Investors, including Y Combinator, cannot fix a company. Many founders mistakenly believe that raising money from top investors will guarantee success. However, investors often lack founder experience and have not learned from their own startup failures. Investors may think they have all the answers, leading founders to make mistakes based on their advice. Many investors come from a finance background and prioritize raising and spending more money in a company, even in early stages before product-market fit. This approach may not be effective or appropriate, as financial projections and balance sheets may not be relevant or understood in the early stages of a startup. Big company executives with experience in scaling successful products may overlook the difficulty of acquiring users in the early stages of a company. Investing in tech startups can be challenging for non-tech investors who are used to traditional industries. Junior investors may overlook underlying issues and not be willing to help fix problems. Influencers and famous individuals can help struggling founders by using their knowledge of distribution and monetizing their network. Founders should not solely rely on their own experiences for advice and should learn from the experiences of others. Extremely young investors tend to mimic the behavior and opinions of more experienced investors without fully understanding the reasoning behind it. YC partners often give the common bad advice of following the lean startup approach without considering individual circumstances. Personal accountability is about taking responsibility for one's actions and not relying on others to solve problems. The role of investors in helping founders and the limitations of their advice are discussed in this video. The main takeaway is that while investors can provide guidance and support, it is ultimately the founder's responsibility to figure out how to best utilize their help.
Why investors including YC can't fix their company?
Investors, including Y Combinator, cannot fix a company.
- Many founders mistakenly believe that raising money from top investors will guarantee success.
- However, investors often lack founder experience and have not learned from their own startup failures.
- Investors may think they have all the answers, leading founders to make mistakes based on their advice.
- Many investors come from a finance background.
Investor with the finance background
- Investors with a finance background prioritize raising and spending more money in a company, even in early stages before product-market fit.
- This approach may not be effective or appropriate, as financial projections and balance sheets may not be relevant or understood in the early stages of a startup.
Balance Sheet
The balance sheet is limited in assessing a company's financial health due to the focus on financial engineering and neglect of product development. Negative consequences include scaling negative unit economics and improper timing of financial advice.
- Focusing on financial engineering can have negative consequences
- Moving money around can neglect product development
- Throwing money at a company can be beneficial, but timing is crucial
Big Company Exec
- Big company executives with experience in scaling successful products are often sought after as investors.
- However, their expertise in scaling and refining products may not be as applicable to early-stage startups.
- Scaling a process and hiring at a larger company is different from the challenges faced by the first few employees of a startup.
- These executives may overlook the difficulty of acquiring users in the early stages of a company.
What does failure look like for a lot of our companies?
Failure for many companies is not being able to acquire any real customers. This is often due to having the wrong people in the company, rather than a lack of departments or executives. Hiring more people becomes essential after achieving product-market fit, but scaling a company post-acquisition requires a different skill set than getting the first 100 users as a founder.
Successful entrepreneur in non-tech
Investing in tech startups can be challenging for non-tech investors who are used to traditional industries. They often struggle to understand the unique nature of the tech industry and may treat startups like traditional businesses. It is important for investors to recognize that software companies operate differently and require different terms and control.
Junior investor
Junior investors often feel pressure to have quick wins and encourage companies to raise more money to establish themselves. However, they may overlook underlying issues and not be willing to help fix problems. Their focus is on their own career success rather than the long-term health of the company.
- Junior investors feel the need to have quick wins to establish themselves
- They often encourage companies to raise more money to reflect positively on their track record
- They may overlook underlying issues and broken aspects of a company
- Junior investors may not be willing to get their hands dirty and help fix problems
- Their focus is on their own career success rather than the long-term health of the company
Influencer / Famous person
- Influencers and famous individuals are valuable to investors because of their extensive network and access.
- They can help struggling founders by using their knowledge of distribution and monetizing their network.
What is the advice that founders get from other entrepreneurs?
- Founders seek advice from other entrepreneurs, including celebrities and influencers
- These individuals may ask for advisor shares or other benefits in exchange for promoting the startup
- Founders often feel that the distribution gained from these promotions is not as helpful as expected
- It is important for founders to set realistic expectations and not rely on others to solve their problems
Founders
Founders investing in each other's companies can be successful, but the advice most often given by other founders on your cap table is unclear.
- Founders investing in each other's companies can lead to success
- Advice from other founders on your cap table is often unclear
founders
- Founders should not solely rely on their own experiences for advice
- Learning from the experiences of others is important
- Y Combinator condenses the learnings of founders to pass on to the next generation
Extremely young investor (Scout)
Extremely young investors, often fresh out of college or still in college, are eager to make their mark in the startup world. However, they are advised to mimic the behavior and opinions of more experienced investors without fully understanding the reasoning behind it. They tend to follow trends and repeat what they have read or heard, hoping to appear knowledgeable. This approach, similar to how students learn in school, may not be effective in the startup industry.
Key points:
- Extremely young investors, often in a scout or similar role, are eager to make a mark in the startup world.
- They are advised to mimic the behavior and opinions of more experienced investors without fully understanding the reasoning behind it.
- They tend to follow trends and repeat what they have read or heard, hoping to appear knowledgeable.
- This approach is compared to how students learn in school, but it may not be effective in the startup industry.
Wrap up
- Dalton Caldwell and Michael Seibel discuss limitations of investors in fixing a company
- Mistakes can happen, even by Y Combinator partners
YC partner common bad advice
YC partners often give the common bad advice of following the lean startup approach without considering individual circumstances. Founders should believe in themselves and not solely rely on external advice.
Personal accountability
Personal accountability is about taking responsibility for one's actions and not relying on others to solve problems. It is important to avoid blindly following others, including the advice of speakers.
Key points:
- Emphasizes the importance of individuals taking responsibility for their own actions
- Discourages relying on others to fix problems
- Warns against blindly following others, including speakers' advice
Big takeaway
The role of investors in helping founders and the limitations of their advice are discussed in this video. The main takeaway is that while investors can provide guidance and support, it is ultimately the founder's responsibility to figure out how to best utilize their help. Success lies with the founder, and they will receive the majority of the credit if they are able to figure out the right path to success.
- Investors can offer guidance and support to founders.
- The founder is responsible for utilizing the investor's help effectively.
- Investors may offer advice based on their own experiences, but it may not always be applicable or relevant.
- Success ultimately lies with the founder.
Great investor advice
Having an outside perspective from investors who can simplify complex information is valuable in investing.
- Valuable advice can come from investors who are not interested in investing in a company.
- Focus on what is working and make necessary changes to avoid failure.
- The best investors point out problems rather than providing solutions.
- Honest and critical feedback from investors can be helpful for founders.