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Y CombinatorY Combinator

Why Founders Shouldn't Think Like Investors

It’s easy to analyze your way out of taking the first step. It’s something we see a lot, particularly when founders try to choose what to build based on what they think VCs and investors will like. In this episode of Dalton & Michael, we’ll talk about the risks of “thinking like an investor”, how to know when you’re stuck in this mindset, and how to unlearn it. We’ll also cover a short list of things that we’ve found actually matter when starting a company — it’s simpler than a lot of people think. Apply to Y Combinator: https://yc.link/DandM-apply Work at a Startup: https://yc.link/DandM-jobs Chapters (Powered by https://bit.ly/chapterme-yc) - 00:00 - Coming Up 00:24 - How VCs Think 03:05 - What Matters 04:56 - What's Changed 06:41 - First Principles 08:41 - Fear 10:06 - Positive Feedback 11:18 - First Customers 12:56 - Scaling 14:19 - Macro Vs. Micro 15:54 - Unlearning 17:22 - Time With Users 20:36 - Superpowers 21:42 - No Exit Strategy

Michael SeibelhostDalton Caldwellhost
Mar 21, 202423mWatch on YouTube ↗

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At a glance

WHAT IT’S REALLY ABOUT

Why Early-Stage Founders Should Unlearn VC Thinking and Talk to Users

  1. Seibel and Caldwell say VC-style thinking, which also covers consultants, bankers and private equity, is valid in those jobs but poorly suited to a startup with no product or customers.
  2. They say that at the earliest stage YC itself looks for basic things: an idea that makes sense, domain knowledge, the technical ability to build it, and the ability to get customers.
  3. They attribute the rise of VC thinking among founders to investor content marketing, startup classes taught by non-founders, fear of picking a bad idea, and the fact that investors reward VC-style pitches.
  4. They use a StarCraft analogy to argue that investors love macro planning, while getting a startup off the ground demands strong micro execution, especially landing the first customers.
  5. Their cures are to unlearn investor habits, cut polluting media inputs, spend deep time with users, and skip planning for exits or scale before the idea is proven.

IDEAS WORTH REMEMBERING

5 ideas

VC tools are good, but for the wrong stage

Both hosts say market sizing, comps and PowerPoint analysis are great tools for investors, but not for a startup with no customers and an unsettled idea.

Early-stage investing is not a model for idea selection

Caldwell says great later-stage investors mostly find companies that already have traction and attach themselves to them, so there is little for founders to learn about choosing an idea from that.

Investor enthusiasm can mislead founders

Seibel notes that picking trendy ideas and using VC language gets more meetings, but investors often respond to things that don't work. Cloning whatever is raising the most money has often gone badly.

The first customer is the real trap

Founders gloss over how hard zero-to-one is, and some gear up for customer 100 by hiring and getting offices. The hosts advise launching quickly to get the hard lesson early.

Micro execution comes before macro

Using the StarCraft analogy, Seibel says you earn the privilege of doing macro by being great at micro, and no amount of macro experience helps you get something off the ground.

WORDS WORTH SAVING

5 quotes

Macro you can do on an Excel spreadsheet.

— Michael Seibel

I think you start being great at micro to earn the privilege of doing macro at all.

— Michael Seibel

if your filter is exactly the same as everyone else's, you're all gonna be screening out the same ideas, right?

— Dalton Caldwell

You don't need the full plan today.

— Dalton Caldwell

We're susceptible to the inputs that come to our mind, and, like, the easiest way we do this is turn that media off.

— Michael Seibel

What it means to think like a VCMarket analysis versus tractionWhy VC thinking has spread among foundersFear of ideas not being venture scaleGetting the first customerMacro versus micro (StarCraft analogy)Spending time with users

High quality AI-generated summary created from speaker-labeled transcript.

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