SPEAKER_00: Hey, how's it going? This is Craig Cannon, and you're listening to Y Combinator's podcast. Today's episode is with Kevin Hale. Kevin is a partner at YC. Before working at YC, he co-founded Wufoo. Kevin's on the podcast today to do some office hours and talk about this year's edition of Startup School. If you'd like to learn more or sign up, check out startupschool.org. I'll also link it up in the description. All right, here we go. Kevin Hale, welcome to the podcast. Hi, Craig. You are running Startup School this year.
SPEAKER_02: Me and Adora are hosting and the main instructors for Startup School.
SPEAKER_00: So many people know about Startup School. We've talked about it on the podcast before. What's different in 2019?
SPEAKER_02: 2019 is a reaction to all the stuff that we learned from 2018. And so I'm going to talk about some stats. So last year, we had over 15,000 people register and participate in Startup School. And we had about 5,000 graduate. From that graduating class, we had about 391 of them end up getting interviewed for the last batch. And then we accepted over 60 companies. It represented 30% of the batch. So Startup School now represents the single largest source of companies that are accepted into a YC batch, which is super exciting. Because the founders in Startup School are so different than what I think a lot of people think a YC company is. So more numbers to throw at you. 83% of people who started doing Startup School, they were pre-launch. So no traction whatsoever. 52% were working full time. So the other 48% was only part time. 63% were single founders, which was very surprising to us. It was not so many teams. And then 59% were international. And so for us, I wanted to make a new version of Startup School that was going to be a better fit for all those different groups of people. Because I felt like the last one probably wasn't a perfect fit. And so we shifted the content so it's more focused on helping you understand ideas, evaluating them the way an investor would think about them, so that if you are spending time on a startup part time, or you're by yourself, or you're trying to figure out what to build an MVP for, you have the tools necessary. And you have the things that we help our companies do to evaluate, for example, a pivot,
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SPEAKER_02: or evaluate which of the ideas is worth spending time on. The other thing we did was, for all these single founders, we realized, holy crap, it's like over 6,000 people who were all trying to do a startup. And we constantly tell people finding a co-founder is the best thing you can do for a startup. And so we're like, why don't we just help them do that? And this is super important for us, because we're finding, increasingly, teams are being created, and other people are asking for equity to help them find co-founders.
SPEAKER_00: Other people meaning other investors, other programs. Other investors, incubators, programs, et cetera.
SPEAKER_02: And for us, we actually feel like the only people you should be giving equity to for a co-founder is two other co-founders. So we're going to make that free. We're building a directory. We're allowing you to state that you are looking for a co-founder. And then the group sessions that you'll do during startup school, you'll be matched up with other single founders in a meeting. So you'll get to meet, talk. And again, we don't expect that you're going to solidify a team during startup school, but you at least will start introductions and start building that relationship, which is needed to figure out if you're going to be a good fit or not. And we're really, really excited about that, because we think that's one of the best things we can do to help all these single founders. And the last one is for all these international people. Last year, we did the tapings weekly at our office, and we invited people to come and attend the live tapings. People were flying from all over the world. It was incredibly popular. But we felt really guilty, because that's a waste of money and time, we think, for people to come for a one-hour session with partners. We are humbled that people think that that's worth it and valuable. Part of what we're going to do is we looked at the data for, what are the top 18 cities that people attended or participated in startup school, and we're going to go out there. So we're going to record some lectures, and we're going to host startup school meetups. Partners are going to be in attendance. You can ask and meet with them one-on-one. And it's going to be at 18 different cities. And it's going to be, I think, super exciting that these people will, one, kind of get to interact with us, and we get to interact with them, which I think is always energizing for us. But the second thing is startup school creates structure and community. And I think when you're meeting other people who are going through the same thing, from the very first startup school, when it was just like a mini conference, everyone was always excited about the energy of being in a room with other people who are having a shared experience or shared ambition. And so I want to give that opportunity to as many people as possible, not just the ones who can make it to San Francisco.
SPEAKER_00: Well, in addition to that, the online community allows you to meet people near you as well. So like when you're finding a co-founder, for instance.
SPEAKER_02: Yes, definitely. Actually, we have a fairly sophisticated matching program for the group session. So you match with people based on your time zone, your level of progress, your sort of preferences that you put into the software, et cetera. Kyle Corbett, he's the person from the software team working on startup school software, did an awesome job basically looking through the data, doing regression tests, and just proving that we're going to have a really good group session. That other thing that we're doing is we initially had it for last year. You got into a group with 20 other startups, and you followed them all the way through. Unfortunately, a lot of people just drop off over time. And so those aren't people you can count on. What we've changed instead is that you're always going to be matched up with people who are actively participating in startup school. And that's just determined on. So your group's going to change a little bit. Your group is going to change every week, actually. You'll meet more people, get more people to build into your network, get more advice. But also, you're always going to be matched up with people who are serious about this, which I think is also going to improve the quality of the program for people.
SPEAKER_00: Yeah, I hope so. And just to clarify for people listening and watching, we always put all this content on YouTube. It's not paywall. It's not behind anything.
SPEAKER_02: Absolutely. And the thing is, I actually think the lectures are the least important part of startup school. It's one thing that it brings a lot of attention. It helps build up the brand. But those lectures are a way for people to understand and get help if they can't commit to a 10-week program. But if you have the ambition and passion and a desire, the 10-week structure in terms of how we set up group discussions, the assignments, the way we hold you accountable by putting in weekly updates into our software, all of that is actually the most powerful thing that can help your startup. And so again, we're happy to give away all the lectures for free. It's something that we've always done for YC. And so this other part is the part that we're trying to figure out how to scale.
