Real vs Fake Startups

Dalton Caldwell 0:00 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.

Michael Seibel 0:09 Yeah.

Dalton Caldwell 0:09 Because if no one knows that your technology exists, it's kinda game over.

Michael Seibel 0:13 Yeah.

Dalton Caldwell 0:13 And the, the, the best technologies are good at marketing, whether you admit it or not. [upbeat music]

Michael Seibel 0:21 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]

Dalton Caldwell 0:31 [laughs] I hope not.

Michael Seibel 0:32 What, what is the definition? I hear [laughs] there's a guy-

Dalton Caldwell 0:35 Yeah.

Michael Seibel 0:35 What's the definition of a fake startup? [laughs]

Dalton Caldwell 0:39 Oh, okay. So you're setting me up.

Michael Seibel 0:40 [laughs] I mean, I might be setting you up.

Dalton Caldwell 0:42 Let's start with the extremes.

Michael Seibel 0:44 Let's-

Dalton Caldwell 0:44 Right? Like, with the cartoonish extremes.

Michael Seibel 0:46 Yes.

Dalton Caldwell 0:46 So a cartoonishly extreme fake startup-

Michael Seibel 0:49 Yes

Dalton Caldwell 0:49 ... is a startup that never builds a product and never writes any code.

Michael Seibel 0:56 Nope.

Dalton Caldwell 0:56 It hires lots of people.

Michael Seibel 0:58 Some-

Dalton Caldwell 0:58 The founders are on the 30 Under 30 list somehow.

Michael Seibel 1:01 [laughs] Somehow.

Dalton Caldwell 1:02 [laughs]

Michael Seibel 1:04 That was a, that was a high priority. [laughs]

Dalton Caldwell 1:06 Some- somehow that's their main work product.

Michael Seibel 1:08 [laughs]

Dalton Caldwell 1:08 The founders have raised money-

Michael Seibel 1:10 Yeah

Dalton Caldwell 1:10 ... despite never having, um, shipped a product or any customers.

Michael Seibel 1:14 Yes. Yeah.

Dalton Caldwell 1:14 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-

Michael Seibel 1:22 Yes

Dalton Caldwell 1:22 ... in some edgy way.

Michael Seibel 1:24 Yes.

Dalton Caldwell 1:24 That's a fake startup.

Michael Seibel 1:25 Yes. I like that, performance art. It's like Hamilton on stage versus actually being there.

Dalton Caldwell 1:30 Yeah, the whole thing is a performance.

Michael Seibel 1:31 [laughs] Yeah. Yes, yes.

Dalton Caldwell 1:33 It's not real.

Michael Seibel 1:33 So what's a real startup?

Dalton Caldwell 1:34 So-

Michael Seibel 1:35 Or the cartoonish version of it.

Dalton Caldwell 1:36 The cartoonish version of a real startup is where, you know, everyone is working 9:00 to 6:00.

Michael Seibel 1:42 Yep.

Dalton Caldwell 1:42 And it's only programmers. There's not a single non-technical person in the business.

Michael Seibel 1:46 Nope.

Dalton Caldwell 1:46 And they're all writing Rust.

Michael Seibel 1:47 Yes.

Dalton Caldwell 1:48 And maybe not even Rust. They're, they're writing their own programming language.

Michael Seibel 1:51 To start, obviously.

Dalton Caldwell 1:52 To start, of course.

Michael Seibel 1:53 Yes.

Dalton Caldwell 1:53 Um-

Michael Seibel 1:53 'Cause it's gotta scale. [laughs]

Dalton Caldwell 1:55 [laughs] They can't be bothered to do all sorts of things. They're just, like, super hardcore.

Michael Seibel 1:59 Yeah.

Dalton Caldwell 1:59 They're super focused, and-

Michael Seibel 2:00 Don't have to do any sales.

Dalton Caldwell 2:01 They don't have to do any sales.

Michael Seibel 2:02 Yes.

Dalton Caldwell 2:02 It's all self-service.

Michael Seibel 2:03 Yes.

Dalton Caldwell 2:03 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-

Michael Seibel 2:11 Mm

Dalton Caldwell 2:11 ... what real is. Just being hardcore. Right?

Michael Seibel 2:13 Yeah. Like, they look at your SAT scores when they're trying to recruit you.

