by Y Combinator7/3/2019
Kevin Hale is a Partner at YC. Before working at YC he cofounded Wufoo.
Kevin’s on the podcast today to do some Office Hours and talk about this year’s edition of Startup School.
If you’d like to sign up or learn more, check out StartupSchool.org.
00:25 – Stats from Startup School 2018
1:45 – Updates for Startup School 2019
8:15 – Sign up at StartupSchool.org
8:50 – Sean Maina asks – In the early days of Wufoo, how did you give a great customer experience?
11:30 – Design affordances
13:45 – Sunil Tej asks – How was Wufoo 10x better than the market when they just got started?
17:45 – Building an audience before a product
20:15 – Wufoo’s growth
23:30 – Coming up with the idea for Wufoo
27:30 – Companies pivoting during YC
29:00 – Building a product in an unsexy space
32:30 – Sivaraj Ghanesh asks – How do you know if you’ve achieved product market fit? Or if your product just isn’t noticed yet?
43:30 – Sivaraj Ghanesh asks – How do you gauge the size of a market?
46:00 – Tips for Startup School success
50:15 – Advice on vetting cofounders
53:45 – Sign up at StartupSchool.org
Craig Cannon [00:00] – Hey, how’s it going? This is Craig Cannon and you’re listening to Y Combinator’s podcast. Today’s episode is with Kevin Hale. Kevin is a partner of YC. Before working at YC he co-founded Wufoo. Kevin’s on the podcast today to do some office hours and talk about this year’s edition of Startup School. If you’d like to learn more or sign up, check out startupschool.org. I’ll also link it up in the description. All right, here we go. Kevin Hale, welcome to the podcast.
Kevin Hale [00:28] – Hi, Craig.
Craig Cannon [00:29] – You are running Startup School this year.
Kevin Hale [00:32] – Me and Adora are hosting and the main instructors for Startup School.
Craig Cannon [00:37] – Many people know about Startup School. We’ve talked about it on the podcast before. What’s different in 2019?
Kevin Hale [00:45] – 2019 is a reaction to all the stuff that we learned from 2018. I’m going to talk about some stats. Last year we had over 15,000 people register and participate in Startup School. We had about 5,000 graduate. From that graduating class we had about 391 of them end up getting interviewed for the last batch and then we accepted over 60 companies. It represented 30% of the batch. The Startup School now represents the single largest source of companies that are accepted into a YC batch. Which is super exciting. Because the founders in Startup School are so different then what I think a lot of people think a YC company is. More numbers to throw at you. 83% of people who started doing Startup School they were prelaunch. No traction whatsoever. 52% were working full-time, so the other 48% was only part-time. 63% were single founders which was very surprising to us. There was not so many teams. Then 59% were international. For us, I wanted to make a new version of Startup School that was going to be a better fit for all those different groups of people because I felt like the last one probably wasn’t a perfect fit. We shifted the content so it’s more focused on helping you understand ideas, evaluating them the way an investor would sort of think about them. That way if you are spending time on a startup part-time or you’re by yourself or you’re trying to figure out like how what to build an MVP for, you have the tools necessary and you have the things that we help our companies do to evaluate. For example, a pivot or evaluate
Kevin Hale [02:42] – which of the ideas is worth spending time on. The other thing we did was for all these single founders we realized is like, “Holy crap, that’s like over 6,000 people who were all like trying to do a startup.” We constantly tell people like finding a co-founder is the best thing you could do for a startup and so we’re like, “Why don’t we just help them do that?” Those are super important for us because like we’re finding increasingly teams are being created and other people are asking for equity to help them find co-founders.
Craig Cannon [03:12] – Other people meaning other investors. Other programs.
Kevin Hale [03:15] – Other investors, incubators, programs, et cetera. For us we actually feel like the only people you should be giving equity to for a co-founder is to other co-founders. We’re going to make that free. We’re building a directory, we’ll allow you to state that you’re looking for a co-founder. Then the group sessions, that you would do during Startup School, you’ll be matched up with other single founders that are meeting. You’ll get to meet, talk and, again, we don’t expect that you’re going to solidify a team during Startup School, but you’ll at least, start introductions and start building that relationship which is needed to figure out if your going to be a good fit or not. We’re really, really excited about that, because we think that’s one of the best things we can do to help all these single founders. The last one is for all these international people, last year we did the tapings weekly at our office and we invited people to come and attend the live tapings. People are flying from all over the world. Those are extremely popular, but we felt really guilty because it’s like that’s a waste of money and time we think for people to come for a one hour session with partners. We are humbled that people think that that’s worth it and valuable. Part of what we’re going to do is we looked at the data for what are the top 18 cities that people attended or participated in Startup School and we’re going to go out there. We’re going to record some lectures
Kevin Hale [04:29] – and we’re going to host Startup School meetups. Partners are going to be in attendance. You can ask and meet with them one-on-one and it’s going to be at 18 different cities. It’s going to be I think super exciting that these people will one, kind of get to interact with us and we get to interact with them, which I think is always energizing for us. The second thing is like Startup School creates structure and community. When you’re meeting other people who’re going through the same thing from the very first Startup School when it was just like a mini-conference, everyone was always excited about the energy of being in a room with other people who were having a shared experience or shared ambition. I want to give that opportunity to as many people as possible not just the ones who could make it to San Francisco.
Craig Cannon [05:13] – Well in addition to that, the online community allows you to meet people near you as well. When you’re finding a co-founder for instance.
Kevin Hale [05:19] – Yes, definitely. Actually we have a fairly sophisticated matching program for the group session. You’re matched with people based on your time zone, your level of progress, your sort of preferences that you put into the software, et cetera. Kyle Corbitt, he’s the person from the software team working on Startup School software. Did an awesome job basically looking through the data, doing regression tests and just proving that we’re going to have a really good like group session. That other thing that we’re doing is, we initially had it for last year, it was like you got into a group with like 20 other startups and you followed them all the way through. Unfortunately, a lot of people just drop off over time and so those aren’t people you count on. What we’ve changed instead is that you’re always going to matched up with people who are actively participating in Startup School. That’s just determined–
Craig Cannon [06:08] – Your group’s going to change a little bit.
