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Essential Startup Advice: Founding & Funding Outside of Silicon Valley

Geoff Ralston
President at Y Combinator
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2020 Startup Grind Global Conference
February 12, 2020, Redwood City, CA, USA
2020 Startup Grind Global Conference
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Essential Startup Advice: Founding & Funding Outside of Silicon Valley
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About speakers

Geoff Ralston
President at Y Combinator
Jewel Burks Solomon
Head of Google for Startups, US at Google

Geoff Ralston is the President of Y Combinator and has been with YC since 2011. Prior to YC, he built one of the first web mail services, RocketMail, which became Yahoo Mail in 1997. While at Yahoo, Geoff worked in engineering and ran a business unit before becoming Chief Product Officer. After Yahoo, he was the CEO of Lala, which was acquired in 2009 by Apple

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As Head of Google for Startups in the United States, Jewel Burks Solomon works to level the playing field for diverse startup founders and communities by connecting them with the best that Google’s products, connections, and best practice has to offer.

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About the talk

A Fireside chat with Geoff Ralston, President of Y Combinator talking about prime Startup Advice around Founding & Funding Outside of Silicon Valley. Interviewed by Jewel Burks Solomon, Head of Google for Startups, US.


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All right. How's everybody feeling? Awesome. Well, hi everyone. Again. My name is Julesburg Solomon and I'm super excited to be leaving this fireside chat Jeff. You have an amazing backgrounds for this particular topic and I know we have a lot of people here from all over but I'm sure a very curious about what are the essential piece of advice a needs to build their startup maybe in Silicon Valley or maybe outside of Silicon Valley. So out of curiosity raise your hand if you're building a startup outside of Silicon Valley Hi. Wow

this before we kind of take it off curious if you can share your background What's led you to where you are today? Give us a little bit of grounding and who you are sure everyone I'm going to be brief cuz I've been around for a long time and I can use the whole half an hour and giving that background. I started as a programmer for HP a long time ago and from there. I became an entrepreneur. I've started for five companies depending on how you count and you know, one of those companies got bought and I became an executive at a large company that a

small company again that company got bought then after that. I became an investor and an advisor to startups. And in that time frame, I became a partner at y combinator about 8 years ago. And since then I've been at Y C & Y C has really thin based in Silicon Valley, but you already started Cambridge actually startups outside of Silicon Valley really super condensed story of y c is the Paul Graham gave this talk at the harbor Computing Society in Cambridge, Massachusetts

called how to start a startup and from then from that him and his then girlfriend now wife Jessica Livingston decided to start something called the summer found. Program which took place in Cambridge. That was the first batch of y c in the spring of 2005 come out in the only been there ever since So speaking of that just kind of thinking through that story curious. What was the pool to Silicon Valley? And what kind of has has kept by sea in Spokane Valley for all

these years, you know, it's it's a good question. What's the pool of Silicon Valley for startups? What's the magic is Silicon Valley that has made it such an extraordinary really fertile place to start startups. Will Paul PG saw that that was the place, you know, he had to he started a couple of startups before Y combinator and he just knew he just had the sense that the future of most artists in that time frame. We're going to you know, what's going to start in Silicon Valley. So it made sense for him to move out. In fact, I'm just came out. Didn't really have a place to

stay and luckily one of the co-founders of Y combinator was also starting a robotics company called any Bots and he had a lots of extra space in this kind of strange building 320 Pioneer Way in Mountain View and we actually still are in that building to this day. We have another building across the street cuz we we've expanded but ever since then they've been in Silicon Valley now fast for many years and see none of us outside of Silicon Valley. What are you saying are those magic

pieces that needs to be potentially recreated or are necessary in the other places where folks are starting businesses? I don't know what you guys think but one of the things that make starting a business in Silicon Valley so natural and so normal is I call it soda the salad bar affect which is you know, I'm actually going to a grocery store and you just going to grab a salad bar because you have no time to do anything else for dinner because you you're doing a startup and so you have no time for anything and you're sitting there making yourself you bump

