nope not live almost live now we're live okay my name is Eric makovski I'm the startup school course facilitator welcome to another live Q&A we're joined today by dalton i how's it going I'm Dalton Caldwell I'm a partner at Y Combinator and in addition to my partner duties I run in missions he's in charge of figuring out who gets into YC so today we're gonna talk a little bit about what answer some questions that you asked about Dalton's
video lecture on pivoting and the YC admissions process let's dive in first question from Danielle at squid bio at what point does pivoting turn into actually shutting down the company you're working on and starting a new one
usually founders are too willing to start a new co and just think about in terms of amount of work you have to do it's much easier to just change your idea with the same Delaware c-corporation like that or for you strike that stripe atlas and there's no
need to redo it I think the major reason I've seen someone creates a new company from scratch is there's like legal liability well the old company or some lingering yeah there's like a really really good reason why but for the most
part you know it makes sense to keep the same cap table to keep the same investors and it's like a waste of time this is an example of like work that is not productive work yeah these were a bunch of entities and like talking to
lawyers and this is a great example of things you could spend time on that are not work and you can also like you don't have to change the corporate name right away remember that they don't like ya jawbone was called Aleph for like 10 years before they renamed it to jawbone like this is totally common so I think in your case at Danielle you were saying that you have some grant money and you're already incorporated I would
recommend just like sticking with that like there's no harm plus like the main goal is to find is to get the product market fit like yes spend time on that part and not on the like corporate shell game looking at this is something you could
spend a lot of time on and then it has basically zero value to whether or not your startup works yeah next up Peter from whiplash gaming whiplash gaming is an interactive watch party platform for eSports Dalton you
mentioned in your video that founders might pivot to avoid a hard work like sales how would you make the judgment call between the product not being good enough and justifying a pivot and the sales efforts not being good enough
justifying a different strategy different different channel so it's totally the case that there are good startup ideas that aren't right for the founders this is the founder market fit thing and so you know it doesn't really
matter if the reason is the founders are bad at sales and will never get better or it's a bad idea those are kind of the same thing and so I you know you want to watch out for three levels of hypotheticals like sometimes when founders end up in a hypothetical land about why the thing isn't working again this is an example if somebody can spend a lot of time on have a lot of conversations about within the co-founders you know ask a lot of advice
and it's not working and so spending too much time diagnosing it I would argue is not great and and I hear where you're coming from but sometimes there's really great startup ideas that require lots of sales expertise and if that's not what you want to do it's not gonna work even if it's secretly a good idea also like at the early stage sales is effectively talking is that is like identical to talking to your customers and responding
to their kind of like their direction so if you can't get past that first stage that's probably more of an indication that maybe the idea is not one that's picking up steam with with customers have you seen any cases where like very
clearly that the founder market fit is unaligned and there's a structural problem to getting to that next stage like say you've got a couple customers some early users I just see a lot of times with those founders whose primary
modality is writing code and maybe they can talk to other programmers but they end up with an idea that involves like selling to insurance companies or something and they really struggle which is like why so many great are like solving a problem that they themselves you have because by definition they are the customer they're like really close to them and they also know how to sell them next question from Matthias at estill
are hey dolfin it's okay we're now pivoting after realizing our solution didn't solve the problem we were addressing yet we're still trying to solve the problem as we believe it's a big one their problem that they're solving is
40% of returns on clothes are because they have the wrong fit so we're now launching it as a discovery tool that shows clothes on your body for new and used clothes on one hand we're concerned that we should only focus on newer used
clothes but we also feel that a discovery tool should have both as 50% of shoppers shop for either one do you think that we should stop start with just one or offer the full range as an MVP yeah so if I were doing office hours
with a company and they asked me that question my answer would be I don't know what are your numbers what are your sales and the reason is you can end up weaving this really complicated web of conceptualism about we think this we
think that and it's if the current product you know has zero user zero revenue zero traction I'd be like we'll just go get anyone to pay you a dollar like in order to make one purchase yeah and either time and it's so tricky when
I talk to people and they have these really complicated like intellectual arguments and they're like whoa we don't really have any customers per se Eric you know it's like whoa how did you end up with this super elaborate theory of
the market and you've gotten no customers and so maybe that's not the case you know the numbers aren't in here on this question but I usually encourage folks to try to make metrics based decisions about if they're like should I
do a or b you you look at your your numbers and it's much easier to not get caught in conceptual land when you're doing that and what's also true is that like you know we see companies across a wide variety of domains products
technologies interestingly that these this kind of advice is actually actually works at like a meta level above the particular thing that you're working on like you really can't go wrong with finding a few people who want to buy the first version of whatever you're making and incrementally add on and for that the best time you know in a pivot is you just fail to get one customer yeah one live customer really using your product like that's
the bar if you're below the bar so it's not even a real thing and if you're above the bar then you can have a sophisticated conversation so in this case like I wouldn't be too worried about like whether your product offers everything at the start I would worry more about can you describe what you're doing in such a way that it gets a couple of people excited right at the beginning and they really use it not just excited they're like yeah oh it's