Dalton Caldwell 2:17 'Cause everything about Google-

Michael Seibel 2:18 Yeah, yeah, yeah

Dalton Caldwell 2:19 ... w- my memory as a founder was-

Michael Seibel 2:20 Yeah

Dalton Caldwell 2:20 ... we were trained that that, that was the golden standard for a real-

Michael Seibel 2:23 Yeah

Dalton Caldwell 2:24 ... hardcore organization.

Michael Seibel 2:25 Yeah. These are clear caricatures, right? Right, like-

Dalton Caldwell 2:27 Yeah.

Michael Seibel 2:28 Y- Goo- y- you know, perfect example, Google's like one of the best sales companies in the world.

Dalton Caldwell 2:32 Yes.

Michael Seibel 2:32 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-

Dalton Caldwell 2:38 They have some good-

Michael Seibel 2:38 ... one of the best enterprise-

Dalton Caldwell 2:39 [laughs]

Michael Seibel 2:40 ... 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.

Dalton Caldwell 3:07 That's such a great question. Let's try to make the most, um, charitable explanation of someone that's doing what might-

Michael Seibel 3:14 Yeah

Dalton Caldwell 3:14 ... seem like a fake startup.

Michael Seibel 3:15 Yeah.

Dalton Caldwell 3:15 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-

Michael Seibel 3:25 Yeah

Dalton Caldwell 3:25 ... hat, and-"

Michael Seibel 3:25 Everyone takes their shoes off.

Dalton Caldwell 3:26 "Okay, I saw..."

Michael Seibel 3:27 Yeah, yeah.

Dalton Caldwell 3:27 You just kinda, like, go through the motions.

Michael Seibel 3:29 Yes.

Dalton Caldwell 3:29 And so I think some of the most unintentionally funny, uh, performative startups-

Michael Seibel 3:34 Mm

Dalton Caldwell 3:34 ... might be someone that's just, like-

Michael Seibel 3:36 Just-

Dalton Caldwell 3:36 They're like a merchant that's just trying to pretend. [laughs]

Michael Seibel 3:39 If you're almost consuming startup culture solely on Twitter-

Dalton Caldwell 3:43 Yeah

Michael Seibel 3:43 ... like, depending on who you're following, you might just be cargo culting this thing that looks like startups, but it's-

Dalton Caldwell 3:47 Right

Michael Seibel 3:48 ... completely not.

Dalton Caldwell 3:48 And you're like, "Wait, I thought this was..." [laughs]

Michael Seibel 3:50 [laughs]

Dalton Caldwell 3:50 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.

Michael Seibel 3:54 Yes.

Dalton Caldwell 3:54 And no one's told you otherwise.

Michael Seibel 3:55 I see people slip into fake startups when they have poor starting conditions, but high urgency.

Dalton Caldwell 4:02 Mm.

Michael Seibel 4:03 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.

Dalton Caldwell 4:37 Yep.

Michael Seibel 4:37 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-

Dalton Caldwell 4:53 Yeah

Michael Seibel 4:54 ... 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.

Dalton Caldwell 5:01 Yes.

Michael Seibel 5:01 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.

Dalton Caldwell 5:17 Yeah.

Michael Seibel 5:17 That's true.

Dalton Caldwell 5:17 It's, again, it, you, you said the term cargo culting.

Michael Seibel 5:20 Yeah.

Dalton Caldwell 5:20 You know, to recap, if you wanna-

Michael Seibel 5:22 Yeah

Dalton Caldwell 5:22 ... anyone out there wants to look up what a cargo cult is, it's where you would, like, performatively do something and expect it-

Michael Seibel 5:28 [laughs]

Dalton Caldwell 5:28 ... to have, like, a magical outcome. I don't know. You can-

Michael Seibel 5:30 Yes

Dalton Caldwell 5:30 ... read the history of that on your own time, but it's-

Michael Seibel 5:32 Yes

Dalton Caldwell 5:32 ... pretty fascinating.

Michael Seibel 5:32 Yes.

Dalton Caldwell 5:33 And so it'd be like, okay, let's rent an office.

Michael Seibel 5:36 Yes. We can do that.

Dalton Caldwell 5:36 Let's hire people and-

Michael Seibel 5:37 Yes

Dalton Caldwell 5:37 ... put them in the office.

