Sam Altman | How to Get Funded by Y Combinator

well I'm very excited to announce our next guest and somebody that you're all anticipating seen tonight and Sam Altman has just done an amazing job kind of taking over by common errors as president with the retirement of PG previously he founded looped previous before that he attended CS at Stanford he's from the Forbes 30 under 30 and he leads Y Combinator let's give a big start Brian welcome for Sam Altman les well welcome thanks for having it it's like this every day when you walk in right or no is it I wish no yeah there's no one there it's just it's just the partners there's no companies there are no companies in there okay well I think I think I'd love to start with this this kind of theme that there's a single way to go to startup and and along this question of you know what are some of the good and the bad things that you see people do in the beginning yeah I think like the the foundation of these startups is so incredibly important and I think that if you get it right at the beginning it's great and and sort of on the other hand if you get it wrong the beginning it's usually fatal and so the first thing is before you even start why you're starting and I think that people that start a start-up for the sake of a start-up before they figure out what their passion about they're going to do that has that's much harder to make succeed as soon as you declare something a company and not a project there's there's this pressure to figure something out quickly and when you're and it can't sound too crazy because it's like now it's my startup and I have to tell people that it is my startup and when it's still just a project it can sound pretty crazy and and and these things are just so delicate these these ideas before they develop that I think one mistake people make is they have this startup and now they're like I need to start up and I'm in my co-working space like hanging out and doing whatever and you know now I need my idea and I'm gonna do that it's gonna be great and I'm gonna rage code and I'm gonna you know like get on TechCrunch in and that that is not the path to success so I think the most important thing to do at the beginning is actually take the time to figure out what what you're going to do and let it be a project before it's a company have have the idea first and then the company have the company be the way to support this thing that you think is really awesome to make it happen once you get started and once you're building and once that eventually sort of develops into this company then I think the most important thing is to have a focus on growth you know we talked about this a lot of YC how startups and growth are incredibly interrelated and the best startups have growth goals from very early days the Airbnb guys used to draw a graph they to hit a forward-looking projecting graph and then they would like put it up on the mirror in their bathroom and on there like fridge Dornan everywhere and you know every week they were just trying to grow 10% and our best startups do this and it's so important it is this function that shapes the company and it's one metric to optimize point it's one way to answer every question and it startups to do this usually succeed in startups that don't do this argue about everything else well I want to talk about growth let me go back to your first point of doing something you're passionate about or just doing a project versus starting a company and like you know wanting to be something and trying to force it what is that balance because like if I say to myself hey I want to be an entrepreneur or I want to work for myself yeah I want to be my own boss but at the same time like I can't force it it just kind of has to happen I have to kind of find a problem that needs to be solved like well the way you can force it sort of is you can just decide to spend a lot of time thinking about ideas and building stuff as projects like until you sort of say this is my startup and we're going that is when I think sometimes stuff goes off the rails and where is that like when do you say this is like a what what where is that at that point I think when you get conviction behind what you're going to do but I think when you're like you know what this may not work but I really believe in this I want to try to make it happen it is there some data piece behind that as well or is it no because again at this stage like it's you know you can certainly make it a company and raise money or whatever before you have built it but raising money for example if you raise money and you still don't know exactly what you're gonna build even generally what you're going to build that's usually really problematic because now you have these investors and you feel like you like owe them progress but you know this phase of like thinking actually takes a while um and you once you go you need to want once you commit to something once you decide to build something you want to go as quickly as you possibly can you know the hours matter but uh it takes time before you get to that phase um and you know you can commit and say I'm really gonna spend a lot of time trying to figure out what is broken in the world and what I'm passionate about making better do you subscribe to the Lean Startup customer development methodologies are those necessary at the earliest stage or not you know I think there are good parts of that for sure like for example I think understand your users is one of the most important pieces of startup advice in the world a startup that