Paul Buchheit on Lessons Learned from Investing in 200+ Startups

Capital & Growth</a> interviewed YC Partner Paul Buchheit about his experience as employee #23 at Google and his key investing insights.\nJasper : You came up with Google’s “Don’t be evil” motto in 2000. Sixteen years later, do you feel they have stayed true?\nPaul : They’ve done about as well as an organization of their size can do. It’s tough to be that big and not make a few mistakes. The issues become very complex.\nJasper : What are some mistakes they’ve made?\nPaul : Some of the things are debatable, but an example would be their entry into China. They cooperated with the Chinese government which was controversial. People said, “Oh, that’s evil.” But there’s a difficult tradeoff because they eventually got out of that market and now Google simply isn’t available in China. Which is the greater evil? It’s hard to say, but I think they came over to the edge.\nJasper : You also created Gmail while at Google. What is the Gmail creation story?\nPaul : Larry Page assigned the project to me. He said, “Build some kind of email something” and chose me because I had an interest in email. I tried to create a web-based email service in 1996, shortly before Hotmail, but didn’t complete it.\nThe idea was that email in the early 2000s hadn’t advanced in a long time. There were these clunky desktop programs and webmail was terrible–Hotmail gave you 2MB of storage, Yahoo gave you 4MB and the interfaces were slow and inefficient. I wanted to make a great product that I would want to use, while also incorporating modern features like search and conversations.\nJasper : Google made what was then a controversial decision by targeting people with ads in email. Was that part of the original vision?\nPaul : That came later. One of the big questions inside the company was, how does this thing pay for itself? One camp thought we should charge for it but I didn’t like the idea because you are not going to serve a billion people that way—most people have limited budgets. I was interested in making it freely available and came up with the ads system.\nJasper : Let’s talk about Y Combinator. You now have several partners, a couple of divisions, a new CEO and plans for global domination–all the partners recently visited countries in Europe, Latin America and Africa. How does the partnership work?\nPaul : It is a fairly equal partnership where each person has as much autonomy as possible since most of us are former founders with self-directed personalities and strong opinions. One of our main challenges is, when you have fifteen people like that, how do you keep them all working together happily?\nA key principle we have adopted is, for most decisions, there is no need for unanimous support. If three partners agree on something they can do it.\nAll the partners also participate equally in the investment profits.\nJasper : <a href=https://www.ycombinator.com/"https://ycombinator.wpengine.com/author/sam-altman//">Sam Altman</a> has said that the only criterion Y Combinator uses to evaluate applying companies is, “Can this be a $10 billion plus company?” like Airbnb and Dropbox. While this model works great for a fund, there is an <a href=https://www.ycombinator.com/"https://capitalandgrowth.org/page/unicorns/">Early Exits movement</a> that suggests individual entrepreneurs have a much higher likelihood of success when they raise less capital and target exits in the $20 million range. What do you think this view?\nPaul : The math does not support this strategy but if other investors want to try it that’s fine. Also, it is not just returns we are looking for but really impactful companies. When you sell too early you don’t realize the full potential.\nFor example, Facebook had an offer from Yahoo for a billion dollars, which everyone told Zuck to take. Fortunately, he said no. Had he said yes, it would have been another failed Yahoo acquisition and Facebook would not have nearly as much impact. The reason we have these big and influential companies is the founders believed in a long- term vision.\nJasper : You are an angel investor in your individual capacity and have made over 200 investments. What are some key lessons you’ve learned? Feel free to talk about mistakes or even your anti-portfolio i.e. companies you passed on that became successful.\nPaul : I think the biggest counter-intuitive lesson is that investing purely on the quality of the idea is inversely correlated with success. The really great companies are largely indistinguishable from the terrible ones when judged simply on the idea. To be good at it you have to meet the founders and assess how good of a founder they are.\nMy favorite anti-portfolio example is Airbnb. <a href=https://www.ycombinator.com/"https://ycombinator.wpengine.com/author/michael-seibel//">Michael Seibel</a> (Y Combinator Core CEO) emailed me their deck before they joined Y Combinator and I couldn’t help but think “Wow, air mattress rental? That’s a terrible idea!”\nJasper : What do you think is the most important factor for startup success? The three most common answers I hear are product-market fit, timing and team. Based on your comment, I would assume you are in the team camp?\nPaul : That’s a false trichotomy. Those factors are all closely interrelated. Certainly just having a good team with a made- up idea is not going to work. And obviously timing is a big factor. To be truly successful you must have all the ingredients.\nTake Google, for example. Larry and Sergey are super smart and recruited a great team. They also tackled an important problem and had impeccable timing–they raised their Series A in 1999 when it was still possible and didn’t spend it all. In the late 90s, most founders who raised a big round squandered it all on super bowl commercials!