SPEAKER_00: And the lectures are going to be a little bit shorter this year. Now they're about 20 minutes.
SPEAKER_02: We're taking a cue from what's popular from this YouTube generation. And so I think you can watch.
SPEAKER_02: People just drop off on the hour-long lectures. Some people who are serious, they really love it. What we want to make sure is that you're going to spend 20 minutes, and it's going to be the highest quality 20 minutes that you're going to get. I've given instructions to all the people doing lectures that we're focused more on practical, tactical information and then try to back up stuff with as much case studies as possible. So therefore, it would always just feel like I'm watching a lecture, and then you're not going to feel like I don't know how to apply this to my company. And so I think that will be a really nice difference. Because some lectures, I felt like for companies who were really early, they're just like, I'm so far away from even thinking about this stuff. And so to me, it's like, OK, great. We have room to make a lot of great content to help people with first principles.
SPEAKER_00: It's inspiring, but not always relevant.
SPEAKER_02: Those are the ones you go back to once you have things going well on the ground. And I think we have enough of that inspirational content, and there's probably enough of it being created by lots of other people. Everyone else.
SPEAKER_00: Yeah, absolutely. And so just to be clear, signups are open right now. When are they open until?
SPEAKER_02: They're open until July 22. So pretty much right up until it starts on that day when I release a video on orientation. And then the first lecture is recorded on the 25th, and then we release that live to the public the next day on Thursday, so on the 26th. Yeah.
SPEAKER_00: Right. Cool. So let's get to some relevant and important advice. We have a bunch of Office Hours questions for you. Many of them, I think, for whatever reason, maybe it's the mood, the startup school announcement, are about the early days. So we have both of your startup and just startups in general, starting a product. So let's start with this very simple question. In the early days of Wufoo, how did you give a great customer experience, like the basic beginning days?
SPEAKER_02: So it's actually relatively easy to provide a good customer experience. I think the default is people expect to not get a response, that it's going to be a really slow response, and the response that I'm going to get is not relevant. So those are the three ways that you can really fix this. The first one is make sure you respond to every single person that has a question or problem issue. Second, we responded, on average, seven to 12 minutes. And then the third one is the person that's responding to your question is most likely probably was going to be someone that worked on the software, was an engineer. And so in the early days of Wufoo, it was like the founders. We were answering all customer support for the first two years. And we just got really disciplined and diligent. We said this was going to be a number one priority for us, that if people are taking a chance on us, that they deserve the respect of getting a good response. And we want to get that feedback. And so that made a huge difference. One is that the people building the product got all this awesome feedback on how to improve it. You also have the right feedback loop, where it's just like, oh, I'm tired of getting this question for the 15th time. I have to do something about it. And the result also is that we started doing a lot of stuff to help people help themselves. I would say Wufoo in the early days had some of the best documentation, screencast, tutorials, help tips. And then we also got very diligent and passionate about building really simple, intuitive interfaces. And that meant actually it was really hard to add features to Wufoo. It was really hard to add a button or a piece of copy, et cetera, because we just knew that, oh, that results in extra customer support or complexity. And so how can we do this with smart defaults or ways that we do this so that we do it with as few different controls or manipulations as possible? And the result is a software that just mostly just works right out of the gate for you, is doing what you want by default, if possible, and that anything that we felt like was not worth that trade-off, we would say, hey, you have to go somewhere else for that kind of complexity. Because eventually, people would graduate. And we would know where we are in terms of the lifecycle of people's form dates. At some point, you need to get a developer and build your own app if you need something really complicated.
SPEAKER_01:
SPEAKER_00: Yeah. And I like that part about your talk recently when you were describing how Photoshop was putting the stroke in red. And that was prompting users to learn the settings. And you did something similar in Wufoo.
SPEAKER_02: Yeah. So in that case, I do this talk to the batch about affordances. And so I talk about, basically, there's an affordance of something really ugly, especially in a design app or a photography app like Adobe Photoshop. And so when you put a border on something, the default was this three-pixel, dark red line. And the affordance of that is designers want to change it. They'll do whatever it takes to change that default. And what it does is it naturally gets them to learn how to use the settings and find the properties, et cetera. And they don't even know they're doing it. Like, they're being kind of annoyed about this one thing. But they're actually learning all the skills and all the things that will help them change all the other settings in Photoshop, which I think is a really brilliant, intuitive thing. And so for us in Wufoo, we tried to do that in a lot of other places. And a lot of that had to do with helping discover certain functions or features that would be hidden behind tabs that were unnatural to find or to think about. And what we would do is we would call things, we would call the default form untitled form. No one would want to have their form called that. So they default naturally wanted to click on that. And as a result, it revealed all these extra settings that were kind of like candies. And they don't even realize that they were learning something. So to me, I always like that interface that teaches people without them realizing they're being taught. I don't think there's many people who send it for a new piece of software and they get tossed into a walkthrough tutorial and they're like, oh, I'm so excited. I'm all about the wizard.
SPEAKER_00: I don't know what you're talking about.
SPEAKER_02: I think the people who are the best at this are video games. They do a phenomenal job. And the people who are worse at this is B2B enterprise software. I think they don't realize how important it is to get that storytelling and that natural feeling right. They just think, oh, I just see someone else has this forced walkthrough. We should just do this as well. Not realizing that the mindset of your user is panicked, trying to evaluate is this something that's going to solve my immediate problem, and so is not going to put up with any weird forced bullshit to walk through your maze.
SPEAKER_00: Or that's part of your business model, offering expensive trainings. Yeah. So in the very early days of Wufoo, there's a question from Sunil Tej. They ask, how is Wufoo 10x better than the market when you just got started? One of those, response time on customer support, what were the other ways?
