1 00:00:01,292 --> 00:00:01,730 Sam: Hi, 2 00:00:01,730 --> 00:00:02,156 everyone. 3 00:00:02,156 --> 00:00:04,453 My name is Sam Altman and this is How To Build a Future. 4 00:00:04,453 --> 00:00:05,120 Today, 5 00:00:05,120 --> 00:00:06,356 our guest is Jessica Livingston, 6 00:00:06,356 --> 00:00:07,709 the founder of Y Combinator, 7 00:00:07,709 --> 00:00:08,721 where I now work. 8 00:00:08,721 --> 00:00:10,305 Y Combinator has funded 1, 9 00:00:10,305 --> 00:00:11,798 500 startups, 10 00:00:11,798 --> 00:00:14,440 and they are worth more than $70 billion in total. 11 00:00:14,440 --> 00:00:16,500 More than 10 of them are worth more than a billion dollars or more. 12 00:00:16,500 --> 00:00:17,575 So, 13 00:00:17,575 --> 00:00:19,366 in terms of how to create a unicorn, 14 00:00:19,366 --> 00:00:22,474 Jessica Livingstone probably knows more about this and maybe anybody else in the world. 15 00:00:22,474 --> 00:00:26,367 So we are super delighted you came here today talk to us. 16 00:00:26,367 --> 00:00:28,486 Jessica: Thank you for having me. 17 00:00:28,486 --> 00:00:34,831 Sam: What I really wanna get out of you is how founders get on a path to build a huge company. 18 00:00:34,831 --> 00:00:34,882 So, 19 00:00:34,882 --> 00:00:36,392 you have now, 20 00:00:36,392 --> 00:00:39,629 for 11 years seen founders coming when they are just two or three people and an idea. 21 00:00:39,629 --> 00:00:41,246 And sometimes, 22 00:00:41,246 --> 00:00:44,546 those founders go on to do nothing most of the time. 23 00:00:44,546 --> 00:00:45,837 Sometimes they create a small success, 24 00:00:45,837 --> 00:00:48,540 and sometimes they create these companies that really transform the world, 25 00:00:48,540 --> 00:00:50,881 and YC has been very fortunate to be involved in a lot of these, 26 00:00:50,881 --> 00:00:51,577 Airbnb, 27 00:00:51,577 --> 00:00:52,787 Dropbox, 28 00:00:52,787 --> 00:00:53,485 Stripe, 29 00:00:53,485 --> 00:00:56,324 the list goes on. 30 00:00:56,324 --> 00:01:06,387 And what I think would be really helpful is to talk about what the companies do during Y Combinator that allows them to go on and build super impactful companies. 31 00:01:06,387 --> 00:01:11,487 So what have you observed the very best companies do when they are brand new? 32 00:01:11,487 --> 00:01:13,028 Jessica: Well, 33 00:01:13,028 --> 00:01:16,941 I've now seen more than a thousand companies go through YC, 34 00:01:16,941 --> 00:01:20,448 so I'm very familiar what these companies do during YC. 35 00:01:20,448 --> 00:01:21,799 And I'm first gonna 36 00:01:21,799 --> 00:01:24,856 say that there is not really one path for everyone necessarily, 37 00:01:24,856 --> 00:01:29,074 and a lot of times these successful startups get started almost accidentally. 38 00:01:29,074 --> 00:01:32,810 But when they are at the point where they say, 39 00:01:32,810 --> 00:01:34,436 "Yes, 40 00:01:34,436 --> 00:01:35,868 I am gonna take this company seriously, 41 00:01:35,868 --> 00:01:37,688 I am gonna apply to Y Combinator, 42 00:01:37,688 --> 00:01:41,468 " and then they come here to Silicon Valley for three months. 43 00:01:41,468 --> 00:01:44,189 The most successful founders I have noticed are totally focused on two things, 44 00:01:44,189 --> 00:01:51,697 building their product and making something people want, 45 00:01:51,697 --> 00:01:52,584 which of course, 46 00:01:52,584 --> 00:01:53,200 is our motto, 47 00:01:53,200 --> 00:01:55,359 and talking to their users. 48 00:01:55,359 --> 00:02:00,497 And they do not let themselves get distracted by anything else. 49 00:02:00,497 --> 00:02:02,668 And that seems so obvious, 50 00:02:02,668 --> 00:02:09,969 but what's not obvious is how easily distracted founders can be by lots of other things going on, 51 00:02:09,969 --> 00:02:16,155 and the most successful startups are like hyper-focused on their product. 52 00:02:16,155 --> 00:02:19,050 Sam: What are some of the things that distract founders that seem like good ideas at the time? 53 00:02:19,050 --> 00:02:23,021 Jessica: There is a lot of these. 54 00:02:23,021 --> 00:02:25,200 And in fact, 55 00:02:25,200 --> 00:02:28,664 in a talk that I gave at a female founders conference a couple of months ago, 56 00:02:28,664 --> 00:02:32,926 I referred to these things as like the startup equivalent of wolves in sheep's clothing, 57 00:02:32,926 --> 00:02:34,924 because they really do seem like, 58 00:02:34,924 --> 00:02:36,500 "You are doing business. 59 00:02:36,500 --> 00:02:51,820 " A few of them are talking to big companies to try and form partnerships in an attempt to get better distribution or somehow get more users. 60 00:02:51,820 --> 00:02:55,587 To do a lot of PR before you nail down a product, 61 00:02:55,587 --> 00:02:58,261 to talk to corp dev people. 62 00:02:58,261 --> 00:03:01,548 When you are not thinking about being acquired, 63 00:03:01,548 --> 00:03:05,447 yet you still have meetings with these people, 64 00:03:05,447 --> 00:03:09,115 or you'll take meetings with investors when you are not in fundraising mode, 65 00:03:09,115 --> 00:03:11,794 just to sort of build a relationship. 66 00:03:11,794 --> 00:03:14,735 Going to conferences, 67 00:03:14,735 --> 00:03:16,295 networking events, 68 00:03:16,295 --> 00:03:26,165 all these things that seem like important things to do as part of your business are not important in the very early stages when it's critical to build your product. 69 00:03:26,165 --> 00:03:28,684 Sam: And how do you know when have hit the product as you just said? 70 00:03:28,684 --> 00:03:30,933 Jessica: Well, 71 00:03:30,933 --> 00:03:32,440 I think when you have people using it, 72 00:03:32,440 --> 00:03:37,475 you can measure your growth and you can measure how many users you get. 73 00:03:37,475 --> 00:03:38,447 And are they coming back? 74 00:03:38,447 --> 00:03:39,806 Are they paying for your product? 75 00:03:39,806 --> 00:03:45,543 That's just the greatest thing of all if you can charge for your product, 76 00:03:45,543 --> 00:03:47,766 and that growth rate is going up. 77 00:03:47,766 --> 00:03:50,830 Sam: So for all of the YC companies that have gone on to be these sort of household names, 78 00:03:50,830 --> 00:03:52,768 do they all do this during YC, 79 00:03:52,768 --> 00:03:56,086 where they just focus on their growth rate right or talking to users? 80 00:03:56,086 --> 00:03:58,094 Are they the companies that end up ignoring everything else? 81 00:03:58,094 --> 00:03:59,897 Jessica: Yeah, 82 00:03:59,897 --> 00:04:05,194 pretty much. 83 00:04:05,194 --> 00:04:05,194 If I had to think back on the most successful startups, 84 00:00:00,000 --> 00:00:00,000 all during YC, 85 00:00:00,000 --> 00:00:00,000 they were super focused, 86 00:00:00,000 --> 00:00:00,000 and they weren't all over the place in terms of ideas that they were working on or things that they were doing, 87 00:00:00,000 --> 00:00:00,000 they were definitely focused. 88 00:00:00,000 --> 00:00:00,000 Sam: Did they have big plans even during the YC? 89 00:00:00,000 --> 00:00:00,000 Like could Brian Chesky of Airbnb have told you during YC, 90 00:00:00,000 --> 00:00:00,000 "Here is how we're gonna be at $25 billion company and here's how we're gonna look like seven years later"? 91 00:00:00,000 --> 00:00:00,000 Jessica: I don't think they would have gone that far. 92 00:00:00,000 --> 00:00:00,000 I think that all of the most successful founders have ambitious plans, 93 00:00:00,000 --> 00:00:00,000 and they certainly start a lot smaller, 94 00:00:00,000 --> 00:00:00,000 like they seem much less important when they are first getting started, 95 00:00:00,000 --> 00:00:00,000 but I think the founders do have a grand plan. 96 00:00:00,000 --> 00:00:00,000 I have to believe though that when they are all in the earliest phases, 97 00:00:00,000 --> 00:00:00,000 none of them can predict just how big they'll big they'll be. 98 00:00:00,000 --> 00:00:00,000 I don't think Brian Chesky knew that they'd be where they are today. 