Michael Seibel 5:38 Yes.

Dalton Caldwell 5:39 And let's do investor meetings.

Michael Seibel 5:42 Yes.

Dalton Caldwell 5:43 That's what a startup is, right?

Michael Seibel 5:44 Right. If we put those three things together, Google pops out, right? Yeah.

Dalton Caldwell 5:47 Yeah. Like, it's, it's sort of, like, superficially-

Michael Seibel 5:49 Yeah

Dalton Caldwell 5:50 ... building infrastructure without, with missing the point that the reason Google worked wasn't that they had pastel-colored balls. [laughs]

Michael Seibel 5:58 Served lunch. [laughs]

Dalton Caldwell 6:00 Served lunch. That, those might be important parts. It was that they built a really good search engine-

Michael Seibel 6:03 Yes

Dalton Caldwell 6:03 ... was actually the higher order bit.

Michael Seibel 6:04 Yeah. Yes. What I have found at YC is, like, you know-We tend to pick real startups, right?

Dalton Caldwell 6:10 We do our best.

Michael Seibel 6:11 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?

Dalton Caldwell 6:35 Advice is most helpful when it's something that you never would've done on your own.

Michael Seibel 6:39 Yeah.

Dalton Caldwell 6:39 Like, if we're just telling you to do stuff you would've already done-

Michael Seibel 6:41 Yeah

Dalton Caldwell 6:42 ... 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-

Michael Seibel 6:56 I was gonna hire A. [laughs]

Dalton Caldwell 6:57 Yeah. [laughs] So, so basically, if you're just telling people shit they're already gonna do-

Michael Seibel 7:01 Yeah

Dalton Caldwell 7:01 ... that's not that useful.

Michael Seibel 7:02 Yes.

Dalton Caldwell 7:03 But telling people things that they never would've cooked up on their own-

Michael Seibel 7:06 Yes

Dalton Caldwell 7:06 ... or that they sort of need inspiration or a pep talk to do-

Michael Seibel 7:10 Yes

Dalton Caldwell 7:10 ... is actually pretty important.

Michael Seibel 7:11 Yes.

Dalton Caldwell 7:12 And so when we take some super technical teams and we're like, "No, you should, you should hire salespeople-"

Michael Seibel 7:17 Yeah, or you should sell yourself.

Dalton Caldwell 7:19 Yeah.

Michael Seibel 7:19 Go out in front of top customers and sell.

Dalton Caldwell 7:20 That's transformative.

Michael Seibel 7:21 Yeah.

Dalton Caldwell 7:22 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.

Michael Seibel 7:40 Yeah.

Dalton Caldwell 7:40 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.

Michael Seibel 7:48 Mm-hmm. Mm-hmm.

Dalton Caldwell 7:48 Google is great at marketing.

Michael Seibel 7:49 Mm-hmm.

Dalton Caldwell 7:50 And, you know, um, some of my newer startups like, like PostHog-

Michael Seibel 7:53 Yeah

Dalton Caldwell 7:54 ... they do a lot of developer marketing-

Michael Seibel 7:55 Yeah

Dalton Caldwell 7:55 ... and that's why people have heard of it.

Michael Seibel 7:57 Yeah.

Dalton Caldwell 7:57 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.

Michael Seibel 8:01 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-

Dalton Caldwell 8:19 Yeah

Michael Seibel 8:19 ... 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.

Dalton Caldwell 8:33 'Cause on the stuff that comes naturally, they're good.

Michael Seibel 8:35 Yeah.

Dalton Caldwell 8:36 You got it.

Michael Seibel 8:36 Yes.

Dalton Caldwell 8:36 Like, just keep doing what you're doing.

Michael Seibel 8:38 Yes.

Dalton Caldwell 8:38 Like, good work.

Michael Seibel 8:39 And if we're in there saying, like, "You should really build better software," like-

Dalton Caldwell 8:43 Yeah

Michael Seibel 8:43 ... we probably made a mistake. All right. That's Real versus Fake Startups. If you find yourself in the fake camp-

Dalton Caldwell 8:49 Do something about it.

Michael Seibel 8:50 Cheers.

Dalton Caldwell 8:51 All right. Thanks, Mike. [outro music]