does not do this will fail startup that does this often succeeds so that I really agree with you know this idea that I'm going to deeply understand my users and iterate very quickly I really agree with um there are other parts I don't like what uh you know I hate to like I don't know Eric Ries isn't here don't worry um tell him no no I I just say like the pot like I I think that I think that the central idea that I'm going to boss okay I'll say one thing that I think can get missing from the Lean Startup methodology I think and this is sort of like not his particular version of it because at this point it's been adapted so many times but sort of very ambitious startups often take a long time to work or sometimes they take a very long time to look ambitious um you know when reddit started it was this sort of like like joke of an online forum and now it's the sort of like weird collective consciousness when Facebook started it was college people sharing photos or not even photos in the meeting days like profiles that was it I remember and now it's this like incredibly important sort of like universal connectivity um other things like if you're trying to build a nuclear reactors take a long time to get started but so sometimes these like these big companies taking very long time to get going um and I think it's important to allow something like that to happen I like this phrase you said the hours matter that's it that's a really great way to describe the earliest days of taking on a project or building a company what how do you pray you prioritize how do you look at that what is your what is your day even look like one thing I've really gotten good at in the last sort of six months just as sort of YC has continued to kind of like growing prominence is saying no to things that I aren't a good use of my time and that's been like this incredibly freeing thing and I've really had to like figure out what the highest and back things I can do are and you know that is like figure out how to grow YC how to figure out to get the best people in the world as YC partners the best companies in the world to apply I see making sure we pick them well making sure we advised them well and making sure that we developed the White Sea Network you know sort of this YC made a company to sort of be this organization that can support these important companies to happen so I try and spend my time on those things not a lot else and I got must never speak of things but like you know these are people so we're here thank you all right there these are the people we want to talk to but generally I've gotten just really good at not doing the things that don't matter the the best founders are just they execute so quickly one of the ways that we can identify people that are really great is how much progress they make between when we meet them so you know the bad or mediocre founders you'll meet them a week later now they're like oh yeah I'm doing those things when we go you know still kind of early and the best founders you see the next day they're like I did all those things and these others and the the founders that execute slowly have always such great excuses with such detail about why they couldn't move faster like what what's a good excuse you've her oh you know like well the product wasn't quite good enough or we learned this other thing we wanted to take more time or our lawyers found a problem or like you know there was this PR issue or because competitor did something or you know this VP at this other company got sick who knows but um it's some they're sleeping kinks a big thing that kills me every I right deal killer um let's talk about what so you got 114 companies in this batch yeah you've talked about a lot you talked about this a lot making greater efforts with with women underserved minorities love to hear where you guys are out on that what what's where it where's that out with this batch what what have you done in terms of your distribution yes sir to to change some of those things improve them I should say look so the way we look at this is you know we want to fund all of the best startups in the world as close as we can get to to that and to do that we need to like reach a very wide applicant pool and so we've made huge efforts to get more companies applying internationally and as you mentioned we have done a lot to reach out to and racial minorities in the US I good news I think that's worked pretty well the applicant pool has tracked upwards and upwards we made a lot of progress especially with black founders in this last batch applying and in front of them we fund you know we've looked at this in detail we fund people from other countries or women or minorities at about the raid they apply so yeah three percent of the applicants are black we fund just about three percent black founders a little more a little less depending on the batch but I think just doing the outreach you know going around and visiting HBCUs or having a conference for women that are thinking about starting companies that goes an incredibly long way that's moved our numbers more than anything else really great if you in terms of your distribution like are you more bullish on the growth of your YC network and alumni or on you know I think historically hacker news was is kind of incredible and in P G's essays where this incredible distribution channel for getting great people to kind of know who you were but are you more bullish on the alumni network in the future or you more bullish as hacker news you know is important as ever it's one of these