Course  Startup School 2019
July 22, 2019, Mountain View, CA., USA
Course Startup School 2019
Video
Jared Friedman - Advice for Hard-tech and Biotech Founders
Available
In cart
Free
Free
Free
Free
Free
Free
Add to favorites
19.21 K
I like 0
I dislike 0
Available
In cart
Free
Free
Free
Free
Free
Free
  • Description
  • Transcript
  • Discussion

About speaker

Jared Friedman
Partner at Y Combinator

Jared Friedman was co-founder of Scribd, which was funded by Y Combinator in 2006 and grew to be one of the top 100 sites on the web. Jared previously worked at a pioneering AI company and studied computer science at Harvard.

View the profile

About the talk

Topic: Business

YC Partner Jared Friedman covers hard-tech companies and why founders should consider starting one. He also covers a couple of the most common problems hard-tech companies face and how to solve them, with examples from seven YC companies.


Share

I'm Jared. I'm one of the partners at YC and I'm going to talk about starting hardtack and biotech companies set of curiosity in the opening is here today who I who is starting something like a heart attack or a bio company a handful of folks across all of start at school. They're actually over a thousand companies that are doing heart attack or attack things, which I think is really cool. So this is going to be most relevant for them. But also for other folks who like might think about doing a company like this in future, even if you're not right now, Sears when

I'm going to talk about Define, what a car tire company is I am going to talk about the two most common heart tumors common problems for tech companies face and how to solve them and I'm going to talk a bit about fundraising specifically for heart a company's building on with Carolyn to talk about So what is a heart Echo company? This is my definition cuz I couldn't find a good one on the internet. So the way I see it is. Phil's two criteria one will take a lot of time and money to build your first product into

even if you have lots of time and money. If not clear if it would be possible to build it at all. Companies like this are a little bit different from other kinds of companies and interesting Lee. It doesn't have to be a physical product and it doesn't say anything specifically about science and technology. It actually applies to like a pretty broad range of companies. Another way of thinking about this is the difference between Market risk and Technical risk. So if your company is building a normal website or mobile app, you probably have mostly Market risk, which is to say you have a

new idea. It's not totally clear if you were going to want this thing that you're making but you probably don't have much technical risk because building websites and apps to the solve the problem at this point. Whereas with a heart accompany. You're probably doing something they clearly people would want if you could do it the question is whether you actually can do it. Okay, so it's starting at 4 tech companies sounds hard. I mean hard as he can in the name and I think the skiers off a lot of Founders who would otherwise start one and I think this is a like non-obvious misconception. So

I'm going to try to address it here is a quote by Sam Altman. That sounds like a complete Paradox. So is Hampstead is in many ways. It's easier to start a hard company than an easy company. That sounds like it doesn't make any sense. But you explain would Sam. I think it's actually like pretty deep truth. And so to explain what is meant by this. I'm going to tell you a story about a family called boom. Who's heard of Boom? If that's okay. So boom is a y c company from 3 years ago and they're doing something completely awesome their Building Des. It is a supersonic

passenger jet to replace the Concorde. It will fly at Mach 2.2 and taking from San Francisco to Tokyo in 5 hours new joke. They're really doing this. The founder of Boom is a guy named Blake and is not Blake's first company before he started boom. He started a very ordinary company that made a mobile shopping app. And Blake came and he talks NYC dinner and he reflected on the differences between his first company the mobile shopping app and a second company boots, and he said something really insightful. When he was building his mobile shopping app getting the product

life was easy. You can build a mobile shopping app in like a few weeks, but then everything after that is really hard see it's hard to get press to write about her mobile shopping out because it's not an interesting story. It's hard to get really talented employees to want to work on it. It's hard to get investors to want to meet with you to hear about your mobile shopping app. Enter is like hard to get people to care about it. And so while launching the product is easy turning the product into a really big company is actually really hard. Words with boom is

exactly the opposite of building a supersonic jet is like incredibly hard but everything else around it is really easy. And from the very beginning back when Ben was like just an idea Blake was able to get some of the most talented people in the world who want to help him. We are living at a unique time in the world where it is become easier than ever before to start the heart a company. There is a new front of all the Mount of investor demand to fund really crazy ambitious ideas. So while you will have to raise a lot more money to do a company like this is also possible to

raise a lot more money to do a company like this fully internalized this year because most YC applications are not for companies like this and I think one reason that Founders don't start companies that are super ambitious like this is because it's like really intimidating. I mean as you guys know like the starting any kind of company is really intimidating but it seems like it's going to be easier if you start a company that's building something simple like a mobile shopping Cup and the the light counter-intuitive thing that Sam realize that I think is

true is that it's only easier to get started. It isn't necessarily easier. Turn into a really successful company. Not everyone knows how big a part of YC hardtack and biotech are so I just wanted to give you a few quick stats. How do I see you refunded / 250 Bayou companies and buy a couple hundred hard tech companies as well. Why see is actually the largest biome seed investor in the world and the largest heart attack scene investor in the world. This includes accelerator seed funds every kind of address or something that most people don't know.

