Ryan Hoover on Product Hunt's Acquisition and Lessons Learned About Launches with Dalton Caldwell

Welcome to the podcast, guys. How's it going?

Doing well. How are you?

Good, good. All right, Ryan, so for those of our listeners who don't know who you are, what do you work on?

So start a company five years ago, almost, actually just over five years ago, called Product Hunt Places. Discover new products. You see a lot of makers and companies launching their new apps or their new products to the world and kind of like Reddit or hacker news, you have people commenting, asking questions, and upvoting what they think is most cool.

And Dalton.

I'm Dalton. I'm a partner at Y Combinator. I'm also the head of admissions. So that's the selection process for who we fund. And I actually worked at YC when Product Hunt was in yc. And so I remember it from the inside, kind of what the story was.

Were you there for the interview?

I was not. I did not interview him. Nope.

Do you remember who it was?

Yeah, it was Sam. Who else was it? It was such a blur. It was 10 minutes of just rapid fire questions and I was like, all right, anyway, I can't remember who else it was.

Yeah, anyway, all right, cool. Yeah. So Dalton, I think he has a question for you to start it off.

Yeah. So maybe to start with, like. Because I remember it so well from being there. Walk me through. From the formation of Product Hunt into applying to YC and to getting into that interview, that is already a blur. You're already not sure who's there.

Was I there? I don't even know.

That's a very common thing, by the way. It's almost like an out of body experience. You'd be. People don't remember them that well. Uh, so it's not just you. This. I hear that. I hear that a lot where they.

There's a lot of anxiety when you go into it, frankly. And. And you know, you try to. Well, someone gave me this advice actually during YC is before you do anything like that, before you do a pitch, pump your chest physically. It might've been Kevin Hale that said this. Yeah. I could be wrong. So sorry, Kevin, if. If I'm putting words in your mouth, but there's a step where you can, like pump your chest physically. And that act of physical nature of like doing something that feels like a little bit aggressive can inspire some confidence. And, you know, it's. Actually, I may have done that a few different times, you know, throughout my career.

I'm not gonna lie, I've never heard that advice before.

But, yeah, that was Jordan Peterson's first rule. In his book, it's stand up straight with your shoulders back. Anyway. All right, okay. So you blacked out during the interview basically. But yeah, what else was that process like?

Yeah, so see, where can I start? So Product Hunt. I'll do the beginning really, really quickly. It started off as a side project and it was right between startups. I was leaving another one and kind of tinkering and interviewing at other startups, started Product Hunt. It started off as an email list, got some traction there, that then turned into a website. And we looked a lot, a lot of inspiration like Reddit and Hacker News and other communities and like, how do you, what systems do we want to take inspiration from? How do we want people to engage? And so we built that, that got some traction. And it's probably four, I want to say four months after the email started and when the website was kind of operating, it was still a side project, it was not incorporated, it was still like a thing I woke up every morning super excited about and found my mind continually 247 focusing on it. But I still didn't know what we wanted to turn it into. And then it was around the four month time period. I just got a DM from Nicholas from Algolia. They were in the previous YC batch.

I interviewed them.

Oh, nice. That was a good pick. They're doing well. He DMed me and said, hey, Ryan, a lot of people in YC are using Product Hunt. They're launching their products there. Gary Tan would love to meet you. Have you thought about joining yc? And it was the perfect time because I was sort of at the crossroads where I'm like, well, what do we do with this? We could keep doing it as a side project. We could make it a company. If you make it a company, how do you build? Do you raise money? Do you not? So a lot of questions. So I initially said, oh, I'd love to meet Gary. We went to the Grove on, I think Mission Street. And my questions for Gary were pretty transparent. I was like, hey, Gary, this is working. Here are the numbers. I love doing this, but I'm not sure I want to take VC funding. And if I go into yc, if we do yc, does that mean we're on that path? And Gary said something along the lines of like, well, when you strike lightning in a bottle, it doesn't happen very often. And I say that not arrogantly, it's not that, like product's the most amazing, best thing in the world. It's not. But very few times in your Life. Do you build something that is like, wow, there's something there that is true. And that advice stuck with me. And Gary was not ever. He never pressured me to say, you should do YC or you should raise VC funding. But that. That advice or that feedback was really insightful because he's right. It's like, am I ever going to have a time in my life where I build something that is starting to show some sort of traction? That's something that people want ultimately.

Do you remember what the growth rate was when you applied to ic?

