Stories of Startups' Early Days | Jessica Livingston | Talks at Google

Joint authors at Google and TechTalk. It's great to have a tech author with us, Jessica Livingston. Welcome her all to Google. She's going to tell us about startups now. Our own Steve Yeage wrote in a blog post a while ago that he finally figured out what Google is like. And he said it was Google is a combination of a startup and a grad school. And he thought that that was a good thing because we had sort of the energy of a startup, but the security of a grad school where, you know, you can go on for a couple years and you're not going to go out of business in a quarter. And to my understanding, that's something like what Y Combinator is trying to do, Jessica's company, and she can tell you more about it, but sort of trying to formalize the process of bringing startups into becoming real companies with, without having them crash and burn along the way. But she could tell you more about it. So everybody, let's welcome Jessica Livingston.

Thanks, Peter. Well, thanks for having me today and thanks for showing up. The first time I came to Google, it was about a year and a half ago, and I was so excited about all the free food and drinks and everything that I think I stole about five granola bars in my purse. And I'm glad that no one held that against me. I'm invited back. I wanted to thank, thank you, Ankur Ponsari, for inviting me here to talk about Founders at Work and Kiki Basel for organizing all of this. Before we get started, I just am curious how many people in the audience have read Founders at Work or parts of it. Ok, so about half of you. What I was going to do today is talk a little bit about what I learned from the process and what are some of the themes. And then I was going to talk about how big companies can learn from what is included in Founders at Work. So I started Founders at Work about a little over two years ago. It was at the beginning of 2005. I was working at an investment bank at the time and we focused on technology and we were supposed to understand entrepreneurs. I headed up marketing and so it was kind of my job to communicate with them. And as I talked to startup founders that I met, I kind of realized, gosh, the bankers and the analysts here, here at my company, we don't really know what happens in companies until they get to the point where they're big enough to go public or they already are public, or else they're big enough to get acquired for millions and millions of dollars. No one really understood how these companies got started and what happened in the first few years as they were building their company. So I decided that it would be interesting to sort of gather this information from people who had done it before. Because the truth is no one really knows what happens in the first few years of Start except the founders and the first employees who were there. And there wasn't a whole lot of data out there available. So I thought I'd do it in an interview format. I interviewed 32 people for the book and there's some older people and some younger people and some people who actually aren't founders of startups. But I tried to collect this really interesting fund of experience for everyone to learn from. People who were thinking of starting a startup or had wanted to go work for one, or even people who were just interested in sort of the startup world because it is very mysterious for people who haven't been there themselves. I like to think of it like in science, matter behaves in really weird ways when it's under extreme circumstances and startups are human nature under really crazy extreme conditions and kind of weird things happen. Startups are extreme in their productivity and I think a lot of people in the business world view them as very unbusiness like and unprofessional when they're first getting started. So I was hoping to sort of lift the mystery off of that. Another little bit of background is at the same time I was starting a company called Y Combinator with three of my friends, Paul Graham, Trevor Blackwell and Robert Morris. And Paul and Trevor are right in the audience today. They had founded VWeb in the mid-90s. It was actually the first web based application. It was an online store builder for merchants that they sold to Yahoo in 1998. I'm the only non technical partner at Y Combinator. I should just admit that right now so that you know that. And at Y Combinator we're trying to help people start companies who haven't done it before. We provide very small amounts of funding for people and we have this sort of unique approach in that we fund startups in batches twice a year. Usually it's 12 or 13 companies at once. And we asked the founders to move to either Mountain View in the winter or Cambridge in the summertime. And we work with them for three months, we help them with their ideas, we give them funding, we help them set up and incorporate and work with them on their idea and introduce them to investors, that kind of thing. We've invested in 39 startups so far. And actually, after this weekend, it'll be more like over 50 because we're interviewing groups for the summer session. Okay, so these are my three partners. And this was taken in the mid-90s. They were, believe it or not, were the inspiration for founders at work at the time. You know, they looked like sort of a motley crew there. Three hackers working out of an apartment about an idea that was just so novel that no one really believed that there was much to it. And I think they had one computer at the time. They're all sort of hovered around it. They'd, of course, bring in more computers and monitors to make it look like they were a bigger company when they had investors coming. But that's it, you know, and that really happens today. A lot of startups get started because they're just a couple friends who have a really cool idea and they want to explore what happens. And so actually, Paul Graham, he was my first interview. And in talking to him, I learned, gosh, there's so much about, like, what's misunderstood, what goes wrong, what. What is most surprising when you first get started. And really, what advice would you give to people who wanted to do the same thing? So