\nWhen the crash came it wiped out all the other startups which was great for Google because we could hire from everyone else without competition. Clearly you need to have all the ingredients.\nJasper : What are some things that turn you off when an entrepreneur pitches you?\nPaul : The biggest one is made-up ideas. The best startups come from personal experience. It was something you or someone you know needed. Occasionally, I’ll ask a company, “Why do you think is a good idea?” And they’ll say, “Oh, I read an article in TechCrunch.” You have to understand it at a deep level. It can’t just be something you read.\nI also like people who get things done. If you’ve been working on your startup for two years and have nothing to show, that’s a pretty bad sign. I’ve discovered that most people are really good at finding obstacles. I don’t fund these people.\nJasper : Do you have any parting thoughts or advice for entrepreneurs?\nPaul : Just get started and deliver now. You should have a long term vision but must also act right now, have near term deliverables and be in contact with the customer. Don’t disappear for years working on this thing, completely disconnected from the world. An extreme example of this is, I wrote the the first version of Gmail in a day!\n","comment_id":"1099504","feature_image":null,"featured":false,"visibility":"public","email_recipient_filter":"none","created_at":"2017-06-01T01:00:55.000-07:00","updated_at":"2021-10-20T13:06:39.000-07:00","published_at":"2017-06-01T01:00:55.000-07:00","custom_excerpt":null,"codeinjection_head":null,"codeinjection_foot":null,"custom_template":null,"canonical_url":null,"authors":[{"id":"61fe29e3c7139e0001a7109a","name":"Jasper Kuria","slug":"jasper-kuria","profile_image":"https://secure.gravatar.com/avatar/c5b1869c510501fd1aeb86b5e999f421?s=512&d=mm&r=g","cover_image":null,"bio":"Jasper is a Managing Partner at The Conversion Wizards.","website":null,"location":null,"facebook":null,"twitter":null,"meta_title":null,"meta_description":null,"url":"https://ghost.prod.ycinside.com/author/jasper-kuria/"}],"tags":[{"id":"61fe29efc7139e0001a71175","name":"Interview","slug":"interview","description":null,"feature_image":null,"visibility":"public","og_image":null,"og_title":null,"og_description":null,"twitter_image":null,"twitter_title":null,"twitter_description":null,"meta_title":null,"meta_description":null,"codeinjection_head":null,"codeinjection_foot":null,"canonical_url":null,"accent_color":null,"url":"https://ghost.prod.ycinside.com/tag/interview/"}],"primary_author":{"id":"61fe29e3c7139e0001a7109a","name":"Jasper Kuria","slug":"jasper-kuria","profile_image":"https://secure.gravatar.com/avatar/c5b1869c510501fd1aeb86b5e999f421?s=512&d=mm&r=g","cover_image":null,"bio":"Jasper is a Managing Partner at The Conversion Wizards.","website":null,"location":null,"facebook":null,"twitter":null,"meta_title":null,"meta_description":null,"url":"https://ghost.prod.ycinside.com/author/jasper-kuria/"},"primary_tag":{"id":"61fe29efc7139e0001a71175","name":"Interview","slug":"interview","description":null,"feature_image":null,"visibility":"public","og_image":null,"og_title":null,"og_description":null,"twitter_image":null,"twitter_title":null,"twitter_description":null,"meta_title":null,"meta_description":null,"codeinjection_head":null,"codeinjection_foot":null,"canonical_url":null,"accent_color":null,"url":"https://ghost.prod.ycinside.com/tag/interview/"},"url":"https://ghost.prod.ycinside.com/paul-buchheit-on-lessons-learned-from-investing-in-200-startups/","excerpt":"Jasper Kuria of Capital & Growth [https://capitalandgrowth.org/index.html] \ninterviewed YC Partner Paul Buchheit about his experience as employee #23 at\nGoogle and his key investing insights.\n\nJasper : You came up with Google’s “Don’t be evil” motto in 2000. Sixteen years\nlater, do you feel they have stayed true?\n\nPaul : They’ve done about as well as an organization of their size can do. It’s\ntough to be that big and not make a few mistakes. The issues become very\ncomplex.\n\nJasper : What are som","reading_time":4,"access":true,"og_image":null,"og_title":null,"og_description":null,"twitter_image":null,"twitter_title":null,"twitter_description":null,"meta_title":null,"meta_description":null,"email_subject":null,"frontmatter":null,"feature_image_alt":null,"feature_image_caption":null},"mentions":[],"related_posts":[{"id":"61fe29f1c7139e0001a71b81","uuid":"b9fa8b72-9a37-4b33-ba34-1fe27cebe9a2","title":"Vikrum Nijjar: Engineer #1 at Firebase and Founder of Gold Fig Labs (YC S19)","slug":"vikrum-nijjar-engineer-1-at-firebase-and-founder-of-gold-fig-labs-yc-s19","html":"<script async src=https://www.ycombinator.com/"https://platform.twitter.com/widgets.js/" charset=\"utf-8\"></script> Vikrum Nijjar joined as the first engineer at Firebase, and did whatever it took to help the company succeed: scaling out infrastructure, shipping mobile SDKs, hosting 1-1 office hours with developers and even standing in as SRE for 24×7 hour shifts… for over a year.\nIn this interview, Vikrum tells us what he found most valuable about his YC experience, how to build successful developer tools, and why <a href=https://www.ycombinator.com/"https://www.goldfiglabs.com//">Gold Fig</a> is going to put an end to embarrassing and costly configuration changes, once and for all.\nIf you’re looking for your next job, visit YC’s <a href=https://www.ycombinator.com/"https://www.workatastartup.com//">Work at a Startup</a> to find engineering roles at over 500 funded YC startups.\n<hr />\nRyan: Firebase (S11) is such an integral part of so much internet infrastructure — every developer seems to have done something with it. What was it like being so early on there?