Yeah, we. If I'm not mistaken, I think we were like 50% month over month. And that's not counting, like, with hundred users in month one. But it was like over the course of a few months with some users. And so it was. And actually going into the interview, I'm fast forwarding a little bit, but we found out some things that worked on the growth side. And a lot of it was very manual. Me basically emailing makers and founders and tweeting at them. And I found out that when I messaged them, they would join the conversation, they would share, and that would drive more traffic to the site. And so there's a nice flywheel effect that still exists today. And when I discovered. When we discovered that, I was like, well, shoot, let me just do that more often. And let me do that as fast and as quickly as I can going into the interview. So that I can say, honestly in the interview, yeah, we have 50% month over month growth in the past, like three months. And. And so anyway, that was. Having those types of metrics gave me a lot more confidence. You know, I didn't have to pump my chest, or maybe I should have, but I didn't have to pump my chest to feel confident going into the interview, even though it was kind of anxiety inducing because it's such a quick process.

Yeah, I've had similar conversations with folks like the one Gary had with you. And sometimes what I do is actually discourage someone from doing venture financing if they have a side project working, especially if they're making money and they never will have. Like, they can support themselves on it and they can basically have the job forever. And you have this, like, cool freedom that so many people dream of. Yeah, I'm sometimes like, hey, like, keep doing that. Like, like you, you're living the dream. The grass is not greener on the other side. And if you do want to decide to raise money, just make sure you're doing it for the right reasons, that you're really excited about it, not that someone told you to or you're seeking approval from. From authority figures. You know what I'm trying to say? Like you wanted to come and so what it sounds like what was good in your case is you were like very on board versus again, sometimes you see people being pushed down this path where they have something working and then they, they regret it in the future.

Yeah.

Because they want to give away a good job. Right. Or a good lifestyle.

Yeah.

I mean, it's this weird thing, right, where you think like startup equals software. Right. So like, because I'm making profitable software, therefore it is a startup, but it can equally be a small business.

Yeah. More likely semantically you can call it a startup too. I just. Maybe it's like the VC line in the sand. It's not for everybody. And especially like I really respect. There's so many great indie software developers building like Mac software and like they make a good living and like, yeah, they got it. I think they have a lot figured out that other people don't. And so those people, I'm like, yeah, I don't know if this is. I think you keep doing what you're doing.

Yeah, that's the thought process that went through my head. And so there was a scenario and I was trying to imagine. Well, let's see, first off, I didn't have much shin savings and I'm not an engineer and so that was one of the things as well. I need people to help me to build this thing and build out this roadmap that I have in my brain. And, and so one way to do that is you get money to pay them. Well, how do you get money? You could do it through VC or you can make money in the project itself. There's other means to get money, but I was certainly evaluating. Well, what if we never raise VC money? What if I could pocket $20,000 in my pocket per month of the business? That'd be amazing.

Isn't that what Wirecutter did? Do you know the Wirecutter folks? Didn't they bootstrap it off the affiliate links and. Yep. Never raised a dollar. Is that right?

Yeah, it's possible. I don't know if Brian and team raised. Maybe they did a friends and family, I'm not certain. But they never raised like a real like VC full round.

Yeah.

And that was 30 million.

Yeah. He did very well.

Yeah.

Yeah, he did very well. There you go.

Yeah. And even look at what Gabe's done with techne, which has been around forever.

Yeah.

You know, it's been. It's basically a force and like a thing that everyone in technology knows about.

I use it every day.

Yeah. And it doesn't. He hasn't raised money. And if he did raise money, the product would change dramatically. They'd have to figure out. They'd have to figure out a lot of things to change it. From what?

Throw conferences? That would be my guess. I've actually talked to him about this, so. Yeah, I don't think that would be.

His first choice, but yeah, I don't think. Gabe doesn't seem like the conference kind of guy.

He does not.

No.

This is. This is a little bit of a tangent, but what did you think of when indie hackers started to come up? Because that was a little bit after Product Hunt and it's very similar and it's within this exact niche.

Yeah. I've been thinking more and more about in my head, I describe it as like maker communities and I would put product in that category. Indie hackers. Lpath is certainly one of those and a bunch of others. And these are sort of communities that are designed and some of them are verticalized around a specific function or whether it's like dribble for designers, stack overflow for engineers, or it's demographic based, like Lpath for women.

And.