SPEAKER_02: So I wouldn't call that a 10x improvement. That's probably, oh, that's a good improvement. But I don't know if anyone is like, oh, I want to switch for great customer. Great customer support is actually a good one for improving retention. And it's something I also tell people about in terms of that's a great user experience. And most user experience features, a lot of people like to be forward on them, especially designers. It's like, it's really beautiful. It's really easy to use, intuitive. And the problem is those words are the words that no other competitor or no other company will ever say the opposite of. And therefore, when you use it, it means nothing. So they only help with retention. So as far as conversion is concerned, when we built Wufoo, it was in 2006. And that is the era where Gmail just kind of came out. And so it is a world where AJAX was brand new. And then the idea of building a modern web app that felt kind of like a desktop came into being. And so all the other form builders at the time was literally, it was like a page refresh for every change you want to make. And so it made that process of creating a form really, really difficult. So one thing is we changed the level of responsiveness so that you could build a form really quickly. The other thing we did on top of that was build an interface that was like simple drag and drop. It was WYSIWYG-like. So other people, it's like a form builder
SPEAKER_02: is a really interesting user interface challenge because it's an interface that builds interfaces. So there's all this weird kind of complexity. So you have to kind of show what is the difference between my interface, the tool that's helping you build, and the interface I'm trying to actually create. And so a lot of the aesthetic weirdness of Wufoo had to do with all this crazy colorful stuff. This is Wufoo land. And then stuff that you're building, that's probably this drab gray and white form. It was really easy to distinguish between the two. And so being able to drag and drop and be like, hey, what you know you want as a non-technical person is I need to collect the name, email address, a bunch of questions, et cetera. You know what you're looking for. You've seen other people do it and you want to copy what you've seen.
SPEAKER_02: A lot of other apps at the time had this different kinds of approaches. One of them was like, hey, we're a database application builder. And so they would start with being like, what's this a structured data that you need? Tell me how to all this stuff. And so what ended up happening is like, you had to know too much about development to build the forms instead of being like, hey, I just need to copy what I want and can you just magically make it work? And so that magic was the big thing that was changed. And when we started Wufoo, we were able to prove that it was going to feel that fast by releasing actually an interface demo. So the very first thing that we launched, so I think we got into YC for winter 2006. We wrote the first lines of code in January of that year. We launched an interface demo in early February.
SPEAKER_00: Meaning a video, screen recording. No, no, no, it was like an interactive.
SPEAKER_02: So all you could do was like drag and drop the fields that you want and then pretend like you're going to hit save. Like it looked like you were changing all the settings for it and then you hit save. And what it came up, it prompted was just like, hey, you just completed the interface demo for Wufoo. If you're interested in using this builder for other forms in the future, sign up. We got over a hundred thousand people who went through that demo and gave us emails in that interface prototype. Basically it showed people kind of like Dropbox's video demo. It was like, oh, this is what it should feel like. This is what it should look like. And so by making it so it was like no signups to feel what the change was going to be. For us that helped people be like, oh, I can imagine myself using this or I can imagine myself giving this to someone else and that they could use it and not have me build this really tedious thing, which is a form. Where were you distributing that at the time?
SPEAKER_00: We had started a blog.
SPEAKER_02: So when we first got started in entrepreneurship, we realized we do nothing. And we had attended a talk at South by Southwest by Jason Fried. It's called Doing Big Things with Small Teams. And they mentioned at 37signals
SPEAKER_02: that they were blogging for years before they finally released Basecamp, their first product. And so they had an audience of huge, hundreds of thousands of people who followed them before they launched. And so when they got started, they were not starting from zero. And their piece of advice they had was like build an audience first. And we're like, we don't have an audience and we don't have a product. So let's start doing that. So that night we registered a domain called ParticleTree.com. And then we just started writing about stuff that we didn't know anything about. Like literally we would research stuff about entrepreneurship, about design and about business. The three things we were like, this is what we're gonna need to know to start a startup, like a technical startup. And so we would research this stuff and we would write these beautiful essays. It was something like part of my expertise. I knew, I studied modern American literature, I was editing for my newspaper. And I was like, I know publishing, I know how we can write this stuff so that it's clear for people. And so that's how it got started. And we build that readership to 100,000 subscribers.
SPEAKER_02: This was like the heyday of Delicious and Slashdot. And so good content got spread around pretty easily. And it's actually Paul Graham had recognized us from our blog. And that's why I think we got in. That was like our proof that we got stuff done.
SPEAKER_00: Right, you can at least make something someone wants. Maybe it's an essay. So we've been writing on that blog for multiple years,
SPEAKER_02: I think about two years. And so when we launched this prototype, we'd launched it on the blog. And I was like, hey, we've taken all these skills and we're starting to build a company. We're building this product, come check it out. So we had all these readers who were developers and other entrepreneurs who are actually our ideal customers coming in to try a thing. And number one, it was not like they were coming in
SPEAKER_02: and be like, I'm evaluating and I don't know if I trust this company or whatever. They're like, these guys have been writing and been generous for multiple years. I already trust them. I'm excited about using this thing that they've been so generous about. So that changed the relationship, but also allowed us to like out of the gate be able to start ahead of the curve. That other people wait until they finally build a product.
SPEAKER_00: Or at that time, like launch and tech crunch or something. So you create that early pop. Did you guys have any interesting referral mechanisms or were you just word of mouth?