Kevin Hale [06:10] – You’re group is going to change every week actually. You’ll meet more people. Get more people to build into your network. Get more advice. But also, like you’re always going to being matched up with people who are serious about this. Which I think is also going to improve the quality of the program.
Craig Cannon [06:25] – I hope so and just to clarify for people listening and watching we always put all this content on YouTube. It’s not paywalled, it’s not behind anything.
Kevin Hale [06:34] – Absolutely. The thing is, I actually think the lectures are the least important part of Startup School. It’s the one thing that… It brings a lot of attention it helps build up the brand, but those lectures are a way for people to understand and get help, if they can’t commit to a 10 week program. If you have the ambition and passion and the desire the 10 week structure in terms of how we set up group discussions, the assignments, the way we hold you accountable by putting like a weekly updates into our software, all that is actually the most powerful thing that can help your startup. Again, we’re happy to give away all the lectures for free. It’s something that we’ve always done for YC. This other part is the part that we’re trying to figure out how to scale.
Craig Cannon [07:21] – The lectures are going to be a little bit shorter this year. Now they’re about 20 minutes.
Kevin Hale [07:25] – We’re kind of taking a cue from what’s popular from this YouTube Generation. People just drop off on hour long sort of lectures. Some people who are serious they kind of love it. What we want to make sure is that like you’re going to spend 20 minutes and it’s going to be the highest quality 20 minutes that you’re going to get. We’re also, I’ve given instructions to all the people doing lectures that we’re focused more on practical, tactical information and then try to back up stuff with as much case studies as possible. Therefore, there’s always I’m watching a lecture and then, you’re not going to feel like I don’t know how to apply this to my company.
Craig Cannon [08:02] – Totally.
Kevin Hale [08:04] – That’ll be a really nice difference because some lectures I felt like for companies who were really early they’re just like, “I’m so far away from even thinking about this stuff.” And so, to me that’s like, “Okay, great.” We have room to make a lot of great content to help people with first principles.
Craig Cannon [08:19] – It’s inspiring but not always relevant.
Kevin Hale [08:22] – Yes, like are those are the ones you go back to once you have things going well. I think we now have that inspirational content and there’s probably enough of it being created by lots of other people.
Craig Cannon [08:32] – Everyone else. Just to be clear, signups are open right now. When are they open until?
Kevin Hale [08:38] – They’re open until July 22nd. Pretty much right up until it starts on that day’s when I release a video like on orientation and then the first lecture is recorded on the 25th and then we release that live to the public the next day on Thursday, so then on the 26th.
Craig Cannon [08:55] – Yeah, right, cool. Let’s get to some relevant and important advice. We have a bunch of office hours questions for you.
Kevin Hale [09:02] – Great.
Craig Cannon [09:03] – Many of them I think, for whatever reason, maybe it’s the mood, the Startup School announcement, are about the early days. So we–
Kevin Hale [09:10] – Of my startup?
Craig Cannon [09:11] – Both of your startup and just startups in general.
Kevin Hale [09:13] – Sounds great.
Craig Cannon [09:13] – Let’s start with this very simple question. “In the early days of Wufoo how did you give a great customer experience?” The basic beginning days.
Kevin Hale [09:25] – It actually relatively easy to provide a good customer experience. The default is people expect to not get a response. That it’s going to be a really slow response and the response that I’m going to get is not relevant. Yhose are the three ways that you can really sort of fix is make sure you respond to every single person that has a question or problem/issue. Second, we responded on average seven to 12 minutes. Yhe third one is the person that’s responding to your question is most likely probably was going to be someone that worked on the software, was an engineer. In the early days of Wufoo it was like the founders we were answering all customer support for the first two years. We just got really disciplined and diligent and we said this was going to be a number one priority for us that if people are taking a chance on us that they deserve the respect of getting a good response and we want to get that feedback. That made a huge difference. One is that the people building the product got all this awesome feedback on how to improve it. You also have the right sort of feedback loop where it’s just like, “Oh, I’m tired of getting this question for like the umpteenth time.”
Craig Cannon [10:37] – Yeah, exactly.
Kevin Hale [10:38] – I have to do something about it. The result also is that we started doing a lot of stuff to help people help themselves. I would say Wufoo in the early days had some of the best documentation, screencast tutorials, help tips and then we also got very diligent about like and passionate about building really simple intuitive interfaces. That meant, actually it was really hard to add features to Wufoo. It was really hard to like add a button or a piece of copy, et cetera. Because we just knew that like, “Oh, that results in extra customer support or complexity.” How can we do this with smart defaults or ways that we do this so that like we do it with as few different controls and manipulations as possible. The result is a software that just kind of like mostly just works right out of the gate for you. Kind of is doing what you want by default if possible and that anything that we felt like was not worth that tradeoff we would say like, “Hey, you have to go somewhere else for that kind of complexity.” Because eventually people would graduate and we would know where we are in terms of the life cycles, like people’s form needs. At some point you need to get a developer and build your own app if you need something really complicated.
Craig Cannon [11:47] – I like that part about your talk recently when you were describing how Photoshop was putting the stroke in red and that was prompting users to learn the settings. You did something similar in Wufoo.
Kevin Hale [11:59] – Yeah, so in that case I do this talk to the batch about affordances and so I talk about like basically there’s an affordance of something really ugly, especially in a design app or a photography app like Adobe Photoshop. When you put a border on something the default was like this three-pixel, dark red line and the affordance of that is like designers want to change it. They’ll do whatever it takes to change that default. What it does is it naturally gets them to learn how to use the settings and find the properties, et cetera. They don’t even know they’re doing it. They’re being kind of annoyed about this one thing, but they’re actually learning all the skills and all the things that will help them change all the other settings in Photoshop. Which I think is really brilliant, intuitive thing. For us, in Wufoo, we tried to do that in a lot of other places. And a lot of that had to do with like helping discover certain functions or features that would be hidden behind tabs that were unnatural to sort of find or to think about and what we would do is we would call things, we would call like the default form, untitled form. No one would want to like have their form called that so the default like naturally wanted to click on that and as a result, it revealed all these extra settings that were kind of like candies.
Craig Cannon [13:10] – Exactly.
