Top 3 Startup Lessons From Y Combinator

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Hey friends 👋 ,

Happy Monday and welcome to Through the Noise!

Today I stumbled on a great interview of Michael Seibel (managing director at Y Combinator (YC)) outlining YCs best advice for founders.

I've dissected the best points to save you 20 minutes of your day.

It’s time to strap in and enjoy.

Read time: 3 minutes

Top 3 Startup Lessons From Y Combinator

Michael Seibel is Managing director of Y Combinator, the most innovative startup accelerator in the world. As a student, Michael went to Yale to become a lawyer however soon after starting college he realised this was not the path for him.

At college, he met one of his best friends, Justin Kan. Justin would end up being part of the first class of Y Combinator in 2005. One year after leaving college, Justin started a new company: Justin.tv (later renamed as Twitch). Justin wanted to recruit Michael.

So Michael asked himself “When is the next time your best friend is going to ask you to start a company?" Michael knew this sounded like something that would only happen once in his life.

The first version of Justin.tv was built. It was a reality TV show.

Justin would wear a camera on his head and broadcast his life 24/7. Michael was the producer of the show. When the they started raising money it was Michael who had to go to the meetings. Justin couldn’t go as he was broadcasting his every move. As a result, investors got suspicious. They kept asking: “Why are we talking to you? You’re not the CEO”

Justin.tv didn’t have a CEO at the time– Michael stepped in.

Transitioning from a show → platform was a big change. Both Michael and Justin realised they weren’t very good at making the show but they were great at making software. Their pivot from ‘us being the show’ to ‘everyone being the show’ was decided within 3 months of starting. Now, anyone could come and broadcast live.

Justin.tv did YC in 2007. The number 1 piece of advice Michael got during the process was from one of the Partners called Paul Buchheit, the original creator of Gmail. He inspired Michael and Justin to build their own live video system for Justin TV. This was the most important technical decision in the entire history of the company. Twitch was acquired by Amazon in 2014 for $970M in cash.

Michael’s most important lesson from building great product:

• You should be willing to give a customer and a problem that you care about 2 years before it’s working. If you’re not willing to work 2 years on something, you probably shouldn’t work on it at all.

• The first 2 years is when you’re becoming an expert. It’s very easy for founders to believe that the vision in their head is the right thing. But you only find the right thing by putting something in front of users and seeing how they use it. You always learn something when you do this.

• It’s very easy to think what’s in your head is right – it’s almost never right.

Michael and Justin worked on startups for their entire 20’s (23-30). From exiting Twitch, Michael liked not having the pressure of working on a startup again but realised he didn’t want to be a retired 30 year old. Michael asked himself what he could commit to afterwards. That led him to Y Combinator.

Y Combinator (YC) is an early stage startup accelerator that helps 500-600 companies every year with funding advice. They invest in companies that are using software to create competitive advantages.

Essential Advice from YC

Most mistakes founders make come from being too afraid or too smart.

1. Too afraid

Run away from the tasks that they should be running towards.

• I’m afraid my users don’t like my product so instead of talking to them I’ll avoid talking to them.

• I’m afraid that customers won’t want to buy the product so instead of trying to sell the product to them, I don’t try to sell it.

• I’m afraid this employee is going to get angry when I fire them because they’re not doing their job well so I won’t fire them.

Founders make mistakes because they act out of fear. Founders have to feel fear, it’s part of the process. But it’s when you act primarily to run away from fear that you start making mistakes.

2. Too smart

Not willing to question the assumptions that they made when starting the business, even when confronting facts that seem to disprove some of those assumptions.

Fear is a great signal as it tells you what you need to run towards.

Michael’s advice:

1. Look at what’s on your to-do list

2. Whatever makes you uncomfortable, do those things first

YC’s 3 pieces of advice

1. Make something that people want

2. Do things that don’t scale

3. Talk to your users

When you’re building a startup, you’re the underdog. Almost always, you have a big competitor and you need to fight asymmetrically. If you try to fight a bigger army head on, they kill you. You have to fight differently. You can’t copy the big player to beat them.

Do something different → do things that don’t scale

Do things that your competitor can’t do. Find your wedge and win.

You can find the entire interview here.

A Little Something Extra

• 🎙 Podcast: Phil Alves hosts a great podcast called "SaaS Origin Stories". It's a personal favourite of mine– Phil dives into conversations with founders as they share how they started their SaaS journeys to fuel your own SaaS adventures.

• 🤝 Sponsorship: If your company would like to partner with me via sponsorship with the newsletter, please fill out this partnership form.

That’s all for today friends!

As always feel free to reply to this email or reach out @thealexbanks as I’d love to hear your feedback.

Thanks for reading and I’ll catch you next Monday.

Alex

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