The Path to $100B by Paul Buchheit

it is now my great pleasure to introduce my longtime colleague at Y Combinator Paul Buchheit Paul is known for a lot of things not the least of which is his wisdom and all things when it comes to startups but he's also of course the creator of Gmail the inventor this is true of don't be evil and has a has had an incredible career so I just thought I'd turn it over to Paul for a couple of minutes for him to describe his journey from somewhere to in into YC in the and and what's happened then and we're gonna have an interesting conversation I hope on on what it means to build an epic company Paul Wow all right thank you how far back do you want me to go exactly where were you born upstate New York me too yeah so I yeah I grew up in the Midwest and I went to college in Ohio and like in the 90s it was just different from now probably everything in the nineties yes everything from now it was different so yeah I was always interested in startups and like you know even as a kid like this idea I think I just didn't like the idea of working for someone else and also I liked the idea that you could make a lot of money and like create cool new inventions basically right like you need to read about inventors like Tesla or someone like that like wow if only that guy we're like smarter at business right like he he invented so much he invented so much and he made like he died penniless like he wasn't smart didn't he start that car company yeah I don't know if he actually I'm not sure if he actually got any equity I don't think he did that so so yeah yeah I was always covering the back of my mind but you know as I'm coming up to graduate college which was in 1998 so I was very interested in startups but there really was you know there's obviously no startup school there was no Y Combinator there was none of was basically very little the web was relatively tiny at the time there was not a lot of resources I didn't really have any connections I didn't know anyone who worked at a start-up but I suspected they were like in California so just always doing kind of like the simplest thing first I've been treated by that what made you think of California I mean like eBay Netscape like that first generation Yahoo all of that first generation of Internet companies say they had already you know it's companies are IPO by the time I graduated so and they were all located here you know with the exception of Amazon up in Seattle so you know it was pretty obvious I didn't have to be that Silicon Valley to figure out where Silicon Valley is so so I took a job out here at Intel kind of with the hope that I would just like you know there but he startups everywhere I'll just like find one or something right so you went to work for the man say yeah I went to work at Intel and that was you know it tells a big company it wasn't it wasn't awesome it wasn't terrible it wasn't like a bad job you know I don't want to like but it wasn't it wasn't something I look forward to like continuing to do year after year you used to call working at HP where I first worked the fur line rut yeah it's comfortable it's comfortable but it's a rut yeah I actually have a specific memory like hanging out with a couple of other friends who worked at Intel and you know I'm like 21 22 years old something like that and they're talking about like oh yeah they've got this really great like retirement plan where you know if you work there until for however many years like your age plus your number of years of service like you could retire at like 55 or something I'm like ah like it's like like oh yeah why don't I just take the next 30 years of my life and stick it in a box and bury it yeah I mean it's worse worse there are people there when you're sitting there at 22 who have been there for 30 years who are just kind of doing time yeah so I wasn't really into doin time but I was really into Linux so that was kind of my obsession I'd gotten interested in Linux like actually really early like 93 like when it wasn't actually very good and so I was kind of like an early kind of Linux elet who was like oh this is so awesome this is how you know the future is gonna be and you know back then businesses didn't really Linux wasn't like a serious operating system they're like no serious businesses will always use Windows you know you need like an enterprise operating system not some hobbyist junkie so I was like looking for something to work in Linux and because I you know everything at Intel was like pretty much windows-based and so that was my criteria when looking for startup so it's just that I wanted it to be kind of technically interesting Linux stuff again there weren't like you know great resources on like a huge list of startup so I I just kind of like scouted out what I could find basically on Slashdot because I would I would read slash down a lot and I came up with a list of like six startups that seemed like they might be interesting you know doing stuff with Linux and so I like just emailed my resume to all of them sort of like ironically it immediately bounced from Google because their mail server was misconfigured so I didn't hear back from from most of them ever I interviewed at one other company and then they I resent my resume the next day and then it went to they had fixed like I think the MX record was broken or something so I only interviewed at like Google and one other company and the other company like I wasn't interested and I think maybe they weren't interested isn't either one of us really like contacted each other and so Google was really the only offer I had so that made it easy to like choose and so I went to work there in 1999 and how many employees did Google have I was the 23rd at that point and so we were in we were in Palo Alto on University Ave kind of on the second floor above what is I think a book shop or cafe or something like that what did it feel like at Google when they were 20 employees there it was really cool actually like I you know I was really impressed when I was interviewing with them that they asked actually like really smart questions which i think is a pretty good indication like that was one of the other reasons I wasn't excited like the other startup I went to that I'd interviewed at it was just like I went into their office and I just sort of felt the pressed like like you could just tell people weren't really that excited to be there and then they'd asked kind of like dumb questions I didn't think we're like anyway it just wasn't like a good sign versus like Google kind of like they were into whatever it was they were doing and actually after I was there for maybe like a week I went back and I'm like hey I want more equity like