I'm hard to come instead of plaid a y c actually help about a 10x higher acceptance rate than other kinds of applications. I don't completely know why that is I suspected something to do with like certain kinds of Founders being attracted to really ambitious ideas. I'm still really, question that I got from Arctic companies is like I am starting a biotech company how much at ycs advice applies to me? A lot of it seems geared towards other kinds of companies and the answer is actually most of it still applies. I went through the start of school curriculum. This is the start of

school 2019 curriculum and I highlighted all the lectures that are typically relevant for heart tech companies in green and the ones that are typically not relevant at least of the early stages in red and as you can see there is a lot more green than red. And this is my experience working with YC companies that are doing hardtack and biotech stuff, which is that while there are some differences there a lot more similarities than differences. Okay, let's talk about the two biggest problems specific 2 hard tech companies. So if you guys remember Michael seibel's talk about

MVPs. He talked about how some companies have a heavy and that is it going to take him a really long time and typically lots of money to build the first product. This is the case for most heart attack in biotech companies. So if you're in the position where you need millions of dollars to build your first product and you don't have millions of dollars right now, what are you do the simple answer this question cuz you have to figure out some way to make some progress on your idea that doesn't require millions of dollars that is easier said than done. So to help

give you guys some inspiration for how you might do that. I'm going to walk through seven examples of YC companies that were doing heart attack and biotic things to do exactly. So the first one is Boom. So booze hack was they started off by doing a bunch of things that don't really cost any money at all. Here are some of the things that they did they assemble a team of top advisors in the space to give them like credibility. They build computer simulations that showed that they had a design that could work a build like a plastic model like a couple speed law

that they could like take around two people to show them what they're like a vision of this plane would look like and then they took that model and they went around to a bunch of Airlines and they showed them the plastic flame bottle and they use that to get interest from Airlines to show that they would be customer demand if they were to build a plan and they use basically all of these things in order to raise the money that they needed to actually build play. There's a y c company called sausage in which the something really awesome. They use synthetic biology to produce hydrogen

peroxide. So on the left is a photo of their current hydrogen peroxide plant, which is enormous and produces truckloads of hydrogen peroxide that they Shuffle around the country. Obviously this plant cost a lot of money to build on the right side. Is there MVP this is what they had when they applied to YC. It is a beaker that can produce about one cup of hydrogen peroxide speaker prove the concept of their new industrial process for creating hydrogen peroxide, which is like the core idea of the company and basically they just like started with a beaker

and then a progressively scaled up to larger and larger installations until they have the giant hydrogen peroxide plant. So are X is a y c company that originally planned to make their own medical device making a medical device is really hard on their original plan was going to take like the several years and millions of dollars in order to get FDA approval for the new device. And then they realized that they could launch a basic version of the sink or service. They put them off by using an existing medical device that was already approved and writing some software around in that it's

not as good as the like eventual long-term Vision, but he was like a good hack to build like something simple that worked. It worked well enough and because of this plant they were able to get live during y c in less than three months with no FDA approval. Notable Labs is a y c company that is developing new drugs for cancer developing new drugs for cancer is super expensive. It takes a super long time. And so the way they got started was by providing services to scream Schumer's to Pharma companies. The services that they ran enable them to generate with revenue and

data that are now using to do to develop their own trucks. Stratus is a y c company that builds telecommunications satellites and watches them into space that is obviously not a cheap thing to do. It turns out actually that the cheapest telecommunications satellite that is useful cost like at least 10 million dollars to build and launch and so estranhas hacked was to start with a test satellite of the satellite in this photo was their first satellite they built it in less than three months during lisinopril less than $50,000 now, they satellite and doesn't do anything really useful like

