How Do Billion Dollar Startups Start? | Office Hours
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Every founder looks ib N B. And just imagine, ib N B in the old days must have been something special. And actually, they kind of all look .

the same for founders just starting out. They think that the trajectory and the growth graph of all the successful startups looks like this, you know, just like constantly up into the right. And they don't see the early, early days.

They might be hard to imagine. But the founders of companies like airbnb, stripe and drop box at one point or another looked in, distinguishable from other startups getting started in their time. We like to put companies on a pedestal as if they were great from day zero.

But IT isn't actually like that. It's actually that tens of thousands of decisions along the way that made them great. Every company, no matter how successful IT becomes, has to start somewhere. And that is what you hear about today.

Jerry, I would love to hear about solid jam. I really like those guys. I talked a few times, but I was nothing interview. what? What was that? Even if you like?

So soligen produces industrial chemicals, primarily hydrogen peroxide. For a long time, I was like just hydrogen proxy de, and now they make other stuff. So like hydrant proxy, the same steps did you buy. And like a drug store that you put on like a cut or something, that's what they make.

And they had invented a new process for making hydro en process that uses a new organic, countless, and you don't need IT like massive heat and massive temperature and IT won't blow up on you. And because they have the process to kill down, they were able to start making really small quantities. Talk about humble beginnings.

I remember the edge in interview um because is really funny one. I just back when injuries were still in person and if you remember back in the old in person days of interviews when people have like harper products, they would actually bring them to interviews. And he was great if I was food. Yes.

they really fluter .

ally brought in hyder's proxy. So they showed up to this interview. We're like sitting in this room in the hydroperoxides guys walk in and they literally have a beaker of hydropower IDE, which I think at the time was like most of the hydrogen roxy ever produced in on during the batch.

Basically, their goal was to figure out how to sell like bottles of passions because they wanted to generate revenue and to prove that this was a real business. So rather than trying to like raise one hundred million dollars to build like a giant facility, they literally set up shop in their garage, and they would just start making bottles of hydrox and selling to anybody who would buy a lot of vigan profit. Today, they actually have this huge plant in houston that ships out like tanker truck falls of hydrogen proxy .

de like every day in the interview what what did they say that convinced you will the .

cool was one these guys clearly had like great background of do do. They were definitely experts in desk um but unlike some of the academic science focus that we interview te from time to time, these guys for doors they like they weren't waiting for anyone's permission to go do the thing they had like made the hydron proxy de and brought IT in and they were like trying to find something to solitude .

they clearly helicopters for action. It's the jeering taly that applies to any kind of start of idea interviews um and also the willingness to admit that you may not have all the answers, you may not be able to think all the steps ahead of how you build a big company, but you're down for the ride like you're ready to do IT and you're signed up for the journey and you will figure out out later. You have to be comfortable with this idea that you know you're going to do a thing and you going to work really hard IT and you don't have all the details, work up OK.

One of the best lessons i've learned in my career is to not worry too much about what it's like at the top of the mountain. The most important thing is to decide that you're gonna make IT there and to take that first step on the journey. And sometimes that first step means building a demo before you even have any customers.

One company I want to talk about is captivate. I Q. Did I see in winter eighteen? And they build software that help sales team figure the compensation. So if you have lots and lots of health people, IT, turns out, is a quite complex math that goes beyond my self skills to figure that out. And they had built some demo software on the finds, built a demo, but they know customers and really nothing else.

That's every company starts, right? And every found looks, just imagine there have been be in the old days, must have been something special. And actually they kind of all of the safe.

And then they convinced us that there are only two major players in the space in the us, and they're both big and they both pretty bad. wow. So they convince as they are like if we just become Better than these two players, we can win the space.

Yeah I think that's another mistake founders make where they sort say there's no competition. It's it's like blue ocean, whatever in the reality is that medication no, what wants to think whereas you've got these huge incomes that making tons and tons of money and haven't innovated in decades actually just perfect yeah because it's like a demonstration that people actually pay .

for the software yeah. And this is one of those companies were everything that kind of said the interview try to be.

And so the Normal state of the company when IT applies to Y, Y, I think back to my application. I was working with two friends in a bedroom in london. We cobbled together this jackey prototype like we believe some friends into using IT.

We had no revenue. In fact, we are losing money on every single transaction, and that's pretty Normal, right? Even earlier, I think why is today is going back to to of the origins of Y Y of funding people earlier and earlier.

