Successful Founders Are OK With Rejection – Dalton Caldwell and Michael Seibel

1. 0:00 – 0:36

   Rookie Mistakes

   1. DCDalton Caldwell0:00

      And so I just noticed with a lot of these teams, the really core thing going on is, is ego protection [laughs]

   2. MSMichael Seibel0:08

      Yeah

   3. DCDalton Caldwell0:08

      ... and nothing else. And, like, you could come up with all these intellectual arguments on why actually, you know. But when you really talk to someone and you get down to the core, it's being okay with getting rejection.

   4. MSMichael Seibel0:24

      [instrumental music] Hey, this is Michael Seibel with Dalton Caldwell. Welcome to Rookie Mistakes. We asked YC founders for their rookie mistakes so we could share them with you and help you avoid them.

2. 0:36 – 0:59

   Note from YC founder

   1. MSMichael Seibel0:36

      Here's the first mistake that was written in. "In the beginning, when you're still figuring out your idea or product, get on as many user or potential user calls as possible, at least one per day and ideally multiple. It seems obvious, but it's something that we personally failed at in the beginning. Don't brainstorm ideas in a silo. You don't know what people want."

3. 0:59 – 1:38

   Ideas vs Reality

   1. DCDalton Caldwell0:59

      We have all these ideas in our heads as founders about what people want, that the moment they are subjected to reality are embarrassingly wrong. [laughs] Like, there's nothing more humbling, there's nothing that makes you feel shittier than seeing real people using this thing that you built, that you spent a bunch of time on, and just, like, ripping it to shreds and not understanding it. Or, like, using none of the features or clicking on the wrong thing. It's horrible. So you ... Talking to users is, like, the inoculation against this spending inordinate amounts of time doing something that is completely irrelevant to your end users, okay?

   2. MSMichael Seibel1:37

      So

4. 1:38 – 2:25

   User surveys

   1. MSMichael Seibel1:38

      you're suggesting then that I take surveys, right? I mean, what's the most-

   2. DCDalton Caldwell1:41

      Yeah

   3. MSMichael Seibel1:41

      ... efficient way to learn what my customers want? I should survey them, right?

   4. DCDalton Caldwell1:47

      So this, this, this may, uh, be offensive to some folks, uh, listening to this video, but, um, I don't think that user surveys are that valuable when choosing a startup idea. Surveys are a useful way to get certain kinds of feedback. I would think of it as sort of micro-optimizations or trying to choose directions. Or say you have four idea, four names for a company, you wanna choose which name was the best of the four choices. Yeah, great. Run a survey. But when you're looking for fundamental truths or you're trying to find your first customer and market validation, you wanna be harsher or harder. Well, what does that mean?

5. 2:25 – 3:20

   Charge for it

   1. DCDalton Caldwell2:25

      That means get someone to give you money for it. Do you see how it's mu- a much higher bar to get someone to pay you money than to fill out a survey? Or to get someone to actually use your thing every day, or to get them to install it on site? Think about how many products that we would all in a survey say, "Oh, that sounds useful." Like, "Oh, it's, um, you know, a very, very useful idea that you have," that you would never in a million years actually pay a dollar for.

   2. MSMichael Seibel2:55

      I think the second thing about a survey that I've seen really be horrible is there's a tiny subset of your potential users who actually have expertise. They've actually tried 27 different products. This is actually a really important problem for them. But if you treat everyone you talk to the same and they fill out the same questions and so on, you never get exposed to the expertise.

6. 3:20 – 5:27

   AirBnB

   1. MSMichael Seibel3:20

      And the best example I saw of this was early days AirBnB. AirBnB did this fun thing to get users in the very early days, where they offered people who were putting their homes online for rental on other platforms, um, free digital photos, high-res digital photos, back when, like, digital cameras weren't a thing yet, um, in order to list on AirBnB. And then instead of hiring a photographer, they went out, they got digital cameras, they went out and they took the photos. And to this day, I still remember that there was one guy who they met, they took photos of his house. He loved the photos. He asked them, "Hey, do you wanna sit down for coffee or tea," or whatever. They started talking and then he said, "You know, I've been renting out my house on all of the platforms on the internet for a decade, and I have a notebook of all of my notes on all the things they do bad and all the things they do well for the last decade. Do you wanna see it?" And it's like [laughs] like ... So in the, in the Dalton scenario A, he would've received an email survey. Like, how ... He would've signed up for AirBnB, not had a listing, not used it, and would've sent an email survey, like, "How do you like AirBnB? Suggest things to improve," right?