Kevin Hale [13:10] – As a result, they don’t even realize that they’re learning something. To me I always like that interface that like teaches people without them realizing they’re being taught. I don’t think there’s many people who like signup for a new piece of software and they get tossed into a walk-through tutorial and they’re like, ooh, I’m so excited.
Craig Cannon [13:25] – I’m all about the wizard, I don’t know what you’re talking about.
Kevin Hale [13:28] – People who are the best at this are video games. They do a phenomenal job and the people who are worse at this is B2B enterprise software. They don’t realize how important it is to get that storytelling and that natural feeling right. They just think, “Oh, I just see someone else has this forced walk-through we should just do this as well.” Not realizing, it’s the mindset of your user is panicked trying to evaluate is this something that’s going to solve my immediate problem and so is not going to put up with any weird forced bullshit. To walk through your maze.
Craig Cannon [14:03] – Or that’s part of your business model offering expensive trainings. In the very early days of Wufoo, there’s a question from Sidney Otege. They ask, “How is Wufoo 10X better than the market than when you just got started?” One of those… Response time on customer support. What were the other ways?
Kevin Hale [14:21] – I wouldn’t to call that a 10X improvement. It’s probably like, “Oh, that’s a good improvement,” but I don’t know if anyone is like, “Ah, I want to switch.” Great customer support is actually a good one for improving retention. It’s something I also tell people about in terms of that’s a great user experience. Most user experience features like a lot of people like to be forward on them, especially designers, it’s like it’s really beautiful, it’s really easy to use, intuitive. Yhe problem is those words are the words that no other competitor or no other company will ever say the opposite of. Therefore, when you use it it means nothing. They only help with retention. As far as conversion is concerned, when we built Wufoo it was in like 2006 and that is the era where like Gmail had just kind of came out. It was a world where AJAX was brand new and the idea of building a modern web app that felt kind of like a desktop came into being. All the other form builders at the time were literally it was like a page refresh for every change you wanted to make. It made that process of creating a form really, really difficult. One thing is we changed the level of response so that you could build a form really quickly. The other thing we did on top of that was build an interface that was simple drag and drop. It was WYSIWYG-like. Other people it’s like a form board builder’s a really interesting user interface challenge because it’s an interface that builds interfaces. There’s all this weird kind of complexity
Kevin Hale [15:50] – so you have to kind of show what is the difference between like my interface, the tool that’s helping me build and the interface I’m trying to actually create. A lot of the aesthetic weirdness of Wufoo had to do with like all this crazy colorful stuff, this is Wufooland. In the sense that you’re building that’s probably this drab gray and white form like that. It was really easy to distinguish between the two. Being able to drag and drop and be like, hey, what you know you want as a nontechnical person is I like I need to collect the name, email address a bunch of questions, et cetera. But you know what you’re looking for. You’ve seen other people do it and you want to copy what you’ve seen. A lot of other apps at the time had this different kinds of approaches. One of them was just like, “Hey, we’re a database application builder.” They would start with being well it’s a structured data that you need, tell me how to, all this and stuff. What would end up happening is like you had to know too much about development to build the forms instead of being like, “Hey, I just need to copy what I want and can you just magically make it work?” And so that magic was the big thing that was changed. And when we started Wufoo we were able to prove that it was going to feel that fast by releasing actually an interface demo. The very first thing that we launched, I think weekend of the YC for Winter 2006, we wrote the first lines of code in January of that year. We launched an interface demo in early February.
Craig Cannon [17:12] – Meaning a video, screen recording.
Kevin Hale [17:14] – No, no, no it was an interactive. All you could do was like drag and drop the fields that you want and then pretend like you’re going to hit Save. It looked like you were changing all the settings for it and then you hit Save and when it came up, it prompted, was just like, “Hey, you just completed the interface demo through Wufoo.” If you’re interested in using this builder for other forms in the future, sign up. We got over 100,000 people who went through that demo and gave us emails in that interface prototype. Basically, it showed people kind of like drop boxes like video demo, it was like, oh this is what it should feel like.
Craig Cannon [17:44] – I get it.
Kevin Hale [17:45] – This is what it should look like. Making so it was like no signups to feel what the change was going to be. Like for us that like helped to people to be like, “Oh, I can imagine myself using this,” or, “I can imagine myself giving this to someone else and that they could use it.” And not, have me build this really tedious thing, which is a form.
Craig Cannon [18:04] – Where were you distributing that at the time?
Kevin Hale [18:06] – We had started a blog. When we first got started in entrepreneurship we realized we knew nothing.
Craig Cannon [18:12] – Yeah, sure.
Kevin Hale [18:13] – We had a tentative talk at South by Southwest by Jason Fried it’s called, “Doing Big Things with Small Teams”. They mentioned at 37signals that they were blogging for years before they finally released Basecamp, their first product. They had an audience of huge, you know, hundreds of thousands of people who followed them before they launched and so when they got started they were not starting from zero. Their piece of advice they had was like build an audience first. And we’re like we don’t have an audience and we don’t have a product. Let’s you know start doing that. That night we registered a domain called particletree.com and then we just starting writing about stuff that we didn’t know anything about. Literally we would research stuff about entrepreneurship, about design and about business. The three things we were like this is what we’re going to need to know to start a startup, like a technical startup. And so we would research the stuff and we’d write these beautiful essays. It was something like part of my expertise. I knew, like I had studied modern American literature. I was editor and chief for my newspaper. I was like I know publishing. I know how we can write this stuff so that it’s clear for people. That’s how it got started and we built that readership to 100,000 subscribers. This was like the heyday of like Delicious and Slashdot and so like good content got spread around pretty easily. And it’s actually, Paul Graham had recognized us from our blog. And that’s why I think we got in. That was like our proof that we got stuff done.
Craig Cannon [19:34] – Right, you can at least make something someone wants, maybe it’s an essay.