99 00:00:00,000 --> 00:00:00,000 Sam: And how much strategizing do you think the companies the do about how they are going to get from here to the next step and the step after that? 100 00:00:00,000 --> 00:00:00,000 Like, 101 00:00:00,000 --> 00:00:00,000 during are YC they really just focused on trying to make a few users really happy, 102 00:00:00,000 --> 00:00:00,000 or are they thinking about, 103 00:00:00,000 --> 00:00:00,000 "Well, 104 00:00:00,000 --> 00:00:00,000 we need to build up a monopoly. 105 00:00:00,000 --> 00:00:00,000 And so in Airbnb's case, 106 00:00:00,000 --> 00:00:00,000 we'll have that because we'll have one marketplace"? 107 00:00:00,000 --> 00:00:00,000 Or, 108 00:00:00,000 --> 00:00:00,000 is it really just like, 109 00:00:00,000 --> 00:00:00,000 "Let's build this product people love and see where it goes"? 110 00:00:00,000 --> 00:00:00,000 Jessica: I really do think it starts as, 111 00:00:00,000 --> 00:00:00,000 "Let's build this product and see where it goes. 112 00:00:00,000 --> 00:00:00,000 " In some cases, 113 00:00:00,000 --> 00:00:00,000 "Let's solve our own problem and see where it goes. 114 00:00:00,000 --> 00:00:00,000 " I'm specifically of Stripe. 115 00:00:00,000 --> 00:00:00,000 I mean, 116 00:00:00,000 --> 00:00:00,000 they built that product because it was a pain is the ass for themselves. 117 00:00:00,000 --> 00:00:00,000 They were solving something for themselves. 118 00:00:00,000 --> 00:00:00,000 So I do think that they are saying, 119 00:00:00,000 --> 00:00:00,000 "Let's build this and see where it goes. 120 00:00:00,000 --> 00:00:00,000 " However, 121 00:00:00,000 --> 00:00:00,000 I think that the most successful ones do have that grander vision. 122 00:00:00,000 --> 00:00:00,000 I remember specifically during YC, 123 00:00:00,000 --> 00:00:00,000 Airbnb said to themselves and I think to investors, 124 00:00:00,000 --> 00:00:00,000 "We plan to become the eBay of space. 125 00:00:00,000 --> 00:00:00,000 " Like, 126 00:00:00,000 --> 00:00:00,000 they were nowhere near eBay of space at that point, 127 00:00:00,000 --> 00:00:00,000 but they had that vision and they were working towards that. 128 00:00:00,000 --> 00:00:00,000 Sam: How much does the idea matter? 129 00:00:00,000 --> 00:00:00,000 You said Airbnb came with this idea that turned out to actually be the eBay of space. 130 00:00:00,000 --> 00:00:00,000 But a lot of founders I think don't get started because they don't yet feel like they have the idea that can be that $100 billion company. 131 00:00:00,000 --> 00:00:00,000 So how important do you think it is to get the idea just right at the beginning, 132 00:00:00,000 --> 00:00:00,000 or to just get started with something and then figure out where to take it? 133 00:00:00,000 --> 00:00:00,000 Jessica: I am of the mind of just, 134 00:00:00,000 --> 00:00:00,000 "Get started with something. 135 00:00:00,000 --> 00:00:00,000 " And that's because we are funding companies at such an early stage that we're really finding the companies for the founders and for the attributes of the founders. 136 00:00:00,000 --> 00:00:00,000 Do they seem determined? 137 00:00:00,000 --> 00:00:00,000 Have they been able to ship something in the past? 138 00:00:00,000 --> 00:00:00,000 Do they seem open minded about things? 139 00:00:00,000 --> 00:00:00,000 Are they domain experts? 140 00:00:00,000 --> 00:00:00,000 A lot of times, 141 00:00:00,000 --> 00:00:00,000 they don't get the idea right the very first time. 142 00:00:00,000 --> 00:00:00,000 They might be in a general vicinity of being right, 143 00:00:00,000 --> 00:00:00,000 but then they have to adjust their idea. 144 00:00:00,000 --> 00:00:00,000 Some founders totally fail with their idea and have to change completely, 145 00:00:00,000 --> 00:00:00,000 but I think it's more important to get started with something, 146 00:00:00,000 --> 00:00:00,000 build it. 147 00:00:00,000 --> 00:00:00,000 Because your idea is always gonna evolve. 148 00:00:00,000 --> 00:00:00,000 I mean, 149 00:00:00,000 --> 00:00:00,000 Airbnb is like to me one of the most famous examples of an idea that has evolved. 150 00:00:00,000 --> 00:00:00,000 They came to us with their idea, 151 00:00:00,000 --> 00:00:00,000 which was at the time renting out airbeds in your home while you were there during conferences. 152 00:00:00,000 --> 00:00:00,000 Like, 153 00:00:00,000 --> 00:00:00,000 that's pretty focused, 154 00:00:00,000 --> 00:00:00,000 right? 155 00:00:00,000 --> 00:00:00,000 And then they said, 156 00:00:00,000 --> 00:00:00,000 "Okay, 157 00:00:00,000 --> 00:00:00,000 now we're gonna rent out airbeds in your home but not during conferences. 158 00:00:00,000 --> 00:00:00,000 " Then it was renting out your own home. 159 00:00:00,000 --> 00:00:00,000 So it morphed. 160 00:00:00,000 --> 00:00:00,000 Sam: And did all of that morphing happen during the YC program? 161 00:00:00,000 --> 00:00:00,000 Jessica: No, 162 00:00:00,000 --> 00:00:00,000 it did not happen specifically. 163 00:00:00,000 --> 00:00:00,000 Sam: How long did it take? 164 00:00:00,000 --> 00:00:00,000 Jessica: I think it... 165 00:00:00,000 --> 00:00:00,000 I wanna say it took about a year. 166 00:00:00,000 --> 00:00:00,000 I'm not 100% certain, 167 00:00:00,000 --> 00:00:00,000 but I remember what happened specifically was Airbnb was always very strict about the hosting homes so that they can provide breakfast because there was there was airbedandbreakfast. 168 00:00:00,000 --> 00:00:00,000 com. 169 00:00:00,000 --> 00:00:00,000 And then the famous story is that Airbnb's one of their hosts was Barry Manilow's drummer, 170 00:00:00,000 --> 00:00:00,000 and he had this great place in New York City. 171 00:00:00,000 --> 00:00:00,000 And he contacted them and said, 172 00:00:00,000 --> 00:00:00,000 "Barry is going on tour, 173 00:00:00,000 --> 00:00:00,000 I'm gonna be gone. 174 00:00:00,000 --> 00:00:00,000 Can I just rent out my apartment while I'm not there? 175 00:00:00,000 --> 00:00:00,000 " And like, 176 00:00:00,000 --> 00:00:00,000 the Airbnbs were like, 177 00:00:00,000 --> 00:00:00,000 "That doesn't really fit what we do. 178 00:00:00,000 --> 00:00:00,000 " That's how they figured out how to rent out whole spaces. 179 00:00:00,000 --> 00:00:00,000 And to this day, 180 00:00:00,000 --> 00:00:00,000 I think that that's like the majority of their business. 181 00:00:00,000 --> 00:00:00,000 But it took something like that to get them to even consider doing it. 182 00:00:00,000 --> 00:00:00,000 Sam: Could you tell the story of what you felt the first time you met the Airbnb founders when they came in to interview for YC? 183 00:00:00,000 --> 00:00:00,000 I know they were kind of a rough place, 184 00:00:00,000 --> 00:00:00,000 they were totally out of money. 185 00:00:00,000 --> 00:00:00,000 Every investor had said no to them. 186 00:00:00,000 --> 00:00:00,000 Jessica: Yes. 187 00:00:00,000 --> 00:00:00,000 We actually did not know what a rough place they were in. 188 00:00:00,000 --> 00:00:00,000 I know that now from hearing stories, 189 00:00:00,000 --> 00:00:00,000 but they were... 190 00:00:00,000 --> 00:00:00,000 Sam: And this was, 191 00:00:00,000 --> 00:00:00,000 2009, 192 00:00:00,000 --> 00:00:00,000 right? 193 00:00:00,000 --> 00:00:00,000 Jessica: This is actually in the fall of 2008. 194 00:00:00,000 --> 00:00:00,000 We did the interviews in November. 195 00:00:00,000 --> 00:00:00,000 And for people that weren't around in the fall of 2008, 196 00:00:00,000 --> 00:00:00,000 it was really a grim time to be doing a startup in Silicon Valley. 