those were the types of questions I tried to uncover. I had a really great slide in here next, and I had to delete it because it wouldn't get sent through Gmail. It was too big because it was a bunch of pictures of all of the founders that I interviewed. There were 32 of them. And like I said, I asked a lot of them the same questions, but some of them I really did tailor to that particular situation. But what I was trying to get at was what were things like when you first got started? Were you afraid of competitors? What went wrong? You know, all these things that can go wrong. And there were some themes that I found. And everyone asked me, what do all the founders you talk to have in common? And that's a. Interesting questions. So I thought I'd start. I'm going to start off talking a little bit about what some of the themes are, and then I'm going to move into talking about what big companies can learn. But the first thing that I found with most of the interviews, really how unsure most of the founders were when they started a company. I mean, we all think of these people, they're practically celebrities now. We think, sure they knew what they were getting into, sure they knew that their idea would be a big success, but they had no idea. I can confidently tell you they were pretty clueless. When you have an idea. But you think, should I actually start a startup? Well, there's some examples of people who kind of forced into starting a startup, they backed into it. Mitch Kapor was working at VisiCorp which produced basically VisiCalc. He was working on the VisiCalc project at the time and he had all these great ideas for improving it and his boss basically just brushed him off. He even said that they thought of me as a pest. And so in order to sort of make these improvements he had to go start a startup. And luckily he was able to get out of an important non compete. And the reason for that was because they did not think that he was a threat. So that's pretty interesting considering he founded Lotus Development and came out with Lotus123. That basically crushed VisiCalc entirely. Waz I'm sure you all know he was a full time employee at HP when he developed the Apple one and the Apple ii and he went around to each department begging them to produce the Apple II and they all said no, no, it's not a good product. And we all know how that turned out. So he agreed to join up with Steve Jobs to do that. Mina Trott of Six Apart, she and her husband had been laid off from the company they worked with. And so they said, well, what do we do now? And they said, well, as we're looking for Jobs, we might sort of work on some blogging software. We blog and so let's try to build something that's good for us. And they kind of launched it. They were very tentative. They said let's just launch it and see what happens. And it just took off. So a lot of people just don't know what they're getting into when they do it or they're unsure of what their idea is going to be. Joe Krause, who is now here at Google, when he first founded Excite, he started it with a group of friends of his from Stanford. And they said, we know we want to start a company, we just have no idea what the idea is going to be. So they sort of made the decision to start a startup before they knew what their product would be. Also they started out doing sort of text searching and not what ultimately became Excite. Max Levchin of PayPal, I think they went through six different business plans. They started off doing encryption software and ultimately they got funded based on the idea of doing payments through handheld devices. It wasn't till a while later that they came upon the idea of what's now the online payment system of PayPal. So the point is, don't think that founders have all the answers. They really don't. One of the most surprising themes to me was how often these founders got rejected repeatedly by everyone, by investors, by business partners, by friends, family, everyone. Adobe. The two founders of Adobe, Chuck Geschke and John Warnock, they were working at Xerox PARC here and that's when they developed what essentially was the predecessor to postscript. And they went to their bosses and they said, we want to produce this idea. And the bosses said, that's really great, we'll do it. It will take about probably seven years to bring it to market. And they looked at each other and said, seven years, forget it. And so they went off and started their own startup only after getting rejected by their employers. Apple, Steve Wozniak same thing. Because remember, when you're starting a startup, you're basing it on some novel idea and new ideas don't look good to most people when they first get started. Not only because they've never been done before, so people kind of don't have that place in their brain for this idea, but also when you first start with an idea, it's really small and it's only through a process of trial and error that you really get into the right fit and know what the idea is ultimately going to be. So one story I love to think about because it's such a mindset blow is Hotmail Sabir Bhatia. He got rejected by a lot of people, believe it or not, by investors, by acquirers. Yahoo just totally dismissed the idea of web based email as being promising. And so they passed on the acquisition. Then they got acquired by Hotmail and Yahoo had to catch up by buying their biggest competitor. Viaweb, as I mentioned before, was the first company doing web based applications. But back then no one really understood why a web based application might be better than a desktop, than desktop software. And it's kind of weird to think that that time was only 10 years ago. I know Gmail faced some resistance here because of its heavy use of JavaScript. And I think people were worried that it would Gmail would only work in the most recent browsers. So I know Paul Buchite had to fight a little bit to get that project launched. BlackBerry RIM. When they were first marketing the BlackBerry, which I think was in 1999, so not too long ago they had to sort of camouflage it. They marketed it as a two way pager because no one really was ready for the idea that you'd want to check your email from a handheld device