Pitch Practice with Paul Buchheit and Sam Altman at Startup School SV 2016

all right so up next do pitch practice this is something that we invented by accident a couple of years ago one of our speakers had to cancel at the last minute so we just threw together this idea let's bring up some startups this is NYC we've never done it on stage before but the idea was you know a lot of people they've gone through I see it's coming up to demo day and actually they've never had a real experience like pitching an investor just like cold someone who doesn't know anything about them so we got this idea hey let's just try it out you know have a founder come up give their pitch and just to warn you they're usually like pretty rough that's kind of the point of it and then we have a partner in this case Willie Sam come reap itch the business and hopefully he does a smoother job we'll see a few things to keep in mind this will be a little bit like the office hours except not at all helpful and probably maybe a little bit more brutal so just to kind of give you some context like as a seed investor something you have to keep in mind is that the median startup is ultimately worth about zero dollars and probably 95 percent of startups are a bad investment so you kind of get in a mode where you're just a default no right and it's a very it's a little bit cold because you know people are pouring off their hearts and they're putting all their dreams into it but you know nine times out of 1,000 probably know the only way around anyway as always if you have to say no a lot and so when you when you when you see a business what you're looking for is like why are you the exception right so it's not good enough just to be like oh that sounds like a nice business I have to think like wow this is that one business that one that I've been saying no for months but today I'm going to say yes so just a just to kind of frame it for you all right first up let's give a round of applause also just for context I don't know anything so I'm not actually pretending that I didn't bother to learn anything so this is I'm hearing about the business for the first time so ok jointed yeah launched in I can't introduce yourself so I'm Jenna and I'm from shipping Max and we help agricultural energy and mining companies hire ships and just to be clear I'm not talking about containers I'm talking about full ships ok so you do something with ships yeah I got that part so this is like if I need to go rent is this like a rental like I needed to go rent so you are a commodity trader you need to shift fifty thousand tons of coal from South Africa to Rotterdam and you come towards the final ship I see so I took a position on coal in South Africa and then like oh now I've gotta get it someplace else and what would I do today well I don't know anything about this business so today you would pick up your phone and your email and you would call five to ten brokers and say hey I need to move this stuff I see so this is like a market place where right now these brokers and they what do they take a big cut and then you're going to like what's the value proposition for me as a trader so think about it like this and today when you're speaking to all these different brokers and they can take you 3 to 24 hours to get some indications back it can take you and up to two weeks and to actually brick that ship and with shipper max we use satellite technology and navigation and to cover every ship on earth and we can tell you which ship can make it in time and fit the specifications and is open in seconds ok so it is the idea that it's just easier for me or do I get a better price like what's what closes the deal so there's two things when you think about trading one it's like a very binary thing as a commodity trader and you need to know what you're delivered prices and to the customer otherwise someone else can come come and get that deal instead of you and both myself and my co-founder I have lost multi-million pound deals if I'm not getting Freight fast enough and and the second proposition is ready and service would you rather speak to five brokers and receive thousands of emails for a per deal or would you rather say this is my let's go the letter sounds better I'm not in that position so so do you have a lot of traction I mean are you what your growth rate so we launched about our beta about seven weeks ago and since then what we were trying to do is talk to these charterers these traders and to see if they would talk to us and give us requests and to date we've had about 4.5 million worth of crusts and last week was a great win for us because we signed one of the largest energy trading companies in the world they shift 150 million and tons of products annually in what does that deal represent for you how much revenue are you going to make off of that so it's we're still competing with other brokers right now the revenue potential is 15 million annually so we're now receiving those requests to compete on a deal by deal basis to be faster and better so from their perspective you're just another broker is that right Yeah right I don't even know that you're like a tech company they're just like a new broker yeah is that good or bad for you and so we're kind of edging our way in so the way I've started this conversation is saying like hey and our goal is to make this much much faster like help us get there and so they're giving us a go they want smarter intelligence and the smaller companies want better access to the market and so today we're just saying yeah it's not all perfect out of the box right now but and give us a go we're not worse than the other brokers have they used you yet or did they just say we'll think about you know yeah they they're giving us requests - so how many ships have you shipped we haven't driven in right now we've basically been getting those requests which as our first test to see will they give them to us because that's actually quite a big deal because they're telling you market information and does that mean that they're sending you the request but then they're going with a different broker and right now basically what our problem has been is that we and need a bit more funding to get more men on the ground to help fulfill these requests and because right now some of the larger brokers