See all Y Combinator transcripts on Youtube

Speaker 1

00:00

All right, so this is going to be the first office hours we're doing on YouTube and people have submitted questions on HN So we're just I

Speaker 2

00:06

am ready.

Speaker 1

00:07

And so yeah, this is Sam Altman Here we go so This is kind of a couple questions put together As a B2B company, how do you get sales outside of your network? What resources can you recommend to set up a process that will get you first 20-ish customers? And then adding onto that, among the successful YC B2B companies, how did they acquire their first few customers?

Speaker 2

00:31

It's a great question. I think it's 1 of the, it is a universal challenge that B2B companies face. The answer tends to be very different for different sorts of companies.

Speaker 2

00:40

There are some companies where all your customers go to 1 trade show and the answer is to go there and meet a bunch of them. There are others where you may only have 10 potential customers in the world, and the answer is to just start figuring out any way to get in front of them, cold emails, referrals, whatever. But I think there is an implied premise in there, which is that you need to get to companies outside of your network. That's 1 way of addressing the problem.

Speaker 2

01:05

The other is to expand your network and get companies into it. And I think that is the approach I have seen work better. So I would think about expanding your network. The particular example of YC, we have kind of built the YC community in such a way that most people that are B2B companies get their first 20 customers from other YC companies.

Speaker 2

01:27

And this has been super valuable for YC and for b2b companies doing YC and we now have enough companies and enough different verticals you can usually find them If you're not in YC, I still think you want to think about things in a similar way Which is how can I meet other entrepreneurs who are always? Founder to founder sales tend to work pretty well. Or how can I just get a bigger network and get access to a broader group of people where I can find my first customers?

Speaker 1

01:54

So in terms of doing that, do you advise people to go to meetups and stuff like that?

Speaker 2

01:59

I think there are some good meetups, but most of them aren't. Okay, how

Speaker 1

02:04

do you filter?

Speaker 2

02:06

I haven't been to 1 in a long time. I mean, I think you want to talk to people that have been to the meetup before, talk to people that you respect. But 1 thing that a lot of people, including myself, did when they were founders that worked pretty well, was just start emailing other founders that you respect that are in your same city and suggest getting together.

Speaker 2

02:26

And you know, like, have a dinner, like reserve a table for 10 people and invite 9 other founders that you respect. And I did this or other people did this to me when I was sort of 18 or 19 in Silicon Valley and didn't know anyone. And some of those people I have stayed in touch with and are close friends now, 12 years, 13 years later. So I think this is like a strategy that works to expand a network.

Speaker 2

02:51

It's harder if you are not in some sort of startup hub, because it is easier to establish these relationships in person. But if you are in 1, that's what I'd recommend.

Speaker 1

03:00

Okay, so do you have any other tips because I know that's like something you're actively quite good at like expanding your network If you're new to a city say you like jump the barrier and make it to Silicon Valley or another hub again, I so so 1 of the things that

Speaker 2

03:16

is magic about Silicon Valley is that there's this strong culture of helping other people and startups are the dominant kind of economic driver here, or 1 of them. So Don't be afraid to just email people that you want to talk to And that is how I think many people end up building their networks there are some conferences and meetups that are really good and Although I'm like sort of shy in big groups, and I don't like them myself I know some people really do yeah, But most of them are filled with people that I just don't think are very good. Another thing that people forget is if you build something impressive, your network will kind of come to you.

Speaker 2

04:00

So if you email people and you're like, hey, I'm gonna start a company, please network with me. I'm trying to find customers. You sound like a lot of other people. And if you instead say, hey, I have built this awesome product.

Speaker 2

04:13

Here it is, check it out. Then people take you seriously. And you are in a top 1% of people that send cold emails.

Speaker 1

04:21

Absolutely, making cool stuff. And on the conference note, I found that speaking at conferences as a more introverted person is like the key.

Speaker 2

04:29

Yeah. Yeah, that's easier

Speaker 1

04:31

for sure. Still possibly a waste of time.