things where the way that we recruit the best people in the world is by reaching in multiple channels so the alumni network is really important hacker news is really important putting great content online is really important I taught a class with a bunch of guest lecturers last fall that God was great millions and millions of views you know that for that applicant cycle are the number of applicants we had one up like 40 or 50 percent 60 percent so I think there's like a lot of things we can do that that's a great point too because this is something that's so interesting about YC is your numbers you have sixty forty to sixty percent increase batch over Batchelor terms of applications but these aren't companies that apply to other incubators I mean that that's it's I don't know needs a hard date on that but you just know you get the sense of people saying hey I'm not applying to I won't apply to any incubators but if I got into YC I definitely do that how how have you like how have you built that brand how have you built that you know that kind of that that that buzz with with entrepreneurs to say like hey in this whole space I look at them and I won't kind of you know I'll focus on that but not really anything else well we've been very fortunate to fund some incredible entrepreneurs and I think that becomes a self-fulfilling cycle um you know I think that there are a lot of things that we do differently from other I don't even like to call us an incubator because that sort of brings to mind all these terrible things that other people do um but I think that uh what are you called what are we yeah I like a like a well what Y Combinator is is a like what the mathematical definition is like a function that starts other functions and so there's way where this company that starts other marketing-wise I'm kind of a but and that was where the name came from but I think what we really are is like a source of funding and advice and a network for startups um but they don't work in our space yeah we don't have them like all lid and some like satirical dorm um you know they kind of they're they're their own companies and we're there as a passenger in the backseat and we help them when we can how many how many countries are represented in the latest badge high 30s high 30s and where has it been in the past um it's importantly trending out but it was gone in the first batch okay it could you that's up yeah um could you every I didn't give a good I think like the thing to the degree that people think of YC differently then than any other accelerator I think it is the strength of our alumni network and sort of the track record of the companies and I think that I hope part of it is also the advice of the partners we don't have a bunch of mentors we only have full-time advisors we only have people that spend all of their time getting better at helping startups and we have this alumni network that is incredibly dedicated to helping other companies um we've also funded now many billion plus dollar companies yeah and the last time I checked no other accelerator had funded a single one that's right oh and so I think people look at that and say well something here is working I could see where they draw that conclusion what what what which international markets are you impressed by like which where do you see an impressive you know group of talent come thing the thing that's so amazing I spent a lot of time traveling around the world last year is how good so many different places are I I remember this one moment at the end of the year actually flying back from New Zealand New Zealand is not where you would expect to be like a start-up hotspot I was like man those founders were so good yeah companies were so good but really everywhere I've traveled in the last couple of years um you know the quality of founders has just gone up and up and I think that I think that Silicon Valley will remain dominant for a long time I hope that um I also I'll sort of note that Beijing is like especially unbelievably impressive um but I think that and I and I think many founders around the world still want to come here not all obviously but a lot of good ones do but the you know if you believe that intelligence and determination is sort of evenly distributed around the world then you know 5% of the best founders will not shall be born in the u.s. ninety five percent will be born elsewhere I do think there are things that the u.s. does that are particularly good sort of culturally at encouraging sort of disruptive crazy innovation um but so maybe some people will come here I hope they keep coming here I hope that we get out of our way on this immigration thing before we sort of really wish we had done so earlier but I think that the talent around the world is amazing everywhere and it's it's like impossible to pick one great place our hashtag is startup grind I once heard that that you guys take more founders from the Waterloo kind of Toronto area than any other international place is that is that inaccurate per capita basis yeah I was there last year too you know there is something about the the you water will in particular that that trains people to think like founders you have the right combination of an engineering background and sort of thinking about what users actually want and get an experience building stuff so yeah Waterloo is especially great we brought three busses from Waterloo so seems like a lot of people spin it every danger is basically terrible but they're nice people could you could you could you ever do a batch outside of