it's about when I'm going to retailers let me put it live like let's do it and you can you can say wow we've done a hundred returns yeah okay that's uh we can work and even if it's just used or even if it's just new like either one as long as you have some degree of traction like then you can iterate and work with that yeah next up Julia at marble marble is a collaborative learning solution for teams automates learning turning assets
like links to courses videos and articles into a learning plan cool I think I get it question is how do we know if we need to pivot the design functionality of the product or continue searching for the right user okay well I would first say
is anyone actually using it does the product exist did you build it so many times I I talked to people there's like a continuum there's people on this end of the spectrum which they pivot constantly but they never actually make
anything they just talk been with a monoid yeah what the night pivot is and we talked about it yeah and then there's gathered in the spectrum where you write code and you build a product and you know it's been live for like a year and
it's not working and so it's a wide continuum so one that one kind of actionable thing that I offered a founders here is to set up experiments that they could run in usually about a week or so and you can run experiments
on the product side by either adjusting or changing the actual landing page or the things that your product does but you can also run experiments on who your who you're trying to attract as users so for example you could like lock your
product in and say like because every good experiment has like a control you don't change both things as your returning spirit you don't change the product and the user base so maybe like say okay that products is doing
good we have like five or ten users you know it's going okay but we really want to explore to see if teachers are the right people or whether it's parents or whether it's whatever and you can set up an experiment so over the course of a week you say I'm gonna try to get twenty customers in this new customer segment and then at the end of the week if you hit that it's pretty good sign that you're onto something and if you like
totally fail and you get like zero or two people well maybe that's not the right group tougher part is when you hit in the middle that's always that's always a bit more difficult and and let me push there's actually a subtlety in
the question the question in one part says well when you pitched the idea to people they are very excited however when they test it they're not finding the use case in themselves so there's a whole variety of ideas that are very
exciting and that I would call them mirages or something and so let me give you an example Eric I have a startup that makes delicious food it is the most delicious food you ever had you love it you're excited about this delicious food right why wouldn't I that does not mean this is a good start watching Eric would you like free money and so you know Oh Eric don't you wish you didn't have to work as hard and you got more work done
these are like leading questions yeah pretty much everyone you ask the coin will say - I'll say and so if you phrase this particular idea is like we're learning solution for teams would you like your team's to learn more or better
or faster yeah that's not actually validating that that excitement is not actually a start-up idea in my opinion and you have to turn it into an actual product yeah and usually usually it's like it's a problem that they're having
in the course of trying to have better learning so Eric do you want your team to work to learn better let me tell you about what I have I have a learning tool it costs $20 per user per month it's a slack plugin and what it does is it sends them daily reminders about whether you know with daily lessons would you pay for that I'd consider it like a that's a pitch like that you have the second part you really need in there which is to offer a
concrete product and solution and ask for money the second part is what you need the first part is not it's so like vague as to not even really be a start-up idea and you can run that in one of your experiments so you already have these people who are kind of casually interested or excited you can try to put people on point and say like okay we talked to 20 people how many of those 20 people are actually willing to pay us just for our MVP yeah
you get an answer pretty you're seeing a lot of this right now we remote work everyone's paid into remote work stuff I get why but just saying we're doing remote work that's not a start-up idea like everyone saying that you have to
turn that into here's the thing that we make and how it works and you know until you nail down the specifics you just saying we're doing a remote work startup is like not it is not reality it's just people will tell you they're interested
they'll be like oh that's very interesting I'm very excited about remote work that does not mean you have validation on your startup idea you know yeah cool next question from Joey from company nurture pivoting mobile apps is a lot
easier and less painful than say building rocket ships to Mars what are sort of the best tips for hard tech companies to avoid wasting kind of time and money to avoid like a pivot later down the road yeah so we've funded a lot
of hard tech companies you have we have to get anything yeah and a group and I think you want to think about this in terms of risk and the biggest risk for a software company is they don't make something that people want and that is
the most you know when we see our cause of deaths that's pretty much it they spend too much money and they don't get the product yeah it's just never it just doesn't happen for them okay what's harder about hard tech is you have this
other kind of risk which is financing risk and that is to even show up we need this amount of capital and whether or not the product is good whether or not people want it like there's all these things that apply to
software that you have this additional financing risk thing and so if you don't have a plan around financing risk and I would love to hear your thoughts you're an expert on this like that's gonna you need a plan from the get-go and even
having tons of consumer demand even having prices even have any Kickstarter's yeah expert here even have like lots of people can be mining kickstarter if you have financing risk it's gonna be tricky so to kind of dive in on this financing for a hard tech company is not just about paying for the engineers and the people who are working at the company it's also creating a business model in which customers can actually buy the thing that you're
building so we have a bunch of companies that are using robotics to solve labor-saving activities in the workplace like this is a really hot subject and we've invested in a ton of great companies but one of the things that we
always talk to or talk about with our kind of hard tech let's say robotics companies is figuring out once you've designed this product we have server example a company that picks a company that makes a robot that picks tomatoes