have better intelligence and so we're starting kind of from zero and each time and we're kind of getting closer and closer to actually working that deal and beating the brokers so you haven't actually won any deals yet oh yeah how soon will you want to deal I think next week all right well talk next week so well how much will that deal be worth in assuming you do get this deal next week and that should be worth $10,000 and in what will be your costs behind is that like pure profit for you and that's like pure profit so it's our cost is just like the men the people now why is this why is this going to be like a hundred billion dollar company and so here's a huge market and so today like the the amount that these traders spend on brokerage fees today is about three billion and dollars at least at current market low rates and the largest company today is communica Clarkson's who and make 240 million GBP and per annum and I mean to me that also means like you have some really formidable competitors like are they really just going to roll over and let you take their business and well now you're going to roll over so I think what's kind of what's interesting that's happening is that the problem with these big guys like they are superior to the small brokers right they have more intelligence and they can serve bigger clients better but who they can't serve is the little guys and and they can't serve them because it's so manual all their processes said that so basically you're thinking you're come in at the bottom of the market where there's totally neglected yeah is that who you're going after right now is that with his first customers is that at the bottom of the market and now we been starting the bottom market but actually a lot of the big guys want to talk to us too because of the superior intelligence that we can actually leverage free data but but I mean if there is this bottom of market that's totally neglected why not because you haven't done any ships yet right like why not just go find some of these guys who are super neglected no we we're all working with Isis oh so is this it seems like I see a lot of startups where they're basically the high level pitch is there's these brokers that make a lot of money and we're going to cut them out with technology and take all the money but I mean just as a general forum like the most obvious for me and familiar to most of us is like the real estate market right like red fin or someone was going to come in and just blow away the brokers but so far it seems like I don't know if I've seen any of that those markets it seems like the brokers are very good at holding on to their position so the key thing in this market I mean I mean there's one thing to say that we still have brokers and so we're not a pure technology play we're enabling our brokers to be much smarter than anyone else and the cool thing about this market is that an intelligence is the main driver traders reward their brokers with deals based on intelligence because you need that intelligence to keep getting good rates so if you can build a platform that is the the only thing that can and aggragate and digest this like explosion of information at scale and you're the only person that can scale and speak to these small companies and the big companies and mine all that data to actually serve people and more effectively than anyone else okay so supposing I do believe all of that and that like there is going to be this one tech company that just manages to displace all of the brokers why should I believe it's you and so our team combines like a few things I won and Stockton's of experience and actually growing businesses and to a very experienced brokers on team as well as people have been in on the trading side of this market as well as deep technical talent and I think you need all those things and it's very difficult people and people in this industry generally don't know anything about technology and it's very old industry and people who understand technology and generally don't understand like the niche things that you need to care about when shipping 50,000 tons worth of commodities have you shipped a lot of commodities a few how much and so it was more my co-founder than me on the quantities and and he was shipping I don't know a thousand tens of thousands of tons of fertilizer people are signaling to me does that mean it's time okay all right I think I think that's time thank you very much thank you all right all right so I have this is that was first time I admit Gemma and heard about the business so I'm gonna try to reap itch it but I will probably get all the numbers and secret plans for the future wrong hopefully it will still be illustrative and helpful and I'm going to treat this like I would treat a meeting with an angel investor that I was trying to get to write me a check so uh hey Paul I'm Sam from Supermax hi so I'd let to tell you about what we do and maybe I can just start with kind of who we are so we are building a marketplace for shipping shipping is still 9% of world GDP it's one of the biggest markets people don't think about and it hasn't moved forward much with technology so it's still if you need to ship something you call around you call a broker who then knows a bunch of ships they try to find one somewhere in the world they can take what you need and and then you pay them and they and they ship it for you everyone thinks that the market has become really efficient because they read the box and they know about containers and they think they're like this is a solve problem but still more than half of all cargo doesn't get shipped that way and it is there's been no winner that's emerged for a uber like shipping experience where basically you click a button you say I need to ship from here to here you get a rate you get a boat and it goes so that's where building and the the standard broker fees are like 15% and so we think this is you know really large market um I'd be happy to tell you about more details of our approach but is this something that at a high level seems interesting to you uh yeah if you're gonna make a lot of money it is it is interesting to me so well I'd love to tell you why we're gonna make a lot of money um not only is this a giant market you know shipping broker fees on cargo shipping is a hundred