   2. DCDalton Caldwell4:30

      [laughs]

   3. MSMichael Seibel4:30

      In the real world example, they got a book of all the things they needed to do. [laughs] Like ...

   4. DCDalton Caldwell4:36

      And again, like, think about this. Imagine y- you know these guys. The founders of AirBnB back in the day, the way they validated the idea was to ask people on a survey, or they did some user research. They did interview- They did a user interview: "Would you like to rent your home?"

   5. MSMichael Seibel4:51

      Yeah.

   6. DCDalton Caldwell4:51

      Do you see how what they could've learned from that is, is like this? Versus actually trying to get strangers to rent their home out to other strangers, and all the, like, things that popped up trying to actually make the damn business work. Do you see how, like, they learned this much from that versus this much from writing a survey?

   7. MSMichael Seibel5:09

      Well, Dalton, it's not even this much. We're not expo- We're not, we're not ... It's, it could be negative, right? Like, it could be negative. [laughs]

   8. DCDalton Caldwell5:19

      You're right. "Well, I would never wanna use that because it's, uh, dangerous, so, uh, you need a ... " You know, like-

   9. MSMichael Seibel5:24

      Done, right? You don't make AirBnB.

7. 5:27 – 9:35

   Twitch

   1. DCDalton Caldwell5:27

      You have another good anecdote about talking to users about the feature set for Twitch streamers back in the day. Can you, can you share that quick story-

   2. MSMichael Seibel5:34

      Oh, yeah

   3. DCDalton Caldwell5:34

      ... about what, how you created a priority list based on ... Tell, tell us about that.

   4. MSMichael Seibel5:38

      So, um, when we were pivoting from Justin.tv and Twitch, um, Emmett, um, Shear and Kevin Lin were kind of leading the Twitch team, and they took this to heart. We had, we, we had not done talking to users for years. They took this to heart, and they basically just started interviewing video game streamers and asking what they wanted. And the funniest thing is that at this point we had built every feature a live video social media site could have. We had chat, we had messaging, we had a feed, we had social media stuff, we had embedding, we had every kind of sharing. We were on multiple platforms. And so they were really surprised when the first thing people said was, "Can I stream in higher quality?" And we were like, "Really? That's like, you don't want like some big [laughs] like ... We, we'll build you anything." Like [laughs] you know? They're like, "Yeah, can I..." You know what they said? They're like, "Well, you know, my computer costs like four grand, and I paid for like the best internet connection in my neighborhood, and I'm streaming this HD game, and it looks like crap." And we were like, "Huh." Well, because we built our own, um, media server and we were controlling our own streaming, that was like a, like a, an integer. Like that was like a-

   5. DCDalton Caldwell7:03

      Yeah

   6. MSMichael Seibel7:03

      ... the, the easiest-

   7. DCDalton Caldwell7:03

      You can change the setting

   8. MSMichael Seibel7:05

      ... change [laughs] easiest change you could ever make. And like it would cost us incrementally more, but it was like what ... But like from a, from a building product perspective, it was very anti-climactic. And so I think like three days later, like, you know, we introduced like, you know, higher, higher, you know, HD or something, and these people went crazy. They were like, "I've never..." I- first of all, they're like, "I never imagined you could do this. Like I thought it was some massive technical-

   9. DCDalton Caldwell7:31

      [laughs]

   10. MSMichael Seibel7:31

       ... issue that was like where you were screwing us for like a year [laughs] just because it was too hard and, and like suddenly you fix it. And then two, I've never used a website where I talked to someone about it and then it got better." And so, um, this kinda started a series of, in hindsight, what looked like extremely obvious things to build, right? One was, "I want my stream to look better." Um, very quickly, two was, "I'd like to make money, please. Like can you help me make money?" [laughs]

   11. DCDalton Caldwell8:04

       [laughs] You guys had a product-

   12. MSMichael Seibel8:04

       Like, "Don't you want a social network?"