sorry you have to negotiate that before you start so yeah that might have been like the the smartest pseudo investment decision you've ever made even though it didn't I guess it worked out but yeah I mean it worked out overall but yeah I do wish I'd gotten more more so the thing about the office I mean you asked about the environment like it just had like a very kind of like a buzz of productivity right like because we were doing these really kind of exciting things and I think like they had hired people who are really into building these like big systems and creating great products and everything so it was it was an exciting place to work where you know I would actually like wake up in the morning and be kind of like eager to go to work cuz like I've got stuff I want to do do you think that was because not just they were working on exciting things but because they believed they were going somewhere yeah I mean there is there's kind of like an irrational like belief right like objectively we were just this tiny little company river but you know Larry would be talking about whatever crazy ideas we were just like wow what like I remember having an early memory where I was building this system and then I'm talking to Larry about he's like why are you even bothering with it disk we're just going to store everything in memory or whatever which at the time was sort of an absurd you know we didn't have enough RAM to store all the data but he was always thinking like so many years ahead in and it was a little bit insane but it made it a very like exciting place to be yeah it seems like there's there's something fundamental if you're thinking about whether you have a potential to build a really big business if you don't have some sort of vision some sort of idea of a future it's hard to believe you're ever gonna get there yeah I think I think you have to have some notion of the big picture and it doesn't mean you look like a detailed step-by-step plan like occasionally I'll run into a startup where they're like here's our five-step plan for how we become whatever and like it isn't until like the fifth step that actually they have a product anyone would want to use if those are like really bad I mean you have to you have to have something today that's good and you have to have something tomorrow and you have to you know day after day have like a product that people actually want you almost want a certain amount of vagueness around your vision because if you have too much detail you just guaranteed to have wasted your time because it's not gonna be right so you uh you spend how much time at Google so I was like Google for seven years so wow that's just about how long you've been at YC now I've actually been at YC from over seven years now mm-hmm so what happened during those seven years stuff happened right so stuff happened a few things so I yeah what did you know like when did you realize that Google was a thing that it was going to be a like you know it's this secular juggernaut that was going to take over the world earlier this year I I mean it bills I got I didn't I I think I like many people I continually underestimated its potential but you know for very early on kind of like after being there for a week I was like ooh there's something magical going on I didn't think it would be what it is today as big as it is but it definitely felt like we were somehow creating the future and then when we started really like like when we got the Yahoo deal and started like really welcome saying yeah we started really just like pushing all just crushing all the other search engines and then there was like a feeling of inevitability that goes pretty clear we were just gonna win because no one else like they just didn't even know what they were doing like the competition this wasn't very good before we move on to your - leaving Google and starting your own company it's just maybe say a word about the founding of Gmail and and how that happened sure so email is actually a thing that I've been interested in for a long time I actually first into your resume bounced yeah no actually before that I mean in college I I had actually been thinking a lot about this because like again back in the 90s like people their email would download to their computer they would run like Eudora or something and it would use pop3 to pull the email down to their computer and I remember people be like I need to go to my room to like check my email and like that's dumb like that doesn't make any sense it's information it shouldn't be like stuck in a box right and so I I've been thinking about you know this idea that like everything is just gonna be online and then we'll just like be able to access it anywhere anytime we want and so I actually in the summer of 1996 I think I kind of had gotten maybe a little bit excessively arrogant and had only applied for like a couple of summer jobs just assuming they would want to hire me and they didn't so I sort of ended up without a job and something like that's fine I'm just going to start my own company and so I actually tried to start this thing of like a web-based email but I that's funny because that's right when we were building web-based email yeah mine would have been better if I have 96 rocket mail was really good anyway I had like grand visions for it but I my approach to developing it was was wrong it was it was very much like I had this great big grand vision and then I started trying to implement it you know piece by piece the components and then I got bored and gave up yeah it's actually a multi-person job to build email it's it's a yeah it's kind of a lot of work it's a lot of stuff but the I went about it I was kind of wrong because it was it was like I actually like did sort of this detailed design of this very intricate system and everything and I've kind of come at least for myself I've come to decide that that doesn't work I need and this is what we preach to the startups is like figure out what you can launch today and so to jump forward to to Google like it was kind of 2001 there is sort of a big reorg where they got rid of all the managers and just gave engineers more of a free range engineering thing gave us all projects and so they're just like I should build an email thing like they knew I kind of had an interest in email Robert but it was it was just like we want to do something in email we don't really know what exactly like just go build it so having learned from my prior experience I decided to you know I think I kind of know I have a short attention span so the very first version of Gmail I wrote in a day and it wasn't very good but I took I previously been working on Google Groups which was like a Usenet search at the