from greenhouses so it drives along the greenhouse and picks tomatoes they had to work really hard to build a arm that would like find the tomatoes they had to build a vision system that would process it and figure out which tomatoes are ripe and then they had to improve it to make it faster than an actual human so that it actually made sense to use as a product one of the things that they did really well is they were super lean like
they managed to do all of this unlike a couple hundred thousand dollars which most people when they think of a hard tech they think like millions of dollars yeah R&D you don't we don't wear socks we need a lot to do all that you can
actually like hack together a pretty good even like hard tech company and then what they did is they talked to customers and in this case this is greenhouses and they figured out what was the buying timeframe how did how did
they allocate money how did the greenhouses run their budget how do they how do they do their profit and loss so they actually built a model but it was almost better than the greenhouses actual financial model to understand
like who is paying what and where were the actual ROI opportunities and then what they did is they said we're gonna build this robot it cost like X amount of money to build and then we're gonna charge our customers in such a way that
it fits into their budget into their line-item so if you're a hard tech company thinking about how are you gonna finance this from like customers you have to consider like how do they how do they earn money how can they pay you and then
potentially even find people who will like finance it or give you loans because the customers aren't used to paying like that much money at the front I think that's great in like final thoughts you know everyone looks at Tesla and
that's the shining light of people that tried really ambitious things but and if I don't know if everyone knows the story but there was a time where they had a big financing risk okay and basically Elon the calebrage himself well know all the money yeah there was a time when like he took his entire net worth which was sizable at the time and put it into the company because they would have died otherwise and so it would be very hard
to bootstrap like what's tricky about certain startup ideas there's no amount of the idea being good can help you from financing Rises you need to figure out the hole the hole it's hard and so yeah the reason we get to enjoy the fruits of
Tesla these days is there was all these times they almost died maybe like half a dozen and but they didn't you needed like a like an act of God to keep the thing financed yeah anyway and just the tension started to touch again on the
question that you asked and so it's like how do you how do you like avoid a pivot later though the main way you can do this is by validating that customers actually want to buy which I'm making like very specifically like yeah the
semester Roadster okay so this you know people bought the Tesla Roadster immediately at a high price point and remember his secret plan you can you can google this there the idea was to make it to start with a very high margin
high-end thing that he could just sell to basically his friends validate the market validate the people that they could actually built it and then and then they wanted and then we give money for it wasn't a hypothetical car and now you know they scale the thing up there's if he started with a model three I don't it's like another way to think about is that you can have this large vision of where you want to go but try to figure
out if there's like even an MVP of like a hard Jack product that you can deliver Elliott from unify asks what is a good way to pitch a market opportunity you win a standard total addressable market slide would show like all
users who take pictures I think the question is kind of getting at like how do you how do you like provide subsets of product of markets that like you could like reasonably say everyone could be interested in I don't think you have
to like well I guess like it comes up if an investor says oh well what's your tam but when you're at a really early stage it sort of doesn't matter I remember one time an investor gave a talk that I attended and they were talking about
uber scam and when uber was very small it was only these cars like limos basically like private car black cars that you would and they did a tam bottoms up tam of the number of black cars in San Francisco and how much uber
could charge and I think the Tam it was something silly like ten million dollars and it just shows how this particular exercise Airbnb yeah the Tammy would be like how many what's the tam of like people who want to sleep on other people's floors when they go to conference in small cities yeah and so we have all of these I think we were saying don't raise the investor the investor is asking that is asking kind of like a question yeah and
what they're really saying is I don't think this is interesting to me like this is a nice way to say it is oh I'm worried about the this is really great but I'm worried about the Tam it's just a nice way of saying I don't want to
invest yeah and the the best way to combat that is to have the overall company seem exciting in numerous different ways then thinking you can debate them with a really good Tam okay or here's a potential like path that you
could take people down I always love it when founders are actually it's counterintuitive but when they're actually like very specific about the market that they're trying to go after because then I can visualize their product being used by that market and then like saying they can easily knock this out of the park like if you go after that and no one else is going after that and then you get into this conversation where the investor is
actually saying well actually it could be used for this category it could be used as well and and as the founder you're like obviously I know this like I've been thinking about this and it but it but it's this more back and forth
where the the investors like actually like generating ideas and kind of participating in it okay we got a youtube comment these are always create tray asks what are the largest best sources for use case for case studies that shows
kind of before and after pits are there any metrics that we should use to track like should we pivot now or are there any like generalizable rules I don't know about a library of case studies and the probably the best equivalent that is
literally this it's startup school because I mean my talk I I'm not aware of there being other people that are talked about this in this level of detail so I think this is as good as it gets and in terms of triggers it's
usually where you're either working at an idea that is not falsifiable and it requires you to work for two or three years I'm exaggerating but like for a very long time with no market feedback that's a pretty good trigger maybe you shouldn't do that or you have been doing it and it's just every turn a goose egg like zero custard like the most it's so it's so funny how many people the signal to pivot is just like literally no one