Kevin Hale [19:37] – We’d been writing on the blog for multiple years, about two years, and so when we launched this prototype we launched it on the blog. I was like, hey, you know we’ve taken all these skills and we’re starting to build a company. We’re building this product, come check it out. We had all these readers who were developers and other entrepreneur who were actually our ideal customers coming in to try a thing. And number one, they were not starting, it was not like they were coming in and be like, “Oh I’m evaluating and I don’t know if I trust this company,” or whatever. They’re like, “These guys have been writing and have been generous for multiple years. I already trust them. I’m excited about using this thing that they’ve been so generous about.” That changed the relationship. It also allowed us to like out of the gate to be able to start ahead of the curve. That other people like wait until they finally build a product.
Craig Cannon [20:25] – Or at that time, launch in TechCrunch or something. You created that early pop. Did you guys have any interesting referral mechanisms or were you just word of mouth?
Kevin Hale [20:36] – When we finally launched, Wufoo by it’s very nature could spread itself. What we had is, we had a freemium product and on the free plan on the confirmation page it would say it was powered by Wufoo. We just had like naturally as people created forms and shared it with other people on our behalf, they would see, “Oh, great.” The second thing is we built this innovation is allow forms to be edited and embedded on other people’s websites. So that was like a new thing. Like people would embed weird chat Widgets and other images and galleries and stuff. But embedding a form was unique. And so we had designed it that Wufoo forms could be embedded. So you could, you know you don’t redirect them. You put them on your own website. What it meant was like a Wufoo form that says powered by Wufoo was put on all these different websites, as well and would link also back to us.
Craig Cannon [21:24] – Upon completion, it does a Ajax reload in the page and then you see the logo.
Kevin Hale [21:29] – Well you would see on the confirmation page but also on the free plan if you embed it you would see that this form was created with Wufoo. Both of those things would mean that our users were spreading the gospel on our behalf. That sort of helped. Secondly, confirmation emails also had it, et cetera. Uhere’s all these like nice mechanisms that allowed that to sort of work. We had the reputation from the blog. And then, we had really great word of mouth, as a result. Like the product just worked really well. People like were satisfied with customer support to help them deal with whatever sort of weird features. I think it was the design of it because it was so strange. It’s a very casual app. For something that’s meant for a lot of business and workflow logics.
Craig Cannon [22:18] – That’s true.
Kevin Hale [22:19] – It’s like red and yellow. It’s like McDonald’s colors. The mascot’s a weird T-Rex. It has all this weird kind of things that if you look at MailChimp software that you will recognize that is cute and witty, et cetera. It has the personality of an app that you’re like, “Oh, I would like to be friends with whoever made this.” But what it did was it made people smile when they use it and it was easy to remember to recommend it to other people. It was like, “Hey, here’s an app that actually doesn’t make me want to kill myself or remind me that I’m working in a cubicle.”
Craig Cannon [22:45] – Right.
Kevin Hale [22:47] – Unlike, all the other apps.
Craig Cannon [22:48] – Especially at the time.
Kevin Hale [22:48] – Which was all gray and blue. Very boring and kind of dull.
Craig Cannon [22:53] – Those little things that show that there’s actually a human behind the screen go so far, especially, in the early days.
Kevin Hale [22:59] – Definitely, I think definitely for sticking out because if someone’s evaluating a bunch of different tools then it’s like, “Oh, what are you going to do to stick out?” And so if everyone’s comparing you against a checklist of stuff, man there’s going to be like, it’s going to be hard to be like if they’re only maximizing this stuff. So in the early days, Wufoo didn’t have a checklist of all the things it could have. So we had to rely on one, this extreme ease of use and then also this friendliness. Like it’s like, “Oh, I’m here,” and then while there’s a lack of jargon and the help kind of talks me in a way that’s very human rather than a way that like it’s a robot talking to a developer, et cetera. So that humanizing element made it be like, “Oh, I can trust this app to be given to my nontechnical people. And that Wufoo’s support is so good that they’re not going to bother me.” Wufoo got easily recommended by technical people all the time.
Craig Cannon [23:54] – To back up, and given, I know with like some of the Startup School content coming out. Let’s talk about even just coming up with the idea for Wufoo. I know that’s a big thing for people getting into Startup School. Some people are like, I sort of have an idea. Where did the idea come from and then how did it evolve during YC?
Kevin Hale [24:12] – Before I get started I just want to make it clear, if you don’t have an idea or you have a bunch of ideas but you don’t know what to pick, Startup School is going to be great for you. We’ve actually got lectures dedicated to that topic and so I think, that’s going to be helpful. If you’re working on an idea and you’re like, “I don’t know if it’s really working, should I pivot?” We’ve got a lecture for you, as well. For us we actually pitched, like back in the day, you could pitch multiple ideas. It wasn’t like a separate question for what other ideas you had. You could put multiple–
Craig Cannon [24:46] – Within the same application.
Kevin Hale [24:47] – Yeah, something like that. Or you could submit multiple and so when we got accepted for an interview, we had two ideas we had submitted. Ee had actually asked ahead of time, we’re like, oh, we had submitted two ideas. Which one should we prepare? And they had responded very quickly. And they were like just prepare for both of them. Ee’re like, okay cool.
Craig Cannon [25:03] – Thanks.
Kevin Hale [25:04] – Ee do all this work and we come into the room and then the first idea, they immediately go no, no, no we’re not interested in that at all. Like they knew immediately when we just described it like, no we don’t want to.
Craig Cannon [25:16] – What was it?
Kevin Hale [25:17] – It was an affiliate link marketplace, basically. Not very interesting, but there are big businesses doing that but I’m glad we didn’t go down that road. I don’t think that would’ve been satisfying. Yhen this other one, was not actually Wufoo the way we described it. We called it a new type of content manager with something we called Reversible Forms. The idea was like, “Oh, you know the form that you fill-in in the backend of WordPress that’s a form. And then the comments form is also a form. So what if you made it so that forms could be like private or public.” We called it reversible. We made all this new jargon. That’s how we tried to describe it. It’s a horrible way to describe a product. And P.G. kind of looked at us immediately and was just like, I don’t know what you’re talking about. And then it was like I think you’re building a form builder. And we, of course, had already like researched a little bit of the market and we’re like no-no-no-no-no, we don’t want to build a form builder. We seen other products in this space. They’re boring. They look terrible. That’s not the space you want to be. Content managers at that time were the hot, it was like Movable Type in WordPress they were like blowing up. We thought they’re doing interesting stuff. And the product space we wanted to be there and then what we didn’t recognize until a little bit after that interview, it was like, “Oh, that’s the whole point.” Yhat’s the opportunity. All these people are bad in this space. And obviously, they’re being supported.