Silicon Valley do you think um we could I I it's not high I mean we have like a lot of like crazy plans coming up and I would not put you know running the batch outside of Silicon Valley on the short list most great founders that many great founders that we we meet still really want to come to Silicon Valley for a little while they may not want to stay but to come for three months develop a network here um you know people move their families here for three months during the summer and move back in you know it's a hard thing you don't encourage them to stay once they get here you say go home build your company many of them get here and love it and decide this is the best place to build their company but many of them are like you know what my users are in India I'm going back to India and we say that's great um so we could run a batch somewhere else but still Silicon Valley works so well for startups I mean if you compare Silicon Valley to the other startup hubs or things that people so like everyone talks about New York is that startup hub right I Love New York I think there's cool things happening in New York as far as I know since Bloomberg New York has not produced say a five plus billion dollar tech company okay um and like why is that I'm not totally sure I think one thing that Silicon Valley has it is great is that although the people here very much want to get rich a lot they're willing to wait a long time to do it and and unlike most other cities where there is the other jobs you know financing New Yorker movies in LA or whatever sort of have this focus on like short ish term cash comp in Silicon Valley people are willing to wait 8 10 years whatever and it's cool to like have equity in a start-up and startups are like the number one thing here it's not a number two to the finance or number two to the movie industry and so I still think Silicon Valley is like the place for us to focus yeah the costs are getting out of control if something is going to upset the sort of Silicon Valley dominance there's a good opportunity it'll be something like the price of housing it's untenable it's awful I mean and it's so stupid that we can't fix this other way call the renter's out they're really good man it's like we want to like you know it's like we want to like drive the startups away it's crazy you talk about in the future you've ramped up the number of startups and the number of partners and you kind of average you're like a one-to-one partner to 20 startups is that it right in 15 okay but you've talked in the future about funding a thousand companies or you hope to fund a thousand companies it sounds like you're trying to figure out how to do that at scale how to do that could is why see something that could ever go public I have no desire to run a public company um and I think like most other people that don't either I'm sorry sure hope not um you know look we're very fortunate um we we invest our own money we don't have outside lp's as lp's are actually generally okay public shareholders are not that great like I you know like I really don't want to like be have someone ran an hedge fund or Bank calling me saying like you missed your quarterly earnings by a penny a like this is the end of YC you know yeah like I'm gonna deal with a stock price like I'd rather just focus on what we do there's um at the end of each application you or and then you know I think PG did this before you know and Jessica talked about this last year when she was on stage you sent out this blog post you know kind of hey we're so sorry we can only fund ya and fun and we got these thousands of applications coming in you guys you know Bessemer has this kind of anti portfolio is there anybody on your list that you say hey you know you can say kudos those guys we missed it but you know with you know they've done a great job there anybody like that like in the YC anti it will attract this obsessively um you know like much more I think than people ah right she would realize yeah we have one we do we have actually custom software that just tracks this um there are a few companies that are doing pretty well we have not yet missed a huge hit but I'm sure level I'm sure with YouTube being a wheel Ian dollar company yeah we have we haven't missed one yet that's applied but the thing that makes me sad is that I'm sure there is someone we would have funded that we didn't that had to be funded yeah it would have been a multi-billion dollar company um probably many of those uh you know there are a lot of companies that we fund we didn't fund them we just never never happened uh anyway I'm sure in the last few years we've missed someone that's going to be a huge success because I have occasionally just gotten so high it just it hasn't happened the company hasn't become really successful yet just a matter of time what do you what do you say to to these entrepreneurs that come in there some of them are pre products some of them are just initial you know product about raising capital and when to do that what are some of your kind of best practices on on when to do that what is the right point and what what the kind of the triggers are to get that machine going you know generally you want to raise capital either when you have to or when it's really easy and so if the company like desperately needs money and they can't figure out any other way then they need to raise money or if someone's like offering an easy money on good terms sometimes happens at the end of the YC program you should take it because you can use it for good things one of the