197 00:00:00,000 --> 00:00:00,000 Sam: Because the macroeconomic conditions had collapsed? 198 00:00:00,000 --> 00:00:00,000 Jessica: The macroeconomic conditions had collapsed, 199 00:00:00,000 --> 00:00:00,000 no one knew what was gonna happen, 200 00:00:00,000 --> 00:00:00,000 Angels were closing their checkbooks, 201 00:00:00,000 --> 00:00:00,000 people all were gonna hold off on investing. 202 00:00:00,000 --> 00:00:00,000 It was really sort of a scary time. 203 00:00:00,000 --> 00:00:00,000 And so I do remember we went into interview saying, 204 00:00:00,000 --> 00:00:00,000 "We are only gonna choose companies that we think could make it to profitability really quickly on their own and then they can live as a cockroach. 205 00:00:00,000 --> 00:00:00,000 "Sam: Because you just weren't sure they'd be able to raise any money at all? 206 00:00:00,000 --> 00:00:00,000 Jessica: Right. 207 00:00:00,000 --> 00:00:00,000 We weren't sure that they come march at demo day that we had no idea what investors would be doing. 208 00:00:00,000 --> 00:00:00,000 And so we were really sort of frightened. 209 00:00:00,000 --> 00:00:00,000 If would be a disaster if we have this big demo day and none of the startups could get more funding. 210 00:00:00,000 --> 00:00:00,000 That would be bad. 211 00:00:00,000 --> 00:00:00,000 So we're very strict. 212 00:00:00,000 --> 00:00:00,000 So, 213 00:00:00,000 --> 00:00:00,000 the Airbnbs came in. 214 00:00:00,000 --> 00:00:00,000 They were sort of a last minute addition to the interview process. 215 00:00:00,000 --> 00:00:00,000 I remember Michael Seibel, 216 00:00:00,000 --> 00:00:00,000 one of the partners here, 217 00:00:00,000 --> 00:00:00,000 said, 218 00:00:00,000 --> 00:00:00,000 "Hey, 219 00:00:00,000 --> 00:00:00,000 can you slot these guys in? 220 00:00:00,000 --> 00:00:00,000 They are really good. 221 00:00:00,000 --> 00:00:00,000 Please have them come in. 222 00:00:00,000 --> 00:00:00,000 "So we said, 223 00:00:00,000 --> 00:00:00,000 "Fine. 224 00:00:00,000 --> 00:00:00,000 "And I remember during the interview, 225 00:00:00,000 --> 00:00:00,000 Paul tried to change their idea. 226 00:00:00,000 --> 00:00:00,000 "We've had this idea of like renting out airbeds was a little weird. 227 00:00:00,000 --> 00:00:00,000 "Sam: What did he try to change it to? 228 00:00:00,000 --> 00:00:00,000 Jessica: I don't even remember, 229 00:00:00,000 --> 00:00:00,000 it's embarrassing. 230 00:00:00,000 --> 00:00:00,000 Sam: Or do you think he didn't? 231 00:00:00,000 --> 00:00:00,000 Jessica: I know, 232 00:00:00,000 --> 00:00:00,000 I know. 233 00:00:00,000 --> 00:00:00,000 But he did try like pitch them a new idea, 234 00:00:00,000 --> 00:00:00,000 and they're like, 235 00:00:00,000 --> 00:00:00,000 "No, 236 00:00:00,000 --> 00:00:00,000 no. 237 00:00:00,000 --> 00:00:00,000 " And that's just one of those things they knew they were on to something because they themselves were hosts. 238 00:00:00,000 --> 00:00:00,000 And that is one of the key things about founders is that, 239 00:00:00,000 --> 00:00:00,000 when you are using your own product or solving your own problem, 240 00:00:00,000 --> 00:00:00,000 you have all these insights that no one else has. 241 00:00:00,000 --> 00:00:00,000 And the Airbnbs were renting out their room in their apartment because they couldn't pay their own rent. 242 00:00:00,000 --> 00:00:00,000 So they had a lot of insights into this idea. 243 00:00:00,000 --> 00:00:00,000 Sam: It's sort of funny given the current controversy on the Airbnb. 244 00:00:00,000 --> 00:00:00,000 The Airbnb started as an affordable housing company. 245 00:00:00,000 --> 00:00:00,000 Jessica: You know, 246 00:00:00,000 --> 00:00:00,000 it's outrageous. 247 00:00:00,000 --> 00:00:00,000 So they were using their own product. 248 00:00:00,000 --> 00:00:00,000 They had these insights that it was this wonderful experience when someone comes out of town to have hosts that can help them and show them around and they knew they were on to something. 249 00:00:00,000 --> 00:00:00,000 So, 250 00:00:00,000 --> 00:00:00,000 they convinced us that their idea had legs and that their users, 251 00:00:00,000 --> 00:00:00,000 the few users they have, 252 00:00:00,000 --> 00:00:00,000 love them. 253 00:00:00,000 --> 00:00:00,000 I remember more about the founders, 254 00:00:00,000 --> 00:00:00,000 though. 255 00:00:00,000 --> 00:00:00,000 I really like the founders. 256 00:00:00,000 --> 00:00:00,000 They were really convincing when they spoke. 257 00:00:00,000 --> 00:00:00,000 You could tell they had thought about this problem a lot. 258 00:00:00,000 --> 00:00:00,000 They didn't have all the answers by any means, 259 00:00:00,000 --> 00:00:00,000 but they just seemed like that they had thought about this a lot. 260 00:00:00,000 --> 00:00:00,000 And I remember also they brought in as a gift the cereal boxes, 261 00:00:00,000 --> 00:00:00,000 Obama-O's and Cap'n McCain's or something. 262 00:00:00,000 --> 00:00:00,000 Sam: This was the 2008 presidential elections? 263 00:00:00,000 --> 00:00:00,000 Jessica: This was the 2008 presidential election, 264 00:00:00,000 --> 00:00:00,000 and they had made these cereal boxes with like Cheerios and Captain Crunch in them, 265 00:00:00,000 --> 00:00:00,000 which sounds so silly because they're cereal. 266 00:00:00,000 --> 00:00:00,000 But I remember they said, 267 00:00:00,000 --> 00:00:00,000 "Oh, 268 00:00:00,000 --> 00:00:00,000 yeah. 269 00:00:00,000 --> 00:00:00,000 You know, 270 00:00:00,000 --> 00:00:00,000 we design these, 271 00:00:00,000 --> 00:00:00,000 and then we went out and got Cheerios, 272 00:00:00,000 --> 00:00:00,000 and we stuffed in there and glue gunned the boxes together, 273 00:00:00,000 --> 00:00:00,000 and we've been giving them lien. 274 00:00:00,000 --> 00:00:00,000 " I thought, 275 00:00:00,000 --> 00:00:00,000 "Oh my god, 276 00:00:00,000 --> 00:00:00,000 these guys are l ike glue gunning the cereal boxes. 277 00:00:00,000 --> 00:00:00,000 "Sam: Why were they doing this? 278 00:00:00,000 --> 00:00:00,000 Jessica: They really were doing this because they were out of money. 279 00:00:00,000 --> 00:00:00,000 And this is like a Hail Mary for them. 280 00:00:00,000 --> 00:00:00,000 And they didn't wind up making a lot of money from these. 281 00:00:00,000 --> 00:00:00,000 But to us, 282 00:00:00,000 --> 00:00:00,000 they were doing it as sort of a fun thing because they are Airbnb, 283 00:00:00,000 --> 00:00:00,000 they provide breakfast, 284 00:00:00,000 --> 00:00:00,000 coincided with the presidential elections. 285 00:00:00,000 --> 00:00:00,000 Sam: But the original driving reason was just like they couldn't raise any money. 286 00:00:00,000 --> 00:00:00,000 Jessica: They couldn't raise any money. 287 00:00:00,000 --> 00:00:00,000 Sam: And they just did anything that they could to survive. 288 00:00:00,000 --> 00:00:00,000 Jessica: Oh my god. 289 00:00:00,000 --> 00:00:00,000 Again, 290 00:00:00,000 --> 00:00:00,000 during the interview we did not know these stories but when you hear the stories of the problems that they had trying to fund raise prior to YC, 291 00:00:00,000 --> 00:00:00,000 it's crazy. 292 00:00:00,000 --> 00:00:00,000 They had one investor like leave in the middle of the pitch, 293 00:00:00,000 --> 00:00:00,000 just walk out without eve say goodbye. 294 00:00:00,000 --> 00:00:00,000 No one believed this idea was good or certainly would be big. 295 00:00:00,000 --> 00:00:00,000 Sam: Did you know at the time that the idea could be great, 296 00:00:00,000 --> 00:00:00,000 or was it for you really just to vet on those three guys as founders? 297 00:00:00,000 --> 00:00:00,000 Jessica: I have to admit, 298 00:00:00,000 --> 00:00:00,000 it was more of a vet on the three founders. 