and fifty billion dollar a year market um but there is a natural monopoly in that like any other marketplace the the people that have cargo want to go where they can get the cheapest rate and the most options and the people that have boats want to go where the most people that need something shipped are and so even though no one has brought software to this industry yet and it's been this sort of network of people calling you know brokers calling around to ships they know why haven't one of these existing brokers just eating up the market well why do it why does any industry not adopt software I think there's a great quote I heard recently that it is harder for existing companies to get good technology people than it is for good technology people to learn about other industries and this is why startups have an opportunity this is why is that the only way that you can eat the industry then is that I mean it's just naturally fragmented if you don't have software is that is that your theory well yeah I think it's like any other industry it's like Airbnb couldn't have worked without software you just have people call around and find vacation homes that happen to be free or you had to call taxi companies before Ober and find a cab that was free the magic of software is just that any of these industries can become centralized on one platform that gives everybody the essential experience and in these large markets these platforms tend to be winner-take-all I want to take most and create super valuable companies so my fear with these kinds of businesses is always just that anytime like tech people go in and they say oh we're going to change everything but then they show up and the customer says I've been doing it this way for the last 30 years I'm going to do it till I'm dead like how do I know they're actually going to adopt your new approach one of the secrets that we've learned as we've been working on this business we're very new or only seven weeks old we sell a lot of things led to figure left to figure out but one of the things that we've learned is most people are either all humans or all software and that that approach doesn't work and what you need is the combination you need humans aided by software this is just like Palantir or how PayPal dealt with fraud and this is what customers want so we're actually going to have a bunch of brokers the customers can talk to you on the phone like they're used to but we'll give them software that makes them 100 times or a thousand times more efficient but you're totally right and the reason other people have failed doing this is they don't understand this and they just have a pure software platform and it really is the combination of humans and software together that makes this still work with customers that have been doing it for a long time but have the advantages of a software company in scale so is this working right now do you have a lot of customers so we're super early we don't haven't been able to raise any money yet we're only 7 weeks old in that 7 weeks we've been able to get 50 people that have sent us jobs we don't yet have enough infrastructure in place to fulfill those but we expect to actually book three boats next week and we'll make our first $10,000 of Revenue and we think we have a path from that just over the next few months on our existing contacts and what we know coming what we know is coming in our pipeline to get to a hundred thousand dollars in revenue and that's not gmv or anything like that that's actual profit that we're going to keep we have nearly a hundred percent margin on that and then what are your expenses well as I said I think one of the key insights here is that we're going to be humans and software together we're going to be brokers and a platform so our biggest expense by far will be paying the the brokers salary and commissions but again I wasn't joking when I said I think we can make them a hundred times more efficient with software you would not believe how broken the industry is today would it would pain you to watch how one of these brokers works so we think there's still substantial economics for us there so how big does this get ultimately like what's where do you see the business in like five and ten years well the charter market alone I the broker market alone is about 150 billion dollars and Zegna gross I know that's net in the market the shipping market is that's their markup I have the shipping markets and the trillions I again it's one of the largest drivers of worldwide GDP but you know like we're pretty ambitious we think this is a big market and that there is a natural monopoly it could get pretty big or very early but why why should I mean sue me I do believe that story like well why do I believe it's you and not some other some other people the software so um we ourselves used to have to do this a lot and we understand a lot of the things that most people don't work commodities traders we've shipped huge amounts of goods and and we've learned these non-obvious things like the most important thing for a commodity trader is not the price but the speed and the certainty so it's really important to know if you're going to trade on a razor razor thin margin that you can have a ship on a particular day at a particular cost before you buy the coal or whatever and that's just one example I could give you of many but we've been doing this our whole lives we really know about this and we're software people that's great well we're out of time but so really quickly um I'd love to have you as an investor I don't you want to rush your process but wow should we follow up what are the next steps how do you think about this you know I usually like to just kind of turn on it for a little while and I may come up with some extra questions so just drop me an email and include whatever other info that would be helpful okay I'll send you an email Mountain can I follow up with you in a week or two and see thing anything else sure yeah just just feel free to ping me all right thank you Paul great thanks should we talk about it a little bit of yeah yeah short on doing quick quick recap I mean so this is one where it's a business that I don't know anything about so there's there has to be like a pretty strong educational component to start with and so definitely you help