Y Combinator Podcast: Michael Seibel on Starting a Startup, Finding Product Market Fit, and Fundraising

  • From his essay Why Should I Start A Start-Up?: There is a certain type of person who only works at their peak capacity when there is no predictable path to follow, the odds of success are low, and they have to take personal responsibility for failure. The opposite of most jobs at a large company. 

  • Working at YC Michael realized there are 3 sets of people: (Set #1) Must work in a radically entrepreneurial job. Won’t enjoy life in a large company. Less than 1% of the population. (Set #2) On the fence people. They want to be challenged at work but can be a founder or really functional inside a big company. Around 1% of people. (Set #3) People who will work best in a large company. They want an existing path, an existing set of rules they can operate by. Someone else defines what's an A and what's an F and then they optimize for that. 

  • How can you tell which set you are in: The questions that I asked myself was where am I at my best? And where do I feel like I'm organically applying effort? Am I 100% self-motivated? In what types of situations am I just naturally, extremely motivated? 

  • Google is operating a machine and the machine has multiple purposes: (1) To get the smartest people to work on the hardest tasks. (2) To get people who are smart and talented so that they're not working for Google's competitors. (3) To get people who are smart and talented so they're not creating companies that will compete with Google. Everyone understands the first one. They don't think about two and three.

  • Big companies are relying on you having poor sources of information:Everything that a big company does to attract a college kid is 100% orchestrated. If you're one of those different people [The people that would enjoy life most in the entrepreneurial world] don't believe the hype. 

  • From his essay One Order of Operations for Starting a Startup: I don't even think people are really taught how to find ideas. People are sitting there thinking I don't have an idea. I don't even understand how to get one. Finding an idea for a business is an active process. Don’t passively wait for one to come to you. 

  • How to find a product to make: What sucks for you? What is the problem in your life? Everyone can do this. If you know the problem you know if your product is helping solve the problem or not. 

  • Outsourcing is not a solution to not being technical: It turns out that getting a technical co-founder tends to be cheaper than paying an outsourcer. 

  • On his essay The Real Product Market Fit: I often talk to founders who believe they've found product/market fit when they haven't. This is a huge problem because they start hiring people, increasing burn, and optimizing their product before they've actually discovered what needs to be built.

  • How Marc Andreessen’s defines product-market fit: The customers are buying the product just as fast as you can make it or usage is growing just as fast as you can add more servers. Money from customers is piling up in your company checking account. You're hiring sales and customer support staff as fast as you can.

  • The awful reality: The vast majority of founders never find product/market fit ever.

  • The amazing reality: Once you find product/market fit it is your company to fuck up. Your company is going to work unless you screw it up. If you fail to execute. 

  • What is not product/market fit: Scaling negative margins. Selling $1 for $0.75 

  • Socialcam did not hit product market/fit: We got 16 million downloads in 4 months. Tons of growth. Top 5 in the App Store. HORRIBLE retention. If you downloaded the app the chances that you’d watch a video 10 days later was basically zero.

  • On his essay Users You Don’t Want: When you’re just getting started, many startups will take every user they can get. They have a strong idea of a problem and they want to attract as many users with that problem as possible. When you open up the barn doors you get all sorts of people with all sorts of problems. Some of them will try to hijack your product to solve a problem you didn’t intend to solve. These hijackers are users you don’t want.

  • In his essay Why Does Your Company Deserve More Money: The hardest conversation I have to have with a founder is when they've spent their one to two million dollar angel round but haven't found product/market fit. It is weird that someone is given $2,000,000 to do something and doesn't succeed thinks, you know what, I need another $2,000,000.

  • A magical moment when you hit break-even: You realize: I can just generate money from my users. I don’t need these investors anymore. The only group of people who are harder to understand than users are investors.

  • Full podcast here.