SPEAKER_02: So when we finally launched, Wufoo by its very nature could spread itself. So what we had is we had a freemium product and on the free plan, on the confirmation page, it would say it was powered by Wufoo. So we just had like naturally, like as people created forums and shared it with other people on our behalf, they would see, oh, great. The second thing is we built this innovation is allow forms to be embedded on other people's websites. So that was like a new thing. Like people would embed weird chat widgets and other images and galleries and stuff, but embedding a forum was unique. And so we had designed it so that Wufoo forms could be embedded. So you don't redirect them, you put them on your own website. What it meant was like a Wufoo form that says powered by Wufoo was put on all these different websites as well and would link also back to us.
SPEAKER_00: So upon completion, it does an Ajax reload in the page and then you see the logo.
SPEAKER_02: Well, you would see on the confirmation page, but also on the free plan, if you embed it, you would see that this form was created with Wufoo. So both of those things would mean that like our users were spreading the gospel on our behalf and that sort of helped. Secondly, confirmation emails also had it, et cetera. So there's all these like nice mechanisms that allowed that to sort of work. We had the reputation from the blog and then we had really great word of mouth as a result. Like the product just worked really well. People like were satisfied with customer sort to help them deal with whatever sort of weird features. And I think it was the design of it
SPEAKER_02: because it was so strange. Like it's a very casual app for something that's meant for like a lot of business and like, yeah, that's true. It's like red and yellow is like McDonald's colors. The mascot's a weird T-Rex. Has all this weird kind of like things that, if you look at MailChimp software that you will recognize, that is cute and witty, et cetera. It was a personality of an app that you're like, oh, I would like to be friends with whoever made this. But what it did was it made people smile when they use it and it was easy to remember to recommend it to other people. It was like, hey, here's an app that actually doesn't make me want to kill myself, remind me that I'm working in a cubicle. Unlike all the other apps that we've said at the time, which was all gray and blue, very boring and kind of dull.
SPEAKER_00: Those little things that show that there's actually a human behind the screen go so far, especially in the early days.
SPEAKER_02: Definitely. I think definitely for sticking out. Because if someone's evaluating a bunch of different tools, then it's like, oh, what are you going to do to stick out? And so if everyone's comparing you against a checklist of stuff, man, there's going to be like, it's going to be hard to be like, if they're only maximizing this stuff. And so in the early days, we didn't have a checklist of all the things we can have. We had to rely on one, this extreme ease of use, and then also this friendliness. It's like, oh, I'm here. And then while there's a lack of jargon and the help kind of talks to me in a way that's very human rather than in a way that like, it's like a robot talking to a developer, et cetera. And so that humanizing element made it be like, oh, I can trust this app to be given to my non-technical people. And the Rufu support is so good that they're not going to bother me. Rufu got easily recommended by technical people all the time.
SPEAKER_00: So to back up, and given I know like some of the startup school content coming out, let's talk about even just coming up with the idea for Wufu. I know that's a big thing for people getting into startup school. Some people like sort of have an idea. Where did the idea come from? And then how did it evolve during YC?
SPEAKER_02: So before I get started, I just want to make it clear. If you don't have an idea or if you have a bunch of ideas but you don't know what to pick, startup school is going to be great for you. We've actually got lectures dedicated to that topic. And so I think that's going to be helpful. And then if you're working on an idea and you're like, I don't know if it's really working, should I pivot? We've got a lecture for you as well. For us, we actually pitched, like back in the day, you could pitch multiple ideas. It wasn't like a separate question for what other ideas you had. You could put multiple applications. Within the same application. Yeah, something like that. Or you can submit multiple. And so when we got accepted for an interview, we had two ideas we had submitted and we had to actually ask ahead of time. We're like, oh, we had submitted two ideas. Which one should we prepare? And they had responded very quickly. And they were like, just prepare for both of them. So we're like, okay, cool. Thanks. So we do all this work and we come into the room and then the first idea, they meet, they go, no, no, no. We're not interested in it at all. Like they knew immediately when we just described it, like, no, we don't want to. What was it? It was an affiliate link marketplace, basically. Not very interesting. Like there are big businesses doing that, but like I'm glad we didn't go down that road. I don't think that would have been unsatisfying. And then this other one was not actually Wufoo, the way we described it. We called it a new type of content manager with something we called reversible forms. So the idea was like, oh, you know, the form that you fill in on the backend of WordPress, that's a form. And then the comments form is also formed. So what if you made it so that forms could be like private or public? We called it reversible. We made all this new jargon. That's why we decided to describe it. It's a horrible way to describe the product. And Bijuu kind of looked at us immediately and was just like, kind of was like, I don't know what you're talking about. And then he was like, I think you're building a form builder. And we, of course, had already like researched a little bit of the market. We're like, no, no, no, no, no, no, no. We don't want to build a form builder. We've seen the other products in the space. They're boring. They look terrible. That's not space we want to be. Content managers at that time were the hot thing. It was like movable type and WordPress. They were like blowing up. We thought like they're doing interesting stuff in the product space. We want to be in there. And then what we didn't recognize until
SPEAKER_00:
SPEAKER_01:
SPEAKER_02: a little bit after that interview was like, oh, that's the whole point. Like that's the opportunity. All these people are bad in this space. And obviously they're being supported. There's enough people doing it, but like no one has really conquered it. And so for us, like that pivot happened in the middle of the interview. And we had not written a single line. We didn't even explain the idea very well, et cetera. And so it's actually one of the like big passions about why I'm doing startup school. It's like, I worry that people think that companies like mine back in the day cannot get into YC. And even though we constantly try to say, it's like we do take single founders. We do take people without an idea. We mostly focus on the team. A lot of people just like hear what happens at demo day and they hear these teams with crazy traction. They think like, if I don't have that, how can I possibly get in? And the answer is like, you don't need that. And with startup school, I hopefully it will make people feel more comfortable with that. It's like, oh, there's a program that explicitly says, you can come here to get help with that. And then actually we're able to use that information, that relationship with those founders during startup school to actually say like, hey, yeah, we want to take you in. Actually most of the startup school graduates that we took, many of them were like pre-traction. Many of them had very, very little traction that we took. And some of them were pivoted after they got accepted into the batch actually.