   13. DCDalton Caldwell8:05

       ... and so you talked to users?

   14. MSMichael Seibel8:07

       "Dude, don't you wanna customize your page more with different colors and themes?" It's like, "No, but like I'll run ads on my own stuff." He's like, "What do you mean?" It's like, "Oh, if you give me a button where I'll just run a video ad on my own users and I can make money, I'll click it." And we're like, "But wouldn't that... But..." And then once again-

   15. DCDalton Caldwell8:27

       [laughs]

   16. MSMichael Seibel8:28

       ... we already had video ads. Like once again, it's like, "Fuck, like that's not even hard to build." [laughs] Like, like the hardest thing was like, what, what should the button look like? [laughs] Right?

   17. DCDalton Caldwell8:37

       And, and again, dude, you were experts. You were running Justin.tv how many years in were you at Justin.tv?

   18. MSMichael Seibel8:41

       This was five years in. We were experts.

   19. DCDalton Caldwell8:44

       So you were five years into your startup.

   20. MSMichael Seibel8:45

       [laughs]

   21. DCDalton Caldwell8:45

       You knew everything about everything, but then you were like, "Oh yeah, I guess we should talk to some of our users," and they said a bunch of stuff that blew your minds, that none of you would've thought.

   22. MSMichael Seibel8:55

       And not only did it blow our minds, like the engineers listening should appreciate it, it wasn't hard to build. Like we could make them happy so easily compared to all the other shit on our brainstorm list that was like, you know, months-long projects. And it was like, "Oh, damn." So anyways, clearly, um, going a little deep helps. Putting yourself in a situation where you can have a deep conversation is way better than anything else. Um, we touched on this and, and I wanna bring up a, a, a, a quote because it, we can dig a little bit deeper. A,

8. 9:35 – 9:59

   Note from YC founder

   1. MSMichael Seibel9:35

      a YC founder wrote in, "A potential customer's opinion is not valuable unless they're willing to pay you, or use the product regularly, or share the product with their friends. They call this financial capital, pay you; time capital, usage; or social capital, give it to their friends."

9. 9:59 – 10:52

   Rejection

   1. DCDalton Caldwell9:59

      I think people really struggle with this because I think it's, it's getting at the core of like a human condition thing, which is we want to be loved and we don't wanna be rejected. And so, you know, getting through all these layers of defense that you've created for yourself to protect yourself from rejection is really hard, and it's like, yeah, man, it's personal work. Like it's work you're doing in your head. It's not work you're doing in the external world. And so I just notice with a lot of these teams, the really core thing going on is, is ego protection [laughs]

   2. MSMichael Seibel10:36

      Yeah.

   3. DCDalton Caldwell10:36

      ... and nothing else. And like you can come up with all these intellectual arguments on why actually, you know. But when you really talk to someone and you get down to the core, it's being okay with getting rejection.

10. 10:52 – 13:13

    Be scientific

    1. MSMichael Seibel10:52

       I always like to think about this a little bit like science. Like imagine that you're a founder... Oh, sorry. If you're a founder, imagine you're a scientist, right? And you could design one of two experiments: one experiment that, that actually tests your hypothesis and will give you actual information about whether your hypothesis is right or wrong, and another experiment that doesn't test the important variable at all. How many founders do we know who are never testing [laughs] the important key hypothesis of their company for the exact reason you talked about? Because if I know that I'm wrong, my ego shatters, or my, my investors will hate me, or my co-founders will leave, or some other reason that I've told myself for not just figuring out is the thing I think true or not. And what I find so surprising is that some founders just it, it doesn't occur to them to think this way. You know, we had the Stripe founders come in and talk last batch, and we always get founders asking us about pricing. "I gotta discount my product, gotta make it free early, and da, da, da, da, da." And the Stripe founders said, "We thought that startups had a problem accepting credit cards." We thought that all of the existing products out there back in the day were too hard to use and too much of a pain in the ass. See, now we tested our hypothesis. We built something for developers that was a lot easier for startups to use, and then we charged more than the competition for it. Now, any scientist would say, "Okay, well, if we're trying to, like, test this variable, charging more to sig- figure out whether startups would use this thing, it seems like a great, just logical test." But for a startup founder, that seems like a crippling decision. And what I loved about the Stripe founders here is that they just went with the logical test. Like, they, they, they kind of put their ego to the side and they said, "Hey, what's the fastest, most logical test that we can run to see if this thing is something that people want?" Anyways, so we've talked about this, like, problem, this, this mistake of, like, are my users willing to spend some capital, any kind of capital on using my product? Here's, here's the last one that I love. Um, the last one is kind of sometimes what I call the terrorist user or, like, the user that you love more than they love you. So, so here's the