time now it's something different but I took the code that I've been working on for that and then I just like took all of my email and shoved it into that you know database into that indexing engine and then you know I kind of had an email search and they're like yeah so your first thing was just an email you could search yeah and so then I like email that out to you know the engineering team I'm like hey I built this email search you let me know what you think and then people reply like yeah it's okay but it would be better with my email instead of yours so like all right I have a feature request so first version zero only searched my email isn't like you know the next version I I made it so it would search other people's email and but it there's a stunning lesson in there I think which is like the point wasn't so much that whose email was being searched it was that email was being searched like you guys got to realize back then you couldn't really search email all you could do is like find the email you wanted and click on it but so searching was like a thing yeah and I figured I mean a lot of our emails and and so it sort of works right we're out in a lot of the same mailing lists or everyone see seeds so so yeah so then version two is just like it indexes other people's email and so I send that out and they'll be like all right this is cool now I want to be able to reply to one of the messages alright feature request right and so the whole thing was just iterating the you know to step by step trying to make something that would make people happy and so we actually had as our kind of like launch gate this idea that we needed to have a hundred happy users inside of Google because we you know we just had we hadn't launched it to the world obviously and so I actually embedded in the in the in the interface this thing of a pop up and be like are you happy yes or no it was just like a single question are you happy with you know Gmail or what was at the time known as Caribou yes or no and and it would get a list then I would look at of who said yes and who said no and then I go to all the knows and be like what's it gonna take to make you a happy user right and actually just get them one at a time and some of the people they're like it basically has to be a clone of Outlook I'm like well you're never gonna be a happy user now actually I did end up getting more tips to me I know I I did end up getting those people and the way I would get them is that outlook at the time when you would hit 2 gigabytes in your in your mail file it would corrupt the database and they would lose all of their mail and then I had the only copy of their email and so then they would become a gmail user not always a happy user but they would become a user anyway other people it would just be like a minor thing we're like I just need to add one feature or like fix a bug or something and then they'll be happy and so we kind of slogged through like just one user at a time until we got to like 100 happy users is that the genesis of you know what we call it YC the poo height rule maybe you can just tell these guys what like it's better to have 10 right so that one of the ideas is like when you're starting out building something new especially if you're kind of going into an established category like email like like literally you know email was like 30 years old when we started on it right so there is a lot of history and a lot of opinions about how email should be like people would sometimes angrily tell me I'm like doing it wrong like because we made the reply on top instead of the bottom or like weird stuff like that and so there's like all this history so it's pretty much impossible to enter a space like that and make a thing that appeals to everyone and if you try to do that what you end up making is just like a mediocre product that nobody really loves and so my philosophy and what we try to get you know all the stars to do is figure out a thing that will just have really deep appeal even if it's to like a tiny fraction of people if you can make that small fraction people just like obsessively love what you're doing it's easier to then grow that group you know cuz like there's always people at the margin where if I just make something slightly better they're gonna join into that group so it's easier to start with that like that deep but narrow appeal and then broaden it over time then it is to start with just sort of like broad men and then try to like convert people from math to like loving your your thing in mass yeah I've been thinking about that lately just in terms of retention like if you get a hundred people who never leave that's a great place to start then if you have thousands of people all of whom turn eventually yeah okay so Gmail happened and then you left yes so happened and yeah a couple years later I I left the the company kind of you know it was becoming a big company again and and I just decided that wasn't the direction I personally wanted to go and I just had a baby who had a pretty traumatic start on life so I kind of had other things going on so actually around that same time actually even before I left Google I was again reading slash dot because that was where I got all of my information and I saw this thing about the summer founders program which I thought like sounded super cool because I'm always just like looking for an idea that's actually novel for those of you don't know the summer founders program that's why see that was the so that was a terrible write that ended up being YC batch summer o-5 that's the one that had read and my chicken visit didn't say Sam's company Justin and Emmett's company Kiko we're all in that batch so I saw that sir Khan is the founder of justin.tv and and twitch and atrium so yeah a few things a few things yeah so I was just like really interested I didn't know Paul Graham or any of these guys so I was just kind of like keeping it on my radar like I'm really excited to see and part of that was it was my own experience kind of like being there in Ohio and thinking like I'm excited about startups and I wouldn't even know where to begin right because I don't like if you go to Stanford like your roommate probably has a startup or something like it's just in the water but if you're from someplace else if you're not from Silicon Valley if you're not from this environment it like it feels like you're just excluded and and I really liked the idea that it was just this open thing like anyone in the world you didn't have to know anyone you could just like submit an application and they were together like you know bring you in and so like that idea sorry to let startup schools the same way now yeah exactly I mean what is it that's