SPEAKER_00: Well, that's what I wanted to talk about. So like not to name names, but we're in the middle of the batch or the first third of the batch right now. People are summer batch. For the summer batch, people are restarting. They're completely pivoting, trying again. Like all the polish that people project onto YC companies that get in that are in the batch, it's not always true. Sometimes the pivot happens a week before demo day.
SPEAKER_02: And then they still will be able to raise, et cetera. Because number one, most investors invest in teams. And number two, if you do the storytelling and if the idea is sound enough and makes sense, those two combine a great team and an idea that is well thought out and told really well to people, that's enough to get people excited. Because like what I am as an investor is trying to figure out is like, can I imagine a world where this team with this idea is going to succeed?
SPEAKER_02: That's actually the baseline for like seed investment. It is not that like I have to have a crazy amount of proof that this is gonna be $10 billion or I'm not interested in it at all. That is not YC's model. Like we would like that, we would like teams to be, but we are humble and vulnerable enough. And part of the shotgun model is based on the fact that is like we actually can't accurately predict who's going to be a $10 billion company. So we invest in 200 companies in a batch.
SPEAKER_00: Several hundred a year. Yeah, so you talked about Wufoo as an unsexy idea. Do you have a mental model for finding unsexy markets or products that people can use? A mental model.
SPEAKER_02: I don't think about it like that. Like here's the thing, if you are a really great product technical team and you're entering an unsexy space, that's good because you're entering a space with like less competitors. Those who are like great product teams, but entering in like consumer spaces, it's like, my God, that is a crazy Mad Max arena where a lot of good people are vying for that stuff. And it gets really, really difficult. And so to me, entering a tedious boring space
SPEAKER_02: is about mindset, about like, what's your mission? And the best advice I'd heard about this is actually comes from Ben Chestnut. He's the founder of MailChimp. And he says, is like, I don't like people who are obsessed with like only doing what they love. That's like a recipe for being unhappy. Like you're like, if I don't love it, I'm not gonna do it. Because like, number one, like that's not practical oftentimes in life. And also you kind of sound like a brat, right? It's like, oh, so you won't do anything. You won't do the hard stuff. You won't do anything that's difficult, et cetera. He actually says, the skill you most want is like figuring out how to love whatever it is that you do. And so that is like, it doesn't matter if I'm building a form builder, I'm making a weird widget or I'm writing a piece of like boring email copy or marketing or doing whatever for start. Like I have figured out a way to like make it my own and I will do the best version of it. A lot of Rufus personality has come out of it was like, oh, I have to make this like confirmation billing receipt. I can do this the really boring tedious way where I will hate it all the way through or I can figure out, it's like, oh, where can I put some sparkle and magic in here? So therefore it's like, I'm proud of it. And Rufu, you easily gonna be like,
SPEAKER_02: oh, no one wants to make form building their life's work. But to me, I was like, oh, this is a body of work that I'm so proud of because like everything in it was something where like, oh, I put some attention to detail and at a fundamental level, it just worked right. Yeah. These problems are also like usually huge markets. So like if you wanna make money and you can like bring yourself to do that, like that's like a great motivation.
SPEAKER_00: Yeah, and I think often, I mean, you've read Man's Search for Meeting, right? Like Victor Frankl. Oh yeah, that's great. I mean, it's terribly sad, but it's great. And this idea is core to it. But also the fact that, you know, like people love getting good at games full stop. And so getting, making the best form builder, that's huge. And then also I think it's helpful for people to just imagine what it is like to win whatever game they want to play and just play it out in their head. And then you can just keep pushing.
SPEAKER_02: It's actually a big part of the philosophy and religion and like that deals with like mindfulness, you know? Like sweeping the temple. It is like, you can do it in a way that is like not mindful, not present, or you can do it in a way where it's like, oh, I'm paying attention. I'm learning stuff about myself and the world and actually being there. And so, yeah, I don't know. Like I think founders who figure out how to be happy
SPEAKER_02: working on what sounds like not sexy, those people usually have the right mindset in their head about work, about how they think about stuff. And so like I get excited about those teams. Yeah, totally.
SPEAKER_00: Well, just, I mean, just having a customer driven mindset makes a huge difference. All right, so shifting a little bit to slightly later stage, Sivaraj Ganesh asks, how do you know if you've achieved product market fit? So for Wufoo, what was the point?
SPEAKER_02: I don't think if you ever get there, I don't think there's any given point. Okay, so I'll tell you this. Wufoo is such a different company than most because we only raised $118,000 for the whole life of the company. So back in 2006, YC was only giving $18,000 and then we only raised from two angels $50,000 each. And that was it. And Wufoo was a company that only had 10 employees
SPEAKER_02: when we got acquired about five and a half years later. And we had done that on purpose and we had profit sharing. So when we gave equity to the employee, like we didn't hire anybody for the first two years by choice.
SPEAKER_00: It was three of you. It was just three of us.