will use it here that's it that's a bar here's one of the triggers that I use when I think about products and it's if there's always like to like if you give it to people and they always say like there's two more features that they
would use before they actually become regular know it's like it's basically and you do this for like three cycles and there's always two or three more things like if you're designing a product that's meant to be used on a
regular basis then they use it for a couple days and they're like they turn out like that's a really yeah for a consumer product that null null hypothesis is you know people sign up you get what they used to poke around
with it and you never come back yeah and for most consumer related products that don't work that's 80% of signups never come out and so I think there's like where the founders if you're better than that then that's interesting and we're
founders kind of where there's an easy mistake to make is that if you're missing like some people who use it despite the flaws like then you're onto something then you then you maybe shouldn't pivot then you should actually
like continue to improve it because if you've got something that has all these flaws that's like blemished and it's hard to use and has all these bugs but yet there's like two people who just like keep using it that's a really good
sign that's probably one that you want to like keep pursuing and working on without kind of pivoting completely off yeah and again the triggers are usually just you're in this situation and you've created a complicated narrative for yourself about why it's actually okay that things aren't working and that it's it's like a prison that you created in your own mind of yeah I'm just gonna keep writing code for nine months and
eventually you know the ship will come in and yeah like that's that's a that's the biggest trigger is that you're in this elaborate and you can always talk to me yeah like I think one of the one of the things that like founders need to do is get comfortable with the idea of talking to each other about like how far along are they actually to getting the product market fit ask your friends ask other people that are working on I'm
sure they'd be a people in to weigh in on that as well okay quick question about the YC application process from Matt if I'm in the process of a pivot or considering a pivot should I mention that in my YC application yes we have
the other ideas section on the application where you mention other ideas you're excited about and I think it's fair game it depends on how serious you are if you're even not serious at all I'd still put it in the other ideas
section because those are usually pretty interesting and I think it's if you're saying you know if the primary application is about your primary idea and that there's subtleties about the go-to-market like say you were you know we want to build a new analytics platform we're not sure yet if this should be b2b or blah blah blah or what industry at once I wouldn't call that a pivot I think it's okay in the application to enumerate that you
haven't exactly figured out the market yet or that you're open to a few options that's pretty different than having this really disjoint application which I don't recommend that would be like we're doing you know vegan dog food and also
satellites and like this somehow you're trying to explain them both at the same time in the application I would usually pick one pick the one that you liked the most and have that be the primary part of the application and put the other one
the other ideas and is that like is that because we have YC we don't really like we're not looking for perfectly form startups here we're looking to find founders yeah and it's when it's very disjoint it's just hard to make
sense of yeah what the deal is what about having two applications should founders ever submit to applications I don't really recommend it and the reason is you're sort of hoping that we can pick which one is better like the main
reason you would do that is it's like a way to be like well whatever one they like better was the one I should work on I don't know put your best foot forward well and do the thing you're actually excited about that that's the thing we
want to fund and actually before I forget there is a I just remembered one all right so last startup school there was a start-up in it I believe they were there they're called post hog now and I I could verify I don't know how much
they did an impression they did and they definitely watch all these videos because I they told me that so I know that and we funded them for a different idea so they're in YC where and why see right now in the current batch and they pivoted to a new idea of mid batch and they brought some blog post about the whole process so if you're looking for a case study it was on Hacker News it was on hacker news last week and they talked
about the application process I think they start talked about startup school they talked about the interview with me i funded them and they talked about the office hours i had with them when they decided to change their idea and and
frankly that's probably the best pivot I saw this batch so you can read the whole thing just give a nutshell of what the idea is is they built an open-source self hosted analytics tool that you could run where it comes from a first
party like if you're familiar with third party analytics they all come from like Google's website and other people's websites those look sketchy and slow down your site and they're blocked by ad blockers post hog is this open source
thing you could run on your own infrastructure to get the benefits of analytics without the downsides and when they told me about it I was like this is great how fast can you build it they can build it fast they had customers lined
up day one they had built it at their prior job it was one of those things where as per my pivoting talk it was they're building something that they I was like wow this is yeah awesome and then they had a great hacker like the
market agreed so just to put some numbers around this like during YC we will fun companies we will give them a hundred and fifty thousand dollars we will be like big fans of the idea big fans of the the founders and everything
and then during the course of three four weeks of like us we're really working with them to try to find like early customers they realized they'd come up against that wall and they're like yeah and he talks about this in the blog post but in this case the reason they decided to change ideas was they had traction for their first idea that they applied with him we funded them for but they never really asked for money Eric yeah and
when they started asking for money all of this excitement evaporated yeah right it was actually nice to have not a half to have and so they never they failed to that pre YC they didn't want to charge they were afraid to charge the
minute they started charging the whole thing just like a vassal this happens like just to put some numbers around this happens to dozens of companies NYC yep and it's totally normal it's in fact it's like sometimes this relief because
