Real vs Fake Startups

1. 0:00 – 0:21

   Why great tech still needs marketing to exist in the world

   1. DCDalton Caldwell0:00

      I have encouraged a lot of founders building technical tools, you know, developer tools, to spend a lot of time posting about their thing and telling the world about it.

   2. MSMichael Seibel0:09

      Yeah.

   3. DCDalton Caldwell0:09

      Because if no one knows that your technology exists, it's kinda game over.

   4. MSMichael Seibel0:13

      Yeah.

   5. DCDalton Caldwell0:13

      And the, the, the best technologies are good at marketing, whether you admit it or not. [upbeat music]

2. 0:21 – 0:42

   Setting up the debate: what “real vs fake startups” means

   1. MSMichael Seibel0:21

      Welcome to Dalton + Michael. Today we're gonna talk about real startups versus fake startups. In this video, I'm gonna say nice things, and Dalton's gonna make people mad. [laughs]

   2. DCDalton Caldwell0:31

      [laughs] I hope not.

   3. MSMichael Seibel0:32

      What, what is the definition? I hear [laughs] there's a guy-

   4. DCDalton Caldwell0:35

      Yeah.

   5. MSMichael Seibel0:35

      What's the definition of a fake startup? [laughs]

   6. DCDalton Caldwell0:39

      Oh, okay. So you're setting me up.

   7. MSMichael Seibel0:40

      [laughs] I mean, I might be setting you up.

3. 0:42 – 1:33

   Caricature of a fake startup: fundraising and status as the product

   1. DCDalton Caldwell0:42

      Let's start with the extremes.

   2. MSMichael Seibel0:44

      Let's-

   3. DCDalton Caldwell0:44

      Right? Like, with the cartoonish extremes.

   4. MSMichael Seibel0:46

      Yes.

   5. DCDalton Caldwell0:46

      So a cartoonishly extreme fake startup-

   6. MSMichael Seibel0:49

      Yes

   7. DCDalton Caldwell0:49

      ... is a startup that never builds a product and never writes any code.

   8. MSMichael Seibel0:56

      Nope.

   9. DCDalton Caldwell0:56

      It hires lots of people.

   10. MSMichael Seibel0:58

       Some-

   11. DCDalton Caldwell0:58

       The founders are on the 30 Under 30 list somehow.

   12. MSMichael Seibel1:01

       [laughs] Somehow.

   13. DCDalton Caldwell1:02

       [laughs]

   14. MSMichael Seibel1:04

       That was a, that was a high priority. [laughs]

   15. DCDalton Caldwell1:06

       Some- somehow that's their main work product.

   16. MSMichael Seibel1:08

       [laughs]

   17. DCDalton Caldwell1:08

       The founders have raised money-

   18. MSMichael Seibel1:10

       Yeah

   19. DCDalton Caldwell1:10

       ... despite never having, um, shipped a product or any customers.

   20. MSMichael Seibel1:14

       Yes. Yeah.

   21. DCDalton Caldwell1:14

       Basically, it's almost like performance art. It's like if you had a modern artist be, like, trying to, to, to disassemble the startup culture-

   22. MSMichael Seibel1:22

       Yes

   23. DCDalton Caldwell1:22

       ... in some edgy way.

   24. MSMichael Seibel1:24

       Yes.

   25. DCDalton Caldwell1:24

       That's a fake startup.

   26. MSMichael Seibel1:25

       Yes. I like that, performance art. It's like Hamilton on stage versus actually being there.

   27. DCDalton Caldwell1:30

       Yeah, the whole thing is a performance.

   28. MSMichael Seibel1:31

       [laughs] Yeah. Yes, yes.

   29. DCDalton Caldwell1:33

       It's not real.

4. 1:33 – 2:25

   Caricature of a real startup: ultra-technical builders who ‘don’t do sales’

   1. MSMichael Seibel1:33

      So what's a real startup?

   2. DCDalton Caldwell1:34

      So-

   3. MSMichael Seibel1:35

      Or the cartoonish version of it.