Speaker 2

04:34

But again, whether it's YC or something else, there are now a number of pre-built networks to get access to, and I think they really help to get initial customers.

Speaker 1

04:46

And then that last question, any successful YC B2B companies on like their stories, like their first customers? Almost all of them sell exclusively to YC companies

Speaker 2

04:56

for their first 20 or nearly exclusively. But I would say this was a little bit less true when the network was smaller, and it is still a little bit less true for companies that are in a very specific vertical that does not exist much in the YC community.

Speaker 1

05:14

But Most

Speaker 2

05:15

of the time it's just start using Bookface or emails of YC founders and selling to the YC.

Speaker 1

05:21

Okay, cool. And Bookface is the internal YC. Our internal YC.

Speaker 1

05:24

Yeah, cool. All right, so the next question is, when founding a startup, Is being a college student an advantage or a disadvantage? Does it matter at all?

Speaker 2

05:36

I think like most things in life, it is. There are pluses and minuses, and you want to get the most out of the pluses and minimize the minuses. I'll answer it generally for sort of a young person, not college in particular.

Speaker 2

05:48

So the advantages you have are you normally have less life commitments than people who are more experienced on more boards or other things or have families or just all of the things in life that creep up and take time and attention. So you have huge focus, generally have a lot of work stamina, you can work super hard. You generally are fairly rootless and can pick up and move around the world for a good opportunity. You generally are, or at least in my own case, you're used to living a very frugal life.

Speaker 2

06:24

And I was thinking the other day, I think it'd be hard for me to go back to the way I lived during my startup, where I had rats running through my kitchen and you know, a mattress on the floor until I was 25. And yeah. And, but at the time it didn't bother me.

Speaker 1

06:43

No, for sure.

Speaker 2

06:43

Cause it was just like what I had always been used

Speaker 1

06:45

to. Absolutely.

Speaker 2

06:47

So the ability to live cheaply is a huge advantage over startups where the founders need a lot of money just to live on.

Speaker 1

06:55

But do you think the weight of being in the valley in terms of the network is worth the cost?

Speaker 2

06:59

I still do. That could tip someday. Yeah.

Speaker 2

07:02

And you can still live cheaply kind of in the nooks and crannies of the valley.

Speaker 1

07:05

I think you can still make it work here. I think it's actually sort of a myth.

Speaker 2

07:08

So those are all advantages. The biggest advantage of all, I think, is that younger people tend not to have the scars of experience. They don't know what they don't know.

Speaker 2

07:20

They are willing to take on these things again and again. You hear someone say, you know, it's a good thing I started this company when I was 19 or 18, because if I knew how hard it was going to be, if I knew what this industry was going to be like, how long it was going to take, I wouldn't have done it. And so there are these ways in which inexperience is an advantage, and also, not always, but frequently, young people tend to be on the forefront of new technological shifts. And so you young people tend to have a pretty good sense of what's What the next big wave is going to be not perfect not always but it has been better than chance The disadvantages are also Obvious, you know, you're probably gonna be not very good at managing people.

Speaker 2

08:03

You're very inexperienced in business You probably not as good of an engineer as you will be later in your life So you want to definitely want to supplement yourself with experienced people in certain areas?

Speaker 1

08:15

Mm-hmm. And do you think like going to college matters at all?

Speaker 2

08:20

I went to 2 years of college and I really loved it and I'm really happy I did. And I learned a lot of stuff that has been helpful to me. So I'm very happy I

Speaker 1

08:27

did. Yeah. It's kind of that first step in the door, because I guarantee most people at YC don't know where I went to school, or most other people at YC went to school.

Speaker 2

08:38

Yeah, I couldn't tell you. I guess, like, maybe the people that went to my school, I happen to know where they went, because we've talked about it, but I couldn't tell you the schools of any YC partners that didn't go where I went. Yeah, no.

Speaker 2

08:52

And maybe like 1 or 2 I just randomly thought of, but it's very hard.

Speaker 1

08:55

And Kassar had an MBA and I was like interested in that.

Speaker 2

08:58

Yeah, but it's never a topic of conversation.