Kevin Hale [26:42] – You know there’s enough people doing it but like no one has really conquered it. And so for us like that pivot happened in the middle of the interview. We had not written a single line. We didn’t even explain the idea very well, et cetera. It’s actually one of the like big passions about why I’m doing Startup School, is like I worry that people think that companies like mine back in the day, cannot get into YC. Even though we constantly try to say is like we do take single founders. We do take people without an idea. We mostly focus on the team. A lot of people just like hear what happens at demo day and they hear these teams with crazy traction and they think like if I don’t have that, how can I possibly get it? And the answer is like you don’t need that. And with Startup School, hopefully, it will make people feel more comfortable. That it’s like, “Oh, there’s a program that explicitly says you can come here to get help with that,” and then actually we’re able to use that information, that relationship with those founders during Startup School to actually say, “Hey, yeah we want to take you in.” Actually most of the Startup School graduates that we took many of them were pre-traction. Many of them had very, very little traction that we took. Some of them were pivoted after they got accepted into the batch, actually.
Craig Cannon [27:48] – Well, that’s what I want to talk about. So like, not to name names, but we’re in the middle of a batch or you know the first start of the batch right now.
Kevin Hale [27:54] – Wufoo or summer batch?
Craig Cannon [27:55] – For the summer batch. People are restarting. They’re completely pivoting trying again. All the polish that people project onto YC companies that get in that are in the batch, it’s not always true.
Kevin Hale [28:07] – Sometimes the pivot happens a week before demo day. They will still be able to raise, et cetera because number one, most investors invest in teams. And number two, if you do the storytelling and if the idea is sound enough and makes sense, those two combined, a great team and an idea that is well thought out and told really well to people, that’s enough to get people excited. Because like what I, as an investor, is trying to figure out is like, “Can I imagine a world where this team with this idea is going to succeed?” That’s actually the baseline for like seed investment. It is not that like I have to have a crazy amount of proof that this is going to be 10 billon dollars or I’m not interested in it at all. That is not YC’s model. Like we would like that, we would like teams to be. But we are humble and vulnerable enough and part of the shotgun model is based on the fact that is like we actually can’t accurately predict who’s going to be a 10 billion dollar company. We invest in 200 companies in a batch.
Craig Cannon [29:16] – Several hundred a year. Yeah, so you talk about Wufoo as unsexy idea. Do you have a mental model for finding unsexy markets or products that people can use?
Kevin Hale [29:25] – A mental model. I don’t think about it like that. But like here’s the thing, if you are a really great product technical team and you’re entering an unsexy space. That’s good, because you’re entering a space with like less competitors. But those who are like great product teams but entering in like consumer spaces, it’s like, “My god, that is a crazy Mad Max arena.” Where a lot of good people are vying for that stuff and it gets really, really difficult. And so, to me, entering a tedious, boring space is about mindset, about, what’s your mission? And the best advice I’d got, I’d heard about this it actually comes from Ben Chestnut he’s the founder of MailChimp. And he says it’s like, “I don’t like people who are obsessed with like only doing what they love.” That’s like a recipe for being unhappy. Like if I don’t love it, I’m not going to do it. Because like number one that’s not practical oftentimes in life and also, you kind of sound like a brat. Right, it’s like oh, so you won’t do anything. You won’t do the hard stuff. You won’t do anything that’s difficult, et cetera. He actually says the skill you most want is like figuring out how to love whatever it is that you do. and so that is like it doesn’t matter if I’m building a form builder, I’m making a weird widget or I’m writing pieces like for an email company or marketing or doing whatever. I have figured out a way to like make it my own and I will do the best version of it. A lot Wufoo’s personality has come out of it, like, “Oh, I have to make this like confirmation billing receipt.”
Kevin Hale [31:05] – All right, I can do this the really, boring, tedious way where I will hate it all the way through or I could figure out it’s like, “Oh, where can I put some sparkle and magic in here?” So therefore, it’s like I’m proud of it. And Wufoo you would think it would be like, oh, no one wants to make form building their life’s work. But to me, I was like, “Oh, this a body of work that I am so proud of.” Because like everything in it was something where like, “Oh, I put some attention to detail,” and at a fundamental level it just worked right. Tedious forms are usually huge markets. If you want to make money and you can bring yourself to do that, that’s like a great motivation.
Craig Cannon [31:44] – Yeah, and I think obviously, you’ve read “Man’s Search for Meaning,” right?
Kevin Hale [31:47] – Actually I haven’t.
Craig Cannon [31:48] – Oh, yeah, it’s great. I mean it’s terribly sad, but it’s great. This idea is core to it. But also the fact that you know like people love getting good at games, full stop. And making the best form builder, that’s huge. I think it’s helpful for people to just imagine what it is like to win whatever game they want to play and just play it out in their head. And then you can just keep pushing.
Kevin Hale [32:12] – It’s actually a big part of the philosophy and religion in like that deals with mindfulness. Sweeping the temple it is like you can do it in a way that is like not mindful and not present or you can do it in a way where it’s like, “Oh, I’m paying attention, I’m learning stuff about myself and the world and actually being there.” And so, yeah, I don’t know. Like I think the founders who figure out how to be happy working on what sounds like not sexy, those people usually have the right mindset in their head about work, about how they think about stuff. And so, like I get excited about these teams.
Craig Cannon [32:55] – Totally. Just having a customer driven mindset makes a huge difference. All right, so shifting a little bit to a slightly later stage Siverage Ganesh asks, “How do you know if you’ve achieved product market fit?” For Wufoo, what was the point?
Kevin Hale [33:14] – I don’t think it did.
Craig Cannon [33:14] – Did it ever get there?
Kevin Hale [33:15] – I don’t think there’s any given point. Okay, so I’ll tell you this, Wufoo’s such a different company than most because we only raised $118,000 for the whole life of the company. Back in 2006, YC he was only giving $18,000 and then we only raised from two angels $50,000 each and that was it. Wufoo was a company that only had 10 employees when we got acquired about five and a half years later. We had done that on purpose. We had profit-sharing. When we gave equity to the, like we didn’t hire anybody for the first two years by choice.
