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CHAPTERS
- 0:00 – 2:00
Play Stupid Games, Win Stupid Prizes
Michael Seibel and Dalton Caldwell introduce the episode on goal-setting pitfalls that startup founders fall into. Dalton frames it with the meme "play stupid games, win stupid prizes," and Michael splits the topic into mistakes in setting goals and mistakes in accomplishing them.
- •The A in a calculus class is a representation of mastery, not the goal itself
- •The episode covers pitfalls founders hit when setting or trying to accomplish goals
- •A silly game leads to equally silly or unproductive prizes
- •Stupid games are covered first and stupid prizes at the end
- 2:00 – 3:29
Goals That Are Too Aggressive
Michael explains that goals so aggressive they aren't motivational miss the purpose of goal-setting, often because of fear. He and Dalton give examples such as $30K MRR by Demo Day and expecting 100,000 DAU right after launch.
- •A goal should motivate you to act smarter and faster than you otherwise would
- •Fear often drives overly aggressive goals
- •Founders new to YC aim for $30K MRR by Demo Day because an alum said it's needed to raise
- •Founders expect an app to take off immediately after launch and delay launching to polish it
- 3:29 – 5:37
Fake Metrics
Michael describes goals measured in something other than money for companies that charge customers, such as registered users. Dalton lists many ways founders avoid measuring whether the product is actually working.
- •Companies that charge money should measure money, or at least active users
- •Examples include website hits, downloads without registrations, and incomplete sign-ups
- •Counting users who opened the app once and never returned is another example
- •Dalton can't tell if founders are fooling themselves or investors, and Michael says it's probably both
- 5:37 – 8:03
Stupid Comparatives
Michael describes founders who assume they can raise money by matching a metric from a past funding announcement, such as $500K ARR in 2021. Dalton says the mistake is chasing superficial resemblance rather than whether the thing is actually working.
- •Assuming 2022 fundraising matches 2021 ignores changes in the market
- •Funding announcements often come well after the deals happened
- •Focusing on surface-level similarity to another company isn't a smart game
- •The Facebook example ignores that its small user base had extremely high engagement
- 8:03 – 9:40
Sandbagging Your Goals
Dalton explains sandbagging as setting intentionally easy goals so you can blow past them. It may help a career at a big company, but when you're your own boss it hurts you, and Michael adds that big companies didn't have that culture when they were starting.
- •Sandbagging means giving yourself a month for something you could do in a week
- •At a company it can make you look like a genius and get you promoted
- •When you're the boss, sandbagging screws yourself
- •The founders of big companies weren't sandbagging when they were starting
- 9:40 – 11:24
Cheating Your Way to the Goal
Turning to accomplishing goals, Michael likens cheating on a goal to cheating on a calculus test: if you didn't learn something, maybe you didn't accomplish it. Dalton adds that people fool investors, co-founders and employees, then assume it worked.
- •Michael's example is a post-launch B2B SaaS company with a goal of 10 paying users
- •Accomplishing a goal in a way you know isn't legitimate is cheating
- •People are trusting, so short-term fooling of others goes unnoticed
- •Founders mistakenly think they won because nobody else is aware of the cheating
- 11:24 – 12:46
Learning to Take the L
Michael says founders often cheat because they treat missing a goal as failure in itself. He argues you should assume you'll be bad at goal-setting and adjust over time, and that YC isn't grading goals but looking at progress on the hardest problems.
- •Founders cheat to avoid the feeling that missing a goal is a failure
- •Give yourself slack and assume you'll be bad at setting goals at first
- •You can set better goals over time and learn from missing them
- •YC isn't a teacher or boss grading you on goals
- •Progress on the hardest problem in the company is what matters
- 12:46 – 14:36
Making Excuses Instead of Moving On
Dalton says that when founders miss goals, he sees them wanting to explain at length why it's not their fault, as if seeking redemption. He says that energy is better spent making something that works, and Michael says goals are an internal tool, not a way to please someone else.
- •Missing a goal is fine; long excuses aren't helpful
- •Founders pleading their case like they're in court waste energy
- •Sales cycle excuses are a common example
- •Michael says goal-setting is a tool for yourself, not to please others
- 14:36 – 16:16
The Stupid Prize of Raising Too Much Money
Moving to stupid prizes, Dalton says a bad goal like raising the most money can be won, and Michael lists the consequences. These include losing control, burning cash, having the wrong team, and a much harder pivot.
- •Raising the most money is a game founders can win
- •You can lose control of the company and your board can fire you
- •Investors expect you to spend the money
- •The wrong people join who think you've made it
- •Pivoting becomes extremely hard with all the money and momentum going the wrong way
- 16:16 – 19:32
Chasing Headcount and an Executive Team
Michael and Dalton cover the goal of having many employees and the plan to recruit an executive team early. Dalton says over-hiring leads to layoffs and some of his biggest failures, and that executive-team advice is aimed at late-stage founders but consumed by tiny startups.
- •Large headcount is often justified as a way to move fast
- •Over-hiring can force layoffs, which Dalton calls among his biggest failures
- •VC content is aimed at late-stage founders but read mostly by two- or three-person startups
- •Executives who join an early startup may have left Google for a reason or expect you to be further along
- 19:32 – 22:22
Burning Money and Premature Acquisitions
Michael describes scaling negative margins, such as expanding a non-working city model to 30 cities, then being unable to raise again. They then discuss founders acquiring companies too early, when the advice they should follow is to make the core business work.
- •Eventually someone does basic arithmetic on your finances and asks if it's real
- •Scaling negative margins to raise the next round only works until the luck runs out
- •Post-IPO companies can lose 95% of their value
- •Acquisitions aren't bad, but startups think about them too early
- •Pre-product-market-fit companies shouldn't be acquiring others
- 22:22 – 24:11
Defrauding Customers Is Not a Game
Michael raises knowingly selling customers something that isn't what you say, causing them harm. Dalton says people face arrest, jail and years in court, and suggests some forget the numbers in a spreadsheet are real dollars.
- •Michael stresses this is knowingly harming users, not a mistake
- •Prizes include arrests, jail and years in the court system
- •Dalton suggests treating everything as a game or joke online can make people lose perspective
- •The numbers in the spreadsheet are real dollars, not Monopoly money
- 24:11 – 26:44
The Angel Investor Status Game
Michael explains that famous founders' angel checks take almost no time, so founders shouldn't copy investors by networking and advising. Dalton calls it a status game whose prizes are illiquid money, a distracted founder and annoyed employees.
- •Good founders get deals and can write angel checks with almost no time or effort
- •Michael's example is Brian Chesky saying yes to a Socialcam angel email in about 15 seconds
- •Copying what investors do on Twitter is cargo culting
- •The status game ties up money in illiquid investments
- •Employees may be upset by a founder distracted by angel investing
- 26:44 – 29:12
Wrapping Up: Teach Your Team and Get Good at Goals
Michael wraps up by saying founders should think through the consequences of the games they play, since their team will copy what they define as success. He ends on a positive note that the best companies get very good at goal setting and execution, improving at a shocking rate.
- •Think through the logic tree of a game to its end before playing it
- •Teams copy what the founder treats as success, like fudged numbers or angel investing
- •Michael compares it to parents not doing screw-up things in front of their kids
- •Some of the best YC companies move faster than anyone would imagine
- •Outliers are smart and great executors, and they don't sandbag themselves