299 00:00:00,000 --> 00:00:00,000 They seemed really good. 300 00:00:00,000 --> 00:00:00,000 I did sort of like the idea of being able to stay in people's home, 301 00:00:00,000 --> 00:00:00,000 but I have to admit I was not thinking it was going to be huge. 302 00:00:00,000 --> 00:00:00,000 Sam: Just because that story was so interesting, 303 00:00:00,000 --> 00:00:00,000 what was it like the Collison brothers? 304 00:00:00,000 --> 00:00:00,000 I think they were in 19 and 17 when they started Stripe. 305 00:00:00,000 --> 00:00:00,000 And they came in and said, 306 00:00:00,000 --> 00:00:00,000 "We're gonna do this crazy thing and we're teenagers and we're going to take on the financial system of the world. 307 00:00:00,000 --> 00:00:00,000 " How does that conversation go? 308 00:00:00,000 --> 00:00:00,000 Jessica: Well, 309 00:00:00,000 --> 00:00:00,000 I have to admit, 310 00:00:00,000 --> 00:00:00,000 we met Patrick years earlier when he was 16 or 17 still living in Ireland because he looked at Paul and we had him over for dinner. 311 00:00:00,000 --> 00:00:00,000 So, 312 00:00:00,000 --> 00:00:00,000 it wasn't like we first met them at a YC interview. 313 00:00:00,000 --> 00:00:00,000 I think Patrick was working on some other idea first or something. 314 00:00:00,000 --> 00:00:00,000 We had high regard for him. 315 00:00:00,000 --> 00:00:00,000 He certainly was good at building things and he had like a Wikipedia app, 316 00:00:00,000 --> 00:00:00,000 so we knew he was like a talented programmer. 317 00:00:00,000 --> 00:00:00,000 He introduced us to his 16-year-old brother. 318 00:00:00,000 --> 00:00:00,000 He was 16 when we meet him, 319 00:00:00,000 --> 00:00:00,000 John was. 320 00:00:00,000 --> 00:00:00,000 And I am trying to remember when they said, 321 00:00:00,000 --> 00:00:00,000 "We're gonna take on the financial industry. 322 00:00:00,000 --> 00:00:00,000 " I think we were kind of like, 323 00:00:00,000 --> 00:00:00,000 "Do you realize how hard this is? 324 00:00:00,000 --> 00:00:00,000 You don't have connections. 325 00:00:00,000 --> 00:00:00,000 " But they weren't trepid. 326 00:00:00,000 --> 00:00:00,000 They were like, 327 00:00:00,000 --> 00:00:00,000 "Well, 328 00:00:00,000 --> 00:00:00,000 we don't have connections, 329 00:00:00,000 --> 00:00:00,000 we'll find connections. 330 00:00:00,000 --> 00:00:00,000 " And they just... 331 00:00:00,000 --> 00:00:00,000 That is actually a really good question that you bring up because it shows how determined they were and how focused they were. 332 00:00:00,000 --> 00:00:00,000 I mean, 333 00:00:00,000 --> 00:00:00,000 you think like the head of a bank is gonna take a 19-year-old startup founder seriously? 334 00:00:00,000 --> 00:00:00,000 It seems pretty implausible, 335 00:00:00,000 --> 00:00:00,000 right, 336 00:00:00,000 --> 00:00:00,000 but they were good enough that they were able to convince these banks to work with them. 337 00:00:00,000 --> 00:00:00,000 Sam: Are there other traits in the founders that go on to really change the future, 338 00:00:00,000 --> 00:00:00,000 besides determination that separates the very best founders from the mediocre founders? 339 00:00:00,000 --> 00:00:00,000 Have you noticed any other traits that kind of founders should aspire to that really wanna have a big impact? 340 00:00:00,000 --> 00:00:00,000 Jessica: Yes. 341 00:00:00,000 --> 00:00:00,000 If I had to say the most important traits of the most successful founders, 342 00:00:00,000 --> 00:00:00,000 I've already mentioned determination. 343 00:00:00,000 --> 00:00:00,000 That is by far the most important. 344 00:00:00,000 --> 00:00:00,000 Sam: More than intelligence? 345 00:00:00,000 --> 00:00:00,000 Jessica: More than intelligence, 346 00:00:00,000 --> 00:00:00,000 more than previous success, 347 00:00:00,000 --> 00:00:00,000 you, 348 00:00:00,000 --> 00:00:00,000 know in school. 349 00:00:00,000 --> 00:00:00,000 I mean, 350 00:00:00,000 --> 00:00:00,000 remember when we started Y Combinator, 351 00:00:00,000 --> 00:00:00,000 our hypothesis was, 352 00:00:00,000 --> 00:00:00,000 "We'll just fund all the best hackers from MIT and Harvard, 353 00:00:00,000 --> 00:00:00,000 and they'll turn out to be great sort of founders. 354 00:00:00,000 --> 00:00:00,000 " That is not true. 355 00:00:00,000 --> 00:00:00,000 That is absolutely not true. 356 00:00:00,000 --> 00:00:00,000 A lot of them are good. 357 00:00:00,000 --> 00:00:00,000 In fact, 358 00:00:00,000 --> 00:00:00,000 Patrick was from MIT, 359 00:00:00,000 --> 00:00:00,000 but it's not true for the most part. 360 00:00:00,000 --> 00:00:00,000 Determination is the most important thing. 361 00:00:00,000 --> 00:00:00,000 Again, 362 00:00:00,000 --> 00:00:00,000 sort of understanding your users and building a product with a great user experience is second most important. 363 00:00:00,000 --> 00:00:00,000 Not being distracted, 364 00:00:00,000 --> 00:00:00,000 not getting lured down these paths that aren't gonna be important for building your product. 365 00:00:00,000 --> 00:00:00,000 Being flexible minded I've always felt this very important, 366 00:00:00,000 --> 00:00:00,000 because you have this idea and you test it out, 367 00:00:00,000 --> 00:00:00,000 and it doesn't always work the first time. 368 00:00:00,000 --> 00:00:00,000 And so you have to be able to say, 369 00:00:00,000 --> 00:00:00,000 "Okay, 370 00:00:00,000 --> 00:00:00,000 I thought I was gonna do this, 371 00:00:00,000 --> 00:00:00,000 but let's try this. 372 00:00:00,000 --> 00:00:00,000 Even though I have like a lot of energy invested in this, 373 00:00:00,000 --> 00:00:00,000 let's try this direction. 374 00:00:00,000 --> 00:00:00,000 " You really have to be open-minded. 375 00:00:00,000 --> 00:00:00,000 And then, 376 00:00:00,000 --> 00:00:00,000 ultimately, 377 00:00:00,000 --> 00:00:00,000 you have to be a good leader. 378 00:00:00,000 --> 00:00:00,000 You have to be convincing and a good leader because you are gonna be convincing employees to join you, 379 00:00:00,000 --> 00:00:00,000 you are gonna be convincing investors to invest in you. 380 00:00:00,000 --> 00:00:00,000 When you do get to the point where you are doing deals with bigger companies, 381 00:00:00,000 --> 00:00:00,000 you have to convince them. 382 00:00:00,000 --> 00:00:00,000 Like, 383 00:00:00,000 --> 00:00:00,000 your whole world is convincing people. 384 00:00:00,000 --> 00:00:00,000 And so you have to be able to communicate your idea and convince people why they should care about you more than any of the other hundreds of startups out there. 385 00:00:00,000 --> 00:00:00,000 Sam: So now I'd like to talk about your startup Y Combinator and how you started that. 386 00:00:00,000 --> 00:00:00,000 Could you tell us the story of starting Y Combinator? 387 00:00:00,000 --> 00:00:00,000 Jessica: Yeah, 388 00:00:00,000 --> 00:00:00,000 it was very much. 389 00:00:00,000 --> 00:00:00,000 It started in the same was as startup is started. 390 00:00:00,000 --> 00:00:00,000 Where Paul and I had this idea, 391 00:00:00,000 --> 00:00:00,000 we really felt that the investment world was broken. 392 00:00:00,000 --> 00:00:00,000 If you are in early stage startup and you just wanted to like test something out, 393 00:00:00,000 --> 00:00:00,000 you either had to go OVC and get $5 million, 394 00:00:00,000 --> 00:00:00,000 which is virtually impossible at that early stage, 395 00:00:00,000 --> 00:00:00,000 or you had to know someone who is rich and could give you money. 396 00:00:00,000 --> 00:00:00,000 And we thought there could be something better. 397 00:00:00,000 --> 00:00:00,000 We thought there could be like a standardized branded form of funding. 