especially that you're able to give like some high-level overview and especially like trying to understand just like the fundamentals of like what drives the business because for me like my default assumption about the world is that 99% of people will want to just keep doing the same thing that they do day after day unless they have no choice and so like change happens when people are like pushed and so like the commodities trader with the margins where it's like he is going to lose money if he doesn't get the right ship or whatever like that makes sense right because it actually becomes like a competitive thing where the people who adopt the technology will defeat those who don't right it's one thing at the end don't leave a meeting without some plan for a follow up it's like really good to just say like can I email you should we meet again what are your thoughts um always have it ask it and you shouldn't just say like can I have a check after a first meeting that really annoys me I think a noise Pb even more when people do that to us but it is always good to ask for a follow up you were really good by the way yeah good job it's it's a tough it's tough to pitch up here all right we would normally talk about this for longer but we're running a little bit over so we'll move on to the next one thank you very much you have a mic never mind hello hello good to see you how's everybody so hi hi my name is Kelly Thomas Drake and I am the president and founder of my purple folder my purple folder is a HIPAA compliant global health care app that provides consumers easy access one-stop shop leveraging and connecting existing patient data while also delivering hospitals and physicians decrease administrative costs associated with patient care and an improved patient experience so is this like a EMR thing is this my health record it's actually all of them combined and why I'm having trouble wrapping my head around so is this is this something that I as a patient want or is it something for doctors who's the customer so the actual end user is the patient the caregiver which is their family member and it's called my purple folder because I kept everything in a purple accordion folder when I was going through this with my grandmother okay so this is a place that I keep all of my medical records essentially so essentially if you're from the Bay Area and you have a clipper Pass and you can go from ferry to bard to Muni to all these different transportation systems with one pass that's what my purple folder is so I guess that's too abstract for me so I mean I've been to hospitals and things like like what is the problem that it solves for me is is the problem that I have to move my medical records around I'm still trying to figure out is this for my medical records or is this something other than medical records so I'd like to tell you that answered through a story basically so as of 2011 a federal piece of legislation was passed called meaningful use which made an already antiquated system more disjointed so my mother as of late was diagnosed with breast cancer she is better now she's in remission however she went from having one patient portal on one Hospital campus to seven because of hospital health care systems being so federally compliant that they forgot about you and me the patient the caregiver the human so this is a go-between no matter what patient portal no matter what hospital healthcare system no matter what city state country this is global access coordinated all at the top of my app my purple folder the patient care easy button so it's my medical records okay is that right I'm it is it like just yes or no is it my medical records yes in addition to some things okay what else is it so it's my medical records it's your medical records it's your healthcare legal records it's just your so like my what do you call it like if I had a DNR or something it would be in there is that so I keep my will in there or like advance medical directives advance directives medical power of attorney durable power of attorney we have a universal hip agreement because I also feel that when you're caught like a deer in the headlights and thrust a clipboard you shouldn't have to answer legal questions then you should have it figured out already I see so I've got all that in advance so so once I have this I walk into the doctor's office and I say hey good news I've got my purple folder here and then the doctor says that's awesome or like did like does it work if the hospital or like medical facility I go to does not yet have your software or do they have to be like do you need to sell all the medical offices before it works for me as a patient absolutely not the way that we do it is we the environment is right for doing a digitized version of what I did for my grandmother and what I've learned as of late so and what we've developed so we leverage and connect existing patient data we connect to the back end EMR systems so that you the new care provider says oh well I don't have that yet we send it through geo location technology you receive a double-oh-seven encrypted link and you input it in your system as you like okay great well we're all out of time but thank you very much thank you thanks before I start we have a little surprise we found PBS Kids Thomas and Camilla backstage they wanted to say hello to all of you you could give them a round of applause why see winter 2024 or excited thanks for coming all right um so we'll do the same thing again I know very little about this business all the numbers will be as close to my memory as I can remember or think of from what I've read earlier but they'll be made up all right all right um hey Paul I'm from my purple folder hi so health care in the u.s. is horrible we spend nineteen point five percent of our GDP on it and we have the lowest satisfaction of any developed nation and you might wonder why that is do you have any idea they have lots of ideas ah well I would actually love to hear before we jump in what do you think is the single biggest driver I mean I think there's like no underlying economic model other than driving the cost higher fundamentally right right make more money by driving cost up so we think the same thing you know you have this like runaway growth because there's just no incentive to do anything but charge