the idea that I think like really resonated with me is that it's like opening it up to everyone even if you're not kind of like an insider or something so I followed them you know pretty closely I want I was one of the very first reddit users I think when when that launched and then did you go to the demo day no I didn't make it to the very first that's the only one you ever miss the only one I missed I I've been to every demo day except the first how actually is the distinction of having been to more demo days than anyone yeah than anyone including PG and Jessica if it's a good distinction but as a distinction yet it's a distinction so so yeah then that fall they announced like PG put out this thing hey for the second batch we're gonna do it in Mountain View like in this room it turns out and so I was like oh that's cool I just dropped them I didn't know my stomache old email introduced myself and like hey if I can like help out in any way just let me know so he's like yeah come on by and you know I started just attending the dinners and actually made my very first angel investment in a company in the second batch winter o 6 which was Kevin hey who then later became a YC partner wufu which is a formed filler you know it isn't like a company that I pee out but it actually turned out to be really good an investment nice first yeah yeah I had I forget what the multiple is but pretty pretty high yeah you know I thought my first investment returned like 10x and it was actually a little unfortunate because it made me think I was better at it than I was I think it's maybe like 50x so yeah hmm so yeah I so that was kind of how I got hooked into this stuff so I started at that point just getting to know the founders in each batch and I've invested in every batch since then it's at least a few of the companies and how did FriendFeed emerge during that time so yeah after I left Google I sort of like retired and then we just like get depressed cuz it turns out tired of it's not fun yeah and maybe I have issues with depression that I don't know so I but working distracts me so I started talking some other friends from from Google who were thinking of leaving and basically ended up starting a new company which which was FriendFeed and that was actually the actual goal of FriendFeed which was just to build a place that was really awesome to work at I was actually just trying to create a job for myself we tried to recreate what it felt like when you're at Google in the early days yeah kind of like the best of parts because there was also a lot of stuff about Google that I found just tremendously frustrating and so I kind of had this idea that like we could take like the good parts and not the bad parts it's like a little bit naive but that was the hope and you know managed to get like an incredibly strong team mostly of a former Google people did you ever feel like I mean frankly it went fine but it didn't obviously end up becoming like a hundred billion dollar company did you ever feel like you could pinpoint what was missing from from the beginnings of FriendFeed that might have led you on that path or what I mean was there was was there grand vision was that missing was it it's a explosive growth was missing you know social social is for those of you don't know it was it was a social network we actually created the like button so like the very first like button was on FriendFeed and then mysteriously appeared on Facebook number of months later they advanced instantly completely by coincidence ya know anyway social stuff is just really hard even and we've seen this Ivan you know we've had a lot of social stuff come through YC you know Google has tried it like it's a really hard space like somehow some of these things that kind of like you know Twitter or Facebook they just kind of like catch and you can go back in time and make up a bunch of stories about like why it is and some of those stories may or may not be true but it's it's one of these things I think is like one of the hardest product categories to like engineer success so but actually I will answer your question which is that I I did sort of come to realize this because in in the process of you know trying to make friend foetus success we kept running into this company Facebook who who actually knew what they were doing and and part of why ultimately like I came to believe that Facebook was just this unstoppable force in that like we weren't gonna beat them and Google wasn't going to beat them and Twitter wasn't gonna beat them like no it's certainly not myspace right like none of these got any worse album it's like having sort of competed with him you start to realize oh they're really good at this right and and I kind of once I was inside so that was why you know it sold front feed to Facebook cuz I'm like wow this is gonna be like another Google sighs there was that as to what you were doing like Google was their best in the world at what they were doing when you were there and they were the best in the world and you weren't right and so it's just like I should go there because it's gonna be first of all I feel like another one of these Google size companies and then like hopefully I can learn how they do it and I think like being there and kind of reflecting not at one realization I had is that we kind of brought like Google always had like a very product oriented mindset like like we would try to build products that were like like what the user wanted so it's like you guys are users you built product like you said you built Gmail originally for people yeah yeah and so with front feet was kind of the same thing of like we're just thinking about like what do I want and I think like one of the really powerful insights that they had at Facebook was that it's almost like the it's not the end user who you have to please it's the network because they understood that the most important feature of a social network is that your friends are there and so sometimes there's actually a tension between like what's good for the individual and what's good for the network and they would always do what's good for the network do you think that's just specific to network effect businesses social media or is that a more general rule do you think like an enterprise product probably doesn't need to think yeah I mean an enterprise kind of has some of the similar thing where you have to make the buyer happy not the end user which is I think a lot of times why enterprise software is not really lovely to use is because the person using it isn't the person with making the binder so both cases you sort of have to have a meta level where you're like we always talked about making something people want but people you have