Garry Tan, CEO of Y Combinator, reflects on his $200 million mistake of not co-founding Palantir and discusses the challenges faced by his own startup, Posterous. He emphasizes the importance of paying attention to the competition in startups and the significance of a healthy co-founder relationship. Tan also highlights the importance of evaluating startups and finding product-market fit, stating that startups either find success or they don't. He uses Clipboard Health as an example of a startup that achieved significant revenue growth by targeting an underserved market. Tan also discusses the importance of clear communication, holding people accountable, and building a strong culture in startups. He believes that culture radiates from the founder and that founders should be authentic and true to themselves. Startups fail because they build something people don't want, and Tan emphasizes the importance of seeking trusted advisors and maximizing a startup's potential. San Francisco is considered the best place to find product-market fit for startups due to its supportive community and vibrant startup ecosystem.
Intro
Garry Tan, CEO of Y Combinator, discusses his career and experiences in the tech industry. Key points include his background growing up in the Bay Area, his time at Palantir, and his education at Stanford. Garry initially hesitated to join a startup but was convinced by Peter Thiel's belief in engineers and product people. He also reflects on missing out on a startup opportunity.
Garry's $200 Million Mistake
Garry Tan reflects on his $200 million mistake of not co-founding Palantir and leaving the company after two years. He discusses his tendency to "rage quit" in the past and his transition to becoming a founder, eventually starting his own company, Posterous. Tan also discusses the challenges faced by Posterous, including competition and the impact of Instagram's launch.
Why Posterous Stopped Growing
Posterous stopped growing because they failed to recognize the dominance of a photo-based social network built on the iPhone. They were too focused on winning in the blogging space and did not pay enough attention to the competitive landscape. If they had, they may have been able to build a better business.
Why You Should Pay Attention To The Competition
Paying attention to the competition in startups is crucial for success. Here are the key points to consider:
- Predicting the future and making informed decisions is essential.
- Choosing the right path and saying no to certain options is important.
- Balancing network features and customization can prevent poor performance.
- Prioritizing profitability and cash flow is crucial, as the next funding round is uncertain.
- Building a strong co-founding relationship is vital for growth.
- Healthy disagreements and arguments in partnerships lead to better decision-making.
A Healthy Cofounder Relationship Means Having Conflict
Having conflict is an important aspect of a healthy co-founder relationship.
Key points:
- The speaker shares their personal experience of a toxic co-founder relationship and the negative impact it had on their health.
- They discuss their involvement with Y Combinator (YC) and how it taught them valuable lessons about investing and venture capital.
- The speaker emphasizes the value of being exposed to a wide range of ideas and people through YC.
- They highlight the unique approach of YC in evaluating founders and creating a high-leverage process.
- The speaker left YC to start their own firm to explore their cultural heritage and personal experiences.
- They encourage addressing and discussing unpleasant issues and seeking therapy if necessary.
- The speaker emphasizes the significance of integrating personal experiences and emotions into startup decision-making.
Adverse Childhood Experiences & Why You Should Heal Them
The most profound aspect of the text is the importance of evaluating startups and finding product-market fit.
Key points:
- There are two types of people who start startups: those with special talents or insights, and those who lack insight but are drawn to the startup community.
- The latter group often struggles to find success and may give pitches that sound like book reports.
- In startups, there is no middle ground - it's either an A+ or an F.
- Traditional education and professional systems where there is a range of grades do not apply to startups.
- Startups either find product-market fit or they don't.
- Many people may think they have an insight but are actually just following trends.
A 'B' is an 'F' in Startups
Startups can find success by identifying underserved markets and creating software solutions for them. Clipboard Health is an example of a company that achieved significant revenue growth by targeting a specific segment of skilled nursing facilities. The key takeaway is that there are untapped opportunities in industries that have yet to be touched by software.
Key points:
- Startups should focus on underserved markets
- Clipboard Health found success by creating software for skilled nursing facilities
- There are untapped opportunities in industries without software solutions
- Finding the "thin edge of the wedge" and targeting desperate customers is important for success
- Honest feedback from users and actionable results are crucial
- Successful founders have intensity and a strategic approach to finding product-market fit.
Users Lie To You Until They Are Paying For Something
Users lie to startups until they start paying for something.
- Great founders communicate complex ideas concisely.
- Founders must convince others to trust and invest in their ideas.
- Clear communication is crucial for pitching, attracting customers, investors, and recruiting.
- Holding people accountable is crucial for growth and product-market fit.
- Choosing the right culture is important for success.
- The responsibility of being a CEO and building a great culture.
- Brian Chesky's speeches and Airbnb as a company with growth potential.
- Leaders must navigate user behavior challenges and adapt accordingly.
Culture Radiates From The Founder
Culture radiates from the founder in startups, and it is crucial for founders to be authentic and true to themselves. The speaker emphasizes that founders should not trim off their rough edges, as it is what makes them special and resonates with the right people. The paradox of venture capital is discussed, where early stage funding is often based on resumes and past achievements, but founders need to learn a different way of being in organizations. YC's office hours are mentioned as valuable for founders to get answers and learn important lessons.
Key points:
- Founders should be authentic and not trim off their rough edges
- Venture capital often focuses on resumes and past achievements, but founders need to learn a different way of being in organizations
- YC's office hours provide valuable guidance for founders
- Culture radiates from the founder in startups
Startups Fail Because They Build Something People Don't Want
Startups fail because they build something people don't want.
- Fundraising is difficult and unpredictable, so founders should seek trusted advisors and gather evidence to support their hypothesis.
- Being in a vibrant startup community like San Francisco increases the chances of success.
- The speaker emphasizes the importance of maximizing a startup's potential.
- The future of venture is discussed, with the belief that there is not too much money chasing too few good people and ideas.
Why SF Is The Best Place to Find PMF
San Francisco (SF) is the best place to find product-market fit (PMF) for startups because:
- SF offers a unique environment for startups to thrive, with a high concentration of talented individuals who can create successful companies.
- The limiting factor for startups is not capital but rather community, and SF provides a supportive community like Y Combinator (YC) where founders can learn from each other and access capital.
- The younger generation already has access to this community and knowledge, which accelerates their startup journey.
- SF has a vibrant startup ecosystem that attracts founders who are a "cut above" the rest and have high expectations for success.
Tyler & Sterling's Takeaways
The most profound aspect of the text is Garry Tan's insights on evaluating startups, including the importance of co-founder dynamics and the need for startups to narrow their focus and search for desperation.
- Co-founder dynamics and the ability to argue without damaging the relationship are crucial in evaluating startups.
- Startups should narrow their focus and search for desperation, but also be open to broadening their scope if they find initial success.
- Buyers are liars, and founders should be skeptical of people who say what they want to hear but don't take congruent actions.
- Authenticity and appealing to a specific niche are important in evaluating startups.
- Successful startups are like religions, where the founder's unique qualities are crucial.
- Decision-making and evaluating opportunities are important skills for evaluating startups.
- Garry Tan feels fortunate to be involved in the startup community and believes he is fulfilling his purpose.