on the move. I mean, it's kind of weird. I bet half of this room has a BlackBerry. I certainly have one. So get ready for a lot of rejection if you're a founder. And these interviews are just filled with all sorts of stories of people overcoming that kind of thing. And we'll get to this in a second. But really one of the most important qualities I think for founders to have is just an insane sense of determination to get through that kind of rejection. I know if I got rejected as much as some of these founders, I'd go home crying, I think so. Next theme Plans change. Your idea changes so much from the point where you decide to start it to the point where it ultimately becomes successful. As I said, PayPal was funded on the idea that it would be that you could transmit money on your PalmPilot. And it was. I'm going to read a passage from the chapter later, so I won't get too into it. But it was only when their customers begged them, took them by the shirt collar and begged them to make it accessible on their website that they changed their idea. TiVo had just this sort of grand ambition to do some sort of home networking thing and home network, and it was just they got funded on that idea. But it just as they worked through everything, they realized this is kind of hard and people aren't really quite ready. They're not there yet. So they focused in really on one component of what they were doing, which was the DVR technology. And sometimes the official idea gets in the way of the real idea. Sometimes your company is doing one thing and you realize that, gosh, the really exciting thing is a tiny little component of that. Flickr you probably all know started off as an online game and it wasn't until they launched this photo sharing feature that they realized, gosh, this is what people really seem to like. And it was with kind of great sadness that Katerina Fake said that they sort of shut down the game and really started to blow out Flickr. And I think they're obviously happy now. Blogger got started, which blogger was actually the first acquisition that Google ever made. I just learned that doing the book, but Evan Williams started Pyrolabs to do project management software and he just put together the software for bloggers so they'd have sort of an internal way to share ideas and keep track of things. And then they finally realized, hey, this blogger tool is pretty useful. And so they focused more on that. The point here is that all the founders I interviewed are really open minded about Things. Startups are a process of trial and error. You've got to evolve your idea and luckily as a startup you can. You have the time to evolve your idea. You have sort of the freedom to. Because no one really cares about you. When you're a startup, no one's going to scrutinize you. I'm sure that never happens here. Outside world doesn't scrutinize you for making changes or launching new things. But as a startup you don't face that. So if you're starting a startup and you're just wedded to a certain idea, it's probably going to be bad. So how do you get ideas to help evolve the product? Well, a lot of the founders really, really listen to their users and that was kind of the driving force behind what they were doing. Early adopters are really useful for giving feedback and they have great design ideas and usually are pretty tolerant of bugs and changes that go on. So the last commonality with all of these is that a lot of the ideas really started because the founders were trying to solve their own problem. Something wasn't working and they wanted to improve it. So they, for instance, Hotmail, I'm sure you all know the story behind that. Sabir Bhatia and Jack Smith were colleagues and they were on the side working on a startup idea that they had. And they couldn't communicate with each other via email at work because they couldn't dial into their home email account because of firewalls. So they came up with the idea of a web based email program to solve that problem. Joshua Schachter was working at an investment bank in New York when he started Delicious, just simply to help him manage his own bookmarks. Craig Newmark started Craigslist because he wanted to send out a list of San Francisco events going on to his friends. That's how that started. And Firefox, which actually isn't a startup, but I thought it was an interesting story. Blake Ross was working at Netscape and he was working with other people to design a new browser. And they were just under so many constraints by Netscape that they would meet after work at Denny's and sort of talk about what would be the browser that they would want to use personally if they were sort of free from these constraints. So, you know, if you're thinking, gosh, you know, how do I come up with a new idea? Just think about what's broken in your own world, what could be improved, what could be really cool. And probably everyone in this room is at the forefront of Technology, innovation. So I'm sure it would be really easy for you to come up with things that you could do that would be improved. So if I had to kind of distill, like, what are the two most important things that the startup founders had in common? I would boil them down to two things. They all made something that people wanted and they never gave up through all of the hardships. And it's interesting, if you're an employee, you really care mostly about making something people want, making sure customers and your users are happy. But as a startup founder, you absolutely have to have this, like I said before, an insane amount of determination and perseverance to get you through the unbelievable disasters that you are like, surely going to face when you do a startup. There are just so many levels of disasters that can be found in the book. But a lot of times at big companies, sort of determination and big companies determined. People in big companies sometimes don't mix that well. James Currier, who founded Tickle, that was later acquired by Monster, sort of put it that some people are just starters. They like to be doing new things, they like to be doing disruptive things. And so sometimes people like that are always going to be happier in an environment at a startup