to think more broader than just the end user it's it's everyone who's involved in the in the system right right and it's people get this wrong a lot of times where they think like there's this meme out there that like oh if you're not paying you're not you're the product not the customer wherever but it really isn't right like you have to identify whose happiness makes you successful so like for Google it really is like the end like the people using Google search like if they go to a different search engine like there's Google screwed right like you have to keep those people happy and you know with the Enterprise example its whoever the buyer is in the I think the sort of subtle thing with with Facebook was was that what makes those people happy is that you have this like huge network and so work that's that's efficient and easy to use and right and so and so you really have to think in terms of like almost what the network wants which is a different way of thinking yeah so when you when you were you friend Pete was bought by Facebook and so you you landed in facebook did it have a similar feel to their I guess Facebook was a little bigger by the time you got bought but did it have a have a Google like feel then I mean there are a lot of people from Google hey hi you know former co-workers similarities and differences so that was again one of the things one of the reasons I was excited to go there it was just like I had had this experience going through Google and it's very easy to over generalize you know like oh wow the reason we were successful is we had like you know brightly colored balls or something like that like you can make up all of these like the rationalizations for what made you a success but in retrospect everything looks the truth is I think like the majority of the reasons you come up with are probably wrong there's there's like a few key things I will say though that like going into the office it kind of had that vibe of like this is a place that's going somewhere right and and I think it's like a really powerful indicator and it's a subtle thing and it's a little bit almost metaphysical or everybody like you walk into an office and you're just like how is the energy how does it make me feel does it when I'm here is that like when I watch my own energy levels am I going up is this making me feel like oh wow or is this like pulling me down am I like depressed because and I think the reason that works is because the employees actually know what's going on right and so if you're just there cuz like you're collecting your paycheck while you wait for the company to go bust like you're gonna have a different energy from yeah you feel that if it versus if you think like oh my god I need to launch this thing it's gonna be so exciting like it's gonna take over the world right and I guess it's just a very exciting feeling to have like these products like like when we were building Gmail and maps and stuff like there was this feeling this palpable feeling of like this is gonna blow people's mind so buddy put it out there right like that's a really exciting thing do you think so part of the energy comes from these amazing products that you're building but it seems like part of that has to come from the founders and the just the attitude that they bring the belief that they bring like whether it's soccer or Larry and Sergey yeah absolutely I mean I think that there has to be a founder conviction like they have to believe in what they're doing and not that they're just chasing after you know some trend like oh I read an article and TechCrunch I'm gonna go off in a new direction I mean I actually think like Zuck is probably the most extreme example of this I've seen I almost feel like the whole world could tell him he's wrong and be like no and and and this is really reflected and some of the I think internal mythology of the company there's a really interesting and this is before my time but you know back when they were just a college social network they had something like 10 million users which first social network isn't that much and Yahoo wanted to buy them for like a billion dollars and everyone is like used to take the money he actually took the money but then a change that they like they're gonna changed theirs and he didn't want it there was pressure on him right so like everyone around it was like pressuring him to take the deal and then by the way if you get offered a billion dollars take the deal right in case you have any doubts right and so finally yeah I mean ultimately turns it down basically replaces an entire management team after that because they were all kind of like we should sell we should sell I mean so he kind of brought in people who who maybe believed a little bit more oh and then there's kind of actually the story I meant to tell wasn't even that it was that when they launched the newsfeed the which was around the same time and people right hey they were furious and and so again they were like something like 10 million users unless something like 8 million of them joined a group protesting it like like it's impossible to get that percentage of your users to do anything even if you want them to so to like suddenly have the majority of your users like a revoltin or whatever and they're just like no I think people we're gonna come around on this in there you know right obviously look at the newsfeed is like a fundamental thing but that receipt is Facebook for most people right right there's nothing else but I mean that requires I think like a pretty high level of conviction when essentially all of your users are furious at you and you're like no I think you're going to come around on this the for somewhat unclear reasons this reminds me of another bukit ism which is that that sam actually repeated in his introduction to the course which was that you know what a company really needs is frugality focus obsession and love and it seems like like if you encapsulate those things even in the very beginning and you think about leaders like zack that they kind of they kind of go together and make sense yeah yeah i i think like focus is one of the most important things because like as a start-up it's actually i think your most powerful weapon right like the reason that you're able to take on like these big companies or whoever is because they're doing a thousand different things right and so the only way you can win is if you take everything you have and you focus it at one point right because you you are underpowered in every way versus these other companies so the one thing you do have that they don't have is you can be like absolutely 100% focused on the thing that you're doing and that was like you know with google that was