Speaker 1

09:00

Yeah, cool. All right, Let's see. So how can a student with no technical background go start a startup?

Speaker 1

09:08

For example, Evan Spiegel from Snapchat didn't have a programming background, neither did Brian Chesky at Airbnb. So first of

Speaker 2

09:16

all, I'd say they're both lightly technical. Both of those guys, both know a little bit. Brian is a great designer and was able to design the first version.

Speaker 2

09:30

And I think they're both really great at the product. So it is possible to be the product founder. And you only need to be lightly technical or lightly design capable to do that. However, you have to be able to convince really good technical people to follow you.

Speaker 2

09:46

So if you're not going to be technical, you have to be great at product and be a great leader. And you have to have a very strong idea and then sweat all the details.

Speaker 1

09:58

So if you are that person, How do you vet someone who's technical?

Speaker 2

10:02

Well, if it's someone that you've known for a while, which I think is the only way I would do this, then you've hopefully seen other things they've built. You've hopefully collaborated together on some projects, and you have a pretty good feeling. Even if you can't read their code, you can say, wow, they built this awesome thing, they did it really quickly, it kept getting better, this is a good sign.

Speaker 2

10:22

I would not start a company with someone I didn't already know.

Speaker 1

10:24

Okay, and so for a while, how long does that mean? Does that mean like 6 months? Does that mean 5 years?

Speaker 2

10:28

I think 6 months would be a minimum. And I wouldn't start a company with someone I hadn't worked with on some project either. And I think in the course of that, you'd find out what you thought about how good they were.

Speaker 1

10:42

Fair. And what about people who do want to dip their toe in and become technical enough to run 1 of these, like Evan or Brian.

Speaker 2

10:50

You know, there are so many resources available. If you're a college student, if you just take a couple of computer science classes, you'll get basic familiarity. And there's many free ways now online, some of which are YC companies, about how to learn to code.

Speaker 1

11:04

Cool. That's exactly what I did. I did Python the hard way. There you go.

Speaker 1

11:09

There you go. Actually worked. So why do you think crowdfunding for startups hasn't kicked off as well as hoped, I guess, as hoped by whoever was starting it. What sort of pitfalls have startups in the space encountered that you know about?

Speaker 2

11:24

Yeah, this is a disappointment to me. I wouldn't call it a failure, but it's not been the runaway success I was hoping. The thing that I still see going most wrong with crowdfunding for startups is it's easy if you're a startup that doesn't need it because you already have very well-known investors.

Speaker 2

11:45

But thus far, when it comes to equity crowdfunding, the crowd has been less willing to back things that don't have professional investor support. And so it has become, largely though not exclusively, a way for companies to multiply the amount of money they raise from full-time professional investors. I still believe that crowdfunding should be important, but clearly we have not yet developed the perfect product for that. I think it's, And I don't blame people for not doing it because certainly as an investor, I want to get to know the company in person, the founders well in person, and I probably would not go investing in people I've never met via a crowdfunding platform.

Speaker 2

12:47

So I think we still have some iteration to do on the model. Okay, cool.

Speaker 1

12:54

So what do you think is the best way to create impact slash maximize potential impact on the world for a high school student developer? Elon Musk named a few things he thinks would be world changing in 10 to 20 years. What do you think high school students should be working on right now?

Speaker 2

13:11

First of all, I think it's a bad piece, a bad strategy to let someone else tell you what they think is important and then go do that. I think it's really important you develop your own convictions because that's what you understand and that's what you care about and also I could be wrong. The areas, so the 2 areas I focused on in computer science when I was an undergrad were AI and computer security.

Speaker 2

13:40

And I thought those were gonna be 2 of the most important areas. I think I called that 1 pretty well. In fact, I still stand by within computer science that those are 2 really good areas to pursue. It's amazing to me how much AI has changed since I was an undergrad, mostly in good ways.