398 00:00:00,000 --> 00:00:00,000 So, 399 00:00:00,000 --> 00:00:00,000 if you wanted $25, 400 00:00:00,000 --> 00:00:00,000 000 or whatever, 401 00:00:00,000 --> 00:00:00,000 you could come to Y Combinator, 402 00:00:00,000 --> 00:00:00,000 and we'd make it very easy for you. 403 00:00:00,000 --> 00:00:00,000 So, 404 00:00:00,000 --> 00:00:00,000 we thought, 405 00:00:00,000 --> 00:00:00,000 "Okay, 406 00:00:00,000 --> 00:00:00,000 let's start an investment company. 407 00:00:00,000 --> 00:00:00,000 " And it was just gonna be Paul and me, 408 00:00:00,000 --> 00:00:00,000 and then we sort of lured in his old co-founders, 409 00:00:00,000 --> 00:00:00,000 Robert Morris and Trevor Blackwell, 410 00:00:00,000 --> 00:00:00,000 to be part of this, 411 00:00:00,000 --> 00:00:00,000 even though they were full time of something else. 412 00:00:00,000 --> 00:00:00,000 And we said, 413 00:00:00,000 --> 00:00:00,000 "Gosh, 414 00:00:00,000 --> 00:00:00,000 none of us know anything about angel investing, 415 00:00:00,000 --> 00:00:00,000 well, 416 00:00:00,000 --> 00:00:00,000 let's learn. 417 00:00:00,000 --> 00:00:00,000 So, 418 00:00:00,000 --> 00:00:00,000 how should we do that? 419 00:00:00,000 --> 00:00:00,000 Let's fund a whole bunch of companies at once and learn a lot. 420 00:00:00,000 --> 00:00:00,000 " So we set up a website and we said, 421 00:00:00,000 --> 00:00:00,000 "Come join the summer founders program. 422 00:00:00,000 --> 00:00:00,000 " It was back in Cambridge, 423 00:00:00,000 --> 00:00:00,000 Massachusetts and it was for the summer of 2005, 424 00:00:00,000 --> 00:00:00,000 and we started working on it, 425 00:00:00,000 --> 00:00:00,000 let's just say in January, 426 00:00:00,000 --> 00:00:00,000 and we posted an application. 427 00:00:00,000 --> 00:00:00,000 We wanted to change a few specific things. 428 00:00:00,000 --> 00:00:00,000 We wanted to make it very easy for people to find us and apply. 429 00:00:00,000 --> 00:00:00,000 They didn't have to have a connection to us. 430 00:00:00,000 --> 00:00:00,000 We had an application of like 20 questions. 431 00:00:00,000 --> 00:00:00,000 We wanted to make it very simple on our side. 432 00:00:00,000 --> 00:00:00,000 We're giving you $12, 433 00:00:00,000 --> 00:00:00,000 000 for a startup, 434 00:00:00,000 --> 00:00:00,000 or 18, 435 00:00:00,000 --> 00:00:00,000 000 if you had three founders, 436 00:00:00,000 --> 00:00:00,000 but it was very specific amount for this amount of stock, 437 00:00:00,000 --> 00:00:00,000 and our paperwork is gonna be real straight forward. 438 00:00:00,000 --> 00:00:00,000 You can see it in advance, 439 00:00:00,000 --> 00:00:00,000 and we're gonna make the decision that day. 440 00:00:00,000 --> 00:00:00,000 We'll interview you and tell you that night. 441 00:00:00,000 --> 00:00:00,000 And that never happened back before us. 442 00:00:00,000 --> 00:00:00,000 No one got a same day decision for the most part. 443 00:00:00,000 --> 00:00:00,000 So, 444 00:00:00,000 --> 00:00:00,000 200 people applied, 445 00:00:00,000 --> 00:00:00,000 they had known about Paul because of his essays, 446 00:00:00,000 --> 00:00:00,000 you were one of them? 447 00:00:00,000 --> 00:00:00,000 Sam: I was. 448 00:00:00,000 --> 00:00:00,000 Jessica: Came out from Stanford. 449 00:00:00,000 --> 00:00:00,000 I remember that interview very well. 450 00:00:00,000 --> 00:00:00,000 And we found eight companies to fund that summer. 451 00:00:00,000 --> 00:00:00,000 And we learned very, 452 00:00:00,000 --> 00:00:00,000 very quickly into the three months that funding startups in a batch was incredibly powerful. 453 00:00:00,000 --> 00:00:00,000 And it was powerful in that you could teach them all sort of the same things at once, 454 00:00:00,000 --> 00:00:00,000 and they became colleagues. 455 00:00:00,000 --> 00:00:00,000 Because starting a startup as one or two people is very lonely and very isolating, 456 00:00:00,000 --> 00:00:00,000 and back then in 2005, 457 00:00:00,000 --> 00:00:00,000 there was no information online about early stage startups at all. 458 00:00:00,000 --> 00:00:00,000 So no one knew what they were doing, 459 00:00:00,000 --> 00:00:00,000 so it was sort of a nice atmosphere. 460 00:00:00,000 --> 00:00:00,000 Sam: So, 461 00:00:00,000 --> 00:00:00,000 even Y Combinator was an example of this, 462 00:00:00,000 --> 00:00:00,000 "Start with an idea you don't know much about. 463 00:00:00,000 --> 00:00:00,000 Tell me something so many people want to iterate"? 464 00:00:00,000 --> 00:00:00,000 Jessica: Yes, 465 00:00:00,000 --> 00:00:00,000 yes, 466 00:00:00,000 --> 00:00:00,000 yes. 467 00:00:00,000 --> 00:00:00,000 And we started small... 468 00:00:00,000 --> 00:00:00,000 Sam: Do it light and start small. 469 00:00:00,000 --> 00:00:00,000 Jessica: Do it lightweight, 470 00:00:00,000 --> 00:00:00,000 start small, 471 00:00:00,000 --> 00:00:00,000 and evolve. 472 00:00:00,000 --> 00:00:00,000 And we realized we had dinners on Tuesday nights, 473 00:00:00,000 --> 00:00:00,000 which actually we still have to this day, 474 00:00:00,000 --> 00:00:00,000 and we have guest speakers coming in. 475 00:00:00,000 --> 00:00:00,000 We had paperwork that we gave them. 476 00:00:00,000 --> 00:00:00,000 I personally helped everyone incorporate their company. 477 00:00:00,000 --> 00:00:00,000 Sam: What else did you spend your time on that first summer? 478 00:00:00,000 --> 00:00:00,000 Jessica: Oh my god. 479 00:00:00,000 --> 00:00:00,000 What didn't I spend my time on? 480 00:00:00,000 --> 00:00:00,000 Like, 481 00:00:00,000 --> 00:00:00,000 as any startup there is like too much for everyone to do. 482 00:00:00,000 --> 00:00:00,000 Paul spent his time advising the startups on their ideas because I didn't really know that much about startups. 483 00:00:00,000 --> 00:00:00,000 I was doing everything to get Y Combinator up and running. 484 00:00:00,000 --> 00:00:00,000 I mean, 485 00:00:00,000 --> 00:00:00,000 we had to get our office, 486 00:00:00,000 --> 00:00:00,000 we had to cook dinners, 487 00:00:00,000 --> 00:00:00,000 I was going grocery shopping, 488 00:00:00,000 --> 00:00:00,000 and Paul was cooking the dinners. 489 00:00:00,000 --> 00:00:00,000 We were recruiting speakers to speak that summer. 490 00:00:00,000 --> 00:00:00,000 Sam: This is now how most people picture doing when they think about starting a really important company. 491 00:00:00,000 --> 00:00:00,000 So I think it's good to note that this is, 492 00:00:00,000 --> 00:00:00,000 in fact, 493 00:00:00,000 --> 00:00:00,000 just like... 494 00:00:00,000 --> 00:00:00,000 Jessica: Oh my god, 495 00:00:00,000 --> 00:00:00,000 there is so much unglamorous work that founders have to do early on, 496 00:00:00,000 --> 00:00:00,000 and you just have to do it. 497 00:00:00,000 --> 00:00:00,000 I was delivering air conditioners to different people. 498 00:00:00,000 --> 00:00:00,000 We had eight startups in that batch and they were all living scattered around the Harvard Square area, 499 00:00:00,000 --> 00:00:00,000 and there was a heat wave. 500 00:00:00,000 --> 00:00:00,000 And we are like we can't our founders not being able to work. 501 00:00:00,000 --> 00:00:00,000 So, 502 00:00:00,000 --> 00:00:00,000 I went to home depot, 503 00:00:00,000 --> 00:00:00,000 and I bought like 10 air conditioners and delivered them to everyone. 504 00:00:00,000 --> 00:00:00,000 Sam: What did you know that summer that Y Combinator was going to work? 505 00:00:00,000 --> 00:00:00,000 Jessica: We had a feeling pretty early on. 506 00:00:00,000 --> 00:00:00,000 Sam: Like the first couple of weeks? 507 00:00:00,000 --> 00:00:00,000 Jessica: I would say within the first month. 508 00:00:00,000 --> 00:00:00,000 We were like, 509 00:00:00,000 --> 00:00:00,000 "This is really interesting. 510 00:00:00,000 --> 00:00:00,000 " And people are working on very interesting ideas. 