things that I think has gotten really screwed up recently is that people if they don't raise a lot of money they don't think of themselves as a real startup like it used to be cool to do a lot with like a small amount of capital when YC started we ourselves used to invest like twelve to twenty thousand dollars but now people are like well I need a million dollars to build my product and that's a real problem I think so I think it is still an incredible win for startups to be able to operate on small amounts of capital build their own product not have to hire developers to build it and this is somehow gotten really screwed up we're gonna take some questions in just a second so be ready apparently we're gonna start with him all right better be good with that kind of excitement what would our ycs core values helping entrepreneurs honestly the thing to the degree that we have been successful I think one thing that we have done differently than most other investors is that we are just all about the entrepreneurs one of the things that I really respect about PG before I took over is I have seen him do things that were like way that hurt him or hurt YC financially or otherwise but we're in the you know the right thing for the founder and you know we're here to help founders like that's that's why we get out of bed every morning and then in funding important companies like making you know like making stuff happen one thing that I deeply believe and I think all my partners would say the same thing is that if we can't get growth back in this country we're in a really bad place like I think it just breaks everything down and the only thing at this point that's going to drive growth is innovation and the only thing that seems to be driving innovation you know Bell Labs you know the US government funding lots of science that's over it's gonna be startups and so I think there's sort of this like moral imperative to make more startups out I'm like that's that's everyone in here's best hope on that I just want to mention more things about about along this line which is you know you see so many entrepreneurs and and they do so many different things yeah 700 900 900 come pick on 800 something ok between so what what's the dumbest thing you've ever seen a founder do nothing I can say on stage but really dumb stuff I'll say that like jailed um or a lot of times really uh no YC founder that I know of has ever I am I have never been involved with any YC founder in jail but I have been involved with others like you weren't you weren't part of the crime that he committed is that way no no no it's just like wasn't it wasn't the person the time that I have been to a jail to build someone out was not oh I see found her okay so um what what is that I mean what what do you do is that was if that I mean guess you cross the bridge and come so but is that something where you say hey look you've crossed our values here's your equity back or yeah yeah yeah what do you do um yeah so we have an ethics policy and if someone violates it then we give them their equity back they get to keep the cash too but we remove them from the program anything it's important that we take a hard line about that we haven't had to come up too often as far as I know I think there's only there's only happened twice ever it's actually remarkably infrequent yeah if you think about we funded like more people than are in like one class at a Stanford or Harvard or something like that yeah and there's a lot of those guys go to jail so it is really that's true by Christensen's book how to measure your life Jeffrey Skilling it's Harvard okay let's give it up for Sam oh man thank you let's take it let's take a couple of questions can I just ask this you've got a roomful of thousand people here so please ask something not so specific to you but something that would be helpful to the general group and please try to ask it relatively quickly we appreciate yes sir right in the front it's all you buddy hey guys um Sam thank you for how to start a startup it's awesome thanks um I wanted to ask about the trajectory of something like Y Combinator typically you have to realize that in order to ride the wave you have to start paddling a little bit ahead of it so do you guys usually look for startups that are 1 to 3 years out of capitalization or do you think more than now no we you know we are the most successful when we fund things that other people don't yet think are going to be a really big deal but two years later become a big deal and it's very hard to predict that and the best thing that we've learned and the thing that is saving me is an individual investor so many times it's just fund the smartest most determined people you can find with the clearest vision even if you don't understand yet why it's going to be a big deal so yeah we try to fund things and we love it actually when other investors are like why is YC funding this crazy stuff and then two years later begging us to fund more of it because at that point it's sort of like too late and we funded our companies um but yeah we try to fund companies that are going to be that are working in markets that could be huge in 10 years even if they're small today we try to fund companies that other people don't like right now but we think we may like in the future and that's that's hard to predict we often get around hi Sam you mentioned earlier that the biggest difference is that some of the entrepreneurs don't execute each week have you been able to parse down is this an issue of not being able to deal with the