所以 a lot of people I interviews this batched， i'm sure the same with you haven't even quit their jobs yet. And they ve got ten an idea. Perhaps that idea is something we'd worked on their previous job, a tool we'd built or a problem identified and they ve recruit a couple of cofounded to come along to the interview. But really there's there's not much there ah you're really looking more the quality, the founder and the progress of the business.

That's a big point for all startups. Don't be afraid to pay the many of the most successful companies initially pitched ideas during their interview that didn't work out. That isn't necessarily a sign of failure.

What's most important is that you have the drive to keep trying until you do finally land on the right idea. So what type of people have the perseverance to keep grinding until they've made something people want? Next up, Diana Michael will talk about one common trade of the best early stage founders .

to be best in the world. This is aspect of the best people at the top of their careers. They actually very, not well rounded, the very quirky people here for a good reason and that's what makes them outlier. By definition, if you're average, that's like, okay, you're not gonna build a great company because because building a successful large company by definition, you're gonna be out of multiple standard deviations at the norm. Have to go all.

And I think that a lot of Young people have never been it's never been communicated to them. The strategy that got them to the school that got them, the meta job that got them, the iv league degree, he's not gonna this strategy that actually gets them to be successful to start of counter. And I argue not occurs this way.

I unfair. There are other careers where that kind of heading. Strap is still a great strategy. But in our game, so few people went like the privacy. So few people turn any amount of there like paper stock value into real cash that like you have to be lucky and really good.

Some of this may seem like it's outside of your control, but that's not necessarily the case. You can create your own luck by staying determined and shutting out all other distractions in your life, as you'll hear from large. And pete, you just have to keep out IT he .

is like another interesting case is amplitude, which is now like a public company um offering analytic products and we interviewed the founder spender and curtis uh in two thousand and eleven now like a while and they apply to Y C with this idea that was A A mobile APP on your android phone that would was voice to text so basic. I was here. If I want to text while i'm driving, i'll talk to the phone and I would like, set my text for me. We didn't think the idea had any legs at the time, because we are all like google, just gna do this. They're really good at this.

And like we had hobo I, the founder of gmail, early google employee in the interview, just like hamming ing on spender saying like google this google is so great at this um like there's no like how you guys gna win and spend there was just so like 手 intense in like his combats and just like determined to like work on this idea we don't agree with like this idea but this is the kind of like intense person you want like they are almost a rationally intense in how attached the the thing that they are working on。 You want to fund people like that and I took amplico, I think a year and a half after I C to find the idea. But once they did, I like really took off.

Yes um as there is almost like I like an obstat about like the best founders where they are just whatever they are working on. They don't do IT at like sixty or seven hundred and eighty percent. They're always just like a hundred percent like committed and have high conviction.

And what they're doing, yes. And then they just need to get in the right direction. They are basically stop.

It's a good to remind of that. H some of these founders came into yc with like actually objectively bad ideas, right? Like there are the best founders when I think we're working on like A V R start up at the time the segment founder, I think they did Y C, they're working like an ed tech .

segments are really another great example. Like segment ultimately was bored by willie if like three billion dollars um and they also went so like developed tools and epi services they applied to Y C. With this idea.

IT was to let professors who are giving a lecture like post students and like, no one wanted this, they had zero traction. And we, like, again, we pushed them. Like, you guys are really smart, your great engineers.

Why do you work on me? Like, technically hard. There is this, like, very obviously student idea.

And they were just obstat like, and but they were not like absent without direction. They were like, what we are really passionate about is fixing education. And we think this is a really good place to start.

And like, we are inspired to work on this mission of fixing education. And so we are like acting like, again, they have this intensity and they have this like thing that they really committed to. And eventually, again, they figured out with the segment idea, but they took them a while.

This is what happens when you have that like abstinence. Like if you're in the wrong direction, you can like get dug into IT for a while longer yeah even longer, right? Like but that just. Like maybe that's like the any yg of IT, like because if you are only ever doing things like sixty percent of the time, like you then just risk like always kind of being in a sixty percent.

say IT may be seeing a pattern here. The key attributes that come up time and again are great and determination. If you give one hundred percent, then you increase your chances of being in the right place at the right time for things to take off, even if it's not your first, second or even third idea. Next up, we've got bad and Nicholas talking about how many of the top founders were clear and concise with their pitches from .

day one company. That comes to mind that I had the good fortune interview that has gone on to be pretty successful as the company called gives. They are a digital bank for startups based outside the us.

And when we interviewed them, IT was uh, two founders with pretty much the exact idea that they have now, which is pretty impressive. But IT was really idea and a lot of homework, but not much actual action just yet. So how do they they convince you? I mean, impact.