SPEAKER_02: And then when we gave equity employees, we were like, we're not gonna give stock options. We're actually gonna give you equity. But the result of that is that it's gonna be really hard to get that equity. You have to really sort of earn it. Because by that time we had to de-risk a lot of the growth mechanics of Wufoo. The revenues were just basically almost doubling every year. And so with the profit sharing, my salary was actually doubling every year. The thing is we couldn't think of any place to put the money that would help it grow faster or would make it better. That was literally how efficient we were. And we had talked to so many other companies. And actually after we got acquired by Survey Monkey, we actually were really relieved. Because we looked at all the other stuff that they tried and we were just like, yup. Didn't work. There's nothing else. Our business was the kind that's like, the market is so huge and it's just nice and steady. And so I believe there's a type of billion dollar company where it's like, if you can figure out how to do this craft and do this work for 10 years, it's inevitable.
SPEAKER_01:
SPEAKER_02: And so increasing burn like crazy and spending a bunch of people on a team. I mean you could have done a ton of paid marketing.
SPEAKER_00: You could have spent a ton of money on that.
SPEAKER_02: So Facebook was really brand new at the time. Twitter had just got it invented. So there wasn't too many. Google. Google, right. But no one's searching form builder. We were successful at getting a lot of SEO traffic. Yeah. And the reason we did that was we built a form gallery. And so every different type of form you could build, there was like a dedicated landing page. It's like, hey, you can have a contact form in like one second in one click. So that was really successful for us for people who were searching that way. There's no need to buy an ad for that.
SPEAKER_02: And it was one of the things, it was a trade off. Like what do we want for the culture of our company? And I got to choose based on our growth rate and the mechanics of the company. And we had interviewed, like again, our roots was with this blog to learn about all this stuff. So we researched things like what was the literature saying about best practices for management, hiring, et cetera. And so a lot of, and then we've interviewed tons of other like entrepreneurs and asking them just like at various different stages of the company. And especially in the early days of like YC, talking to tons of other founders and we would find out, it was like, what made people happy and what made people not happy. And hiring like crazy was consistently, everyone was like, when my company got to a certain stage and I had this many people around me that I didn't even know who they were, I hated it. And so for us it was like, we're gonna do everything we can to. Let's not do that. Yes. Like let's not make it so that this management thing and bringing on people that we're not passionate and care about, not gonna be a part of it. And so like that became a core mission, is to make us efficient. And the profit sharing helped reinforce that. And then those values helped everyone be on board
SPEAKER_02: for like why everyone should do customer support in the company. Because it's like, hey, if we have to bring on more people to do this stuff, like that eats away at our own success, eats away at the culture that we don't want to change too much, et cetera. So all of it was reinforcing.
SPEAKER_02: What was the question again?
SPEAKER_00: So yeah, I was gonna say, just so I get back to the question. When do you know if you've achieved product market fit? So as a result,
SPEAKER_02: I feel like there's never really been a clear definition for it. But the ones that talk about like breakaway startup success, they say product market fit is one where it's like, you feel out of control. Like you're no longer driving the boat. I don't feel like we were ever at that point, but I would not say that we were not at product market fit. So that's like the weird thing. Like we were not a company that was gonna have an inflection point that was gonna grow to some, right, an exponential rate. Well, we were a company that was in charge of our own destiny. And we were not trying to figure out where the new customer is gonna come from or who's gonna beat us, et cetera. And so it was a very different kind of mindset. It's like, I felt like we had product market fit, but it was controlled. And so to me, it's like, it's just different. Like there's an argument that you make is the path that we have. And that I have to talk to companies about this. Like you might have a growth pattern that's not gonna justify venture capital. And we were really lucky to recognize that. And we did not give up extra equity to get money to try to see if like, are there other avenues of growth or channels that would make that happen? And the result is all the founders had so much equity in the company and that our employees who got equity actually had equity in the company, not just like options and shares they would have to pay for. Yeah, or just a tiny fraction. And so when the exit happened, our exit like equivalent for us is something that would have been three times larger for some other company in terms of returns back to the founders, et cetera. So that's like a whole different thing that you can manipulate. And I think a lot of people don't talk about.
SPEAKER_00: Very much related to what I was saying before is like, think about this game that you're about to enter into and what does it actually look like to win that game?
SPEAKER_02: And I think for many, many, many years, I think Wufoo's returns were still like one of the top returns back for YC as a result. Yeah, dollar for dollar, yeah. Yes, exactly. And so that's something to keep in mind.
SPEAKER_02: It is like a company like mine is considered a big win for YC also, but it requires discipline of the founders and also recognizes a different channel. That being said, my type of company is so rare, actually. This is not like it's a choice. It's actually not many companies have the luxury of being able to grow that way. I felt like we were really lucky to have that path and to recognize it and not create a bunch of extra burn and give up extra equity. Many people who might have that be a path, they're like, oh, I gave up all this equity and all this, and then I increased my burn that I don't have a chance to go back and do this other path. Definitely not. That's another angle of it, but most companies who are successful actually are ones that, oh, you figured out there's a rocket ship there. Those are the ones you mostly hear about, but I would say those are actually more common for YC than the ones who are steady growth and eventually be big. Yeah, so would your advice then be just run the experiments
SPEAKER_00: incredibly cheaply to figure out?
SPEAKER_02: You should always be frugal. I think any partner at YC will say you should always be frugal. That's number one. Number two, understand fully, number one, why you're giving up the equity and why you're increasing the burn. Those are two big sacrifices. And so you should have a very strong level of confidence that giving up those two things are actually gonna result in growth. I think a lot of people will give them up prematurely thinking it will result in growth. And so when that happens, it's usually a tragedy, almost always a tragedy that happens. And so this was why our biggest advice that's kind of ignored is treat every fundraise as if it's your last.
SPEAKER_00: People just think that's the point of this game, unfortunately.