where they don't have to answer to anyone. Okay, so we think that these. I'm waiting for the second slide to change. We think that these two qualities are so critical that we actually. Let me make sure this. We actually put them onto T shirts. At Y Combinator, we think, gosh, how can we get these messages to really sink in with the founders? Well, we'll give them some clean laundry. So we put them on T shirts. The first is make something people want, because that's first and foremost the most important thing you need to do. And then we said, gosh, you know, these companies are going through so many difficult times, raising money from investors, getting sued. We really have to have a T shirt that talks about the insane level of determination you have to have. So the one on the right is about that. And for anyone who can't read it, that's what we say. That's sort of our informal advice to anyone who wants to be a startup founder. So anyway, what can big companies learn from startups? I wanted to talk about this a little bit before I read some of the passages from the interviews, because I really think that the early days of startups show you, like, this is productivity in its naked form. And I think that a lot of people might claim that structurally big companies with 12,000 people that I Hear Google now has, as of today, they announced they have over 12,000 employees. Structurally, it's impossible to behave like a startup. But I think Google shows you that there are different degrees that you can in fact achieve a startup like environment. And Google's the best company out there that does it. As far as I know, you have the 20% time they care about the employees, they have all these great benefits and it's a great company to work for. But I think there are a lot of companies out there that could, could really be more productive if they took some pages out of life in an early startup. So I was just going to go through some of those. So startups, when they first get started are typically just a couple people, they're friends. So you're working with people that you like. They are insanely productive. We have some of our fundees tell us that the most productive time of their entire professional life lives was the three months that they spent in the Y Combinator sessions. And that's pretty exciting to think because they are literally just coding, eating and sleeping the whole time. And that's probably not healthy to do for your whole life. But if you want to compact it into a couple years, probably is a good idea for some people. So you're working with people that you like and trust. You're probably working out of your home, so, so you don't have to commute, you don't have interruptions, you don't have meetings or bosses or performance reviews. Basically you are just working on your product. And in a startup you're just always in flow. If you have an idea that you think, hey, maybe this will be an improvement, you don't have to get permission to do that. You don't have to explain why you think something's good. You can just test it out, which is a really big benefit. You don't have to write a presentation about why you should test this out and why it's going to be good and the return on investment. You just do it at a startup. The founders are really closely identified with their product at a startup and so they have an enormous sense, enormous pride of craftsmanship and their honors tied to this company. So they're working really hard and they care a lot about it. Individual performance at a startup is so much more visible at a big company. You can work super hard and you might not really see what kind of effect it's having on the company. You kind of feel have that whole cog in a wheel phenomenon going on really importantly in a small startup. So maybe under 20 employees, you don't have the politics that exist at big companies. You don't have to get permission to do things. You don't have to get people to like you. And so because of that, the programmers, the founders who are like driving this process, they don't have to, they don't have to be politicians. And also hackers are their own product managers, which makes the process much more efficient. And lastly, and most importantly, when you're a startup and no one cares about you, I'll reiterate that no one cares about you. You can take risks because you don't have a reputation to lose. And there's a lot more flexibility to play around with the idea and take risks. So what do startups show us needs to be fixed in big companies? Or at least what can big companies be thinking about to try to improve their own productivity? Well. Well, I think it's pretty obvious. Big companies don't like risks. That's why they have legal departments whose sole job is to make sure that they reduce the risk that the company is taking. And when you're doing something new or you have a new idea, remember, that's risky because it's unproven. No one has ever done them before, so they seem crazy. And big companies really don't like crazy ideas. Most of them don't. And so the convention is to kind of shut down the new ideas before they get a chance to be tested out. You have to fight against a lot of layers of resistance. And that resistance can come in forms of, oh, we don't have the bandwidth, or oh, that's not related to your current project, all sorts of things. It's just hard to get a new idea to take off. In a big organization again, you have all the things. Things like you have to commute to work, you get interrupted a lot. You have to work with all these people who you might not have chosen to work with otherwise. You know, as I was saying before, if the idea isn't related to the official purpose of the company, or it might sort of overlap on someone else's project, it probably will get killed. Even if it's a really good idea, there could be sort of political reasons for, for killing it. Also, at a big company, you do have to spend time to make sure people like you so that you have. I hate this word, but you have champions within the organization to help you if you want to do a new project. So that's time consuming. In a startup, it's the market that judges you. Is your product good or not? It's much simpler. One other