into someone, you know, and it's Silicon Valley you use one of the conversation actually goes to so what are you doing? And if I'm starting a start-up weather like yeah, that's awesome. That's great. And you start talking and maybe they are maybe the right but it's so exciting to be doing a startup but it's so many other places of the country in the world. If you if you tell someone you're starting a start-up they'll be like a damn couldn't get a job. You okay? You know that may be a bit a bit of an exaggeration but there is something in the air in the water in the soil

of Silicon Valley that makes it natural that that makes it okay to do something that has such a high chance of failure. That is so difficult and you know pay so little until it doesn't right. And so there is there is this sense here that starting a start-up is a viable real powerful alternative for your career and that's not necessarily true in other places. Now, we also of course have Sand Hill Road here, which is shorthand for Venture money and startups need fuel. They need that money and there is a lot of it

here it started because back in 1957. This strangely named firm called ardc invented invested $70,000 in this company that actually who knows who digital Equipment Corporation deck Yeah, well, they were one of the early computer companies and they invested $70,000 in that company when they went public they made 35 million dollars. It's pretty good. Right and a lot of people saw that just had a pretty good they came out to Sandhill Road which you know, that's where they were and that's where a lot of these companies

are being started because you know Stanford and Berkeley in the other universities in the local area. So we have lots of people who had the skills necessary to start companies. And so that's part of what makes Silicon Valley special but But of course, there's great universities around the world and there's availability of funds around the world and around the country. So those things aren't nearly as special as that special culture that I think he is getting built in other places around the around the world in the country. So, I believe we have a really cool culture that's emerging they

are and so I want to talk a little more about what is it take to be successful as a start-up so you can show him the business anywhere just I think you have a talent or Silicon Valley, but curious what are the key elements for the start of itself? What does it mean to be successful companies leaving where your startup has the best chance of success? That usually means where your customers are. So if your customers are all New York, maybe you should go there that they are

B&B guys in 2009. They were never in Mountain View. They were always in New York cuz they're early customers were New York town. Of course. It didn't matter where they were in the ended up in San Francisco, but they could have been anywhere. So you do want to go where your customers are. That's maybe because I hope some of you have seen the post at myself and Michael Skibo Road called and they're like you no talk to your customers, right? It seems pretty obvious, but you

should talk to your customers. But one thing that sometimes people misses that you have to do it forever always it's an iterative process week. We tend to tell people that a simple recipe for making a great start a business. Talk to customers in right software. Okay. So if you're not a software company, you can stop you can put let you know build stuff and then do that forever find out how you deliver value what the best way your product can deliver value and then and then do that and you only can really do that by being as close to your

customers. You can so a lot of times your first employees will be people, you know, or people who you know know and so building that initial startup team if you think about it, if you're going to build a billion-dollar company, you better start with a quorum incredible people who you trust and who are going to be with you through thick and thin so you should go with your network is curious to get your thoughts on is how do you know if it's not working? How do you

know if you're sailing in We are we tell the start of YC a lot that you know, if you want to know if you're failing just ask. And sometimes that's actually the best way because you're so involved in what you're doing. You might not be paying attention to what's going on. So to have a trusted advisor who you can say it. Well, I think the easiest way to tell if your failing or not is to ask yourself. I'm super simple question, which is the model of Isis. Have you made something people want can you actually say that a lot of times

it's just completed with product-market fit in and ideas like that, but you could ignore that. Have you made something that really delivers value to customers and you know that they really love your product. They couldn't live without it there. If you read a second startup advice we talked about the Paul Buchheit Republican partner y combinator in the inventor of Gmail. And we have a friendly competition Yahoo! Mail 10 sometimes rules in 10 users who really deeply love what you've done. And expand from there don't find a hundred or a thousand or ten thousand or more