part of the reason that we won it search was i was all we were focus on like early on right is and you became the best in the world at it like you versus like everyone else's ago we want to be a portal right we need all this other so like that that's really key frugality i think is also really essential I think like one of the best indicators of if you're doing it right is essentially your input to output ratio so you want to do more with less unfortunately most startups do less with more so like you give them money and they just burn it up and there's like no results so like being able to to produce a lot of outputs with a minimum amount looks like amplify time and money right but you have to like amplify the mean get that ratio where it's I give you a dollar and you turn into ten dollars my god that's a good business right like we just scale that thing up even if it's ten dollars worth of something like ten dollars worth of product $10 worth of innovation and so and this goes back to always figuring out how to do things in the absolutely minimal way and minoo it means this is one of the key startup things where they're like it you know if you if you're not embarrassed of your product you've waited too long to launch like these things are at the root there there's a lot of like frugality there right because you don't want to spend too much time or too much money like you want to get it out there as quickly as possible in as little cost and well so you don't want to spend too much time running on the wrong thing and you just don't know enough right right a builds way too much email and you wouldn't have learned what to actually build right it's easy to go completely off the rails and it's one of the most surprising things like I've learned just working with so many startups is how often the cause of death is too much money like I think there are companies that if they had not been so well funded could have been successful in the company I like to make fun of not because they may have been successful but just because it's funny to laugh at is juice arrow like the the $700 juice bag squeezing machine and the thing that made that I think such a like tremendous trainwreck is that they gave them a hundred and twenty million dollars for that thing before they ever like talked to any customer like if if juice arrow had gone through YC and we gave them one hundred and twenty thousand dollars they would have had to go talk to a customer and be like hey like we want to sell you the seven hundred dollar juice bags right they would have had to talk to customers like like and that's the thing like we push so you have to go talk to your customers is so easy to become detached and off in this like bubble of delusion in the problem with having lots of funding before you're really ready for it is that's exactly what happens so you can you can sell yourself on this idea oh yeah once we build the perfect juice bag squeezer like we're gonna take over the world everyone's gonna want to spend $700 I mean plus is like you get this giant box in the mail has tiny bags of juice in it is awesome like everyone's gonna want this right and they were able to live in that delusion for years because they never had to go out and talk to customers but if I refer a call you could actually just recreate everything you did by just going like that right the reason for it so I cut open one of the bags the reason is I think to actually get it to work they had to really heavily macerate the fruit so that's why I call it a juice bag squeezer because it was actually already juiced it was so is really just separating the pulp from the juice which is why also it's no better than just like going to the store and buying juice like the whole thing was like built on a number of flawed premises but but like in particular you weren't really even juicing it has already been juiced you're just straining the juice but there's a deep lesson there which is no matter what you raise if you raise fifty thousand dollars or five million you you should think of the amplification you need if you raise five million dollars that doesn't mean you can create 150 thousand dollars worth of value and be happy you have to create 50 million dollars worth of value yeah but you can't like it's easy again I think to come up with stories in your mind about how you're doing it because like once we release this you know juice squeezer it and and that's why I think like you just have to stay close to the customers you have to be out there selling because you can just become delusional otherwise and so that's why you know with startups like I I've just seen it again and again like if they get a huge round of funding before they have product market fit it kills the company like it because because it's just too hard for the founders to resist that because actually going out and dealing with the fact that you don't have product market fit it's really painful it's easier to tell yourself stories about how oh yeah we're killing it I'm hiring I just hired a whole new team we've got this cool office like there's all these like a cool technology yeah we're doing all this amazing stuff right I'm in the press all the time I go to conferences I'm up on stage you know like there knows like it's easy to just kind of like be completely detached from reality because because you're not out there selling a thing McCrea ting a thing that people actually want to use we were talking earlier it seems like there's this is this interesting juxtaposition that that if you really want to be creating an epic company you have to be thinking about the future but you better be paying attention to the past at the same time because there's a lot of lessons to be learned about what goes wrong more things go wrong than go right with startups and yeah III mean that's just the past but I think more importantly the present like that's the thing like you have to have some some you have to maintain kind of like a dual like a dream or a vision of like what that future is of you know something that gives you an orientation like I need to head in that direction like like I think about you know the Lewis and Clark expedition or ever they're like we're going west we're going that direction but like you don't really know all the streams and rivers and forests and mountains you're gonna have to cross along the way right you but so you have to be very focused in the moment so that you don't get like eaten by a bear or something like that but at the same time you have to have that vision of like where you're headed and so I think those are kind of the two things I being a visionary alright yes like between you know just paying incredible attention to your current customers