SPEAKER_02: So anyway, product market fit. I had a very different kind. It's an extremely rare kind that you normally don't hear about. The kind that you mostly hear about is ones where it's like, oh my God, we have something that's so good for the market is that we can barely hold on and we have to hire like crazy, et cetera. And so if you have to ask the question, you definitely don't have it. That's number one. And number two,
SPEAKER_02: don't give up everything to try to achieve it. Like again, it's one of those things where like, you should know kind of right away whether it's gonna work or not.
SPEAKER_00: Well, they had a little addition to this question, which was on the other hand,
SPEAKER_00: how do you know if your product just isn't even noticed yet? And so, I mean, I think you could lump this into the category of like, do you have a hundred people that love it? But what would you say to that?
SPEAKER_02: So there's two things. And actually you should refer to Don Caldwell's content. So he did a video on the YouTube about, I think pivoting a little bit. And then also he actually did like a tweet about a storm, about a bunch of ideas of how companies get locked into too much, like being really diligent. I actually think it's extremely difficult to know when to give up. Because there's no shortage of stories of founders who like they just kept at it. And then finally something clicked. And there's others where there's plenty of stories where it's like, we finally gave up and changed. And then that thing worked right away. Slack. Yes. So to me, I actually feel like there's no good answer. Quite honestly, like this is where you need a little bit of luck.
SPEAKER_02: And the question is like, you kind of are actually asking your own self is like, what are you gonna be happy with? Right? So if you are just like, man, I just want a company that like I'm proud of, et cetera. Then there's a certain level of growth that you can want. If your goal is like, I want a company that is gonna be a fucking rocket ship. Then yeah, you need to basically be like, all right, is it a rocket ship? Right. Is it a rocket ship? Is it a rocket ship? And then there's a certain point where you wanna say it's like, well, it's not a rocket ship. And that point is usually before you run out of money. And I would recommend is that you want, like when you start getting down to nine months of runway,
SPEAKER_02: you should start seriously asking yourself about like, what would have to change definitively for me to know that this is a rocket ship? What would I have to figure out? And then you'd like time box it. Cause like, once you run out of money, it's game over. And then the lower the money gets, the lower the leverage that you have to ask help from someone else to help buy more time.
SPEAKER_00: Well, and you're just shrinking the amount of time you have to run experiments. So you're not finding anything out, you're not learning. They asked one more question that I think is also quite common for early stage founders, people doing startup school. How do you even gauge the size of a market?
SPEAKER_02: Oh, how do you gauge the size of the market? Usually that's a little bit of research. I feel like in whatever space that you're in, you're gonna have a rough understanding of it. Like basic demographics, there's tons of research studies on all these different industries. Usually companies themselves, especially big ones are touting how big the market or what the opportunity is, et cetera. So I feel like that's easy to find. I think more importantly, what you're trying to figure out is like, and I talked about this in an early YouTube video, is like understanding, like, does my model even make sense? Is it even plausible that I can become a billion dollar company? And what I talked about is you're just trying to figure out, it's like, oh, based on how much you charge or the average amount of revenue you're gonna get from someone, how many customers do you have to have to get to $100 million in revenue? And I do this with all my companies. I actually had two that pivoted this batch after we ran through that exercise. They were like, oh, my company's a really bad model. It's not gonna work. Like I either, because it's either I need to increase how much I'm charging or I need a really great acquisition strategy to get at those numbers. And then once you have the number, the question is, does the market even support that? And as an investor, I'm usually thinking it's like, okay, if they need to capture more than 10% of the market just to get to that $100 million revenue, that's probably not plausible. I've seen numbers where it's like, oh, we need to get like 100,000 customers. But then the number of customers in the market is like 150,000 only. And therefore it's like, oh, that's gonna not be plausible.
SPEAKER_00: I mean, you see stuff all the time. It's like, well, if we get everyone in America, we're gonna be a total hit.
SPEAKER_02: So you shouldn't do that. I actually think you always wanna do this bottom up calculation. And then for consumer apps, there's probably always going to be a lot of people. The bigger part of that equation that you're focused on is like, how do I get at these like two, 300,000 people that's needed to make this consumer startup worth a billion dollars? And so if your answer is, I'm gonna pay for every single one of them, man, you now have to give up so much equity in your company to do that. So the ones that we get excited about, ones who figured out like, I figured out a trick for people to recommend me to do this for free or like have other people act as my salesmen on my behalf.
SPEAKER_00: So for this last section, let's go into some hardcore startup school advice. So a lot of people are gonna turn, fewer people than the average MOOC, way fewer, but people will turn. What kind of mentality should someone adopt to ensure like at least completion, but hopefully success in startup school?