Craig Cannon [33:55] – There was three of you?
Kevin Hale [33:56] – There’s just three of us. Then when we gave equity employees were like we’re not going to get stock options, we’re actually going to give you equity. But the result of that is that it’s going to be really hard to get that equity. You have to really sort of earn it. Because by that time, we had derisked a lot of like the mechanics of Wufoo like the revenues were just basically almost doubling every year and so with the profit-sharing, my salary was actually doubling every year. The thing is we couldn’t think of any place to put the money that would help it grow faster or would make it better. That was like literally how efficient we were. We had talked to so many other companies. Actually after we got acquired by SurveyMonkey we actually were really relieved because we looked at all the other stuff that they tried and we were just like, yep.
Craig Cannon [34:40] – Didn’t work.
Kevin Hale [34:41] – There’s like nothing else. Like our business was the kind that like the market is so huge and it’s just nice and steady. And so I believe there’s a type of building to our company where it’s like if you can figure out how to do this craft and do this work for 10 years, it’s inevitable. Encasing burn like crazy and spending bunch of–
Craig Cannon [35:03] – I mean you could have done a ton of paid marketing you could have spent a ton of money on that.
Kevin Hale [35:07] – Facebook was really brand new at the time. Twitter had just got invented. So there wasn’t–
Craig Cannon [35:12] – Or Google.
Kevin Hale [35:13] – Google, right, but no one searching form builder. We did, we were successful at getting a lot of SEO traffic. The way we did that was we built a form gallery. Every different type of form you could build there was like a dedicated landing page. It’s like, “Hey, you could have a contact form in like one second and one click.” That was really successful for us where people were searching that way, there’s no need to buy an ad for that. And it was one of the things, it was a tradeoff, like what do we want for the culture of our company? I got to choose based on our growth rate and the mechanics of the company. And we had interviewed like, again, our ruse was with this blog to learn about all this stuff. We researched things like what was the literature saying about best practices for management hiring, et cetera. And so a lot of, and then we interviewed tons of other like entrepreneurs asking them just like at various different stages of the company and especially in the early days of like YC, talking to tons of other founders. And we would find out what made people happy and what made people not happy. And hiring like crazy was consistently, everyone was like, “When the company got to a certain stage and I had this many people around me and I didn’t even know who they were, I hated it.” For us it was like we’re trying to do everything we can…
Craig Cannon [36:23] – Let’s not do that.
Kevin Hale [36:24] – Yes, like let’s not make it so that this management thing and bringing on people that we’re not passionate and care about, not going to be part of it. That became a core mission is to make us efficient. The profit-sharing helped. We reinforced that and then those values got helped everyone be onboard for like why everyone should do customer support in the company. It was like, “Hey, you know if we have to bring on more people to do this stuff that eats away at our own success, eats away at the culture that we don’t want to change too much,” et cetera. All of it was reinforcing. What was the question again?
Craig Cannon [36:59] – I was going to say just to sort of get back to the question, when do you know if you’ve achieved product market fit?
Kevin Hale [37:04] – As a result, I feel like there’s never really been a clear definition for it. The ones that talk about break away startup success, they say product-market fit is one where it’s like you feel out of control. Like you’re no longer driving the boat. I don’t feel like we were ever at that point, but I would not say that we were not at product-market fit. That’s the weird thing. We were not a company that was going to have an inflection point and that was going to grow to some exponential rate. We were a company that was in charge of our own destiny and we were not trying to figure out where the new customers were going to come from or who’s going to beat us, et cetera. It was a very different kind of mindset. It’s like I felt like we had product-market fit but it was controlled and, so to me, it’s like it’s just different. There’s an argument that you can make that it’s the path that we have and I have to talk to companies about this. You might have a growth pattern that’s not going to justify venture capital. And we were really lucky to recognize that and we did not give up extra equity to get money to try to see if like are there other avenues of growth that would make that happen. The result is all the founders had so much equity in the company and that our employees who got equity actually had equity in the company, not just like options and shares of it–
Craig Cannon [38:29] – Yeah, or just a tiny fraction.
Kevin Hale [38:31] – And so when the exit happened, our exit like equivalent for us is something that would have been three times larger for some other company in terms of returns back to the founders, et cetera. That’s like a whole different thing that you can. But I think a lot of people don’t talk about.
Craig Cannon [38:45] – Well, that’s like very much related to what I was saying before it’s like think about this game that you’re about to enter into and what does it actually look like to win that game.
Kevin Hale [38:52] – And I think, for many, many, many years I think Wufoo’s returns were still like one of the top returns back for YC as a result.
Craig Cannon [39:02] – Yeah, dollar-for-dollar. Yeah, totally.
Kevin Hale [39:04] – Exactly and so, that’s something to keep in mind. That it is like a company like mine is considered a big win for YC also, but it requires discipline of the founders and also recognizes a different channel. That being said, my type of company is so rare, actually. This is not like it’s a choice. It’s actually not many companies have the luxury of being able to grow that way. I feel like we were really lucky to have that path and to recognize it and not create a bunch of extra burn and give up extra equity. Many people who might have that be a path they’re like, “Oh, I gave up all this equity and I increased my burn, like I don’t have a chance to go back,”
Craig Cannon [39:46] – Definitely not.
Kevin Hale [39:46] – To pursue this other path. That’s another angle of it. But most companies who are successful actually are ones that, “Oh, you figured out there’s a rocket ship there.” Those are the ones you mostly hear about. But I would say those are actually more common for YC then the ones who are like steady growth and then eventually be big.
Craig Cannon [40:03] – Yeah, so would your advice then be just run the experiments incredibly cheaply? Figure out–
Kevin Hale [40:09] – I think you should always be frugal. I think any partner of YC will say you should always be frugal. That’s number one. Number two, understand fully, number one, why are you giving up the equity and why are you increasing the burn? Those are two big sacrifices and so you should have a very strong level of confidence that giving up those two things are actually going to result in growth. A lot of people will give them up prematurely thinking it will result in growth. And so when that happens it’s usually a tragedy. Almost always a tragedy, that happens. This is why like our biggest advice that’s kind of ignored is treat every fundraise as if it’s your last.