right and having take over the world right and I think the thing that happens with too much money is you just spend all of your time like dreaming of like the Promised Land but you're not actually dealing with the problem that's in front of you we may have I want to turn over to Q&A and we may have covered most of this already which is fine but you've been spending a lot of time with YC batch companies doing I think what you're called a hundred billion dollar office hours which is which is my understanding is a way for you to help them think about what it might mean to actually become an epic company what are the like you know there two or three things maybe that we haven't talked about that you cover in those office hours I thought this would be like a group office hour a hundred billion dollar office I yeah all of our startup school companies yeah so I thought a lot about you know what is it that makes these these companies that are you know Google Netflix Amazon like all of these like just huge huge companies like what is the that gets you there in it's not this I I don't think it's that you're smarter necessarily it helps to be smart it isn't that you're harder working there's a limit to how hard you can work what I think necessarily to get to that point you're sitting on top of a big exponential change in reality or in the world so like you know Intel and Microsoft in in the early days Apple we're kind of sitting on top of this like the rise of micro computers right and so like what made Microsoft a big company is that they got in early on micro computers and then they kind of owned that space right where the micro computer operating system you know and they were they were able to ride that if we weren't from microcomputers like they wouldn't have been able to do that and likewise you know Google obviously was sitting on the growth of the Internet that the reason that Google made sense in the in the thing that part of the reason other people got it wrong was they weren't thinking about the fact that the amount of information online was increasing exponentially and so we were gonna have to get a lot better at like or organizing it right like googles mission from the beginning is to like organize and make useful all the world's information and people are always surprised that they're aggressively gathering information it's like right there in the missions David all the world's information game sososo I what I try to have the the founders I kind of give them a two-part question and so the first part is like let's say I hop in my time machine which is hopefully a DeLorean and I like travel ten years into the future so I get out it's the Year 2028 you know I take a look around I like grab some nearby people and talk to them or whatever I ask questions like what about the world of 2028 is fundamentally different from 2018 like what's what's the thing that's totally different right and so the Trump will no longer be President yeah yeah we don't really know the future you just completely derailed me that was the first thing out of two anyway so the thing is what I want them to do is identify the change and this should be as it pertains to their startup because obviously there's gonna be a bunch of changes but as it pertains to your startup but factoring out your startup because even if like Facebook didn't exist I guarantee someone would have built a giant social network right like Facebook was was was sitting on top of that exponential change and they were the ones who were most able to like capture it that position and hold on to it but if it wasn't them I guarantee someone else would be in that ecological and estimated ability there's a Nevitt ability these companies will exist in some form and maybe you're making it a little bit faster or a little bit better or something like that but that position is gonna exist and then the second part of the question is simply like how are you gonna be the one who captures it right so let's do some Q&A any questions what's the tipping point where you really approach the market and you know know that you're going to convert a lot of it for us and customer interviews about 80% of the people want to try what our product does and we even have people pay 40 bucks for a cup of coffee I just take my money so what's your question so how do you identify the tipping point and really how you execute that tipping point that gets a market to that so the question is how do you identify a tipping point for a market I almost feel like this is being over thought if you've got people who will pay you $40 for a cup of coffee I would just start selling $40 cups of coffee like that sounds like a really good business and very profit the tipping point is when you can't keep up with demand right and so again like you don't you don't find this by thinking about it if you think about it too much you end up just like in delusional land you find out by talking to the market and having them give you dollars and and and so it's it's like literally when you're just like scrambling to keep up with with demand and that and that's the thing that you get into in these like hyper growth companies like one of the biggest problems inside of Google is like we couldn't build datacenters fast enough right like things are just exploding so quickly that you can't even scale out that's that's what tells you that that you have that yeah I kind of hit you over the head right it's not like you don't you don't have to give instruction for when you're in hyper growth you know you're there in the back practices for enterprise companies where maybe you can't launch something that's really really bad because there's requirements around security etc so the danger I feel like with a lot of these enterprise things is that you end up not really solving an urgent problem because like when you talk to people they're like oh yeah this is it would be great to have this solution or whatever and so then you go off and you build this thing you spend years maybe building this product and then you go to them you're like here it is we got it and like you know we're really busy this quarter and actually we don't have it in the budget until maybe next year so can we talk again in nine months or something right like and that's just deadly for a start-up like so the way I try to think about it is you want to find someone who has a really really urgent problem right and so like the analogy I like to use is like imagine that your arm is pinned underneath a boulder and you have two options one option is to like knopf your own arm like with your teeth or the other option is to sign an LOI with this promising young startup like right right like that's the kind of customer you