you can't sell it but by watching an actual fully functional satellite into space of showing that they could do that. They were able to like generate The credibility that they needed to go and raise the money to watch like a full-scale useful telecommunications High Point. Last example of Ginkgo bioworks is a y c company that does genetic engineering of organisms. And in order to engineer their first organisms. They were going to need like millions of dollars. And so there was the one around to some large companies and they closed contracts to create the organism before

they actually made the or miss with the contract basically said that we will pay you lots of money and they use those contracts and it took those contracts around to investors as proof of customer demand and they use that to raise the millions of dollars from investors that they needed to actually make the organisms that they had promised to customers. The basically they sold it before they made it and this is a very generalizable technique that a lot of heart that companies use in one form or another. Okay, so that brings me to the second most common heart egg problem, which

is How do you prove people will want your product if you haven't built it yet. This is important for found for you to prove to yourself because the last thing you want to do is spend years working on some product that people don't actually want it at the end to prove it to investors. And so here are a couple of ways that you can do that. The best way is through pre-sales. So I delete you just sell your product before you build it is what people do on Kickstarter example, if this is a common cold a jetpack Aviation from two batches ago, which is building the flying motorcycle in

the picture. And which nation did was they ran a priest out in pain and they basically sold flying motorcycles to a bunch of people on the internet to prove that people would want them unfortunately doing peace sells is not always possible if you're doing for example, if you're doing something medical the requires FDA approval is actually illegal to do pre-sales. So don't do that. So because of that we created something called a letter of intent or Loi and a letter of intent is a non binding contract to buy your

product when it's ready have a non binding contract seems like kind of a silly idea like non binding contract is kind of like a paradox, but It turns out that it's Ashley convert kluber contract because it's not binding. He doesn't actually commit the customer to buy it because it looks like a contract customers take it really seriously. It's easy when you're talking to a customer for them to like be polite and casually say like sure I buy your thing you could ever work someday cuz it's like no, but if you ask them to sign an Loi you'll find out if

they're actually really serious about buying a product investors know that I'm secure to some quick advice about. Otherwise, if you decide to go down this route, the more specific the other one is the more valuable. It is a good Halloween includes all the following information. The cool thing is if you can get a customer to sign an Loi like this, it literally gives you a road map for what you need to build in order to generate revenue from a product. Okay. The last thing I want to talk about is fundraising for hardtack and biotech companies. Most high tech companies will not

be supported building a hard tech company is coming up with a smart fundraising plan. And sometimes hard to companies will come to me at the beginning of the batch for the fundraising plan. That looks something like this is fundraising plan is like hey, I have a really good idea. I need $50 to go and build it. So I'm just going to go catch two bunch of a duster is until 7 against me $15 and then and I'll be all set. I don't recommend this plan when I see a plant like this. It makes me think of this guy who's just like standing in

front of a wall staring at the wall. The wall is like the 50 million dollars like Kim Possible fundraising is the fact is impossible to get investors to give you $15 for an idea. You have to make some progress first. And so would you want to do is a fundraising plan that looks like it is still gets you to 50 million dollars, but it's split into five discrete races that start a very small and the key thing here is that for each of these fundraiser you want to have specific Milestones that you hit so like you start off the want to be able to make some progress with your company before

you read any money at all like a boom. Did anyone use that in order to raise maybe like a couple hundred thousand dollars and then you want to use the couple hundred thousand dollars to make more progress which enables you to raise like a million dollars and anyone who has a million dollars to make more progress you can Is formally dollars and so on and the general principle is simple and easy to understand a lot of this skill and building a hard tech company is in fine shooting this fundraising plan. So that like all the steps are like a small as I possibly

can be because the most important part of this fundraising plan is that new Step should be too large if like by the time you go out and start trying to raise a $15 series egg you have to actually have accomplished enough and investors will give you that larger fundraising run. Otherwise, you're just going to hit another one of those like fundraising balls. And so really good hard tech Founders are maniacal about like pushing down the size of each of those steps. So that each type is a smallest possible to push makes it is easy as possible for

them to achieve the Milestones that they need to raise the next round of funding. And that is all that I have about heart attack in biotech companies. Okay will do some questions Whenever there. Yeah Usher sued, the the question was of the examples I didn't mention any AI companies and it's a great point I probably should have included one there's a really famous YC company that's an AI company called Cruise Cruise Cruise built self-driving cars and they got acquired by GM for a billion