511 00:00:00,000 --> 00:00:00,000 I mean, 512 00:00:00,000 --> 00:00:00,000 you are working on location stuff on your phone, 513 00:00:00,000 --> 00:00:00,000 Reddit was in there, 514 00:00:00,000 --> 00:00:00,000 we're very interested in Reddit. 515 00:00:00,000 --> 00:00:00,000 The Justin TV and Twitch guys, 516 00:00:00,000 --> 00:00:00,000 Justin and Emmett, 517 00:00:00,000 --> 00:00:00,000 were working on a calendar. 518 00:00:00,000 --> 00:00:00,000 Unfortunately Google Calendar launched and killed them. 519 00:00:00,000 --> 00:00:00,000 I mean, 520 00:00:00,000 --> 00:00:00,000 these were interesting things. 521 00:00:00,000 --> 00:00:00,000 So, 522 00:00:00,000 --> 00:00:00,000 we were very excited about the ideas. 523 00:00:00,000 --> 00:00:00,000 Sam: It's a great story about investing in people, 524 00:00:00,000 --> 00:00:00,000 that it was Justin's third Y Combinator startup, 525 00:00:00,000 --> 00:00:00,000 I think, 526 00:00:00,000 --> 00:00:00,000 that ended up being a billion dollar exit? 527 00:00:00,000 --> 00:00:00,000 Jessica: Yeah, 528 00:00:00,000 --> 00:00:00,000 yeah. 529 00:00:00,000 --> 00:00:00,000 Sam: [inaudible 00:23:25] three times, 530 00:00:00,000 --> 00:00:00,000 and it worked out on the third. 531 00:00:00,000 --> 00:00:00,000 Jessica: And it worked out the third time, 532 00:00:00,000 --> 00:00:00,000 it's a charm, 533 00:00:00,000 --> 00:00:00,000 yes. 534 00:00:00,000 --> 00:00:00,000 I mean, 535 00:00:00,000 --> 00:00:00,000 this is, 536 00:00:00,000 --> 00:00:00,000 again, 537 00:00:00,000 --> 00:00:00,000 going back to funding the people. 538 00:00:00,000 --> 00:00:00,000 Justin and Emmett were a great team. 539 00:00:00,000 --> 00:00:00,000 I'll just... 540 00:00:00,000 --> 00:00:00,000 This is a bit of a tangent, 541 00:00:00,000 --> 00:00:00,000 but it's important to remember they were college roommates and like best friends all growing up, 542 00:00:00,000 --> 00:00:00,000 and so they had known each other for a long time and have like this great trust. 543 00:00:00,000 --> 00:00:00,000 And so, 544 00:00:00,000 --> 00:00:00,000 when they wanted to build something, 545 00:00:00,000 --> 00:00:00,000 they were both excellent programmers, 546 00:00:00,000 --> 00:00:00,000 and that's as good of a bet as you can make. 547 00:00:00,000 --> 00:00:00,000 Sam: How important is it that to have co-founders at all? 548 00:00:00,000 --> 00:00:00,000 And then how important is it that the co-founders have a preexisting relationship like that? 549 00:00:00,000 --> 00:00:00,000 Jessica: I think it's critical. 550 00:00:00,000 --> 00:00:00,000 I think there have been cases of successful startups with one founder, 551 00:00:00,000 --> 00:00:00,000 but I'm sure they will tell you it's extremely hard and overwhelming, 552 00:00:00,000 --> 00:00:00,000 emotionally draining. 553 00:00:00,000 --> 00:00:00,000 You have no peer who you can rely on for moral support and holding all of that. 554 00:00:00,000 --> 00:00:00,000 It's a big burden for people emotionally, 555 00:00:00,000 --> 00:00:00,000 I think. 556 00:00:00,000 --> 00:00:00,000 Also, 557 00:00:00,000 --> 00:00:00,000 at the very early stages, 558 00:00:00,000 --> 00:00:00,000 there is so much to get done that you need more than one person doing it. 559 00:00:00,000 --> 00:00:00,000 You can't be out fundraising and building the product at the same time. 560 00:00:00,000 --> 00:00:00,000 So, 561 00:00:00,000 --> 00:00:00,000 yes, 562 00:00:00,000 --> 00:00:00,000 it's important to have a co-founder. 563 00:00:00,000 --> 00:00:00,000 It's not impossible. 564 00:00:00,000 --> 00:00:00,000 I will say it's critical that you know your co-founder well. 565 00:00:00,000 --> 00:00:00,000 Because if you don't, 566 00:00:00,000 --> 00:00:00,000 and if you're like me at a hackathon and things you get along... 567 00:00:00,000 --> 00:00:00,000 Sam: Do you ever see that workout? 568 00:00:00,000 --> 00:00:00,000 Jessica: Rarely. 569 00:00:00,000 --> 00:00:00,000 I'm trying to think of an example and off the top of my head I can't think of an example of two people who were introduced, 570 00:00:00,000 --> 00:00:00,000 or sort of bolted on to each other the last minute ever working. 571 00:00:00,000 --> 00:00:00,000 I'm sure there are examples of it having worked, 572 00:00:00,000 --> 00:00:00,000 but I can't think of them. 573 00:00:00,000 --> 00:00:00,000 The relationship becomes so stressed as the startup goes on its path. 574 00:00:00,000 --> 00:00:00,000 I mean, 575 00:00:00,000 --> 00:00:00,000 you have like, 576 00:00:00,000 --> 00:00:00,000 you could get sued and you have to deal with this, 577 00:00:00,000 --> 00:00:00,000 or you'll get an acquisition offer that's really tempting and that can cause friction. 578 00:00:00,000 --> 00:00:00,000 So many things can cause friction and tension. 579 00:00:00,000 --> 00:00:00,000 It's really like a marriage, 580 00:00:00,000 --> 00:00:00,000 and I know we all laugh at how we compare founder relationships to marriage, 581 00:00:00,000 --> 00:00:00,000 but in many ways, 582 00:00:00,000 --> 00:00:00,000 it's kind of like that. 583 00:00:00,000 --> 00:00:00,000 Sam: There is a lot of issues to that? 584 00:00:00,000 --> 00:00:00,000 Jessica: Yeah, 585 00:00:00,000 --> 00:00:00,000 yeah. 586 00:00:00,000 --> 00:00:00,000 Sam: So, 587 00:00:00,000 --> 00:00:00,000 you said about within the first month, 588 00:00:00,000 --> 00:00:00,000 you could tell YC was on to something. 589 00:00:00,000 --> 00:00:00,000 But when did you first realize that YC was going to be as big as it just turned out to be? 590 00:00:00,000 --> 00:00:00,000 Did you have any idea of that summer? 591 00:00:00,000 --> 00:00:00,000 Jessica: I don't think we had any idea of that, 592 00:00:00,000 --> 00:00:00,000 that summer. 593 00:00:00,000 --> 00:00:00,000 We knew we were on to something, 594 00:00:00,000 --> 00:00:00,000 and after that summer, 595 00:00:00,000 --> 00:00:00,000 we knew we had to come out to Silicon Valley. 596 00:00:00,000 --> 00:00:00,000 That was an important next decision for us. 597 00:00:00,000 --> 00:00:00,000 We knew that people could easily copy us, 598 00:00:00,000 --> 00:00:00,000 and we didn't want someone else to be the Y Combinator of Silicon Valley. 599 00:00:00,000 --> 00:00:00,000 We wanted to be the Y Combinator of Silicon Valley. 600 00:00:00,000 --> 00:00:00,000 And I remember Paul saying, 601 00:00:00,000 --> 00:00:00,000 "We got to go out there. 602 00:00:00,000 --> 00:00:00,000 " And I remember thinking like, 603 00:00:00,000 --> 00:00:00,000 "We have two months to do this. 604 00:00:00,000 --> 00:00:00,000 "Sam: Was that really driven by not wanting to be copied? 605 00:00:00,000 --> 00:00:00,000 Jessica: Yeah, 606 00:00:00,000 --> 00:00:00,000 we did not want somebody else to be the Y Combinator at Silicon Valley. 607 00:00:00,000 --> 00:00:00,000 Sam: You noticed that with great startups a lot, 608 00:00:00,000 --> 00:00:00,000 that they really hate getting copied. 609 00:00:00,000 --> 00:00:00,000 I think that's an interesting point. 610 00:00:00,000 --> 00:00:00,000 Jessica: Well, 611 00:00:00,000 --> 00:00:00,000 you know, 612 00:00:00,000 --> 00:00:00,000 I think no one likes getting copied. 613 00:00:00,000 --> 00:00:00,000 It's unpleasant, 614 00:00:00,000 --> 00:00:00,000 I am used to it by now. 615 00:00:00,000 --> 00:00:00,000 And you just can't worry about it. 616 00:00:00,000 --> 00:00:00,000 If you are building something great, 617 00:00:00,000 --> 00:00:00,000 you're gonna get copied. 618 00:00:00,000 --> 00:00:00,000 So anyway, 619 00:00:00,000 --> 00:00:00,000 so we came out here and now was also very important for us, 620 00:00:00,000 --> 00:00:00,000 because we didn't have relationships in Silicon Valley, 621 00:00:00,000 --> 00:00:00,000 we didn't know the investors out here, 622 00:00:00,000 --> 00:00:00,000 and that's when we started to meet the investors. 