want is like someone who's like desperate right and because they're desperate they're willing to put up with kind of a shitty product maybe they're willing to spend a lot of time working with you right and so like actually one of the things that works really well like is is is if the founders are actually able to just go into the organization and actually work there so like that was how like the very early stripe installs Patrick Collison would show up and integrate stripe into your code you just show up and do the work and so like that's a good thing and if they're not really eager to have you come in and integrate into their systems or talk to their people or whatever like maybe they're not in enough pain and like you need to go find a different customer who's in more pain and if it's a big enough market there's got to be someone who's desperate back there you believe in using personas to represent your customers do I have that right not really don't believe in using people to represent my customers sorry common denominators for the founders hundred billion dollar companies so this was actually where the focused frugality obsession and love thing came from is I was actually trying to distill it down into a small enough number of words and then I was here to try to translate it into emoji but I failed at that part I couldn't figure out the I couldn't figure out what is the emoji for obsession like love I like okay a heart but there is I think like this obsessive focus there's there's almost an irrationality in some of these founders like the example that comes up as like the most insane version of it is probably like Elon Musk so I actually he came into Google gave like a Tech Talk I want to say 2003 or something like that and it was it was after he had started SpaceX but before they had done the first rocket launch and someone is like what are you gonna do if the rocket explodes when you launch it he's like well I have enough money for three launches so I hope one of them succeeds like he literally ploughed his entire fortune the first three blew up - I think yeah the first three did Lobby that he managed to scrape together enough money for like a fourth rocket yeah but that fourth rocket hadn't gone there would be no SpaceX and Elon would be bankrupt right like he like that is insane I would not take all of my money and plow it into like some harebrained rocket scheme right like that's like a level of irrationality that is I think like wonderful so I think the question is how come Google never made it in social networking you know it just wasn't I think really in the DNA so we actually like had even before Facebook do you remember Orkut like we like it was we actually could have or you know at the time like in Brazil right yeah well it became big in Brazil but I actually tell you like orchid actually was taking off and you can make up a bunch of reasons why maybe it didn't end up being the social network but it was exploding and then it became it was growing so fast it became unresponsive so like it just that was kind of why it died off in at least the United States is that it was so slow but part of the thing is that within the company I think like it just didn't resonate with people enough like it wasn't really it didn't become this crisis we're like oh my god we have to make this thing succeed it was kind of like this thing that's over here to the side right and so like Google is very much about like these really interesting big computer science problems and stuff like that like that's what really would get people excited and this stuff kind of seemed like a distraction I mean like the founders of Twitter or at least like two of the three founders of Twitter where Google employees right like like and they never would have built that at Google because like if you had built it'd be like what is this thing there's nothing technically interesting about Twitter right and so I think it just wasn't really in the DNA and then when they did try to do it it wasn't because like it wasn't because like you know Larry has a deep love for social networking or whatever right it was because they wanted to be competitive with Facebook but by then Facebook was way ahead of them and had a much deeper understanding of like what makes this stuff go so if you're behind and not as good you're guaranteed to lose it's not a good outcome so I think we're going to call it there thank you very much Paul you you

Channel: Y Combinator

Views: 67,582

Rating: 4.8932495 out of 5

Keywords: YC, Y Combinator, Paul Buchheit, Geoff Ralston

Id: Ir3hGtg0Wog

Length: 54min 42sec (3282 seconds)

Published: Wed Oct 24 2018

Reddit Comments

[u/midael]

06:30: Pul B." Working at Google when it was 20 people, was really cool + stayed there 7 years
06:35: Compared to other startups I applied, Google just had this buzz at the office and they asked really smart questions. It was just this irrational believe that we’re going to be great.
09:00: You have to have some notion/vision of future - otherwise it’s hard to get to the future you desire (but not too much detail)
11:10: In some ways, competition to google in the early days just wasn’t very good. Really looking back, it seems like they didn’t have any idea what they were doing
13:30: It’s usually a mistake to make a too detailed of a design of a new feature/product. Because while you built it, you will learn new things that will lead to a better design/product if you’re not stuck to fixed design
17:50: When you enter especially established space, it’s impossible to appeal to everyone. Focus on features that have big appeal to small number of users that love your product. Build slowly around that.
26:18: When you realize that your competitor is really good at it and is going to be the leader, big, it’s maybe time to sell, maybe to the competitor. Anyone. Before you lose everything that is interesting about you.
27:45: End user may not be the actual user using the SW. You may have terrible usability, if person buying / deciding is not the actual using user.
33:00: Sometimes you have to follow your vision. Even if users protest. Even if everyone disagrees.
34:20: Only way to win against big players is to really absolutely focus on something you’re good and passionate about.
35:15: [un]fortunately many start-ups do less with more. Good measure of a startup is how much they can get done with a limited resources.
39:00: In order not to LOSE FOCUS, you as a founder have to be OUT THERE, SELLING, TALKING to the customers. Otherwise you’ll end up as another Theranos etc. totally detached from reality(!!!)

42:00: What I think gets Google, Netflix, FB, Apple others where they are riding some massive change in technology / other landscape