they've been working so hard and they're up against this wall and then they like change change ideas or change markets or something and it just like this you know basically like wall of water just rushes over and it feels like it's working
we got another quick question from Dan is it harder for a social app to get into YC than a b2b app um I think it really depends on what you have I don't evaluate things as oh this is a social app or this is a b2b up it's sort
of is this an interesting thing that has done something different and the founders have smart things to say the issue with social apps for the most part is it's just very crowded and the differentiation exists primarily in the founders own mind it's not like they have users that prove that it's differentiated or traction or the it it seems you know we see a lot of like dating apps and it's just like another dating app and the difference is and
it's like you know everyone wears hats I'm exaggerating but it's like it's the differentiation that to me is meaningless yeah but to the founder they're like no but no other dating hapless has had this hats feature this is a really big deal and you know that that's and if they launched the attraction and they can demonstrate it like the people really wanted an app let's take that yeah and so you see a lot of apps that are like oh well this
is like Facebook and Instagram and also privacy and also tik-tok and then also with your friends we just see so many of these things ago yeah you got that oh we're gonna do this existing thing on the blockchain and you know maybe but
for the most part the segmenting you know these things are not launched and it's mainly the founders being really convinced it's a good thing then there being any evidence from the external world usually would be to be
it's easier to get first customers and we're used to seeing a b2b app hey we have our first customer rely of they're paying as $100 great yeah that's fantastic one of the cool things I think about YC as it's grown is that we also have more and more partners we have something like 10 to 15 partners and visiting partners at any given time we all read applications and we each have different brains so you apply like there
is an expert in your domain who's like really excited about reading applications at it I guarantee that pretty much every startup that can possibly apply will have someone at YC who's like actively interested in that
domain and seeking out applications so we actually in the system of the Dalton and his team built we actually have like a search feature where we can search for applications that just have keywords and I do this all the time like searching
for cool things that I wish would exist and I see if there's like people building that and so I would not like stress over whether it's easier as a b2b company or guarantee that YC in general is interested yeah I mean to give you a
sense of the bar for social apps if you're someone the audience building one of these things look often the people that build successful social companies have built and shipped things that maybe are even toys or side projects right
even know what you call them not companies and we've gotten millions of users and so even if you if you know the Facebook story you know when Zuckerberg was in high school he built this winamp plugin he put this little music plug-in
that Microsoft wanted to buy yeah we've got a millions of users and so he was always building little things and getting lots of users and what I've what I've successfully funded folks working on social stuff they usually
extremely know what it means to make a thing to put it out there and to grow it yeah and they're pretty sophisticated like they know what it takes to build an app with a million downloads and they're done before even they're not charging
for it even though the same things like built some they have this sort of they're sophisticated about how hard it is and they have some evidence that they've like made stuff and giving it to people for even if it was like for
college or was a class project or was an art project it's it's trickier when you see people that have no experience ever delivering software in any form in any context wanting to do consumer apps and you know it's like you
don't know what you don't know I think what so if you're one of those people out there that wants to do consumer stuff I would highly encourage you just ship anything all the time and develop a philosophy on what kind of stuff do you
put out there works versus thing going to create one thing once it's gonna be the perfect thing it's in take over the world that just doesn't map to any reality I've seen maybe there's counter examples but a bit of social apps usually the founders that really make something good reliably have tried a few times and have a very sophisticated internal strategy about what works and what doesn't kind of the question from early we think
it's time to pivot how do we explain this to our current investors ok well this would require more context to give you a good answer so don't over listen to just this one piece of advice but for the most part sophisticated good
investors will be like great we're behind you 100% let us know the early stage how we can help and you know good luck sometimes that's not the case and it's very context dependent and you sort of need to talk to them about it and
depending on what terms or whether it was a convertible note or a safe there's different legal ramifications about whether or not they can ask for the money back yeah and I've seen it in both cases like if you have if you still have
the money and you haven't spent if you if you already spent the money the answer is pretty clear yeah they know they know the game they invest in the company like that's that's what investments like if you still have the
money then you possibly could say like maybe I don't want be these people in my cap table anymore they're like a biotech investor and like very specifically in that and we're going after consumer social apps so in that case like you can always consider making the offer they might let a ride like they might just keep the money in but at that point you kind of need to decide like the the famous story about this is back in the day
odyo was a startup that existed and they had several investors and they offered the money back because odio did work it was like a podcasting thing yeah before smartphones like like podcasting waka and and I think about half the
investors took the money back in half didn't and then they pivoted and did yeah and so anyone that left the money and made a lot of money and the people that got their money back you could change this story but that's it so
basically that because that happened it's like bad luck or something like that story alone scares people to never ask for money back because of that one particular story you know it's usually very call like if you invested in that
if they vested in you as great founders like presumably you're gonna figure you're gonna figure something out I've got another question from Rahul can I apply to I see when my idea is in a different market than the US so we've