   4. DCDalton Caldwell1:36

      The cartoonish version of a real startup is where, you know, everyone is working 9:00 to 6:00.

   5. MSMichael Seibel1:42

      Yep.

   6. DCDalton Caldwell1:42

      And it's only programmers. There's not a single non-technical person in the business.

   7. MSMichael Seibel1:46

      Nope.

   8. DCDalton Caldwell1:46

      And they're all writing Rust.

   9. MSMichael Seibel1:47

      Yes.

   10. DCDalton Caldwell1:48

       And maybe not even Rust. They're, they're writing their own programming language.

   11. MSMichael Seibel1:51

       To start, obviously.

   12. DCDalton Caldwell1:52

       To start, of course.

   13. MSMichael Seibel1:53

       Yes.

   14. DCDalton Caldwell1:53

       Um-

   15. MSMichael Seibel1:53

       'Cause it's gotta scale. [laughs]

   16. DCDalton Caldwell1:55

       [laughs] They can't be bothered to do all sorts of things. They're just, like, super hardcore.

   17. MSMichael Seibel1:59

       Yeah.

   18. DCDalton Caldwell1:59

       They're super focused, and-

   19. MSMichael Seibel2:00

       Don't have to do any sales.

   20. DCDalton Caldwell2:01

       They don't have to do any sales.

   21. MSMichael Seibel2:02

       Yes.

   22. DCDalton Caldwell2:02

       It's all self-service.

   23. MSMichael Seibel2:03

       Yes.

   24. DCDalton Caldwell2:03

       And I dunno, like, I think back in our day when we were early founders, Google was, like, the textbook example that I was taught of, like-

   25. MSMichael Seibel2:11

       Mm

   26. DCDalton Caldwell2:11

       ... what real is. Just being hardcore. Right?

   27. MSMichael Seibel2:13

       Yeah. Like, they look at your SAT scores when they're trying to recruit you.

   28. DCDalton Caldwell2:17

       'Cause everything about Google-

   29. MSMichael Seibel2:18

       Yeah, yeah, yeah

   30. DCDalton Caldwell2:19

       ... w- my memory as a founder was-
5. 2:25 – 3:07

   Reality check: even iconic ‘technical’ companies are great at sales

   1. MSMichael Seibel2:25

      Yeah. These are clear caricatures, right? Right, like-

   2. DCDalton Caldwell2:27

      Yeah.

   3. MSMichael Seibel2:28

      Y- Goo- y- you know, perfect example, Google's like one of the best sales companies in the world.

   4. DCDalton Caldwell2:32

      Yes.

   5. MSMichael Seibel2:32

      I mean, they have an advertising business, [laughs] right? Or, like, Stripe, which is perceived as this just, like, oh, self-serve thing, and it's like-

   6. DCDalton Caldwell2:38

      They have some good-

   7. MSMichael Seibel2:38

      ... one of the best enterprise-

   8. DCDalton Caldwell2:39

      [laughs]

   9. MSMichael Seibel2:40

      ... software payments companies in the world. I think this real versus fake startup thing is interesting because we interact with a lot of founders who aren't taking a sober look at whether they're taking a real shot at the startup game or not. What do you think causes someone to kind of, kinda slide into the fake side? 'Cause the problem with fake is, like, if you're not taking a real shot, this is so hard if you're taking a real shot on goal. If you're not even taking a real shot on goal, you're kinda wasting time.

6. 3:07 – 3:55

   How founders slide into fake: copying startup culture and ‘cargo cult’ behavior

   1. DCDalton Caldwell3:07

      That's such a great question. Let's try to make the most, um, charitable explanation of someone that's doing what might-

   2. MSMichael Seibel3:14

      Yeah

   3. DCDalton Caldwell3:14

      ... seem like a fake startup.

   4. MSMichael Seibel3:15

      Yeah.