Craig Cannon [40:52] – People just think that’s the point of this game, unfortunately.
Kevin Hale [40:54] – So anyway, product-market fit. I had a very different kind. It’s a extremely rare kind that you normally don’t hear about. The kind that you mostly hear about is ones where it’s like, “Oh my god, we have something that’s so good for the market is that we can barely hold on and we have to hire like crazy,” et cetera. And so if you have to ask the question, you definitely don’t have it. That’s number one. And number two, don’t give up everything to try to achieve it. Like again, it’s one of those things where like you should know kind of right away whether it’s going to work or not.
Craig Cannon [41:31] – Well they added a little addition to this question.
Kevin Hale [41:34] – Oh, okay.
Craig Cannon [41:35] – Which was, “On the other hand, how do you know if your product just isn’t even noticed yet?” And so I mean I think you could lump this into the category of like do you have 100 people that love it? But what would you say to that?
Kevin Hale [41:49] – There’s two things and actually you should refer to Dalton Caldwell’s content. He did a video on the YouTube about, I think, pivoting a little bit and then, also, he actually did like a Tweetstorm about a bunch of ideas of how companies get locked into too much, like being really diligent. I actually think it’s extremely difficult to know when to give up. Because there’s no shortage of stories of founders who like they just kept at it and then finally something clicked. And there’s others where there’s plenty of stories where it’s like we finally gave up and changed and then that thing like ran away.
Craig Cannon [42:29] – Slack.
Kevin Hale [42:31] – Yes, so to me I actually feel like there’s no good answer. Quite honestly. This is where you need a little bit of luck. And the question is like you kind are actually asking your ownself, is like what are you going to be happy with? Right, so if you are just like, “Man, I just want to company that like I’m proud of,” et cetera. Then there’s a certain level of growth you can want. If your goal is like I want a company that is going to be a fucking rocket ship, then yeah, you need to basically be like, “All right is it a rocket ship?
Craig Cannon [43:04] – Right.
Kevin Hale [43:05] – Is it a rocket ship? Is it a rocket ship?” And then, there’s a certain point where you want to say it’s like well it’s not a rocket ship. And that point is usually before you run out of money. And I would recommend is that you want like when you start getting down to nine months of runway, you start seriously asking yourself about like what would have to change definitively for me to know that this is a rocket ship? What would I have to figure out? And then you’d like timebox it. Because like once you run out of money, it’s game over. And then the lower the money gets, the lower the leverage that you have to ask help from someone else to help buy more time.
Craig Cannon [43:45] – You’re just shrinking the amount of time you have to run experiments. So you’re not finding anything out.
Kevin Hale [43:49] – Exactly.
Craig Cannon [43:50] – You’re not learning. They asked one more question that I think is also quite common for early stage founders, people doing Startup School. How do you even gauge the size of a market?
Kevin Hale [43:59] – Oh, how do you gauge the size of the market? Usually that’s a little bit of research, I feel like in whatever space that you’re in you’re going to have a rough understanding of it. Basic demographics, there’s tons of research studies on all these different industries. Usually companies themselves especially big ones are touting how big the market or what the opportunity is, et cetera. I feel like that’s easy to find. More importantly what you’re trying to figure out is like. and I talked about this in an early YouTube video, like understanding like, “Does my model even make sense? Is it even plausible that I can become a billion dollar company?” And what I talked about is you’re just trying to figure out like, “Oh, based on how much you charge or the average amount of revenue you’re going to get from someone. How many customers do you have to have to get to 100 million dollars in revenue?” And I do this with all my companies. I actually had two that pivoted this batch after we read through that exercise, they were like, “Oh, my company’s got a really bad model. It’s not going to work.” Because it’s either I need to increase how much I’m charging or I need a really great acquisition strategy to get at those numbers. And then, once you have the number, the question is, does the market even support that? And as an investor I’m usually thinking, it’s like, “Okay, if they need to capture more than 10% of the market just to get to that 100 million dollar revenue, that’s probably not plausible.”
Kevin Hale [45:23] – I’ve seen numbers where it’s like, “Oh, we need to get like 100,000 customers.” But then like the number of customers in the market is like 150,000 only. And therefore, it’s like, “Oh, that’s going to not be plausible.”
Craig Cannon [45:36] – You see stuff all the time. It’s like well if we get everyone in America we’re going to be a total hit.
Kevin Hale [45:40] – You shouldn’t do that. I actually think you always want to do this bottom out calculation and then for consumer apps this is probably always going to be a lot of people. The bigger part of that equation that you’re focused on is like how do I get at these like two, 300,000 people that’s needed to make this consumer startup worth a billion dollars. If your answer is I’m going to pay for every single one of them, man, you now have to give up so much equity in your company to do that. The ones that we get excited about, the ones who figured out like, I figured out a trick for people to recommend me to do this for free or like have other people act as my sales and on my behalf.
Craig Cannon [46:17] – With this last section, let’s go into some hardcore Startup School advice. A lot of people are going to churn, fewer people than the average mook, way fewer. But people will churn. What kind of mentality should someone adopt to ensure like at least completion but hopefully, success in Startup School.
Kevin Hale [46:35] – For us, at the end of the program what we have people do is apply to YC and then when you apply you’re also applying to get this $15,000 equity free grant. The most promising startups from Startup School we give out those grants. Simultaneously, we look at those applications and also consider them for the YC Core program, as well. It’s like a two for one in that application. The minimum requirements for applying for that is you have to complete eight out of 10 weekly updates. Basically every week we send out a thing that we say like, “Hey, how many users have you talked to and what have you learned? Or like how much revenue?” Like, “What is your main KPI?” Whether it’s engagement or revenue, like how much have you done? And, again, it’s not that it has to go up every single time, but you have to at least submit the updates. If you don’t submit the updates you don’t get considered for Group Office hours, because you’re not active, et cetera. That’s like the minimum is like you spend 10 minutes a week writing an update about what you’re doing on your startup and what progress that you’ve made. That’s like you know that’s like–
Craig Cannon [47:45] – Basic requirement.