who kind of sort of like it and we'll drop it at the drop of a hat find the people who love you and if you have built a product like that then then you probably not failing not yet. There might be other things that they get in your way. But that's the most important place to start and you can easily kill yourself fool yourself about whether you've really done that or not, which is which is why you need to be close to your customers and really figure that out really asked you that ask yourself that question if you want to wait tomorrow. Would anyone notice would anyone

care would it matter? Not you personally, but your business so you have had a great career as far as Angel Investing and now investing through YC for you. What are the things the key things that you're looking for when you're evaluating companies? So this is the most common question we get, you know, like what it's all wrapped up into how you get into YC and what do we care about? What is it matter? What matters to us? For sure. The most important thing to us is the is the team is the is the is there

Resilience their toughness there their they're kind of hard to describe ability to become these formidable founders of multibillion-dollar companies. We want to see that potential and I found her if we see or sense that potential then we almost don't care what you're doing. We do I mean having some inside of some idea even if you think it's a bad idea is really important, but you know an example very young Founders from Brazil. Who had the virtual reality idea which

better actually fintech and you know now they're just another. Y combinator billion dollar company. So when you're thinking about that grit the kind of qualities are hard to show on paper. How do you sense that when you're talking to a Founder? What is it? What are the key elements at 10 to bring that out for you? There's a bunch and it has to do with how we read applications and what you said on the application when you done before what you've built what sort of experience you have and then when we get in front of you we you know, our interviews are the interview

They're kind of intense. Right reason for the intensity is an accidental. It is partially because we only have 10 minutes and we have a lot to get through but partially is we're testing you were trying to understand what you know what you're made of how you how you respond to difficult questions rapidly. That's actually less interesting how well you prepared but more interesting you get all this week and we'll come up with something you haven't thought of and see how you think on your feet and how you deal with, you know, someone who's who's just like focusing and super hard on the

things that might go wrong with your business cuz there is no business for which you cannot, you know, throw stones. It's easy there always, you know, you can say I go back to my my Airbnb case right who funds the company that's doing are beds in people's homes. When you know when there's a overflow from conferences who funds that well, if you if you look at that at Brian and Joe and Nate, I knew you understand how they had been struggling and fighting for years because they believe in something bigger than that and you know, and I wasn't there I can take no credit for

that. But Paul and those who who did that interview saw that what is the difference between a company that goes through y c and goes on to be super successful in a company that goes through what I see and doesn't and doesn't have that same what's the difference between those two? Well the founders of the first one around The Witcher. You know. There is that's a complicated question and there's no simple answer of what what does create success. Sometimes. It's just that the founders were that

good or that lucky or the idea that they have plus their abilities was the perfect match and it matched the timing of the market and all the macroeconomic. Variables that matter right or you know, maybe they understood the competition and how they had to beat the competition better than other people. Did you know by the way we do we spell startups? You should never worry about your competition as a startup which is one piece of counterintuitive advice that might not make sense to you. But our point

is and this is a Paul Graham is it startups? Almost always die by Suicide the set of murder. You will easily be the cause of your startup staff before any competition, but of course as you grow and as far as the business matures and more people coming to Market bike competition matters and the big companies navigate that really well and it's super hard. It's super hard to go from. You know, it's I think it's some I'm Horwitz who said that the That is impossible to get from 0 to a million dollars and then getting from $1000000 to 10 million dollars is

you know, probably and possibly fully Hard Summer from 10 to 100 is inevitable and I don't know if that's true. But at least age you have these difficulties you have to overcome and the ones that overcome them that you know, remember your 10 million dollars and you stay at 10 million dollars your for 4 years. Your starter is probably worth 10 million dollars. If you have 10 million dollars and you grow to a hundred million dollars in a fairly short. Of time, you're worth billions huge difference why that happens is a whole series of variables.