Speaker 2

14:02

If I had stayed at school longer, I would have studied what was at the time called biotechnology and now it's called sometimes that, sometimes synthetic biology, but that sort of stuff where you're really kind of pushing the edge of what computers and biology can do together and how we can build new, modify life forms. Energy, So I'm the chairman of the board of 2 nuclear energy companies and I Really believe that quality of life and cost of energy are super correlated I also believe will destroy the planet if we can't get cheap clean energy I was in Beijing recently and I could not believe the pollution. So I think if you could pick a major area that's not software to have an impact, clean energy, really cheap clean energy would be transformational. I think education is really big and under explored.

Speaker 2

15:07

I think there's a lot we can do with technology to make education a lot better. And then, it's still early, but VR, AR, clearly will be an important computing platform. Agreed. And so

Speaker 1

15:24

to specifically answer the question,

Speaker 2

15:26

like for a

Speaker 1

15:26

high school student.

Speaker 2

15:27

To specifically answer the question, don't go let someone else give you a list of 3 things and pick 1 from there. Like, go study the world, go study history, go look at the bleeding edge of technology, go read what a bunch of smart people say, and synthesize it all and then make your own list of the most important things. Like, you get to make your own prediction.

Speaker 1

15:46

That's what I wanted to talk to you about with your the recent notes for the New Year blog post. Like you're talking about like finding what you value and the world values. Yeah.

Speaker 1

15:53

Like how do you go about doing

Speaker 2

15:56

that? Well,

Speaker 1

15:58

How did you?

Speaker 2

15:59

I think I needed to try a lot of things. I needed to study a lot of things. I knew I loved computers from a very early age, but I didn't know exactly what about them I loved.

Speaker 2

16:08

I certainly didn't know that I would end up loving investing in tech companies and helping founders. So I took an extremely broad look at the world. I tried to take like 1 class in everything. I tried to read 1 book in every topic.

Speaker 2

16:27

I tried to make smart friends that work on really different things. And then I tried a bunch of things. So, to my great shame, I was like an investment banker for 1 day, but I didn't like that. And I built a lot of software and I got really into AI and I got really into mobile.

Speaker 2

16:50

And I tried a lot of other things and there were other things that I really loved but were just not quite smart enough for theoretical physics. But I did love it. And I found out, I sort of, In the process of that and then pushing a little bit further in the areas where

Speaker 1

17:07

yeah I

Speaker 2

17:07

seem to have an interest and an aptitude I kind of converged to what I do now and I think that You know breadth first and then increasingly depth first search algorithm works right well And I ended up getting super specific in a few areas. What the world values question is different.

Speaker 1

17:36

Well, that was split up too because it was values and needs, right? So value is a nice way of saying money, right? And the needs is kind of separate.

Speaker 2

17:44

Yeah, So I think in terms of what the world needs I found that through my exploration Like it's very clear that okay Like if you study history and if you study science the importance of the cost of energy is super obvious.

Speaker 1

17:57

Yeah

Speaker 2

18:00

If you study economics though, it turns out that actually if you make cheaper energy over a 20 or 30 year period, you can totally replace existing forms. So I think what the world needs, there's a lot of things and it doesn't take brilliance to see them. Although there are some things that the world needs that are very non-obvious, it doesn't go the other way.

Speaker 2

18:22

If you identify something the world needs, they probably need it. If you identify something obvious, the world needs it, they probably need it. We probably need it. In terms of values, yeah, there are some things that are Great that you don't get paid for but in general if there is a true need for it Oh, I also wanted to be a writer.

Speaker 1

18:48

Really? I did. Non-fiction? Fiction?

Speaker 2

18:53

All. Whatever. I didn't have much aptitude for that, but I also realized that the world does not need or value the 7 millionth novel. Yeah, absolutely.

Speaker 2

19:03

That was not where I could make the best contribution. And in cases like that, it also is generally harder to sort of make a lot of money or even enough money doing them. Oh, for sure.

Speaker 1

19:14

Yeah, I mean, you see the rates. And it also works backwards too, like if you find you're just very good at something, it's just nice to be good at the game and you have a lot of satisfaction in that way.

Speaker 2

19:25

Yeah, I mean, that is true for most people

Speaker 1

19:29

for sure. Yeah, by and large. Okay, so back to VR, AR.

