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Y CombinatorSimple Products That Became Big Companies – Dalton Caldwell and Michael Seibel
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CHAPTERS
- 0:00 – 0:30
Features That Don't Work vs. One That Does
The episode opens with Dalton Caldwell arguing that a product with many broken features is far worse than one with a single working feature. Michael Seibel plays out the idea with a payroll and benefits example, and the two compare it to a hated company like Verizon.
- •A product with lots of features that don't work is infinitely worse than one feature that works
- •Seibel imagines healthcare, benefits, 401k and payroll all failing to work
- •Caldwell compares unreliable multi-feature products to Verizon
- •Unreliable features are a great way to build a hated company
- 0:30 – 1:56
Rookie Mistake: Boiling the Ocean
Seibel introduces the Rookie Mistakes series and the first founder-submitted mistake: serving multiple use cases before nailing one. Caldwell calls this boiling the ocean, and Seibel explains how building before talking to users lets a founder's assumptions run wild.
- •Founders tried to support more than one use case before proving a single one
- •Caldwell calls the pattern boiling the ocean: building a full elaborate product before getting a single user
- •Seibel says every founder starts with a useful lie about what customers want
- •Putting the product in front of users reveals which hypotheses were correct
- 1:56 – 2:30
Googlitis: Copying a Mature Product
Seibel coins the term Googlitis for founders who look at today's big companies without seeing how they began. Caldwell uses Amazon, which started as a simple site selling books, as the example.
- •Googlitis means copying a company's current product rather than its beginning
- •Founders say they're the next Amazon and try to build everything Amazon has
- •Amazon began as a simple website that just sold books
- •Seibel adds that it didn't even do that very well
- 2:30 – 4:30
OpenSea's Simple Start
Dalton Caldwell describes how OpenSea went through YC in 2018, pivoted, and spent a year or two grinding on a bare-bones site for buying and selling NFTs. He argues that simple fundamentals and focus produced network effects, and that newcomers shouldn't chase feature parity.
- •OpenSea pivoted from another idea in YC in 2018
- •It spent years in obscurity on a simple site that barely worked
- •It shipped constantly and didn't build its own wallet
- •Caldwell says NFT startups should do the simple fundamentals first rather than chase feature parity
- 4:30 – 6:25
Gusto Started as ZenPayroll
Seibel recounts how Gusto began as ZenPayroll in his second batch, doing exactly one thing: online payroll. He contrasts this with the old ADP process and with today's full suite of HR tools, and the two stress that the core feature simply has to work.
- •Gusto went through YC in Winter '12 as ZenPayroll
- •Before it, running payroll meant calling ADP and signing papers in person
- •The product did only payroll and was designed so you could forget about it
- •Good payroll is payroll you forget about because it just works
- 6:25 – 8:48
Copying Overseas Business Models and Investor Validation
Seibel reads a founder's mistake: copying a business model from another country and assuming product-market fit was a given. Caldwell says founders want to believe validation from investors, press or competitions means the idea works, comparing it to having a driver's license without being a good driver.
- •A founder copied a model from an overseas market, hired fast and burned money before learning users didn't want it
- •Seibel notes investors like funding these simple 'if it works there, it works here' theses
- •Caldwell says validation from investors, press or friends doesn't mean the thing works
- •The driver's license analogy: credentials don't make you good, and no one will stop you from doing poorly
- 8:48 – 10:32
First Principles and Ground Truth Over Authority
Seibel argues that founders are used to learning from teachers rather than observing problems themselves, which is why startups feel harder. Caldwell adds that people ask for advice after watching videos that say to talk to customers, and both stress that nothing substitutes for ground truth from customers.
- •Most of what founders learned in the past didn't require first-principles observation
- •Startups require going to observe the problem and talking to people who have it
- •Seibel compares it to learning physics without a teacher or book
- •Authority figures don't have the answers about whether your idea is good
- •Ground truth from customers can't be replaced
- 10:32 – 13:17
Investor Money, Magical Thinking and Runway Pressure
Seibel is distressed that investors often assume founders don't need ground truth, so companies raise money, build big teams and return two years later with nothing working. Both note that decision quality improves when runway shrinks, and Caldwell likens it to a college paper due in 24 hours.
- •Companies raise a lot, hire a team of 50, and ignore YC for two years before returning
- •Seibel gives an example of a company that wanted to grow potential customers before actual customers
- •Magical thinking fades when runway drops to about 12 months
- •Caldwell wishes people did their best work before their backs were against the wall
- •Seibel says companies that struggle to raise money stay in constant fire-drill mode
- 13:17 – 15:37
Discipline Beats Genius
Seibel says the best founders are disciplined, doing the right thing when nothing forces them to, and that genius is often mistaken for discipline. Caldwell says successful people are simply better at focused work, and Seibel notes this skill can be trained like working out.
- •Discipline is doing the right thing when no situation is forcing you
- •Peers may be hiring, going to conferences and talking to reporters instead of working on the product
- •Caldwell sees successful people as simply better at doing focused work
- •Seibel says you can't change raw intelligence but you can get better at focus
- •Lazy competitors are a founder's friends
- 15:37 – 16:43
Why Hardware Crowdfunding Seemed Great
Caldwell turns to lessons from hardware crowdfunding, explaining with a T-shirt example that large orders are cheaper and crowdfunding let you sell everything up front. He mentions the YC company Teespring and ironically describes the idealized story where everything goes perfectly.
- •Manufacturing is much cheaper in large quantities, like 10,000 identical T-shirts
- •Crowdfunding let companies sell all the units at once to fund the order
- •Teespring was a YC company built around this idea, though it didn't work out
- •Caldwell facetiously describes the idealized version where everyone gets the product and is happy
- 16:43 – 18:18
What Actually Goes Wrong with Crowdfunded Hardware
Seibel lists the unknowns in crowdfunded hardware: cost to build, price, timeline and whether the product solves a real problem, all with lots of money and expectations up front. Caldwell says it's a sure way to make strangers on the internet hate you, and that this has ruined lives of people they know.
- •Founders often don't know how to build it, what it costs or what to charge
- •Backers don't know the timeline and nobody knows if it solves the problem
- •Missed shipments and excuses lead to angry backers calling founders scammers
- •Caldwell says they've seen this ruin the lives of people they know
- 18:18 – 19:55
Crowdfunding as a Fad and Hardware Best Practices
Seibel recalls that crowdfunding was a six-to-seven-year cycle in which not doing it made a hardware company look foolish. Caldwell says it was seen as a panacea but is just a tool, best used later with V2 or V3 when ready to manufacture at scale; Seibel adds that software is easier.
- •Everyone was doing crowdfunding, so skipping it looked foolish, but popularity didn't mean it worked
- •Caldwell says startups seven or eight years ago saw it as the solution
- •Best practice for hardware startups is to crowdfund later, with V2 or V3
- •Intent doesn't matter to strangers on the internet
- •Seibel's better strategy: do a software company
- 19:55 – 21:18
Taking Money from People at Scale Has Consequences
Caldwell warns that taking money from people at scale on the internet means they will hold you accountable, referencing crypto and rug pulls. Seibel adds that screwing up with enough people's money can change your life permanently.
- •People who give money online rightfully hold you accountable
- •It can look like free money, but there's no free lunch
- •If people feel rugged, they may try to track you down
- •Seibel calls this one of the few one-shot-kill mistakes in the startup world
