58
Well, there was one example that I do feel comfortable sharing.
46:05
Ilya Lichtenstein of MixRank.
46:05
Do you know the guy that stole billions of dollars in Bitcoin from a crypto wallet?
46:14
Do you not know this crazy, crazy story? Please share.
46:20
I think he's in the joint now.
46:20
He was definitely convicted of this, and his wife, and they stole billions of dollars.
46:23
And I definitely don't remember thinking anything bad about him or thinking he could be that kind of person.
46:34
So that definitely, there've been some doozies like that, where, did not see that one coming. Oh my God.
46:48
I think what's extraordinary about the fact that that happens rarely is that your interviews are 10 minutes long, and so you have very little time to actually find all these things.
46:59
And plus, the actual product and the idea and growth strategy and all these things.
47:04
Well, you find a lot can come in reading the application.
47:04
That's a lot of legwork at the beginning.
47:10
You read the application.
47:10
But then the 10 minutes is kind of as long as you need, in most cases.
47:17
Because we found when they were longer, like 20 minutes, you'd know in 10 minutes and be twiddling your thumbs trying to get through the interview for the next 10 minutes.
47:21
So we kept them short so we could interview more people.
47:26
But there have definitely been cases where we've interviewed people, accepted them, and then very soon afterward, we're sort of like, crestfallen like, "Oh, these people are very limp. What were we thinking?"
47:39
Definitely, we've been tricked in that respect all the time.
47:46
Or, "Oh gosh, they seem so impressive in the interview and now they're just posers who can't really do anything."
47:55
Definitely, I'm tricked all the time in little ways.
47:55
Or, I didn't notice two founders didn't get along and then one co-founder goes missing a week into the program or something crazy.
48:09
There's all sorts of crazy stuff like that that happen.
48:14
I think in the game you're playing, I would expect some things to slip through. Yeah.
48:21
You said that there's been kind of an operationalization of some of the things you used to look for in founders, now that you're not actually in the process.
48:27
Is there a Jessica-as-a-service sort of thing?
48:33
What kind of stuff have they built that looks for the sorts of things you used to look for in the interview process?
48:36
No, it's all just stuff in application that automatically flags certain things.
48:41
I actually don't remember all of them, but it's just, all it is, is a, "Please pay attention to this, reader of the application."
48:49
It's not, "This disqualifies anyone."
48:56
It's, "Just please pay attention."
48:56
And those are things like I mentioned, a really crazy equity structure, founders not quitting their job, things like that, that it's important that someone is voting on them and then interviewing them knows.
49:11
Because I would often, some of the questions I'd ask at the end of the interview, I'd say, "It looks like you have 90% of the stock and your co-founder only has one.
49:24
Can you tell us why that's the case?"
49:24
And maybe they could make a case for it, who knows? But at least I'd ask.
49:29
So the flags just say, "Pay attention to it." Amazing.
49:37
So if we were to zoom out, in early stage investing, the main thing you need to get right and evaluate as the founder, the social radar skill that you've had from childhood is such an incredible advantage in doing this well, and you could basically say YC is what it is because of this unfair advantage that you all had in the early days.
49:58
I'm guessing many people listening to this are like, "We need a Jessica on our team.
50:04
We need to build this skill ourselves.
50:04
We need to figure out how to integrate social radar into our process."
50:08
I know you're going to hate this question, but just, do you have any advice for people that want to try to build the skill, get better at this, notice some of these things?
50:17
I really think that our advantage was that my three co-founders were deeply technical people.
50:24
And I think a lot of investors back then weren't, didn't have that background.
50:33
And I think that that background really helped YC choose good founders.
50:40
So I don't want to make it sound like it was that big of a deal, but advice?
50:40
Advice for how to hone...
50:50
I mean, I think just try to pay attention to subtle cues.
50:50
If you really feel like, gosh, I'm so clueless about these things, try to just tell yourself, "Okay, I'm going in to evaluate these founders, evaluate this investment opportunity.
51:07
I know I'm bad at these kind of judgments.
51:07
I'm going to remember, do they seem like they get along?"
51:13
Because there are no trick questions.
51:13
I don't have any trick questions that you could ask, or it's just paying attention. Have a conversation.
51:26
Do they understand their product well? Are they defensive?
51:26
Maybe have your own little checklist that you think about.
51:30
You don't have to have it written down, but you think about, and then afterward, you spend some time thinking, were they defensive?
51:36
When I asked them why this is better than the competitor, how did that go?
51:42
Or ask them, maybe do have some questions, if you don't know how long they've known each other, ask them that question. "How did you two meet?
51:55
Have you ever worked together before? How's it going?"
51:55
Just be a little bit more conscious about asking these types of questions to reveal some key information for your investment decision.
52:09
That was an awesome summary of a lot of the stuff we talked about.
52:09
If anyone ever doubts that you are very good at this, Paul tweeted this quiz, the Reading the Mind in the Eyes quiz, that I took, it's incredibly hard.
52:21
You basically see a bunch of eyes and you're supposed to judge their emotion, and it's really hard.
52:26
And you got 36 out of 36, which blows my mind. I did nail it.
52:33
I do have to tell a funny story about this. Please.
52:36
So Paul, sort of late at night, and he emailed me, because I had gone to bed, but I had my thing, and he emailed me.
52:40
He's like, "Check out this quiz. I got 25 out of 36. What can you get?"
52:44
So I got my computer out because I was like, I have to beat Paul.
52:52
And I did it, and it was really hard.
52:52
They'd only show the eyes and then it would say, what is this person thinking? Are they happy, sad?
52:58
But some of them were really hard to distinguish.
53:05
Are they irritated or are they angry?
53:05
It's kind of hard to tell the difference between irritated and angry.
53:10
And I remember looking into these people's eyes saying, "What are they trying to communicate to me?
53:18
Are they irritated with me or are they mad at me?" Kind of thing.
53:24
And as I went through, it would tell you if you got it correct.
53:24
As I almost got to the end, I was like, "Oh my God, this is going to be a near-perfect score. I have to nail this."
53:33
And when I got 36 out of 36, I was like, "Yes."
53:33
And I told Paul, he tweeted it.
53:33
We then, a week later, had this YC event in London, and I swear to God, about 10 people came up to me to talk about this eye quiz and how they had not done well, and what was my secret? It was very amusing.
53:52
I never thought that anyone would think it was that interesting.
53:59
I love that there's this thing that totally shows this skill you have that is better than everyone else.
54:04
I took it, all my friends have taken it after that tweet, and the highest we've gotten is 31 of all the people I know. Really?
54:12
And I think when people take it, we'll link to it, they're going to be like, "How can you get 36 out of 36? Impossible."
54:15
You have to look into their eyes and say, "What are they trying to tell me?"
54:20
I hope you're not trying to tell me you're full of shit with your eyes.