Four people in the audience who are considering an accelerator and are trying to figure out if they should do one. You know, which ones they do. What advice would you give I mean, obviously you interviewed for wifey three times and they're not able to get in. What do you say to them? Do they? What do they do? Yeah. Well, I do think that there is there is an increasing set of companies to get into I see that I'm applied before and not gotten in I think in the last batch was

over 20 in less than thirty but in percent of the match something like that, so you should keep on applying to YC I will argue that because of a lot of reasons. I think we're good at what we do because of our Network because of how respected we are helping startups that it is the best place to be for a startup. And so if you can't get in and it is hard to get in but if you can you should try you are You should not use an accelerator as a crutch. If you haven't figured out a way to get product-market fit. I don't know that too many accelerators will help you what we don't actually

help you get product-market fit as much as illuminate the fact that you haven't reached product-market fit. It's on you right? It's on you to make something people want and so don't use an accelerator as a crutch for that. If you think that some Excalibur will help you raise money and that you won't be able to do that. Otherwise because you don't have the network. You just don't have the connections or you just you need that boost of a demo day. That's fine. But you don't beware of wasting three months that

Clases tasks etcetera that don't actually move your startup forward because you know star apps are like sharks in that sense. If you don't keep on moving forward, you will not sure I agree 100% there. I I applied a couple times to Wifey I will say I did not get in school and not talk to you but but for those of you who have applied to sell the Raiders many times and trying to figure out where is accelerated play in your journey. I will say if you can get into a great wonder if

you can't don't be discouraged because you can still have a very successful startup Journey even without an accelerated med school a few years ago in 2018 how to get in 2019 this year were teaching it twice. It's awesome and it's free and we accept everyone. Who applies if a 10-week program usually take this weekend might be not this year if I need 9 weeks but there's great contents. You get to be part of a community which is super important when you start

a startup because we all need that, you know, whether it's within our own startup are other people who are sharing that experience that gives us that social validation that helps make the next hardstep doable. And so I totally recommend that you do start of school. It is true that doing start of school is a good boost into the application for YC. We love to see the people have done startup school. It gives us a ton of information about you which is really helpful when we try to decide whether you are going to be funded or not. And

what is it? That is the most valuable aspect is it the continents is a network. Is it the community what is kind of the essence of what makes what what is midwives? He's so successful in Able to Founders that's that's also a multi-part equation you get different things from different people depending on when you ask him and how they think about it. When you're out 5 years out here even 10 years out. One thing that people say a lot in this is a super important thing for startups to is that one of the things they learn while being at

White see was how to focus on what's important and just a really focus at the exclusion of everything else. So we tell people when you do NYC, you know, it's the perfect excuse to tell your best friend who is asked me to help move that you can't you're too busy doing what I see. You're focused sometimes actually our company's years out go back on to Wifey time when everyone just like it's incredible focus and does nothing but focus on their startup I have to say something else to French people think that the reason to do I see is because we help you raise money is true demo day is is is

the YC demo days. Different than anything you could ever experience else worth a thousand investors over a couple of days and the vast majority of YC startup to raise money, but I think we do that is maybe suffered from that may be connected is that we really help you believe has a startup nothing. You have a good idea. Not that you're a smart person or a good founder. We help you believe that you really can be that billion dollar company. We pretty good now after 15 years at helping people

create and see a path towards being a multibillion-dollar company and coming out of YC like that. That's kind of like a superpower really believing that you're the next Drew Houston Branch at Carson Brothers. You name it? That's pretty powerful. Curious if you if you're violating application and you don't see a path for a business to become a billion-dollar company, is that a non-starter for you? Yeah, it is. We are funding startups and herbs are fast-growing companies that can become multi-billion-dollar company. By the way. That doesn't mean that

that's not a great outcome creating a business that is a lifestyle business where you have a great son of employees at Grayton, great. Revenue stream is fantastic. The only catch is it doesn't tend to be better financeable afro, you have to figure out a way to bootstrap that and so our whole system is predicated on Ventra financeable companies. I didn't know that you all fun nonprofits. What's the thinking there as far as why was that added the part of this wifey strategy