   5. DCDalton Caldwell3:15

      I think that humans are social animals. The way we learn things is we look around the room and we try to see... You know, if you, if you go to a new culture, and you're like, "Okay, everyone's wearing this kinda-

   6. MSMichael Seibel3:25

      Yeah

   7. DCDalton Caldwell3:25

      ... hat, and-"

   8. MSMichael Seibel3:25

      Everyone takes their shoes off.

   9. DCDalton Caldwell3:26

      "Okay, I saw..."

   10. MSMichael Seibel3:27

       Yeah, yeah.

   11. DCDalton Caldwell3:27

       You just kinda, like, go through the motions.

   12. MSMichael Seibel3:29

       Yes.

   13. DCDalton Caldwell3:29

       And so I think some of the most unintentionally funny, uh, performative startups-

   14. MSMichael Seibel3:34

       Mm

   15. DCDalton Caldwell3:34

       ... might be someone that's just, like-

   16. MSMichael Seibel3:36

       Just-

   17. DCDalton Caldwell3:36

       They're like a merchant that's just trying to pretend. [laughs]

   18. MSMichael Seibel3:39

       If you're almost consuming startup culture solely on Twitter-

   19. DCDalton Caldwell3:43

       Yeah

   20. MSMichael Seibel3:43

       ... like, depending on who you're following, you might just be cargo culting this thing that looks like startups, but it's-

   21. DCDalton Caldwell3:47

       Right

   22. MSMichael Seibel3:48

       ... completely not.

   23. DCDalton Caldwell3:48

       And you're like, "Wait, I thought this was..." [laughs]

   24. MSMichael Seibel3:50

       [laughs]

   25. DCDalton Caldwell3:50

       But you don't realize you're doing it. You're just trying to go along with what everyone else seems like they're doing.

   26. MSMichael Seibel3:54

       Yes.

   27. DCDalton Caldwell3:54

       And no one's told you otherwise.

7. 3:55 – 5:17

   Poor starting conditions + urgency: grit misapplied becomes fakery

   1. MSMichael Seibel3:55

      I see people slip into fake startups when they have poor starting conditions, but high urgency.

   2. DCDalton Caldwell4:02

      Mm.

   3. MSMichael Seibel4:03

      So it's like I've got these poor starting conditions, and maybe I'm in the wrong place. Maybe I can't work full time. Maybe I don't know a technical co-found- Like, all these kinda, like, kinda non-ideal starting conditions. Like, you know, Dalton, that soil is full of rocks, and it's, nothing's growing in it. And instead of asking themselves the question, "How do I fertilize that soil? How do I improve my starting conditions?" They kinda tell themselves grit alone can, can overcome any starting condition. So yeah, I don't have technical co-founders. Let me just pay for a contractor to build the V1.

   4. DCDalton Caldwell4:37

      Yep.

   5. MSMichael Seibel4:37

      Or yeah, I don't know what I'm doing yet, but let me put together a pitch deck and try to ra- Like, it's just kind of like grit will see me through. And grit's important. But oftentimes I'm telling founders, like, use the grit to improve your starting conditions. It's a lot more efficient use of grit, you know? It's like-

   6. DCDalton Caldwell4:53

      Yeah

   7. MSMichael Seibel4:54

      ... do high-leverage work. Improving your sharp condition, starting conditions, is often high-leverage work. You know, that's why we tell people to come to the Bay Area.

   8. DCDalton Caldwell5:01

      Yes.

   9. MSMichael Seibel5:01

      Like, all things being equal, your starting conditions are better here. I feel for the people who slip into fake 'cause sometimes I think they're slipping into fake because they don't have any interest in winning, right? They just wanna be part of the game and look cool. But more often, I think they slip into fake because they feel as though they have to start right now.

   10. DCDalton Caldwell5:17

       Yeah.

   11. MSMichael Seibel5:17

       That's true.

8. 5:17 – 6:04

   Rituals aren’t the cause: offices, hires, and meetings won’t summon Google

   1. DCDalton Caldwell5:17

      It's, again, it, you, you said the term cargo culting.

   2. MSMichael Seibel5:20

      Yeah.