been working on something in Germany but I'm not sure too much about the market in the u.s. absolutely something like 40 percent of the current batch is targeting a market outside the US exclusively exclusively so yeah this
is our bread and butter we've yeah sounds great we've had fantastic success yeah with companies like this for one reason like we invest in people who have an idea or who have built something special I mean who are experts in this space we're not
usually experts in either the technology the product or the geography that they're operating but what we are experts in is connecting to Silicon Valley raising money figuring how to pitch your company connecting to like the network that we've already built that's what we can help with so we have companies that come to us from India I just did a doubt some concrete names yeah in India I interviewed and funded RAZR pay which I think is the like
second largest payment processor that you the audience member may even use yeah I interview those guys and funded them and I you know it worked it was pre-launch but they had the the basic set up rappy you was a company that I interviewed and funded and in Latin America they're the largest online offline company they're basically in every city and they're very big we've had Southeast Asian companies we've had nine divisions and again
so one of the things that you can do to help us do our jobs better is to provide some context around the problem so oftentimes if there's a problem that's specific to your geography you might just not be too familiar with
it so bring it up like feel free like we love to learn things especially about interesting like different yep different things in different countries so like take a paragraph and kind of frame the problem explain like the context you can
assume that we are not going to be yeah in the case of raiser pay I remember at the time there was a complicated two-factor authentication thing for doing digital payments in India and that's why yeah and so it was like they
had to educate us a little bit about that and that explained why it needed to be its own startup and not just a multinational from the US moving into India okay let us let's look through here here's a quick one from Natalie she asks
for a b2c app what number of weekly active users will put me in a strong position to raise money on retention and retention yeah well the key spot a spot is expensive yeah like so if you if you're trying to grow brie if you like things I think the question is around like if you're if you're building a b2c app and it costs money to acquire new users how do you like that and how that operate it because they have to have put planets oh
yeah okay you know what's hard is when you have a consumer app that's growing and you lose money on every user that's good old-fashioned negative you know economics and that can happen to you in for your consumer app can definitely
yeah like imagine one of the reasons that YouTube needed to sell the company back in the day when they were a start-up was the video hosting costs and the infrastructure costs were exorbitant and so I don't know how much longer
YouTube could have made it as a standalone company and it needed to get acquired by someone and it was good that was Google because just operating that thing was like really expensive and so you you want to have a sense so ideally
you didn't want to make money sooner so that you're not just running a thing where the faster you grow the more money you lose that's really frightening or I don't know if there's an or that's what I would recommend I mean a door yeah
yeah there's their counter examples and what's funny another quick anecdote is the the Facebook founders way back in the day they always were profitable according to them they had some bad ads on the site and so they made it so they
were never in a position where it was a huge cash burn situation like YouTube was and that helped give them lever there was all these like good properties of and it buys you time to get more users yeah that's them and so it wasn't
like lots of money but I remember Apple they had like Apple ads like this was like 2003 2004 a or a Facebook but from the movie like when the guy was going to sell ads yeah yeah but they had revenue right it wasn't what it is now but that helped me offset the burn and make it where it wasn't just the faster they grew the more they lost money it's just it's really tricky here we've got some more plan to YC questions from marina
we're considering applying to Weiss for this batch and we'd like to know what your top priorities are when reviewing applications it's her first application you know easy to understand what's going on easy to parse what it actually is and just
following the advice that this whole course you're taking is which is you know yeah like for example the first thing that I do when I read an application is I read the one-liner yep it's like thing at the top like what is
your company do yeah and if I can if I can parse it and not like I have to be able to understand it and if I can understand it that's already like honestly better than some large like surprisingly large percentage of all the
applications so if you're thinking about what like a priority for you to put time and effort into is your one-liner you can do things like practice sharing that one-liner with other people either startup school founders friends and
family just get some more eyeballs on it so like if we for the first time ever hearing about your company read it we understand it like that that's a great start yeah and I think just to bring up like a side point in my job here I see or interact with a lot of people that it feels like they put a lot of energy into trying to hack the system and to figure out how to give themself edges around the application process and to me that's
not a great use of time and if it seems like you're doing that you definitely don't endear yourself to us in our and so one of the ways you try to hack the system sending a lot of cold emails you know trying to get a bunch of fake
recommendations try like there's all these things that we see and it's like people are treating this like get getting a YC interview is like a lottery ticket or it's like getting like like that there's a game that you're there's
a game and I played a game right and you like you know it's it's all about not whether or not your company is good it's about gaming the system so that you get funding and this sucks not a fan of that what we want to do is
just figure out who's doing something good and and do our best to fund those people and if there's any like smell anywhere of like people that are trying to hack the system or manipulate the system or manipulate us or all the weird
I don't even want to enumerate them to give you any ideas viewer but like it just seems very much like misplaced effort if you would have spent that effort on just like getting a customer it's gonna weigh more increase the odds you will get into I see then whatever complicated plan you have let me give you another example of this is there's all these people on their internet that have become obsessed with the view counts of how many times your YC