11. 13:13 – 13:40

    Note from YC founder

    1. MSMichael Seibel13:13

       quote from the YC founder. Um, "When the customer you're pitching says, 'We really love your tech, but we can't pick it up today because X, but we want to use it in our next project and we'll be in touch soon.'" Um, this is a rejection.

    2. DCDalton Caldwell13:29

       [laughs]

    3. MSMichael Seibel13:30

       They don't want your tech. They just want you-

    4. DCDalton Caldwell13:32

       But they said they loved it. [laughs]

    5. MSMichael Seibel13:34

       [laughs] They just want you out of their office. This is a, "Don't call me, I'll call you."

12. 13:40 – 14:15

    Real customer

    1. MSMichael Seibel13:40

       So how does a founder interpret whether they're talking to a real customer or someone who's just trying to be polite or just trying to move on or doesn't have the need? Like, h- how do you figure out ... We told them to talk to their potent- their users. How do I figure out when I'm dealing ... talking to a live one?

    2. DCDalton Caldwell14:00

       I think if we talk about being scientists again, like we did a moment ago, a scientist would be dispassionate and would say, "Okay, no," and they wouldn't think about it anymore, and they would go onto the next thing.

    3. MSMichael Seibel14:14

       You

13. 14:15 – 15:53

    Sales

    1. MSMichael Seibel14:15

       know, Dalton, I think a lot of the reason why founders get caught in this trap is because they were never taught what sales really is. Like, they were taught sales in the context of, I would almost argue, argument. Like, I think what a lot of founders think sales is, is more like what lawyers have to do to convince a jury. Like, a jury's p- has to be there, and, like, they're gonna make a decision, and as a lawyer, your job is to convince them one way or the other. I would argue that the best salespeople, convincing is really low on the list of what they're doing. [laughs] Like, y- I might say convincing isn't on the list of what they're doing, [laughs] right? I would argue that the best salespeople are spending a lot of their time doing two things, learning and filtering. Learning and filtering. It's a successful conversation with the customer if they say no quickly, and they teach you about other kinds of customers who also are going to say no quickly. That's a success, and, like, filtering out the customers who will never get to a yes as soon as possible is a success. And I think that a lot of founders who've never done sales are like, "Oh, no, if they say no, that just means that they don't understand how good my thing is and I have to explain it better," as opposed to, like, no, that no is a gift. Figure out what you could have asked them so they would have said no in the first three minutes of the conversation. You know, so at YC

14. 15:53 – 17:48

    Customer validation

    1. MSMichael Seibel15:53

       we kind of talk about this as customer validation. Like, every sales call should start with three questions that allow the customer to disqualify themselves from your product, right? A lot of your calls should be ending in the first five to 10 minutes with like, "You know, I don't think we're right for you now. We're happy to call you back when we can do this, this thing or that thing, but I don't think we're right for you now." And, and if enough founders ... And it's funny 'cause the themes are all the same. Being willing to say no, being willing to test the core hypothesis. Or sorry, being willing to accept a no, being willing to test the core hypothesis, not feeling bad when someone doesn't want your thing. [laughs] Like, having a strong enough ego.

    2. DCDalton Caldwell16:34

       Yeah, not falling into a spiral of self-recrimination-

    3. MSMichael Seibel16:37

       [laughs]

    4. DCDalton Caldwell16:38

       ... and self-doubt and, you know. Like, you can get really dark, and it's like someone just doesn't want to buy your thing. Like, who cares?