   3. DCDalton Caldwell5:20

      You know, to recap, if you wanna-

   4. MSMichael Seibel5:22

      Yeah

   5. DCDalton Caldwell5:22

      ... anyone out there wants to look up what a cargo cult is, it's where you would, like, performatively do something and expect it-

   6. MSMichael Seibel5:28

      [laughs]

   7. DCDalton Caldwell5:28

      ... to have, like, a magical outcome. I don't know. You can-

   8. MSMichael Seibel5:30

      Yes

   9. DCDalton Caldwell5:30

      ... read the history of that on your own time, but it's-

   10. MSMichael Seibel5:32

       Yes

   11. DCDalton Caldwell5:32

       ... pretty fascinating.

   12. MSMichael Seibel5:32

       Yes.

   13. DCDalton Caldwell5:33

       And so it'd be like, okay, let's rent an office.

   14. MSMichael Seibel5:36

       Yes. We can do that.

   15. DCDalton Caldwell5:36

       Let's hire people and-

   16. MSMichael Seibel5:37

       Yes

   17. DCDalton Caldwell5:37

       ... put them in the office.

   18. MSMichael Seibel5:38

       Yes.

   19. DCDalton Caldwell5:39

       And let's do investor meetings.

   20. MSMichael Seibel5:42

       Yes.

   21. DCDalton Caldwell5:43

       That's what a startup is, right?

   22. MSMichael Seibel5:44

       Right. If we put those three things together, Google pops out, right? Yeah.

   23. DCDalton Caldwell5:47

       Yeah. Like, it's, it's sort of, like, superficially-

   24. MSMichael Seibel5:49

       Yeah

   25. DCDalton Caldwell5:50

       ... building infrastructure without, with missing the point that the reason Google worked wasn't that they had pastel-colored balls. [laughs]

   26. MSMichael Seibel5:58

       Served lunch. [laughs]

   27. DCDalton Caldwell6:00

       Served lunch. That, those might be important parts. It was that they built a really good search engine-

   28. MSMichael Seibel6:03

       Yes

   29. DCDalton Caldwell6:03

       ... was actually the higher order bit.

9. 6:04 – 7:12

   Why YC advice often emphasizes sales: it’s targeted at builder-heavy teams

   1. MSMichael Seibel6:04

      Yeah. Yes. What I have found at YC is, like, you know-We tend to pick real startups, right?

   2. DCDalton Caldwell6:10

      We do our best.

   3. MSMichael Seibel6:11

      We do our best. We tend to pick startups that are probably more on the, "I wanna put my head down and build developer tools" than on the, "I wanna raise infinite money and what is software again?" As a result, our advice is probably more, let's call it sales and revenue-oriented than people would expect. How do you think about that? Like, who, who are we actually talking to when we're giving that advice?

   4. DCDalton Caldwell6:35

      Advice is most helpful when it's something that you never would've done on your own.

   5. MSMichael Seibel6:39

      Yeah.

   6. DCDalton Caldwell6:39

      Like, if we're just telling you to do stuff you would've already done-

   7. MSMichael Seibel6:41

      Yeah

   8. DCDalton Caldwell6:42

      ... that's not useful. Like, what was that, did you see the, the tweet recently where it was, like, Ben Horowitz was like, "Oh, some VC told me to hold- only hire A players," and I'm like, "Thanks, dumbass. That never would've occurred to me. Only hire A players. That's amazing advice. I was gonna-

   9. MSMichael Seibel6:56

      I was gonna hire A. [laughs]

   10. DCDalton Caldwell6:57

       Yeah. [laughs] So, so basically, if you're just telling people shit they're already gonna do-

   11. MSMichael Seibel7:01

       Yeah

   12. DCDalton Caldwell7:01

       ... that's not that useful.

   13. MSMichael Seibel7:02

       Yes.