stress or anxiety or uncertainty in terms of hitting those targets each week like what have you seen in patterns what did we change the men from the boys or the women or the Winterhold girls I think I said each hour not each week and and that is an important difference but you guys measure growth at what 7% growth is like the optimal week over week like 1010 okay you know it's partly just a personality thing it partly can be learned one of the things that makes me feel like we actually really help it YC is that we can often take someone in that is like a slow mover and kind of limp and make them a fast mover and really fearsome so it is possible to teach someone to do this sometimes there are some people that never do it and there's just a disposition issue but a lot of the times you can just really focus on this and learn to be decisive and move quickly and yeah I think that's a good thing to strive for hi my name is Gloria and I'm curious to know earlier you mentioned that you guys are very active in terms of supporting female entrepreneurs what suggestions do you have for female entrepreneurs that is not data not technical well I won't answer that for female entrepreneurs specifically because I'll just give the answer what I what I suggest for founders that are non-technical um and I think the answer that I give most is work with a technical founder um don't just pick someone ran them off the street that you don't know but you know spend whatever time it takes working another job develop a working relationship with someone to found a company with um I think not everyone has any desire to learn to code that's fine people shouldn't but it's very hard from the data that we have to have a company with no technical founders it's not impossible but it's a significant headwind and there are all these reasons we've talked about you can believe them or not it's certainly something that in our experience we've seen is true you know companies with no one on the technical team have a much harder time getting the product build cheaply a much harder time hiring engineers because it's hard to evaluator they want to work with a great technical founder so yeah my advice for anyone male or female is to define the technical co-founder see him what advice would you give to an entrepreneur that is trying to change in the government space um first I would say that's great I think a lot more people should be doing that I think that you know in many senses like the government is the largest enterprise customer in the world as any other enterprise customer goes the bigger they get the slower they move and you have to find ways to not have that kill a start-up which is what usually happens so figuring out ways to move quickly and start with smallish kind of like bite-sized projects that government agencies can act on quickly seems really important but in general this is one of those areas that I think in a few years will be big that today people aren't paying attention to we funded many government related startups in the last year so so Tom Dennison from Chicago greatest city in the world by the way thank you I was born in Chicago nice what's your question Tom so I was a co-founder of a startup that went through YC and we got down to the finalists whatever we were flown out and did the interview and all that very candidly how on earth can you choose whether a startup gets into YC in ten minutes yeah so this is a question that we get asked all the time um the first answer is we can't always and the interview process I think for companies is not pleasant it's pretty harsh it's pretty quick often founders are sort of not super happy with that with us afterwards but here's the deal with YC a lot of what makes us work is that we don't have a filter we don't require intros you have to be in our network you don't have to have an in with us and so we see tens of thousands of startups per year we have to spend 90% of our time advising founders so there's a limit to how much time we can spend selecting the next batch and so we've learned as much as we can what what makes a great company and we try to make our best guess in 10 minutes and we try to learn sort of what what the characteristics of a founder are you know clarity of vision clarity of explanation determination passion you know some evidence that they've done something great in the past or that they have on this company but honestly it's really hard and and we screw it up all the time I'm sure and the thing that like sucks the most is that I know like for certain there are these great companies that we've rejected that had we accepted would have would have become great anyway but the hard part of our model is that you know the top of our funnel is just so huge and so we haven't figured out a better way yet yeah it's not a perfect science let's give Sam another big round applause thank you for being

Channel: Startup Grind

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Rating: 4.9029126 out of 5

Keywords: Sam Altman, Y Combinator (Venture Investor), Incubator (Invention), Accelerator, Startup Grind, startup, startup company, technology, fundraising, yc, ycombinator, how to get funded by y combinator, yc application, y combinator application, how to apply to yc, how to get into yc, derek andersen, how to start a business, how to raise money, venture capital, silicon valley, san franciso, billionaire, advice, interview, application, entrepreneurship, 500 startups, demo day, business ideas

Id: kVKaMHgOTP4

Length: 32min 49sec (1969 seconds)

Published: Mon Feb 09 2015