thing that Google obviously gets, but I think a lot of big companies, like gm, let's say, or something, but big companies just don't understand how attached hackers can become to their projects. I mean, I see this all the time with the startups we fund. They'll just spend days without sleeping working on this project because they're working on this idea because they think it'll work. And, you know, I just feel like if companies were a little less restrictive of the about things, good things would come out of it. Good things would come out of it. And I guarantee you that it would not be as disastrous as the big companies think it might be. So as I was saying, Google is much better about all these things than other companies, but I feel like anyone can do a little bit better. So at the end of the day, startups really are vehicles for ideas. A lot of people start startups to get rich, but remember they're taking a huge risk by not having medical insurance and not having a paycheck coming in every week. But I think one of the things that really drives them to try to do this is because they have cool ideas that they want to explore and they can't really explore them on their own because it's a lot of work. It's really too much for one person. And because if they try to do it at their companies, chances are it'll either get shot down or somehow will be compromised in some way. So in a startup, kind of all you need to get things going is kind of a gut feeling that, hey, there could be something really cool to this and just test it out. At a big company, if you go to your boss and say, I have this idea, I have this feeling that it's going to be really cool, but I can't really explain why because I haven't tested it out. You're probably not going to get permission to work on that idea. All of the founders that I talked to in my book just were so excited about their idea as a project and just spent all their time on it. And you really, you have to feel that way if you're going to start a company and work on a project because it's just too big to not care that much about. It really will take over your whole life, at least for a little while. Let's see here. Okay, so some trends. Just wanted to touch on why people you're hearing so much about startups these days. It's probably not news that startups are a lot cheaper to start for the reason up there. That's great news for anyone who wants to start a startup. I mean, you could really go from zero to 60 on like $10,000. I mean, that's what Y Combinator is premised on. But because you can start startups for less money, more people are doing it, which is great. They can take smaller investments, which means that you don't have to get permission from a venture capitalist to do your idea. You don't have to get 5 to $10 million in funding just to test out your idea. You can test it out and if it works great, there are better or at least more exit options if you don't take many investments. And I think a lot of people are realizing that it's really a win win situation for acquirers like Google and founders. If they get acquired early on, after maybe working on an idea for a year or two, the founders have gone out and have been able to build a really cool thing and have proven themselves. And then the acquirers, you know, get the engineers and this cool product. So another thing, another trend is that it allows the founders of these startups to be a lot more hackerly. You don't have to have a business person on the team whose job is to convince investors that they should fund you because remember, you get to referred rejected a lot. So you need someone who's really good at convincing investors to give you money. And then lastly, it's just more transparent. There's so much more information out there about starting a startup. My book is just one of them, tons of websites and I'm sure more of your friends are starting startups and it's just, it's a lot easier, I think, to do that. So that's kind of the end of my presentation. Prepared remarks. I just want to mention I'm going to start working on a volume two very soon. So if any of you know Larry and Sergey and convince them to participate in the volume two, just send me an email. Or if you have any other ideas about founders, if you know anyone who would be interesting to talk to, I'd love to hear from you. So Kiki, how much time do I have? Okay, so I'm going to read a couple passages from my book that, you know, people always ask me what are my favorite chapters? And that's so hard to say because every single one was special in some way. And I think you can really learn a lot from all of the stories. But I'm going to read one first. I'm going to read one from PayPal. I had asked him, so what was the first thing that they did after they got funding? And Max Levchin said, so as soon as we got funding, we started hiring aggressively and we built this app for the PalmPilot, which was getting pretty good growth. We were getting 300 users a day. Then we built a demo for the website which was functional. So you could do everything on the website that you could do on a PalmPilot, except the website was unsexified and we didn't really care. It was like, go to the website and download the PalmPilot version. It's really cool. So I said 300 people were downloading it per day for fun. And he said, well, there are a lot of geeks. It slowed down pretty quickly too, but initially we got a lot of publicity about it. Sometime by early 2000, we realized that all of these people were trying to use the website for transactions. And the growth of that was actually more impressive than the growth of the handheld device one, which was inexplicable because the handheld device one was cool and the website was just a demo. Then all these people came from a site called ebay. They were contacting us and saying, can I put your logo in my auction? And we were like, why? So we told them, no, don't do it. So for a while we were fighting crazy ebay people saying, go away, we don't want you. Eventually we realized that these guys were begging to be our users. We had the moment of epiphany and for the next 12 months just iterated like crazy on the website version of the product, which is today's