📓 week 5 of @ycombinator's @startupschool continues today was the last founder talk, from @yinyinwu of @Pulley 💥 She’s talked about what it’s really like to work on a startup, especially one that’s not going well 📝 sharing my notes:

Yin is a three-time YC founder, starting Vapor (S11), Echo Locker (S13) and now Pulley (W20). Her first two startups didn’t work out, and the current one is doing extremely well.

She'll talk about her experience starting both successful and unsuccessful companies, and everything she's learned in over a decade of startups.

@snowmaker explains that the typical startup media is focused on the success stories but today we'll hear about the times where founders are struggling - that's what makes it so exciting!

Yin actually attended startup school 10 years ago!

here she is on that day

a bit about @pulley - they help companies make better decisions around fundraising and equity - they just announced a round funding led by Keith Rabois and Founders Fund

today's talk is about failure @pulley was an 'overnight success' 10 years in the making they went through this same curve that we've seen before:

the hard part is that founders are their own worst critics when you look around, it looks like everyone is doing well you're in the thick of it and putting out fires it feels like you're being left behind this talk is about the time before that yellow circle above

this is a more realistic graph today she'll talk through her journey through those times

four companies that you may never have heard of these were all started by her until most recently they didn't work

her goal is to tell you that the feeling that it's tough and it's not working - that's normal the more founders that make it through, the better for society and making the world a better place

her first story is about AdRaid, when she dropped out of Stanford she thought it would be easy but she was really wrong - it was like rolling a boulder up a hill in both directions

they had amazing experiences like this visit from @algore at @startupschool and shared pain with other founders

they were building ad tech to inject ads into video they raised a million dollars after demo day then 6 months later they shut down the company

they realized that good tech wasn't good enough users didn't want it advertisers didn't see the return on investment brands didn't see the value of the placements couldn't re-upload videos to youtube no users knocking on the door

Lesson #1 - start with the user, not the tech the problem was finding a way for content creators to monetize, not use tech to add advertisements to video

Yin and her founder thought about what they knew best: laundry which inspired their next company - PRIM

they knew this was a user problem because it was their own problem they started PRIM around the time @doordash and others were starting it was exciting because no one knew how it would play out it turned out that people DID want it

but the issue was total market size. it was shrinking and small. people also have a good alternative - the laundry machine. PRIM was also competing against small businesses that could work for zero profit.

despite strong reviews, the unit economics also didn't make sense they were not taking salaries and they were burning money on both pick up and delivery

she remembers having to do a load of a customer's laundry herself by hand --- and had an epiphany she was doing manual labor and it wasn't scalable they went to advisors and investors, who gave advice to keep going. they were one of many bets for the investors

but they were spending 24x7 on the problem and saw competitors coming in the numbers didn't make sense they listened to their instincts and shut it down

weight the advice of your advisors with their stake in the business you often hear of positive acquisitions but behind the scenes, it's typically messy you build something, it's kind of working then you have to convince someone to buy it they did it

they salvaged enough out of that to build runway for the next startup

lesson 2 - pick a growing market for example social networks 10 years ago

they decided they would focus on software and came up with the third company, Echo

during PRIM, she was doing a lot of deliveries and getting constant notifications she didn't know if it was urgent or something else all notifications shouldn't be treated equally Echo was a solution to that problem

they took over the android lock screen for a notification inbox it was a business that could work facebook had launched their ad network

but there was a huge platform risk building on google's android native android would always be in front of echo, and it wasn't clear how they could continue if that changed they started to realize that and thought about acquisition opportunities

microsoft was thinking about what to build next so they bought Echo the acquisition money wasn't life changing but it was more than she'd made in her life exits are not all or nothing. small outcomes can help you along the way

as a founder you naturally feel obligation to employees and investors but the reality is that the outcome can be great or not great they didn't have the distribution advantage to make it a huge success so they took money off the table