application video gets viewed and where the people reading it are and all those things and so we actually built a whole system to to you know and I'm not going to explain how but where our views of your application video no longer get
reported to you and so you should have zero views and that is on purpose because all the efforts that people put into freaking out and posting on the internet about how many views their video got is a great example of
something that like in this place time is like why are you worried about this and talking about it and posting the reddit about it like and so you know the same thing on the application if you put a bunch of bit ly links in there you
know probably not gonna click on those here's the thing you know like just if you've used bit ly links know you know how many applications did we get less match seven or eight thousand I get ya we have many thousands of applications
but here's the thing the YC partners read hundreds if not thousands I read thousands each I read about 2,000 which means that you know we get some applications that are kind of like like gibberish or they're just not fully
formed for the fully formed applications if you put time and effort into writing your application we will put time and effort into reading it right this is one of the like crazy things that I think gets missed a lot like we read every
application you get so if you take the time to fully form your idea and put it down it's been the hour on paper we'll spend like dozens of minutes there will be like dozens of minutes worth of partner time just going in to understand your company and figuring out whether it really great fit for YC that's kind of like our price and so the closing thought here and this is related to people we say during the bat you know this is a
overarching lesson is you should think about it every stage what is the actual thing you should be doing and how do you do a good job of that then trying to gain the system and Paul Graham talked about this a lot back in the day of
people thought that he would teach them how to raise money well and how to hack the system and say the right words to raise money and you know what he would say is let me tell you the secret the secret to raising money is to have a
good startup and so I'm going to teach you how to have a good start up and then you can be bad at fundraising and you will still fundraise and that's it and it works and that again like he was this is like yeah this was like the thing this was the whole thing of Y Combinator is that it wasn't a system to teach you how to raise money and we don't even talk about raising money until we're like this area that's like I'm not even
part of the program if the whole thing is making a company that's worth investing in yeah and so back to applications your job is to make something that you describe in your application or a team that you describe
in your application that is worth that is good and then we will want to fund it and not you know you hack this isn't to get funded a couple more rapid-fire questions our idea is in a and the other industry so it's not in one of the dropdowns that
we have is there anything specific we should include in our application so it's reviewed by the right YC partners I think we're pretty good at knowing what to deal with others that could mean biotech or hard tech or basically any we
see some weird stuff so I would have confidence that no matter what it is if it looks like something related to technology or a startup that we're to money but the category like that yeah yeah we don't know we use difficulty too
much with us yeah is YC still interested in innovative nonprofit startups nonprofits what do we look for yes we do it's it's much harder to get in as a nonprofit way harder sometimes again people hacking the system they'll try to apply as a non-profit and then be like well actually because they think it's easier to get in it is not we're looking for people that are really dedicated to making a difference and ideally using technology in some way
first is just a standard on profit where they're getting a technical advantage to do it but unless this is already your life's work and it's a really big deal I would not like it's just much harder to get in that I've noticed something
really interesting I've had the pleasure of working get a couple nonprofits in the last few batches one of the really cool memes or trends that's happening right now is nonprofits that have a business model yep so they have some way
of actually generating income that they then use to like invest in the operations or grow or whatever and this gives them kind of this like well first of all they can treat it kind of like a startup because there's something that they can iterate there's a metric there's a KPI that they're working towards they can still raise money from from donations and other things but they have this kind of like steady state business model that's driving the
company forward we've seen some great companies so if you but have a you have a non-profit that's kind of in that in that vein I would highly encourage you to apply to YC because we've had great success with companies like those and we've got our eye out specifically for nonprofits like that next question about interviews what are the top three things we should focus on getting across in the interview kind of not specific to the
startup but more the soft skills or the the other stuff yeah I think if you read blog post some other people like the post hot guys and others and they talk about their interview the main thing you would want to do in a YC interview is to
behave like a normal human being and treat us like we are normal human beings versus treating it like this theater of awkwardness and so what do I mean by that people sometimes memorize scripts they're like I was told I read these
blog posts and it says I need to get my three key point across and so they come in you sit down with so hey how you doing and they just like recite this monologue that is an awkward it you know we're and usually they soft on most
people that even if you accidentally like within a minute or two you're gonna like you're gonna you're gonna fall into your normal like happy animal cell and so I think your mental model should be we are believe it or not
normal people and interviews is our job and we meet with a lot of people and to the extent that it is a fun conversation that it is an engaging conversation and that we feel as though you are act is that you're negating tourist I don't know people that is highly recommended versus that there's this over practice anything that that happens to people is they practice too much they treat it like like a pig it's not a pitch this is
not actually a pitch yeah congressman more than it's a natural conversation and that your mental model is we are normal people we're doing our job you're a normal person you're doing you your job and we're having a conversation
that's the middle model I would have to have a successful interview then yeah I've been like to get really agitated about it and treat it as a theatre production or something yeah yeah I've got a question from Toto are at Nomad