And there's like this whole ecosystem of maker communities on the Internet. And I find it really fascinating because it's largely built into the thesis of Product Hunt, which was always, well, I love discovering products. There's like this cultural relevance and interest within products and technology and more and more people are building products. In fact, in the next five years, I'm going to see a ridiculous number of products being built. Partly because it's more accessible, it's easier. You don't actually need any money to build anything. Anyone with the motivation and Internet access can build something. So I'm going off on a tangent a little bit now, but I see indie hackers is certainly filling this sort of niche in this focus around bootstrapped entrepreneurs. And that's their focus within this kind of maker community ecosystem for me. And what Cortland's done is great. I participate in the community. I've been on this podcast. I'm seeing him tonight, actually, which is funny. Yeah, I love what they're doing.

Okay. But not all companies that go through YC ultimately raise money afterward. Right. Like Zapier is a good example.

That is correct. Yeah.

Right. And so. And they predated Product Hunt. Right. So I think kind of what Dalton was alluding to like, so you had this like, point where you could have raised money or could have not raised money. And so demo day, like, why do you decide to follow that path?

Yeah, so the, the story with us going through yc, so we raised around the same time we got into yc and part of the strategy was one, we're building something for the tech community. And strategically it was important or rather beneficial for us to get a lot of notable tech people involved. So we raised money from gv, Greylock, SV Angel. They were the first check in. Bunch of other strategics. And. And having them involved was just helpful to have like this support community. And granted, we probably gave up more equity than we needed to. We raised a million before, like going into YC, before demo day, when we were targeting like 400k. But we got great people around us. And then fast forward through demo day. Mark Andreessen reached out kind of in the middle and he'd been following it and was interested and we met up and that happened. And then three or four weeks later he contacted again and this was pre demo day and it was sort of, how are things going? And I knew what that meant they were interested in. Long story short, they ended up doing a series A preemptively. We were pretty early, especially for Andrew Snortz to do that type of round, but the metrics are great, the vision or rather the opportunity, massive. And I felt that it was better to work with a great firm and raise more capital now than risk in six months. Raising with maybe not as good of a firm with maybe not as strong in numbers. And that money then would allow us to continue for several years building the company and hiring and building out what we want to build.

And so I think my perspective working at YC is your experience was 100% a side effect of the lightning in a bottle effect you had and is not at all representative with 98% of the people in YC. That is just not how it happens. And the reason is people don't have buzz or excitement. And because you're a community, they were participating in the community. And so it was very hard in that era. You know, everyone was using your site. And so you see these things sometimes when there's social products that take off. Yeah, everyone is on them all the time. I mean, I'm not gonna. Yeah, I can think of where there was like big things that were hot and then everyone got excited about them. But like, it's. It's fascinating hearing you say that because, like, seriously, that is no one's experience. Like that is like 1% of the batch has that experience. And the other thing that I would say is like those aren't always correlated with the companies that like do really well in the long term. I'm trying to say in a nice way, but like, yeah, when you see these and it's usually because someone has like a hit on their hands and so all the investors like circle around and do all this extra work to do it. But if you look at like a great example I like to talk about is Coinbase, like he couldn't raise from anyone. I think he got like half a million bucks.

Yeah. Is that 2013 winter, summer, 12 summer. Oh, wow.

There's companies like Coinbase where like they couldn't get people to return their phone calls and like couldn't, I think couldn't put together that much money. And you know, like, as a long term investment, wouldn't you love to be an investor in that? You know, like, like I think the price is pretty good. And so we, so what we see from our side of the table and why see is like excitement around the core product or feeling like other investors are excited about it and things like that definitely give a founder like yourself tons of leverage. But that I actually have learned to not take that too seriously as an investor as a signal for how the company will do. It's more just like, oh, people like scooters or something. There's other examples of these hype cycles happening and to try to remember that it's the long term things that really matter like retention and growth and revenue and those are, those are super predictive at demo day. So. Yeah, so anyway, I just like, I remember that too. When you were. Everyone was like so excited about Product Hunt and everyone to work with you and they put tons of work into it and like, yeah, other founders probably were like, why can't I be that? Like, yeah.

I think part of the challenge is, you know, some of the best investments are somewhat contrarian. So Coinbase being a great example in 2012, you know, crypto and that whole world was just like a totally different era. And you know, the best investments oftentimes.

And he was a single founder at the time, right?

Oh, was he?

Yeah, he's a single founder.

Oh really?

When he was a demo.

Yeah.

Yeah. So it was like Brian Armstrong, like just Brian Bitcoin guy. Yeah. And it was like cool. Like I'm the bitcoin guy and I. It's just me. So like he had a lot of. It was not a slam dunk at Demo day for, for Coinbase.