that gave them lesson 3 - distribution is key

now on to @pulley she learned how to operate a scale after working at @Microsoft and she knew how to focus on user problems as a founder & builder

she knew that founders have so many questions at the start: how much equity to grant how to raise money

pulley would answer these questions so founders can focus on finding product market fit she went through YC a third time because they needed a distribution advantage: YC gave that through their cohorts

during the batch, she would talk to every founder about equity and onboarded 80% of her batch onto @pulley even when it was going really well, it felt uncertain

she found out she was pregnant soon after getting into YC having a baby and running a company felt like doing 2 startups at the same time but there is never a perfect time so she went for it

and then COVID happened YC shifted remote being remote was a great equalizer for her, she could keep going this is her and her co founder during that time

the learning was that even when it's going well, it's incredibly difficult it's like sports - you competing at higher and higher levels of intensity as you progress

but as the levels increase, you get better too you earn the ticket to the harder race there is so much content out there but there's a difference between reading and jumping into the race yourself you have to go through the hardships

she has a much better understanding of why or why not to do a startup common reasons that she things are not good because there are easier ways to achieve these goals:

money (you take a pay cut for longer hours, and odds are it won't be worth much)

autonomy (only thing that matters is the customer)

impact and respect (better to work at @apple where you have millions of users, and founders don't get much respect)

good reasons to build a company: solve a problem you care about. this is what gets you to the other end

she shares a chinese proverb: a farmer that was walking through the woods, found horses and took them home his neighbours congratulated him he said 'maybe' the farmer's son broke his leg riding one of the horses neighbors felt sorry for him he said 'maybe'

that's a lot like being a founder - it's cyclical, up and down founders are the ones that keep going no matter how hard it is

Ben Horowitz says that there is no silver bullets - it's a series of lead bullets Look at the current economy conditions, very unpredictable 80% reduction in public company valuations

Founders have to overcome that volatility you have to be the one to step back and balance out the company it's a day to day roller coaster there's something magical about making an idea happen

you can work at a large tech company later if you want the big shots are exciting and may not always be there

on her decision to drop out of stanford she's from kentucky where no one had heard of tech startups stanford made it easy to drop out it wasn't actually that hard. she always had the backup plan to go back to stanford, get a job

your ability to take risk is also different as your needs change it was easy for her to be ramen profitable - break even at $2k a month if you have a family it gets harder

now with a 2 year old son, she may not be able to make the same decisions with different needs take the leap if you can handle the risk

how did you get investors to back your companies after your past failures? she thought failure was a one way road. but it's not the case. so many successful companies, the success came after the 3rd or 4th try. some investors want to back 2nd/3rd time founders

the way you shut down matters, investors want to know that you are fighting and doing everything you can you have to be a good steward of investor resources you can explain that your initial assumptions have evolved, you have learned and now pivot your focus

when they returned money to investors, they thanked them and asked to be notified when they were starting another company

it's not all or nothing. thinking about the Echo exit, they returned a good multiple to investors, which built trust and meant that they were willing to bet on them again

how did you get the exits? through introductions. for PRIM, a PE investors was trying to buy coffee shops but eventually wanted to buy laundromats around the same time, they were talking to people about getting out of the business. it's not magic, it's about persitence

with microsoft, they had reached out to the team to partner with them. they started building the relationship. they were acquiring not just the company but the people too. having a relationship helped tl;dr do something, learn, repeat, double down on what works

on having a child while building a company: use your support networks work more efficiently not just grinding hours don't intentionally opt out because you think it'll be tough

on competition (like Carta) - why go for a contested space? there's no easy business. if you enter a business with an incumbent, you'll be compared if you're picking a market with no competitors then you may question the size of the market or other solutions

they still went ahead because 1/ they thought this market was still growing and there was space for 2 players 2/ they believed that they could build a better product 3/ they believed that they had a unique advantage going through YC and partnering with Stripe

when to use @pulley? any time after incorporation if you don't know how much of the company you own, you need pulley now it's free to start