Speaker 1

19:35

With VR, AR on the rise in the last couple of years, how do you think it's going to impact the startup community and in your opinion, what industry is going to get impacted the most in the next 10 to 20 years?

Speaker 2

19:47

Well I think everyone's kind of searching for the next platform. Companies tend to, they're really transformational companies, get formed in clusters on the rise of a new platform. So in 1996 through 2000 we had the birth of the internet, or say the rise of the internet.

Speaker 2

20:06

And as part of that, we had the rise of all these companies. And then it was kind of quiet for a while. And then after the iPhone in 2007, maybe from 2007 to 2011, we had another rise of the mobile-first companies. Facebook somewhat split the difference.

Speaker 2

20:23

I'd mostly throw them into the mobile bucket in terms of where they got really huge. And so there's this question of what's going to be next. What is the next platform, the next wave that will create a handful of hundred billion plus dollar companies? A lot of people think it'll be VR and AR.

Speaker 2

20:42

It feels a little early, but I can suggest a metric for how you should know when it's time to start really focusing. And that is, you wanna look at usage per individual user. So, there were smartphones before the iPhone, But people didn't use them all day every day like they do with an iPhone. They buy them They'd use them a couple of times.

Speaker 2

21:05

I didn't even take them with them every day They certainly didn't do much besides calling on them and calendar maybe and then the iPhone came out and the iPhone didn't sell that many In its first year relative to like how many phones Nokia sold or whatever in

Speaker 1

21:17

2007.

Speaker 2

21:18

But the people that had 1 loved it and used it all the time. And so I would ignore total shipments for VR and AR and I would wait until it gets to the point where someone builds a device or software that once people get it, they use it a lot of every day.

Speaker 1

21:36

Mm-hmm. And is that regardless of price? Because now we have like, you know, Daydream, whatever, fairly cheap. Whereas like to get an Oculus set up, you're in several thousand dollars.

Speaker 2

21:46

Yeah, regardless of price, because again, the first iPhone was somewhat expensive, but people that had it, you could still tell that people that had it really deeply loved it. So regardless of price, the price will come down.

Speaker 1

22:01

Similar to a question before, this is just kind of funny anyway. How do you know if you're technical enough to build great products?

Speaker 2

22:08

I mean it really depends on what you're building. Like if you're going to build a nuclear reactor, you better be quite technical with nuclear engineering and nuclear physics. If you're going to build an iPhone app, and it's not a particularly complex 1, to build the first version you don't have to be that technical.

Speaker 2

22:24

Later you better get world class technical talent, but you don't need it for the first proof of concept in many cases.

Speaker 1

22:31

I mean, I think you see it across YC too. It's like people who can get shit done.

Speaker 2

22:34

Yeah, you build a product that people love and that's what matters. It's not how beautiful the code is in the first version. Again, later that will become really important.

Speaker 1

22:42

Yeah, agreed. All right, so going into 1 of the more obscure questions. Sam, if you were an important but not founder employee at a startup and your company were to be acquired, how would you approach the process of integrating and ensuring success between the companies And how would you evaluate the acquiring company and decide if it's worth staying?

Speaker 2

23:05

Most acquisitions are not smooth sailing, first of all. So I would go into it knowing that it's going to be hard. The most important thing that I have seen is an agreement before the acquisition is finalized about autonomy of the target company.

Speaker 2

23:23

And so I would push the founders to make sure that you got such an agreement that you would operate as independently as possible. Then you do want to build bridges. You don't want 2 warring factions. You want the existing company to support you and you want to support them and you want people to like each other.

Speaker 2

23:41

So I think piece of advice number 1, Negotiate the level of independence up front. Piece of advice number 2, as a important leader in the company, make it your personal business to develop strong relationships with as many people as you can at the acquiring company. And then be a bridge as tensions inevitably rise.

Speaker 1

24:04

In any opinion on how long a person like that should stay?

Speaker 2

24:07

I would give it like a good 6 to 9 months before making a decision that it's not going to work. Okay, cool. You you