thing about the the recent most of us were at YC is to have a positive change in the world and a significant positive change a scalable changed. Pond companies that make something people want and make something lots and lots of people want that's the ultimate goal nonprofits can do the same thing. They can change the world in a super positive way if it's scalable if they can do things that can affect tens hundreds of thousands or even millions of people. So we have funded I think

over 40 nonprofits now that we can have a really strong positive impact on society, you know companies like watching you with that the help fund medical procedures for four people around the world who wouldn't otherwise be able to afford them or companies like women's cold which is trying to change sort of the that that's strange thing that happened somewhere in the last 50 years where the original programmers for all women and then somewhere along the line it became the wrong then but since programmers are going to be at the center of value

creation. That was one of the original Epiphany Paul Graham had the more women were doing that the better so Companies like that are really making a difference and we're happy to find them. So that time inspires me for the next question which is around y c and diversity and inclusion and Equity curious your thoughts on how I see is kind of taking a stance on those topics today. What is why is he doing? How is YC addressing the inequities that exist in just curious your thoughts on that in

more or less reflect the applicant pool. And so if you look at our last batch something like for example, 28% and 20% of the batch. The thing that we can do then is to make the applicant pool more diverse and the way we do that is in a couple of ways we do we do Outreach we go to historically black colleges place by Clark University. Coward maybe we're always open to how we can make a difference because it helps us there's great Founders that are not found in companies in every underrepresented group and we think it's great for YC and great for the world if those people become entrepreneurs, so

we had to go out and and and talk about the gospel of Entrepreneurship. If you will companies that have an impact their like jopwell for example, and so we're we're trying in a multiple ways to actually make a difference and as the as much as we do the applicant pool hopefully get more more diverse. The last question I want to ask you is about giving that you see so many companies. I'm really curious about what are the areas at our most interesting. I know you kind of you all usually publish sort of thoughts on the interesting Trends in areas, but

it's perfectly outside of the valley since going to bring it back to that part of the conversation. What are the industries the trends the areas where you think people should be starting businesses and maybe they're not just curious to get yourself where we think there's Big Ideas that can happen that might be in carbon sequestration and in energy, you know, she plentiful clean energy has huge impact if it can be done with actually funded to nuclear power companies that make small clean reactors that could make a huge difference in those

areas. And of course Vacation in other areas that we think are impactful but we're not to be prescriptive. We let the the applicants the founders of these great companies come to YC and create what they will have lots of areas that that are going to make a huge difference in the future. We are focusing a lot right now in biotech. It was just an event out on the east coast and in vial which is a little new for us. But other than that will let Founders figure out what the new great technology is the future are and will just help them be successful

hilarity for on that question to you personally. What are some of the area is that really kind of spark your interest and curiosity? I think you started businesses in a number of Industries. So just kind of curious on what is interesting to you personally. It's a little bit of a strange story of how I joined YC because when I join y c I started a company at exactly the same time called imagine K12 that was an educational technology version of y c parking is going to be a partner at the same time. He said you can start a startup and have another job.

It's really easy to learn at why CNN to do imagine K12 at the same time and in 2016 we merged imagine K12 back into YC that's all just say that education is near deer. If you want to change it to my heart. If you want to change the trajectory of somebody of a family than improving their education and pretty equity and Excellence there. There's no stronger and more powerful thing. You can do that's always near and dear to me. I also shoot proponent of some of the new bio technologies that I think we're going to chase. Scary but also they

have huge potential for human flourishing and well-being and I think those are great and Technology are awesome. And of course the the people talk about AI a lot I think the horse on a horizontal technology that it will be able to sort of every company that people are starting out there at some point because adding cognition into the works of what we do has the potential to make it much better and more effective and you don't do incredible things for us.

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