So I went back, read the application the other day. And one thing that jumped out me from the application itself was that I was very clearly written. The language was very plain and simple in the application and IT was also pretty success CT.

So we have a question in the application about um how much progress have you made so far? And I think they literally just had two senses. We've completed a deal with our first bank partner and are ready to start on boarding initial customers that was IT.

Now in my mind reading that, I that's the answer. Okay, great. That's what y've done so far.

And it's very easy though for founders that are applying to Y, C, to just do like paragraph after pair. First I did this, then I did. I did right, get the pitch mode.

And so looking back at that, I immediately, you know, that jumped out to me. I would jumped out to today, someone just very confidently and distinctly saying, this is the most note thy part of what i've done make sense, but that's the application. How about interview itself? It's interesting because they came in and they they were well spoken.

Um we could got what they were working on and all came across very clearly. But they were also pretty upfront about things that they did know and didn't know and they you know they didn't try to like rizal as well with a like fake traction or anything like that. IT was pretty clear that they didn't know yet what the actual usage was going to look like or what the demand was going to look like.

They had a few early customers. They were excited about that. They had signed up maybe since applying before the interview, but there were many question Marks. But I would say, and this is one of the qualities that I think is kind of common among the companies that go on to become big. They didn't hide that stuff in the interview.

They were pretty front about IT and that put the the ball in art court after the interview to say, okay, there's a lot of question Marks here. Do we want to go forward? And funding IT wasn't the most obvious idea to fund IT based on the interview wasn't like a slam dunk.

Oh my gosh, this is incredible. But the founders yeah but we were pretty impressed with the founders that they had the confidence to talk about the business and what they're working on in that way. And we thought that would be pretty good experience.

And one of the cool points about that, that I think a founder listening to this can take away that all of those things are in your control. You can write to simply if you choose to. You can say a little bit less than just the highlights about your business.

If you choose to, you can be very fourth right and very confident about what you have done and haven't done if you choose to. IT feels like the the best founders when they come to. They don't teach us. They engage in the conversations and our questions like as clearly as they can. And I don't try to hide any theme that's kind like the scene here.

Yes, there is a classic P, G, S, A about how to convince investors where a pair race this roughly the most convincing ing way to talk to investors is just a plane to tell them what you're working on and let them build the model and understanding themselves. That's what we have to get and get to those founders and they are yeah what they think, how they think, right? And the only way to do that is to have the conversation and not be the target of a pitch.

Whereas at stuff, stuff that don't always make me. yes. And with the jeff founders, we definitely sense, alright, we had a real conversation with them.

This only ten minutes long, but IT felt real. I felt genuine, felt like I actually like working conversation. And we think this could be a big thing if it's successful. There's a lot of question Marks.

but let's let's do IT. A lot of times, we as group partners aren't totally sure about an idea at the interview stage. It's really about identifying these key traits, the same ones we've seen time and again in the most successful founders. Next up, serbian iron will talk to you about why you should avoid trying to follow in the exact footsteps of successful founders that came before you.

A lot of our early stage founders, they look at these hyper successful founders in their current state where they are now after they've had the success. What do you think the risk is of doing that?

Well, I think that for founders just starting out, they think that the trajectory and the growth graph of all the successful startups looks like this, you know just like constantly up into the right. Um and they don't see the early early days when applied with a different idea. They had no product, they tried something and nobody wanted IT. And so what you end up seeing, the stories that you read in the press and in the media has this like P, R, gloss over IT, where they are only showing the positives, only showing the good stuff and not showing a lot of the negatives and all of the leg super difficult times that they had to go through in order to get to that point to be able to tell their story. I like to talk a lot about, like when founders are going through a tough time imagining the story that they want to tell in ten years, and how boring IT would be if everything was just up into the right and successful the whole time.

Yeah to learn something .

yeah there is no chAllenge, right? And so when you think of those challis like IT just makes the story that much more interesting and memorable.

I totally agree. One thing that this reminds me of is one of our more successful health care companies recent successes is called nourish and they just close a really meaningful series a from a brand name investor and it's all over the news, uh but they said the whole batch pivoting in even after, you know, they pivoted five times before they found the right idea and now they're taking off. And the team was always promising. The team was always great, but isn't always .

roses truly legendary? Startups aren't just born that way. They are forged through difficult decisions, uncertainty, mistakes and pain. I'm proud to say the group partners at the some of the most experienced people in the world at helping founders get to product market fit, we can do IT not just because we've been there. We can also do IT because we've directly worked with more zero to one startups than anyone on the planet. Thanks for watching, and we will see you on the next episode of office hours.