   14. DCDalton Caldwell7:03

       But telling people things that they never would've cooked up on their own-

   15. MSMichael Seibel7:06

       Yes

   16. DCDalton Caldwell7:06

       ... or that they sort of need inspiration or a pep talk to do-

   17. MSMichael Seibel7:10

       Yes

   18. DCDalton Caldwell7:10

       ... is actually pretty important.

   19. MSMichael Seibel7:11

       Yes.

10. 7:12 – 8:01

    Marketing as the transformation for technical founders (and examples that prove it)

    1. DCDalton Caldwell7:12

       And so when we take some super technical teams and we're like, "No, you should, you should hire salespeople-"

    2. MSMichael Seibel7:17

       Yeah, or you should sell yourself.

    3. DCDalton Caldwell7:19

       Yeah.

    4. MSMichael Seibel7:19

       Go out in front of top customers and sell.

    5. DCDalton Caldwell7:20

       That's transformative.

    6. MSMichael Seibel7:21

       Yeah.

    7. DCDalton Caldwell7:22

       And so you'll notice at the beginning of this talk, we were talking about the extremes. I have encouraged a lot of founders building technical tools, you know, developer tools, to spend a lot of time posting about their thing and telling the world about it, because if no one knows that your technology exists, it's kinda game over.

    8. MSMichael Seibel7:40

       Yeah.

    9. DCDalton Caldwell7:40

       And the, the, the best technologies are good at marketing whether you admit it or not, and that Stripe is great at marketing whether you're aware of it or not.

    10. MSMichael Seibel7:48

        Mm-hmm. Mm-hmm.

    11. DCDalton Caldwell7:48

        Google is great at marketing.

    12. MSMichael Seibel7:49

        Mm-hmm.

    13. DCDalton Caldwell7:50

        And, you know, um, some of my newer startups like, like PostHog-

    14. MSMichael Seibel7:53

        Yeah

    15. DCDalton Caldwell7:54

        ... they do a lot of developer marketing-

    16. MSMichael Seibel7:55

        Yeah

    17. DCDalton Caldwell7:55

        ... and that's why people have heard of it.

    18. MSMichael Seibel7:57

        Yeah.

    19. DCDalton Caldwell7:57

        They couldn't just, like, wait in the ivory tower for people to hear about PostHog. They have to market the heck out of that thing.

11. 8:01 – 8:43

    Myths about winners mislead founders; real job is improving what’s unnatural

    1. MSMichael Seibel8:01

       I think that there are myths created about startups that people kind of model themselves after. Like, oh, like, you know, Google didn't do any marketing, this guy didn't do this, this guy didn't do that, this was always self-serve forever. And kind of when you take the startup that, the company you think has won, and you create a myth about it that's not true-

    2. DCDalton Caldwell8:19

       Yeah

    3. MSMichael Seibel8:19

       ... and then that's where you set your North Star, you've really screwed yourself, right? You've really screwed yourself, and I think that you make a really great point. The best companies, our whole job is to get them to be better at some of the things that don't come naturally.

    4. DCDalton Caldwell8:33

       'Cause on the stuff that comes naturally, they're good.

    5. MSMichael Seibel8:35

       Yeah.

    6. DCDalton Caldwell8:36

       You got it.

    7. MSMichael Seibel8:36

       Yes.

    8. DCDalton Caldwell8:36

       Like, just keep doing what you're doing.

    9. MSMichael Seibel8:38

       Yes.

    10. DCDalton Caldwell8:38

        Like, good work.

    11. MSMichael Seibel8:39

        And if we're in there saying, like, "You should really build better software," like-

    12. DCDalton Caldwell8:43

        Yeah

12. 8:43 – 9:02

    Closing: if you’re in the fake camp, change your approach

    1. MSMichael Seibel8:43

       ... we probably made a mistake. All right. That's Real versus Fake Startups. If you find yourself in the fake camp-

    2. DCDalton Caldwell8:49

       Do something about it.

    3. MSMichael Seibel8:50

       Cheers.

    4. DCDalton Caldwell8:51

       All right. Thanks, Mike. [outro music]

Episode duration: 9:03