And it takes some conviction for like the future. The people that did invest saw a future of crypto and what it could become. And so they placed a bet on him. And that's, that's where I think maybe it gets challenging, is if it's already super hot, then there's probably also a lot of other companies competing for that same real estate. And I think maybe product is probably not the best example because we're not, it's not like a Lyft and Uber situation. It's not like we have a zero sum game when it comes to competition with other, other companies. But yeah, I think that's, that's true. And I've seen, you know, there's some, I'm trying to think back on the batch and who's, who's.

Yeah, who. What were you? Summer 14.

Summer 14. Yeah.

Yeah. So I think Ginkgo is extreme. Like, they probably have hundreds of employees. They're, they're, they're a biotech company again. Like, I think they raised fine, but there was not this like hot buzz. Oh, Ginkgo Bioworks, they're from Boston. They're, you know, they're doing synthetic biology. Yeah. Like, like, I don't think Marc Andreessen was cold emailing them.

Yeah, yeah.

And so, like, who else was in summer 14? There were the nuclear companies. Remember the Octo and the fusion and the fission company were in summer 14. So there was like, stuff like that. But it would be easy to forget. And this is also why what's fascinating working here, man, is people think that YC funds consumer companies and this is what our bread and butter is.

Yeah.

And like, yeah, like, I think it's like 5% consumer.

Yeah. It's funny, people think that most of Product Hunt is actually consumer as well. Yeah, it's probably, I don't know, 50% at most is consumer. There's a lot of B2B stuff on there.

Well, I mean, they're just the loudest.

Well, but that's what I'm saying. Everyone remember, oh, Product Hunt. That makes sense. Like Reddit, like Dropbox, Airbnb. But man, if you actually look at the data, which is my job to do, a huge percentage is like good old fashioned B2B enterprise. There's a lot of hard tech these days and people just don't think about them. And it's not because they're not good businesses. They're less fun to talk about than.

And they just don't maybe, like, I don't understand Biotech it's less exciting for me simply for that reason, because I just don't understand it.

And you don't know where the market's going.

Right.

Where, like, when you think about Airbnb, you're like, oh, I could see myself doing that. And then you just start doing it. So I'm curious, Dalton, about application surprises on your end, because I think, like, both of you guys having done investments as well, you can understand that the market gets really frothy and you're like, maybe I don't want to do that deal and I have to be principled, or maybe you do do the deal and that's how it goes. What were the companies that we were like, I don't know about this. And then they went on to be quite successful?

Well, there's a lot of famous cases of people that we fund and then that end up pivoting into something wildly different, and that ends up being pretty good. And so my. My example that I had a front row seat for was Brex. I funded them to do a VR headset thing, and I was their credit card company. Yeah.

Well, I didn't know that.

And they. I was. I interviewed them. I was their group partner. I was their main contact through the whole thing. And, you know, they. They didn't know a lot about VR headsets. I think they like. And, you know, that's fine. It sort of came out during. During the batch and during office hours that, you know, perhaps they might want to consider something they knew more about. And they had prior built something sort of like Stripe for Brazil when they were younger. And so the idea was like, hey, maybe you should work on some fintech stuff that you. That you know more about. And it was like, well, what should the product be? I'm like, well, what can you sell the people in your batch? Like, you should talk to people. What do they want? Oh, like. And so the credit card thing just kind of came out organically, and that was like six weeks before demo day.

Wow.

And so there was. There's no way you could have known that the folks working on the VR headset idea that didn't know much about hardware were going to end up being a pretty good company. Yeah.

So you were just surprised. You like the number of them as engineers.

Like, impressive and right place, right time. And, you know, like, there's lots of people that are super high caliber, but that was one where certainly there was not a lot of hype about their VR headset idea. Yeah. And. And they could have just gone all the way through it. And I don't. I think it would have been a struggle.

Do you remember what that conversation was like? Because I think this is a. It's a super common question we get for the podcast.

Yeah.

People who change their ideas, what were those conversations like with them? What was the progress looking like? Did they even have a product?

They did not. I think they ran into some pretty fundamental issues that they didn't know how to fix and they didn't know how to get around them. They hit a roadblock. And I definitely did encourage them to maybe in a very nice way to maybe, like, why always encourage people, if they're thinking about maybe pivoting, to go more towards something they're deep experts in that they know more about and not less about. Right. And so you knew all about community, like you were in the right place for you and you still are. Right. So you want to find a good, like, cohesion of a founder doing something that plays to their strengths. Sometimes people pivot into stuff that they know nothing about, and I'm pretty sure that is not correlated with success.