623 00:00:00,000 --> 00:00:00,000 And that's an incredibly important component of Y Combinator that we have great relationships with investors, 624 00:00:00,000 --> 00:00:00,000 and they come to our demo days, 625 00:00:00,000 --> 00:00:00,000 and hey invest in our startups because, 626 00:00:00,000 --> 00:00:00,000 again, 627 00:00:00,000 --> 00:00:00,000 we're like first gear for startups, 628 00:00:00,000 --> 00:00:00,000 we're helping them get started, 629 00:00:00,000 --> 00:00:00,000 and then we want to introduce them to like wonderful later stage investors. 630 00:00:00,000 --> 00:00:00,000 Sam: So once you got to Silicon Valley and started running the program out here, 631 00:00:00,000 --> 00:00:00,000 then did you know it was gonna be? 632 00:00:00,000 --> 00:00:00,000 Jessica: Not yet, 633 00:00:00,000 --> 00:00:00,000 not yet. 634 00:00:00,000 --> 00:00:00,000 I think when we had a feeling that it was gonna be really good was when Reddit got bought, 635 00:00:00,000 --> 00:00:00,000 and that was very exciting news for us. 636 00:00:00,000 --> 00:00:00,000 But, 637 00:00:00,000 --> 00:00:00,000 I think like when Dropbox started getting some traction, 638 00:00:00,000 --> 00:00:00,000 then we thought like, 639 00:00:00,000 --> 00:00:00,000 "Whoa, 640 00:00:00,000 --> 00:00:00,000 this could be a contender here. 641 00:00:00,000 --> 00:00:00,000 " This is someone doing it really, 642 00:00:00,000 --> 00:00:00,000 really well, 643 00:00:00,000 --> 00:00:00,000 and you were funded on our.... 644 00:00:00,000 --> 00:00:00,000 So, 645 00:00:00,000 --> 00:00:00,000 if companies were sort of flourishing, 646 00:00:00,000 --> 00:00:00,000 that's when we knew I think this could be... 647 00:00:00,000 --> 00:00:00,000 Sam: And what is it like looking back now? 648 00:00:00,000 --> 00:00:00,000 Y Combinator has become this pretty influential thing that has impacted a lot of people on a lot of industries. 649 00:00:00,000 --> 00:00:00,000 Looking back, 650 00:00:00,000 --> 00:00:00,000 is there anything you are like, 651 00:00:00,000 --> 00:00:00,000 "Well, 652 00:00:00,000 --> 00:00:00,000 if I know YC was going to be as important as it's become, 653 00:00:00,000 --> 00:00:00,000 I would have done this differently or anything that... 654 00:00:00,000 --> 00:00:00,000 any lessons that you take away or is it just like, 655 00:00:00,000 --> 00:00:00,000 "Well, 656 00:00:00,000 --> 00:00:00,000 this happened, 657 00:00:00,000 --> 00:00:00,000 and I was only ever looking one step ahead at a time.? 658 00:00:00,000 --> 00:00:00,000 "Jessica: You know, 659 00:00:00,000 --> 00:00:00,000 there is always things that you do a little bit differently. 660 00:00:00,000 --> 00:00:00,000 Possibly, 661 00:00:00,000 --> 00:00:00,000 we would have hired more partners earlier on so that we could have accomplished more. 662 00:00:00,000 --> 00:00:00,000 I mean, 663 00:00:00,000 --> 00:00:00,000 for many years it was just Paul and me full time. 664 00:00:00,000 --> 00:00:00,000 And so, 665 00:00:00,000 --> 00:00:00,000 there is only so much we could do. 666 00:00:00,000 --> 00:00:00,000 So we didn't do so much outreach, 667 00:00:00,000 --> 00:00:00,000 and we... 668 00:00:00,000 --> 00:00:00,000 You know, 669 00:00:00,000 --> 00:00:00,000 I wish maybe we could have done more of that earlier on. 670 00:00:00,000 --> 00:00:00,000 But, 671 00:00:00,000 --> 00:00:00,000 in the grand scheme of things, 672 00:00:00,000 --> 00:00:00,000 there is no like massive, 673 00:00:00,000 --> 00:00:00,000 massive mistake, 674 00:00:00,000 --> 00:00:00,000 I think. 675 00:00:00,000 --> 00:00:00,000 We sort of grew organically. 676 00:00:00,000 --> 00:00:00,000 Sam: And what is it that you did as you were growing organically that has made YC work so low? 677 00:00:00,000 --> 00:00:00,000 Someone recently told me there are now 2, 678 00:00:00,000 --> 00:00:00,000 500 accelerators around the world. 679 00:00:00,000 --> 00:00:00,000 However, 680 00:00:00,000 --> 00:00:00,000 every billion-plus dollar companies so far effort [inaudible 00:29:19] I think is 11, 681 00:00:00,000 --> 00:00:00,000 have been part of YC. 682 00:00:00,000 --> 00:00:00,000 So, 683 00:00:00,000 --> 00:00:00,000 that's a great credit to you and Paul, 684 00:00:00,000 --> 00:00:00,000 but what did you do in your early days that set up YC to do this? 685 00:00:00,000 --> 00:00:00,000 Jessica: Well, 686 00:00:00,000 --> 00:00:00,000 there are a couple of things. 687 00:00:00,000 --> 00:00:00,000 And, 688 00:00:00,000 --> 00:00:00,000 you know, 689 00:00:00,000 --> 00:00:00,000 sometimes I would be nervous about sharing some of our secret weapons. 690 00:00:00,000 --> 00:00:00,000 But I'm gonna share one because it would be great if people copied this, 691 00:00:00,000 --> 00:00:00,000 but they won't. 692 00:00:00,000 --> 00:00:00,000 One of the most important things is that Y Combinator always started to be founder friendly. 693 00:00:00,000 --> 00:00:00,000 We were not doing this to make money. 694 00:00:00,000 --> 00:00:00,000 We were doing this to see if we could encourage more startups to get started. 695 00:00:00,000 --> 00:00:00,000 Because we felt that would be good for the world, 696 00:00:00,000 --> 00:00:00,000 like more people starting startups, 697 00:00:00,000 --> 00:00:00,000 more innovation, 698 00:00:00,000 --> 00:00:00,000 that's good for the world. 699 00:00:00,000 --> 00:00:00,000 And so, 700 00:00:00,000 --> 00:00:00,000 we didn't do it thinking we could make money, 701 00:00:00,000 --> 00:00:00,000 and we weren't trying to like squeeze out the best deals in every situation. 702 00:00:00,000 --> 00:00:00,000 We were always driven by what's best for the founders, 703 00:00:00,000 --> 00:00:00,000 what's best for the startups, 704 00:00:00,000 --> 00:00:00,000 our times in our investment paperwork are very founder friendly, 705 00:00:00,000 --> 00:00:00,000 and I think that attracted good founders who wanted to be treated fairly and not be taken advantage of. 706 00:00:00,000 --> 00:00:00,000 Sam: It's interesting you see that many of YC's most successful founders. 707 00:00:00,000 --> 00:00:00,000 They wanna make a lot of money, 708 00:00:00,000 --> 00:00:00,000 but that is far from the primary motivation. 709 00:00:00,000 --> 00:00:00,000 Jessica: Yes, 710 00:00:00,000 --> 00:00:00,000 you cannot be the most successful startup founder if you are driven by money. 711 00:00:00,000 --> 00:00:00,000 You have to be driven by a greater purpose. 712 00:00:00,000 --> 00:00:00,000 Sam: So, 713 00:00:00,000 --> 00:00:00,000 YC's version of this was just like, 714 00:00:00,000 --> 00:00:00,000 it'll be good for the world to treat founders better and have lot more startups? 715 00:00:00,000 --> 00:00:00,000 Jessica: Yes, 716 00:00:00,000 --> 00:00:00,000 yes. 717 00:00:00,000 --> 00:00:00,000 Now, 718 00:00:00,000 --> 00:00:00,000 we hoped we made some money because we couldn't keep self-funding for the rest of our lives. 719 00:00:00,000 --> 00:00:00,000 We couldn't be self-sustaining if we didn't make some money. 720 00:00:00,000 --> 00:00:00,000 And by the way, 721 00:00:00,000 --> 00:00:00,000 for years we didn't make money. 722 00:00:00,000 --> 00:00:00,000 It takes even a long time. 723 00:00:00,000 --> 00:00:00,000 Sam: I remember, 724 00:00:00,000 --> 00:00:00,000 people forget that. 725 00:00:00,000 --> 00:00:00,000 Jessica: People forget how long it takes to make money as an investor. 726 00:00:00,000 --> 00:00:00,000 So we were always driven by like this benevolence. 