PayPal. Sometime by late 2000, we killed the handheld one because we peaked out at 12,000 users. They were still using it a little bit, and they were really upset when we killed it. They said, you were about the handheld transactions, not about this web stuff. We're like, no, we're pretty much about this web stuff. So then I go on to ask him, when did you first notice fraudulent behavior? Because that was really a big deal, a big disaster in their life. And Max Sundays, from day one. It was pretty funny because we met with all these people in the banking and credit card processing industry and they said, fraud is going to eat you for lunch. We said, what fraud? And they said, you'll see, you'll see. I actually had an advisor or two from the financial industry and they said, get ready for chargebacks. You need to have some processing in place. We said, uh huh. And they said, you don't know what a chargeback is, Do You. So I said, you didn't foresee this? And he said, I had no idea it was going to happen. We tried to attack the system for ourselves like a good security person would. How can you cheat and steal money and do whatever? We made some provisions from day one to prevent fraud. We prevented all the obvious fraud. And then I think six months into it we saw the first chargeback and we're like, ah, one per week, okay. Then it was like an avalanche of losses. 2000 was basically the year of fraud where we were just losing more and more and more money every month. At one point we were losing over $10 million per month in fraud. It was crazy. That was when I decided that that was going to be my next challenge. I started researching it, figuring out what could be done and attacking the problem. So that is an example of some of the disasters that can strike that you can't really foresee in a startup. And then I wanted to read a little bit from Paul Buchheit who I'm sure a lot of you know, who started, started Gmail here. And I chose a little passage that kind of just goes to show you that you can take something that the world sort of thinks, oh, this can't be improved, this is just fine and you can really rethink it a lot and improve it a lot. And you can even do that at a big company, which he did. So I start off asking him, was it always your plan to archive everything and not delete emails and have the massive storage needs? And he said, you can delete email. The idea was that there's valuable information in email and we thought, why would you perform these actions for deleting? We found three or four reasons why you might delete things. One is that you're running out of space, which is the most common reason for deleting things because you only had a two megabyte quota. We said if we give people enough storage then they won't run into this problem. The second reason was that people would delete things just because email quickly became unmanageable if they didn't. So we said, we've got search, we'll try to make that efficient. I can handle. I don't know how many millions of messages are in my email now, but it's not a problem. They don't get in the way, they're just there. And if ever I want to find a message from four years ago where someone made some funny comment about Gmail that is ironic at this point, then I can go back and find It. I guess the third reason that there's something is that there's something in the email that the person is really nervous about and they want to get rid of it. But that's pretty uncommon. So we said, you want to provide the ability to delete things, but ordinarily it really was not necessary because most of the reasons are actually just consequences of limitations elsewhere. And then I asked him about some of the brand new features that the world had never seen. And he said Conversation View is new. When you click on a conversation and you get all the messages as cards instead of separate emails. Was that your idea? I asked and he said this was a consequence of a few things. One is that I'd worked on groups where we had done some of the same threading. Second was the fact that we have so much email internally. We'd have these conversations where someone sends out an email and then four or five different people reply to the same, same thing. And some of them would be five hours later and you'd think, we've covered this five times already and you keep responding. It turned out that part of the reason people were organizing their email so aggressively is because they were trying to put the conversations back together. They'd put them all in the same folder or they would forget and put them in the wrong folder and the conversation would get split and they could never find the reply to this message. There were all these little tools and tricks that people had for reassembling the conversations. Why not just put them all together to start with? At that point we said, let's hide the quoted text too. Because the way, because the way you can just read it, because that way you can read it much faster without having to read the same content over and over. We were also looking forward to integrating chat and im. We didn't have to include chat or we didn't have time to include chat in the original launch, but it was in the early prototypes because we very much wanted to integrate chat and email. They belong together. So the one thing that we did was to think about email from a chat perspective, as though we were adding email to chat instead of the other way around. Of course, chat is very much conversation oriented. Nobody thinks about individual chat messages. So the conversation view also came out of that. For a while we even formatted the email to look more like a chat conversation. And so I said, it really sounds like Q. You took the user's perspective when you designed email. And he said, absolutely, that's very much how it developed. Every time we would get irritated by some Little problem, or one of the users would say, I have this problem. It isn't working for me. We just spend time thinking about it, looking at what the underlying problems are and how we can come up with a solution to make it better for them. So those are two. I had one more, but I don't know if we have time. Should I. We can do. Why don't we do Q and A?