Kevin Hale [47:46] – The basic requirement. I would like to think that like if you’re thinking about your startup and for most people who I know who think about their startup it’s like nonstop. This should be an easy thing to do. The reason people don’t do that is like they’re like the truth really fucking sucks. It’s a large thing that we actually do with our own YC companies is I have to get them to be like, you as an entrepreneur, have been born with some kind of broken gene that makes you more optimistic than other people. But what that means is you’re going to lie to yourself. I’m here to fix that gene. I’m a CRISPR and so I have people get the honest truth about where you really are in your startup. And so that update is like there to help you see that. When you finally honest about about like, “Oh, you know what? My KPI is revenue and since I’m pre-launch it’s zero and then the next week it’s zero again.”
Craig Cannon [48:35] – Yeah, I got to change something.
Kevin Hale [48:36] – I got to change something. Or I need to speed up, et cetera. What you want is to look at Startup School and be like for this 10 weeks I’m going to go through these exercises, I’m going to ask these hard questions of myself and my co-founder and this is why Startup School is also great for companies who are already working on a startup, because it goes back to these first principles. Then be honest about those answers. That’s number one. Number two, participate in the group sessions. Every week we’re going to match you up with six to eight other people on Thursday evenings is kind of what we figured out was the ideal time for everyone across all time zones. You’re going to talk about your startup. Actually, those group sessions are very simple. You actually are practicing talking about what you do. It’s what we mostly do in YC is fixing your narrative and storytelling, because people come in and they’re so bad at talking about what they’re doing. And because it’s not clear, people can’t understand and if they can’t understand they can’t get excited and if they can’t get excited, you can’t grow and you can’t recruit and you can’t get people to invest, et cetera. So fixing that story’s the most important part. We’re giving you an opportunity to do that with lots of people and actually we have software that when you’re in the video sessions and you’re saying like, “Hi, my company is this, this is my oneliner.” People will be able to now say to you it’s like, “I understand what you’re building,
Kevin Hale [49:56] – I’m excited about the problem you’re working on and then are you the kind of team that like I would want to work for?” Getting to understand how do you project and present yourself? Because those three things are a lot of what we’re trying to evaluate. A lot of people I feel like I talk to you about their company it’s low energy, they’re not passionate and those aren’t people that attract other people. Because anyone that’s going to build a billion dollar company, they need to be able to attract other people to this. I think Startup School is also successful to people who are committed to that process of like I’m going to try to get real feedback and I’m going to practice talking about my company. I’m going to fix my narrative and get it to the end where people like hear what I’m talking about, they immediately get excited and then it’s so exciting and I do such a good job, people are attracted to me.
Craig Cannon [50:44] – Last question. A high percentage of these people are solo founders. Say, they are looking for a co-founder, what would be your advice given it’s a relatively short period of time, on vetting co-founders?
Kevin Hale [50:59] – Okay, getting a co-founder is like getting married to someone. It’s probably like even way more intense. You don’t have usually sex to relieve the tension or fix a bunch of things or smooth things over.
Craig Cannon [51:17] – Or a different job. You work together all the time.
Kevin Hale [51:20] – You have usually a chemical that’s helping fix a lot things that are a problems. I actually think it’s like you should treat it very similar to like what would you do to get married? You don’t immediately like to talk to someone, figure out a bunch of characteristics and then on the first date go like, “Let’s get married.” What you’re actually doing when evaluating co-founders is you’re dating. And the dating should be small. Number one, is like do you understand each other? Do you have complimentary skills, right? Do you like just talking with them? Do you think that you would like to spend more time with them? So that’s like the first question because you got to spend a whole lot of time. So that’s like the big thing. Is like I would just practice that. Oh, I like discussing, talking, et cetera. The second stage would be is like, oh, okay do I, is there some kind of small thing that we can do for each other? I would start with small favors. Like, “Oh, I’ll research this question and I’ll get back to you.” Or like, “Oh, I’ll look at that” or, “I’ll send you some recommendations,” et cetera. Like how are they reliable in terms of exchanging small stuff and then you move on to, to like, maybe we’ll try building something. Or maybe we’ll try doing something, et cetera. Then you move on to like all right let’s have conversation about like, “Hey do you want to work more longterm? Do we want to commit more resources to do that?” I think you can timebox everything and work your way up. The dating is super important. I think founders, single founders are unsuccessful
Kevin Hale [52:46] – when they are kind of desperate about it. It’s the same problem in normal dating, actually. The second thing is it can’t be all take. It’s like, “Uh, I have a great idea and I’m looking for a technical co-founder to do all the work.” You have to be good at selling yourself on like what your contribution and what you’re going to be able to do, et cetera, is. If your contribution’s nontechnical, then like you know there’s good examples of this. Alexis Ohanian is my favorite example of a nontechnical founder. He did everything else. Right, was like I’m going to smooth this over for you. That’s something that can be really appealing if there’s someone who’s like I know I’m going to have to build this.
Craig Cannon [53:30] – What about, given that you compared to dating, dating multiple people in the beginning?
Kevin Hale [53:35] – What’s that, I’m sorry?
Craig Cannon [53:35] – Startup School, that’s allowed?
Kevin Hale [53:38] – Yeah, I think you should probably have conversations with lots of people. Like you never really know. I feel like the only reason I did my startup is because I met my co-founders. I never thought about entrepreneurship. I was supposed to like get my MFA and teach art to hippies. Making money was the farthest thing from my mind. And I would say like college Kevin would like really punch myself in the face and call me a sellout. If he knew what I was doing now.
Craig Cannon [54:05] – Oh, man, all right awesome. Startup School signups are available where?
Kevin Hale [54:09] – They’re open at startupschool.org and registration’s open until July 22nd.
Craig Cannon [54:15] – Awesome. All right, thanks for coming in.
Kevin Hale [54:16] – Thanks, Craig.
Craig Cannon [54:17] – All right thanks for listening. As always you can find the transcript and the video at blog.ycombinator.com. If you have a second it would be awesome to give us a rating and review wherever you find your podcasta. See you next time.
Y Combinator created a new model for funding early stage startups. Twice a year we invest a small amount of money ($150k) in a large number of startups (recently 200). The startups move to Silicon