SPEAKER_02: So for us, so at the end of the program, what we have people do is apply to YC. And then when you apply, you're also applying to get this $15,000 equity free grant. So the most promising startups from startup school, we give out those grants. Simultaneously, we look at those applications, also consider them for the YC core program as well. So it's like a two for one in that application. The minimum requirements for applying for that is you have to complete eight out of 10 weekly updates. So basically every week we send out a thing that we say like, hey, how many users have you talked to? And what have you learned? Or like how much revenue? Like what is your main KPI? Like whether it's engagement or revenue, like how much have you done? And again, it's not that it has to go up every single time, but you have to at least submit the updates. If you don't submit the updates, you don't get considered for group office hours because you're not active, et cetera. So that's like, that's the minimum is like, you spend 10 minutes a week writing an update
SPEAKER_02: about what you're doing on your startup and what progress that you've made. So that's like, you know, that's like the basic requirement. And I would like to think that like, if you're thinking about your startup, and for most people I know who think about their startup, it's like nonstop, this should be an easy thing to do. The reason people don't do that is because like, the truth really fucking sucks. And so it's a large thing that we actually do with our own YC companies is I have to get them to be like, you as an entrepreneur, I've been born with like some kind of broken gene that makes you more optimistic than other people. But what that means is you're gonna lie to yourself. I'm here to fix that gene. Like I'm a crisper. And so I help people get the honest truth about where you really are at in your startup. And so that update is like there to help you see that. When you're finally honest about like, oh, you know what, my KPI is revenue. And since I'm pre-launch, it's zero. And then the next week it's zero again. Yeah, I gotta change something. I gotta change something or I need to speed up, et cetera. And so like, what you want is to look at startup school and be like, for this 10 weeks, I'm gonna go through these exercises. I'm gonna ask these hard questions of myself and my co-founder. And this is why it's start schools I think is also great for companies who are already working on a startup because it goes back to these first principles and then be honest about those answers. That's number one. Number two, participate in the group sessions. So like every week we're gonna match you up with six to eight other people. On Thursday evenings is kind of what we figured out was the ideal time for everyone across all time zones. And you're gonna talk about your startup.
SPEAKER_02: And actually those group sessions are very simple. You actually are practicing talking about what you do. It's what we mostly do in YC is fixing your narrative and storytelling because people come in and they're so bad at talking about what they're doing. And because it's not clear, people can't understand. If they can't understand, they can't get excited. And if they can't excited, you can't grow and you can't recruit and you can't get people to invest, et cetera. So fixing that story is the most important part. And so we're giving you an opportunity to do that with lots of people. And actually we have software that when you're in the video sessions and you're saying like, hi, my company is this, this is my one-liner, people will be able to now say to you, it's like, I understand what you're building. I'm excited about the problem you're working on. And then are you the kind of team that I would wanna work for? So getting understanding, it's like how do you project and present yourself? Because those three things are a lot of what we're trying to evaluate. A lot of people I feel like I talk to you about their company, it's low energy, they're not passionate. And those aren't people that attract other people because anyone that's gonna build a billion dollar company, they need to be able to attract other people to this. And so I think startup school is also successful
SPEAKER_02: to people who are committed to that process of like, I'm going to try to get real feedback and I'm gonna practice talking about my company, I'm gonna fix my narrative and get it to the end where people like, hear what I'm talking about, they immediately get excited and it's so exciting and I do such a good job that people are attracted to me.
SPEAKER_00: Last question. A high percentage of these people are solo founders. Say they are looking for a co-founder, what would be your advice, given it's a relatively short period of time, on vetting co-founders?
SPEAKER_02: Okay, getting a co-founder is like getting married to someone and it's probably like even way more intense. And then you don't have usually sex to relieve the tension or fix a bunch of things or smooth things over. Or a different job. You work together all the time. Exactly, but you don't have usually a chemical thing that's helping fix a lot of things that are problems. And so I actually think it's like, you should treat it very similar to like, what would you do to get married? Like you don't immediately like talk to someone, figure out a bunch of characteristics and on the first date go like, let's get married.
SPEAKER_02: So what you're actually doing when you're valuing co-founders is you're dating. And the dating should be small. Number one is like, do you understand each other? Do you have complimentary skills? Like, do you like just talking with them? Do you think that you would like to spend more time with them? So that's like the first question because you got to spend a whole lot of time. So that's like the big thing is like, oh, I would just practice that. Like, oh, I like discussing, talking, et cetera. The second stage would be as like, oh, okay. Is there some kind of small thing that we can do for each other? I would start with small favors. Like, oh, I'll research this question and I'll get back to you. Or like, oh, I'll look at that or I'll send you some recommendations, et cetera. Like, how are they reliable in terms of exchanging small stuff? And then you move on to like, hey, maybe we'll try building something or maybe we'll try doing something, et cetera. And then you move on to like, all right, let's have a conversation about like, hey, do you want to work more long-term? Do we want to like commit more resources to that? Like, I think you can time box everything and work your way up. And so the dating is super important. I think founders, single founders are unsuccessful when they are kind of desperate about it.
SPEAKER_02: That's the same problem in normal dating actually. The second thing is it can't be all take.
SPEAKER_02: It's like, oh, I have a great idea and I'm looking for a technical co-founder to do all the work. You have to be good at selling yourself on like what your contribution and what you're going to be able to do, et cetera is. And if your contribution is non-technical, then like, you know, there's good examples of this. Alexis Haning is my favorite example of a non-technical founder. He did everything else, right?
SPEAKER_02: Just like, I'm going to smooth this over for you. And that's something that can be really appealing that someone who just like, is like, I know I'm gonna have to build this.
SPEAKER_00: What about, given that you compare it to dating, dating multiple people in the beginning? That's totally fine. Startup school, still out?
SPEAKER_02: Yeah, I think you should probably have conversation with lots of people. Like you never really know. I feel like the only reason I did my startup is because I met my co-founders. I never thought about entrepreneurship. I was supposed to get my MFA and teach art to hippies. So like making money was the farthest thing from my mind. And I would say like, college Kevin would like really punch myself in the face and call me a sellout if he knew what I was doing now.
SPEAKER_00: Oh man, all right, awesome. So startup school signups are available where?
SPEAKER_02: They're open at startupschool.org and registration's open till July 22nd.
SPEAKER_00: Awesome, all right, thanks for coming in, man. Thanks, Craig. All right, thanks for listening. So as always, you can find the transcript and the video at blog.ycombinator.com. And if you have a second, it would be awesome to give us a rating and review wherever you find your podcast. See you next time.