Hello. Hello. Thank you for coming here. I've been following Y Combinator very closely, so it's interesting to hear from you. One thing I've noticed in reading what various people in Y Combinator have to say is that it's, you know, not so much the money they get from Y Combinator, Y Combinator that matters. It's not the quality of the initial ideas that matter, but it's really the connections that Y Combinator gives them. Introducing them to the right people, introducing them to investors, the promotion, getting them tied into the community. And so it seems a lot like, you know, record company producers building up stars. And so what I was wondering is, you know, how much of the success of a startup do you think comes from, you know, the actual technical quality of the idea and how much comes from, you know, the right sort of promotion being introduced to the right people, getting, you know, pushed in the right direction that way?

Well, I think that the technical quality of the idea is always going to win in the end. Right. And now the Internet has a way of sort of allowing really good ideas to bubble up. Even if you. No one's ever heard of you. I will say it is easier to get the word out. I know for some of our founders, their association with us helps because we are mentioned in the press, their friends blog about them. But I honestly, I think it's really the technical idea that will win in the end. We just make it easier for people. We also certainly help with the process of raising more money. It definitely helps to sort of have our name behind you. Investors will at the very least take a meeting with you. So I know that that helps. And also one other thing that we provide is a sense of community. If we invest in batches, there's suddenly 40 other founders who come together at least once a week and sort of that loneliness and sort of sense of isolation that you often feel when you're just two people in an apartment all day long, not doing anything besides coding and sleeping. It helps. It helps to know there are other people in your boat.