727 00:00:00,000 --> 00:00:00,000 And I think it's still part of our DNA, 728 00:00:00,000 --> 00:00:00,000 I truly believe that. 729 00:00:00,000 --> 00:00:00,000 I think we gave great advice. 730 00:00:00,000 --> 00:00:00,000 You know... 731 00:00:00,000 --> 00:00:00,000 Sam: Surprisingly hard to get from investors. 732 00:00:00,000 --> 00:00:00,000 Jessica: Yes, 733 00:00:00,000 --> 00:00:00,000 yes. 734 00:00:00,000 --> 00:00:00,000 There are some great investors out there that do give great advice, 735 00:00:00,000 --> 00:00:00,000 but for the most part getting really good advice is hard. 736 00:00:00,000 --> 00:00:00,000 I think Paul Graham's exceptional giving startup advice and helping people with their ideas. 737 00:00:00,000 --> 00:00:00,000 And quite honestly, 738 00:00:00,000 --> 00:00:00,000 telling people like, 739 00:00:00,000 --> 00:00:00,000 "Hey, 740 00:00:00,000 --> 00:00:00,000 you are doing this, 741 00:00:00,000 --> 00:00:00,000 you're it wrong. 742 00:00:00,000 --> 00:00:00,000 Don't do it that way. 743 00:00:00,000 --> 00:00:00,000 " In a way that's very straightforward, 744 00:00:00,000 --> 00:00:00,000 and founders can respond to that pretty quickly. 745 00:00:00,000 --> 00:00:00,000 What else? 746 00:00:00,000 --> 00:00:00,000 You know, 747 00:00:00,000 --> 00:00:00,000 what the important things about us? 748 00:00:00,000 --> 00:00:00,000 We've always attracted from the very first batch that you are in. 749 00:00:00,000 --> 00:00:00,000 I believe we attracted talented founders. 750 00:00:00,000 --> 00:00:00,000 And they've gone on to be role models and attract other people that are talented, 751 00:00:00,000 --> 00:00:00,000 like, 752 00:00:00,000 --> 00:00:00,000 kind, 753 00:00:00,000 --> 00:00:00,000 intelligent founders. 754 00:00:00,000 --> 00:00:00,000 And so I think it's sort of grown organically and spread, 755 00:00:00,000 --> 00:00:00,000 and we've kept a pretty great community of founders over the years. 756 00:00:00,000 --> 00:00:00,000 Sam: So there are a lot of people that have realized startups are really great ways to impact the world and get new technology built and distributed. 757 00:00:00,000 --> 00:00:00,000 At a young age now people are realizing they may wanna start a startup some day. 758 00:00:00,000 --> 00:00:00,000 So, 759 00:00:00,000 --> 00:00:00,000 if you are an ambitious teenager or college student, 760 00:00:00,000 --> 00:00:00,000 what should you spend on if you know someday you wanna start a startup? 761 00:00:00,000 --> 00:00:00,000 Jessica: Well, 762 00:00:00,000 --> 00:00:00,000 there is a lot of things you can do to sort of prepare yourself to be a startup founder. 763 00:00:00,000 --> 00:00:00,000 The first is learn to code. 764 00:00:00,000 --> 00:00:00,000 There is a lot of great online courses now, 765 00:00:00,000 --> 00:00:00,000 if you don't already know how to code, 766 00:00:00,000 --> 00:00:00,000 but I would strongly recommend that everyone learn to code. 767 00:00:00,000 --> 00:00:00,000 Even if you are not great, 768 00:00:00,000 --> 00:00:00,000 we don't know how to do it, 769 00:00:00,000 --> 00:00:00,000 and it helps you sort of judge other programmers. 770 00:00:00,000 --> 00:00:00,000 Build stuff with people. 771 00:00:00,000 --> 00:00:00,000 It doesn't have to be like the next Facebook, 772 00:00:00,000 --> 00:00:00,000 which by the way did start out obviously as a little side project when it got started. 773 00:00:00,000 --> 00:00:00,000 But just build something that you might like to use. 774 00:00:00,000 --> 00:00:00,000 Try to solve your own problem. 775 00:00:00,000 --> 00:00:00,000 Work with other people, 776 00:00:00,000 --> 00:00:00,000 especially if you are in college, 777 00:00:00,000 --> 00:00:00,000 that is just the best place to meet potential co-founders and get to know people and talk about interesting problems and try to solve them. 778 00:00:00,000 --> 00:00:00,000 It does not have to be the next startup, 779 00:00:00,000 --> 00:00:00,000 but it will at least get you to thinking about problems, 780 00:00:00,000 --> 00:00:00,000 it will get you like practicing, 781 00:00:00,000 --> 00:00:00,000 launching something and listening to users and talking to users. 782 00:00:00,000 --> 00:00:00,000 And after that, 783 00:00:00,000 --> 00:00:00,000 if you are not ready to start a startup right away, 784 00:00:00,000 --> 00:00:00,000 go work in an early stage startup. 785 00:00:00,000 --> 00:00:00,000 You can learn so much working at an early stage startup that you wouldn't working on a big company. 786 00:00:00,000 --> 00:00:00,000 So, 787 00:00:00,000 --> 00:00:00,000 that's probably my best advice of what to do to practice to become a startup's founder. 788 00:00:00,000 --> 00:00:00,000 Sam: Great. 789 00:00:00,000 --> 00:00:00,000 Okay, 790 00:00:00,000 --> 00:00:00,000 last question. 791 00:00:00,000 --> 00:00:00,000 You are probably the most successful female founder in Silicon Valley at this point. 792 00:00:00,000 --> 00:00:00,000 So do you have to advice for other female founder or aspiring female founders about what to do? 793 00:00:00,000 --> 00:00:00,000 Jessica: Well, 794 00:00:00,000 --> 00:00:00,000 it's definitely a subject I think about a lot because when we first started Y Combinator, 795 00:00:00,000 --> 00:00:00,000 there were very few female founders. 796 00:00:00,000 --> 00:00:00,000 They were scarce. 797 00:00:00,000 --> 00:00:00,000 And I am pleased that there are more these days, 798 00:00:00,000 --> 00:00:00,000 and they are just continuing to be more. 799 00:00:00,000 --> 00:00:00,000 And so I spend a lot of time trying to help the women that we've funded to become more successful so that they can go on to inspire people. 800 00:00:00,000 --> 00:00:00,000 Because you have to have those role models so that you can think that, 801 00:00:00,000 --> 00:00:00,000 "Gosh, 802 00:00:00,000 --> 00:00:00,000 maybe I could start a startup. 803 00:00:00,000 --> 00:00:00,000 " But I will give some advice based on my own experience. 804 00:00:00,000 --> 00:00:00,000 You can't worry too much about what everyone is saying and all the noise and like, 805 00:00:00,000 --> 00:00:00,000 "It's so much harder as a woman. 806 00:00:00,000 --> 00:00:00,000 " Yes, 807 00:00:00,000 --> 00:00:00,000 it's harder as a woman. 808 00:00:00,000 --> 00:00:00,000 I've been discriminated against, 809 00:00:00,000 --> 00:00:00,000 but I have always kept focused on my product and what I'm doing. 810 00:00:00,000 --> 00:00:00,000 And I don't listen to all of this stuff going on, 811 00:00:00,000 --> 00:00:00,000 and I'm like building a product that people love. 812 00:00:00,000 --> 00:00:00,000 And I think that the women we funded would say the same thing. 813 00:00:00,000 --> 00:00:00,000 They're startup founders. 814 00:00:00,000 --> 00:00:00,000 They are not like necessarily like female startup founders. 815 00:00:00,000 --> 00:00:00,000 They are first and foremost startup founders, 816 00:00:00,000 --> 00:00:00,000 and they are caring about their product and their users, 817 00:00:00,000 --> 00:00:00,000 and they are totally focused on that. 818 00:00:00,000 --> 00:00:00,000 And so my advice is like, 819 00:00:00,000 --> 00:00:00,000 just do it. 820 00:00:00,000 --> 00:00:00,000 Start a company, 821 00:00:00,000 --> 00:00:00,000 apply to Y Combinator, 822 00:00:00,000 --> 00:00:00,000 and, 823 00:00:00,000 --> 00:00:00,000 you know, 824 00:00:00,000 --> 00:00:00,000 build something people want. 825 00:00:00,000 --> 00:00:00,000 Sam: Great, 826 00:00:00,000 --> 00:00:00,000 Well, 827 00:00:00,000 --> 00:00:00,000 thank you so much for joining us and funding my company in hiring me. 828 00:00:00,000 --> 00:00:00,000 That's great. 829 00:00:00,000 --> 00:00:00,000 Thanks a lot. 830 00:00:00,000 --> 00:00:00,000 Jessica: Thanks, 831 00:00:00,000 --> 00:00:00,000 Sam.