It's.

Yeah, it's like if you try to pivot into biotech.

Yeah.

You'd be like, oh, like biotech seems to fund me.

Yeah. Product Hunt is like Product Hunt is me in many ways, for better or worse. And it's just what I love. I love products and it's what me and my friends were doing. And so it felt. It was just fun. And actually I tend to when I talk to founders or people who want to start a company, sometimes people overthink it and they're like, I need to start a business business and I need to think about markets and everything. And I'm just change your frame of mind. Think about it as an experiment or a side project. And when you put your frame of mind of like a side project first, you sort of settle. Most people start to settle in, well, what would I want to build or what could I use? And it's just a lot better way to start, I think, personally.

So do you think there's a way to play it over again where you could have, should have, would have monetized or expanded faster? Because again, this is especially if we're talking about non venture funded things. It's not like a choice if you're bootstrapping about whether or not you charge for your product. Right. And so just like, where would you advise yourself? You know, say you have a time machine. You could advise your younger self. What would you have told yourself around monetization? It would have been like, you know what? Wouldn't change anything. Like, yeah, that's a valid option.

It's. Yeah, it's one of those things because there's a lot of mistakes I made, of course. And so I. When I think about the mistakes, I think, well, I should have done it differently. And then there's another part of me, though, that thinks, well, with the information I had at the time, I probably still would have made the same decision. So the reality is I don't think things would have changed. And it's also hard to know if I did that, would that have actually been worse than what happened?

Totally fair.

So the things that I think we made a mistake on that I take responsibility for are a few different things. One of them is we should have dedicated a little bit of time and focus on revenue. And. And in the beginning, before we were funded, I was paying the Heroku bill out of my own credit card, and it wasn't expensive, like a couple thousand dollars a month maybe at one point. And I was like, well, I don't want to pay this, so let's do job ads. And so we did job ads and made like $4,000 a month. So not much, but there's clearly very easy money with our community. It wouldn't have taken much work to make a little bit of money to increase our Runway. Ultimately, the challenge is always, especially with consumer kind of focused startup, is as soon as you start making money, then VCs will start judging you based on that revenue today. So strategically, there's some challenges there, which is an unfortunate byproduct of, I think, of how a lot of investors think.

Yeah, for what it's worth, I would always tell someone, like, to make that money. Like, I wouldn't judge someone for having small amounts of revenue. Yeah, if this was in someone's application, they're like, yeah, we're making this money from job ads. That would be like, cool. Like, makes very smart. Like, I would in no way caused me to be less psyched about the company if I read that in like an application or something.

Yeah, I mean, I'm trying to think of a scenario where that would be hurting their company. Like maybe if it was affecting growth negatively somehow.

Right.

Like giant banner ads for jobs.

I feel like in a lot of media companies, what people end up starting with is affiliates. And so certainly that's how Wirecutter works is like, if you click on the thing and you buy it on Amazon, they get 3%, and it is very hard to build a huge, huge Huge company doing that. But it certainly helps when people are doing communities or things around discovery. That's a pretty tried and true way to pay the bills.

Yeah, yeah, yeah. I think there's a difference between a job board, but then if investors perceive it as, well, that's the business model and that's the mechanics of how you're going to make money. And if it's not impressive, then they'll be potentially less excited. It's this weird game that you have to play. So one thing would be make money, extend Runway and start proving out some ideas early. Cause taking. Making money takes a while. We focused on that last year and now we're profitable. And so that was like our number one goal is just let's cover our cost. And that just took a while. Took a lot of experimentation to get.

There and to push on this again. I'm just picturing back in the batch. You kind of could have gone deeper on products, like really deep on just tech products and done like, I don't know, partnership. There's ways you could go deep on that. I remember there was ideas to expand to discovering other kinds of things. And like you can discover game. I don't. I don't remember the current status of.

That feature, but games is one of.

Those talking about diversification, about the kind of stuff you discover. That's one way to do it. The other thing you've done is use the traffic you have and bootstrap things like a job board. Or there's a scenario where you literally could have become Angellist. Right? You could have gone really deep on that and so it's your company. But I could pitch like five different scenarios where you could have sort of zeroed in on what you were most excited about as a founder. And by going deep on those, it would become more evident if those are all wildly different.