    5. MSMichael Seibel16:45

       Who cares?

    6. DCDalton Caldwell16:46

       You just have to get used to it. [laughs]

    7. MSMichael Seibel16:47

       There are lots of, there are lots of people out there. So, um, if we're to wrap this up, this has become commonplace advice now, to talk to your users, and I think that the reason why people don't do it, and, and you know, clearly what you've kind of played out, is they don't do it because it makes them feel bad, and they don't wanna feel bad. And, you know, here's what I tell YC startups. "I hope you're passionate about what you're working on, 'cause you're gonna feel bad all the time." Like, that's what you signed up for. So, like, don't run, don't, like, d- like, it's kinda like a marathon runner being like, "Man, I hate that feeling when my legs are super cramped and I don't wanna run anymore." It's like, well, you're gonna feel that way all the time. Like, you're good because you can deal with that feeling and stay productive and stay logical and stay scientific about what you're doing.

15. 17:48 – 20:18

    Trade-off - Employee vs Founder

    1. DCDalton Caldwell17:48

       I think about a lot of what you just said in terms of the trade-off of being an employee versus being a founder.

    2. MSMichael Seibel17:55

       Yeah.

    3. DCDalton Caldwell17:55

       When you're an employee, if you're working at Apple or Google, you don't have to worry about any of this stuff.

    4. MSMichael Seibel18:01

       [laughs]

    5. DCDalton Caldwell18:01

       You're like, you got 15 layers protecting you from external world feedback that you don't want.

    6. MSMichael Seibel18:09

       Yeah.

    7. DCDalton Caldwell18:09

       You have l- several layers of managers telling you it's all gonna be okay and giving you constructive, positive feedback.

    8. MSMichael Seibel18:17

       And getting fired when it doesn't work out, right?

    9. DCDalton Caldwell18:19

       Exactly. You-

    10. MSMichael Seibel18:19

        It's their fault. It wasn't your fault.

    11. DCDalton Caldwell18:20

        You have company all hands where you can ex- you know ... Like, you have all these layers where you're, you're ... This is all the stuff that's filtered out from you, man. Like, this is not your problem when you have a job. When you're a founder, there is no filter. And I think people freak out because they treat being a founder as on the same, like the same sort of thing as being an employee. They're like, "Oh, either I'm gonna work at Google or I'm gonna start a startup." It's like, well, no. [laughs]

    12. MSMichael Seibel18:45

        [laughs]

    13. DCDalton Caldwell18:45

        This is different, right? One of the, in one of those things, you're like a worker bee and, like, you can just work on your thing and it's really low stress. And like, you know, you have to worry about your manager liking you and stuff like that. In this, there's no managers, there's no filter. You're just out there dangling in the wind, and every breeze that comes your way, you're gonna feel.

    14. MSMichael Seibel19:07

        Yeah. Yeah.

    15. DCDalton Caldwell19:08

        You, you ... The, the, the inputs that you experience as a founder are, like, completely unfiltered.

    16. MSMichael Seibel19:13

        Yeah.

    17. DCDalton Caldwell19:14

        It's just ... And, and you have to be the person that tells the people working with you that it's all gonna be okay. You're now in the role of the filter. [laughs] Like, you are the filter, not the person being filtered to.

    18. MSMichael Seibel19:23

        Yeah.

    19. DCDalton Caldwell19:24

        Yikes. I think a lot of folks aren't mentally prepared for this. Um, reality is tricky when it's not filtered.

    20. MSMichael Seibel19:35

        But I'd argue it's more fun.

    21. DCDalton Caldwell19:37

        [laughs]

    22. MSMichael Seibel19:38

        It's more fun to look at the sky with your own eyes than to look at a drawing of a picture of a movie of a da, da, da, da, of the sky. Like, it's more fun. Like, you gotta live your life, right? Like, [laughs] you know? Like, we only get a short time on this earth, so you s- might as well use your own two eyes. Um, that's, that's at least my thought on this. All right. Well, this was a great, this was a great wrap-up on talking to users, why, and, and why it feels like crap. [laughs] [outro music]

Episode duration: 20:18