more do more tests do more procedures and the patient's out of control so our whole goal is to put healthcare back in the hands of the patient so they have a sense of what's going on and see everything in one place as we've had this explosion patients have data on six or seven different systems they have prescriptions they have appointments they have communication with doctors most people can't use all the systems or one and so we've just tried to make one consumer portal for all your medical records and any other medical data you have if you have this you can actually understand your care or family members care and actually have a much better experience and hopefully over time drive the cost way down in the process we become one central repository for all patient health data that actually works so basically as a patient I just this just has all of my medical records in there is that is that yeah so we make that work magically we connect with every system we don't have to do any deal with them we just used api's that they all have to have or secure email whatever they have but we make it work so that as a patient you just say you know I need to connect these few systems or your doctor can send you invites and then you can view everything in one app I see though I is there something you sell to the patients or to the doctors who's the customer here today we're going to sell to patients it's really hard as you may know to try to sell things to doctors and hospitals but we have we have customers with an you know their hair on fire this burning problem of not being able to manage their health care the health but what is the thing that actually drives some would like what is the moment where like my hair is on fire well um one particular scary story from a friend of mine was a missed message about a potential cancer screen but it's usually something like that it's someone gets really sick or something bad happens because of a lack of information in communication and so the pitch to me as a consumer is that this brings together all of my information just so that I can like peruse my medical records or like what am i doing with it well it's so that you can get better care like the the issue many people taking care of a sick parent or grandparent have run into the issue where they don't know what to do you know the patient doesn't remember something or the family member doesn't remember something and the idea is like these are complicated things you'd really like to have a single set of information that says here's when you need to take these medications here are these test results you have to go in to get this test this doctor said this thing once you tell us other doctor it really is just about you know better care and people are willing to pay and unlimited amount of money if they can get that actually to be good are they paying you an unlimited amount of money right now so we've just started charging um we unlike most healthcare companies don't want to drive the cost of health care up and up and up we kind of hate him when people say oh I make this medical device for you know seven dollars in charge twenty two thousand cuz insurance will pay me that's not who you want to be so we're only going to charge 99 dollars a year per patient although over time will become such a powerful how many customers do you have at that price this is made up we have a 150 so far and we're growing at 12 percent per week right all right well I'm all out of time but I think you want to invest do you want to learn more what how do you think about uh yeah you know it's it's definitely an area that I'm interested in but I think I need to learn more about the products and maybe you can send me all actual financials from there okay great all right thanks thanks I probably butchered that sorry I don't believe you did all right Oh Sam Altman saying my my business to everybody all right so this is a tricky one because like we spent a lot of time with me just trying to wrap my head around what it is and to be totally honest I'm still not entirely sure I think it's basically a thing that brings together all of my medical records right well but and this is a really common thing where startup founders saying no no no it's it's that in like a thousand other things but it's really important especially at an early stage that you be able to be focused so you know if you can say yes it's that but here's the part that's really exciting is it grows bigger but I need to be able to wrap my head around it otherwise it's almost like it's like a Christmas tree right you want to like hang the ornaments off but without the tree like it's just ornament smashing on the floor so like I need to have that that like concrete framework in my head first so like the first thing I ran into is just like unsure what the product is me too I it's always so tempting to try to tell this sort of grandiose and exciting story but if you can't if the person you're pitching can't understand what you actually do today in the first like 30 seconds the pitch is unlikely to get better from there and so just like saying it in plain language just what the product actually does what a user can do who your customer is what they pay you for and what your product does is super important yeah and in fact this is the once you're in YC this is the first thing that we work on and so it's not easy like it takes the companies in YC usually about a month to get it right so every time we meet with them in regular office hours or especially we have a thing called group office hours the very first thing that each company has to do is give me their one-line description and usually at the start of the batch it's all incomprehensible and so it's something that no it's normal that you have that because almost every company we fund comes online i have that sounds like a disease yes it's learning how to easily curable though yeah learning learning how to really reduce things to their essentials is is super important but not always easy that is the number one skill of pitching though to practice alright I think we're way out of time yep thank you all right thanks thank you

Channel: Y Combinator

Views: 36,001

Rating: 4.889431 out of 5

Keywords: YC, Y Combinator

Id: fcyf9z4gSeI

Length: 33min 4sec (1984 seconds)

Published: Sun Dec 25 2016