players about the coronavirus he's built a company that has in-person events as one of the primary things that they they do and they organize its worried that due to the coronavirus the whole like event sector is gonna be dragged down
and that his company in its nascent stage may be affected any thoughts on that one yeah probably it will be I mean like there's you know remember there were the fires in California last year that affected a lot of startups I was
running a start-up during the 2008 financial crash crash in certainly affected my startup and everybody I think what I remember from that era was the people that were really affected by it there's just not much you could do and for and so so again maybe you need to make revenue you maybe need to change your contingency plans and wait it out and for the companies that weren't affected by it them making smart strategic decisions often round not
spending as much like basically when the market changes if you can react to it quickly and inflexibly yeah flexibly startups tend to make it and it's the ones that don't really react that have the hardest time so I don't actually
have an answer for you about what you should do but yeah you probably would want to react to that also going back to like how companies die they usually die by running out of money or running out of the ability to continue working on it
so as always like spend less money and it gives you more time to iterate and to potentially find like a solution to this problem for you the other question on pivoting it's from garage he's built a service business and he's trying to pivot it to become a product business how how hard is it to do that it's pretty hard and there's different ways to define it so let's attempted to define what that would mean so a services business could be let's say
that you have like a call center and there's a bunch of people and the answer calls and it's a services business you have revenue and you want to turn it into alright let me give you a better example in fact we have a devil them dev
shops a dev shop is you do contract mobile app development web development for Perry common we see we actually fund a lot of these and when we do fund one it's usually that they the people running the dev shop find a specific
startup idea that is really good and they use their own dev shop resources to make the thing and then we just evaluate it as the thing the idea yeah and ignore the dev shop part and usually they can clean it up by the time they get into YC does that make sense like that's good we actually fund a large number of these and in some in some ways they're great because they've you've got a team that's worked together for a while so you they
know each other they know their their their their skills and they can actually move pretty quickly the downside here is sometimes people fall in love too much with that idea and they they don't think about it as like well they they actually like they may have too large a team yeah work on that first idea and then they have to pivot and you're left with like 10 people kind of hanging out with an idea that really only needs to and you
get confused around consulting revenue where you're like you try to pretend that your startup revenue is revenue from the dev shop and like half the company's working on the product like there's all these like complications actually a much
a common case another case it's two founders they have an idea and instead of building the product they actually go and find customers who will pay them to kind of manually do the thing that eventually the product will do and in
this case it's like we see this sometimes for like DevOps where then the the problem is they need to build some sort of like infrastructure and they're experts in this infrastructure instead of like building the whole product they
kind of like find a customer that's willing to pay them a couple thousand dollars like a real sum of money and then they like basically doing cheap consulting but they own the product that then they can find other companies to
sell to but that I think we've seen pretty good success with yeah and that's I would not call it a service business I always just call that yeah but but to the other to the founded like yeah yeah at the beginning it doesn't feel like
you're selling a product like you're kind of selling your time but you're getting them to fund the development of the product that you will then insult other people that's that's like every day of the week I think we do that
what percentage of international applications get accepted to YC is it the same like an average international application will get accepted at the same rate as an average u.s. except application basically like I don't have
I don't have those numbers memorized but basically yes the percentages all line up and there's not like a wild difference between them yeah and again oh it's going back to what Dom said like a large percentage almost a majority of
companies in YC have some business outside of the US things like that is totally normal yep one other thing that I'll clarify is like back in the old days YC used to have this thing where it's like they really encourage companies to move to the Bay Area and that was like a meme that that I remember as it as a founder like oh it doesn't YC say like you have to move to the Bay Area that's not the case we encourage our companies to come
to the Bay Area for three months because it gives them a chance like if you're living in Indonesia or living in Japan or somewhere gives you a great opportunity to network and to build a community here in the US but we have
companies that the minute YC done they raised their money and they like they set up their HQ wherever they came from that's like totally fine exactly okay a couple more where am I so you know other ones Joan that I should be oh here's what you could do
Elliott from unify asks does having a provisional patent for a mobile app provide value when applying to IC or when pitching investors for initial funding rounds probably not patents are usually more relevant in hard tech and it could be that there's a business process or you're a biotech company software patents in general are problematic that's feel free to Google that that's a whole thing and most people are not super impressed in terms
of things that you could spend time on that are very value add versus not you can spend so much time creating a sophisticated IP strategy when you have zero customers and it may feel like you're accomplishing a lot generally
speaking for for software patents are not super valuable and investors bought it's almost like a line item that most people will ignore yeah unfortunately and so there could be counter examples maybe you're one but like for the most
part this is a great another great example of something you could spend tons of time on and it feels like work and that is not exactly work or it's not valued it's as if you never did it like focusing on an MVP focusing on getting initial customers is gonna be like way away better you super time like 99 times out of 100 basically cool well Dalton thanks very much thank really appreciate your time and that's it for today thanks