Okay, thank you.

Out of the startups in your book, which ones do you think Y Combinator would not fund if they had come to you, if you had existed at the time and they had come to you.

Good question. Probably, if I had to name one, probably Lycosis, because it wasn't a technology company really. And like I said, my three partners are all technical people, and we do care about that a lot. We like to see companies that have some kind of barrier to entry in that way. And so probably not. But, you know, we make mistakes all the time. We would have made a mistake with Lycos, you know, and sort of related.

Which one do you think, admittedly is easier? And retrospect, would you have gone, oh, wow, this is going to be great, we really want to fund this one.

Besides viaweb, probably Hotmail, I think that. I think we would have recognized that, whoa, this is a concept that could be really big. I mean, it was sort of one of those big ideas that were just under people's noses all the time. But hey, we wouldn't have done too badly if we'd funded all of them. Right? It's always easier in hindsight. That is the key.

Thank you.

Hi, I had a question about the Silicon Valley culture, and I noticed most of the startups you talk to, they're Silicon Valley based. My husband's startup, which was started out of Carnegie Mellon, when he talked to investors in Pittsburgh, they just didn't get it. When he came to see Silicon Valley, it was like, yes, skip to the next slide. We got it, we got it, we got it. So could you talk a little bit about that? Sure, sure. I mean, cut me off here because I have a lot of opinions on this. I live both in Cambridge for part of the year and Palo Alto for the other part, so in Silicon Valley. And there is just a huge difference. I mean, Cambridge and Boston is a fine place to start a startup, and there are a lot of people who care, but, oh, my God, you come out here and just everyone gets it. There are so many more investors, which is a key to raise money. I mean, certainly there are venture capitalists in Boston, but a lot of our startups aren't looking for $5 million. They want 100,000, $200,000 just to sort of take them to the next level. And there are just so many more investors out here who themselves became rich through technology. And so they understand technology and they're. They're willing to take a risk. They don't have to have a business plan. All the investors in Boston want to see business plans right away. Everyone's sort of set up to help startups. The law firms out here will have deferred payment plans, whereas in Boston they don't really do that. There are more people doing it. There are more social events that are around like, hey, come and demo your stuff. There's just much better community out here. And also people don't think you're nuts because that's one thing. When you start a start up, a lot of times you think you feel very alone and alienated. And you know, in Boston or New York, probably your friends are all working at an investment bank, getting paid lots of money and think you're crazy to quit your job. But out here they don't think you're crazy. So we really recommend that if you're starting a company, you move out here. We actually had a group from Carnegie Mellon just in the winter session. They moved out here and they're doing really well out here. They love it.

I'm originally from Boston actually. I don't think it's that bad. You had some really interesting, like situational confrontations that a lot of founders had to go through. So I was very curious to find out if they had any similar characteristics. Characteristics? More specifically their egos. So on one hand it's like you have to have the confidence to believe in your product and on the other you face a lot of rejection. So were they egotistical? Did their ego change as they reached more successful avenues of growth? Did you get a sense of that at all?

I think confidence levels change. You know, you think, well, if you're rich and successful, a lot of people can become egotistical. But actually most of the founders I talked to were not. I really enjoyed. They were really nice people. I see this in the startups we fund. They come, they get funded by us, and you can sort of tell they're thinking like, what am I doing? I feel clueless. I'm kind of nervous about all this. And at the end of the three months, they're like new people. They're confident about what they're doing, they can demonstrate exactly what they're doing. And they just have a whole new sense to them. You know, there's one of them sitting in the audience and you can just kind of tell and it's a nice thing to see. So I don't, I wouldn't call them egotistical. I just say they have the confidence to sort of explore new things. The open mindedness aspect, the confidence to approach investors and say, here's why you should give me $5 million. You do have to have A certain level of confidence and I think it's more that than ego.

So they were never overly confident and then decided to be less confident because. Or less egotistical because of certain situations. It was almost the other way around where they were confident but they weren't sure. But then it became more.

Yeah, I don't think you go from being like egotistic deciding you're not going to be, I don't know, unless you face it like true humiliating disaster, which does happen in startups, but most people approach it as like the startup's much bigger than me.

Okay, thanks.

Any other questions? Oh, one more.

So do you talk to anybody whose startup was really a disaster?

Well, in the book I actually before I answer that people often suggest like, well, why don't you talk to people whose startups failed? Because there's so many and it would be interesting to learn why did they fail. And so for volume two, I think I'm going to try to interview like pets.com or whatever. But the one story in the founders at work, Arsdigita who? Eve Anderson isn't at this talk right now, but she just joined Google about a month ago. She was a co founder of RsDigita. But I interviewed Philip Greenspunt and it was just a spectacular disaster. It started off being a really good idea and a new way of, new way to do consulting but they took venture capital money and it just was an awful, awful story that you can read about. But you know, most of the companies were successful. But by the way, there's like a fine line in all of these. There's like a moment where it could have gone either way really. A lot of luck is involved in timing. So I will say that I think all successful founders know that they need to be appreciative of like whatever got them through to be successful. Well, thank you, I think. Is that it? Well, thank you very much for coming.