dollars and yeah Cruz is a great example of a heart attack company the original Cruise car was built in less than three months during YC Kyle basically just like but in a garage building this car and writing code for like 3 months Olive and by the end of YC, he had an MVP that he could use to drive on the highway to show that like basically you could build a self-driving car. Whenever there have you ever worked with any nonprofit hard tech startups and how did they raise money? So the question is have I ever work with any nonprofit

hard tech companies know if you have one. Okay, we should maybe talk about that after I'd be interested to hear how that could work. Any other question ever hear you until I understand some contractors on finding some of them might be like if you deliver that I can give you a kiss or whatever, but it seems like a lot of needy organisms or whatever. Like do I have a plan with the organisms room? I like maybe if I have enough gray, that's yes who I'll try to paraphrase the question. It was like It seems like getting an LLY would be hard because

the company doesn't know if you're actually going to be able to deliver it and they have to like plan around that an answer is yes. It is hard to get Eloise like even though otherwise are not binding. They're actually pretty hard to get and the weird thing is that the very fact of their hard as it makes them valuable if they were easy, they wouldn't be worth anything. So they're the reason of their kind of valuable is that it is hard to get a company to do that till typically only do it. If you're solving a really critical pain point for them, just like a nice to have it's going to be hard

to get an LLY which is actually really good signal for you to know that you're working on something. That's a really big problem for them in the mail. Artic ideas ideas, and how do you get a blood stain out of clothes? Okay. So the question was is there a difference between hard tack and moon shot ideas at Terminal de question answers know I was using the terms interchangeably. What is the Honda Accord? So the question is if your idea like this disruptive, how do you prove how do you prove that you're going to be able to make it or how do you prove

the people will want it if you make it? Okay, that's kind of like the examples what kind of about some ideas for like how to how to do that like Kind of sticky sticky thing for hard tech companies is to figure out ways to prove as much as possible as early as possible in order to reduce the like perceived risk that the idea is going to work has the more you can reduce the risk easier is going to be to raise money in order to get to the next step. Start for hunting ideas.

How do you make the decision maker because it might not be here in a in a big company, which was exactly going to make the decision is ologist in my activity. John Darrah decision-maker and that he was supposed to be determining who gets taken care of her and you okay. So the question is for a heart tie company where you're selling it to into an Enterprise and there's one person feels like the decision-maker about buying it. But there's another person

could actually be the user. How do you How do you manage that situation? Okay, so this is actually like a really cool thing about the Ella. Why is that the l y basically forces you to do a dry run of the sales process that you will eventually do when you have the product before you have the product. So sometimes like sales are complicated because you have a bunch of different stakeholders and organization. He may have different incentives and by trying to get an LLY out of the organization, you will basically uncover that

fact and you will figure out what you need to do in order to appease all the different stakeholders in order to get the sale. How can I be really valuable feedback to get early on in your company? Restaurant near here. So the question is like how do you find like, yeah, like Founders and early employees for hard tech companies. The good news actually is I found it hard to companies tend to have an easier time recruiting than other kinds of companies kind of like how I shine. Boom because talented people are

drawn towards like crazy and vicious ideas. So I actually think it's like a real Recruiting advantage to be working on something that's really like crazy and ambitious like that, but it turns out like where to find people I mean kind of like everywhere just like, you know hiring a why is it like this going to be hard even if your having a heart attack, It's going to be hard to find like like super talented people.

Cackle comments for the website

Buy this talk

Access to the talk “Jared Friedman - Advice for Hard-tech and Biotech Founders”
Available
In cart
Free
Free
Free
Free
Free
Free

Access to all the recordings of the event

Get access to all videos “Course Startup School 2019”
Available
In cart
Free
Free
Free
Free
Free
Free
Ticket

Interested in topic “Business”?

You might be interested in videos from this event

April 29 - 30, 2020
Online
14
157
b2c, covid-19, customer, ecommerce strategy, gmc, growth, marketing, martech, monetization, seo

Similar talks

Adora Cheung
Partner at Y Combinator
Available
In cart
Free
Free
Free
Free
Free
Free
Eric Migicovsky
Partner at Y Combinator
Available
In cart
Free
Free
Free
Free
Free
Free
Kevin Hale
Partner at Y Combinator
Available
In cart
Free
Free
Free
Free
Free
Free

Buy this video

Video

Access to the talk “Jared Friedman - Advice for Hard-tech and Biotech Founders”
Available
In cart
Free
Free
Free
Free
Free
Free

Conference Cast

With ConferenceCast.tv, you get access to our library of the world's best conference talks.

Conference Cast
558 conferences
22059 speakers
8190 hours of content