\nThere’s so much I got to build, it was incredible. In the early days, I started by working on improving our engineering rigor and automating our deployment process. We were thinking about scale from the start — we already had customers, and knew it would be big. At one point, we needed to pick good technology for the infrastructure, and I had lots of experience working with JVMs, so we picked Scala. We also knew Scala would help us attract good candidates, which it did. From there, I got to build the networking layer too, and wrote the first iOS and Android SDKs. At a startup, you get to contribute to just about everything.\nRyan: And what was it like working on such a small team?\nJames and Andrew [the co-founders of Firebase] really treated me like a peer. At no point did I feel like Firebase was not mine. In the early days, I would just ship things without asking anyone and they were fine with that. One of the most memorable things was when I added office hours to the app. Any Friday, developers were invited to come to the Firebase office and ask me anything.\nThen about two weeks in, James comes to me and says, “Who are all these people coming into our office?” I told him what I did, and he just said, “Keep it up.” I mean, our customers were developers, and we want them to be super successful. And this was like having office hours in college. It was also a great way to engender trust with our users, and to get feedback on what’s working and what’s not working. And you know, do things that don’t scale.\nRyan: What’s it like building a tool for developers?\nDeveloper tools have these 2nd and 3rd order effects. It’s really endearing. There are — I kid you not — people who have found out I worked at Firebase and have told me, “Firebase changed my life.” I once met a guy who used to be a waiter at Applebees, went to a hackathon and learned Javascript and Firebase, and then won the hackathon. He ended up sticking with it, getting into tech and now he’s a PM. He never thought he’d be out of the food service industry, and — just to think that Firebase was part of his story — is really amazing. At one point, we had a tweet posted on our wall, “Please marry me, Firebase!”\n<blockquote class=\"twitter-tweet\">\n\n The support from <a href=https://www.ycombinator.com/"https://twitter.com/Firebase?ref_src=twsrc%5Etfw\%22>@Firebase is incredible. I loved them before, but right now I’d almost marry them. Highly, highly recommended. <a href=https://www.ycombinator.com/"https://twitter.com/hashtag/StartupAUS?src=hash&ref_src=twsrc%5Etfw\">#StartupAUS</a>\n \n— Murray Hurps (@Murray) \n <a href=https://www.ycombinator.com/"https://twitter.com/Murray/status/556567564155748352?ref_src=twsrc%5Etfw\%22>January 17, 2015</a>\n</blockquote>\nRyan: Ridiculous. What do you think helped Firebase turn into such a big phenomenon?\nIt’s going to sound cheesy, but really, it’s about the people who worked there. We all wanted to do whatever we could do to help the company succeed, and that meant helping developers succeed. As we grew, we tried to make sure we found people who believed the same thing. Everyone says that hiring the right early employees is extremely important, and it was no different for us.\nOur highest order bit was to hire kind people. Obviously we wanted people with the right skills and ability to communicate, but James and Andrew went out of their way to make sure they didn’t hire jerks. We also made sure we hired people who enjoyed coming to work, and whom we enjoyed working with. That’s really important to look for, because each person you add to the team changes the dynamic — for example, if you hire somebody more introverted, it changes the team’s communication style.\nWe were kind of lucky because we got to stay small for the entirety of Firebase. I joined in 2011, and when we got acquired by Google three years later, we were still only 22 people. And only one person ever left during that time, and it was for non-work related reasons.\nRyan: So how early were you?\nWhen I started, it was just me and the founders and they were going through the S11 batch. The company was actually working on chat APIs, and then realized that their real-time infrastructure was more useful than the chat tools themselves. We pivoted to Firebase a few months after demo day.\nI originally found their job post on Twitter. One of the founders put a description on HackerNews and then tweeted it. I cold emailed them, something like “I saw your post, I’m winding down my startup, and I want to join a good team.” At the time they had customers and revenue — two things I didn’t have with my own startup.\nAnyway, they asked to meet, so we got coffee at the Creamery, and it was pretty casual. We did an onsite about a week later, and then a small take-home exercise. Not as taxing as what we had at Google, and I got to get to know them better in the process. I’m a strong proponent of interviews being bi-directional — candidates should take the time to really get to know the startup, founders, and team. And I vividly remember James letting me list out all the things I expected culturally. That meant a lot to me. And it turned out he was really listening; even on the toughest days, we still took time to take lunch together, walk around SoMa, and enjoyed every step along the journey.\nRyan: And have you been in touch with them?\nDefinitely. When I applied to YC for my startup Gold Fig, I reached out to Andrew and James and told them about it. They were both incredulous — “No way you’re getting in.” But they still spent time with me, and gave me strong recommendations. That was key, because I had only done a bunch of mocks and hadn’t written that much code at that point. Getting their input on what I was working on and my YC application was huge.\n<img loading=\"lazy\" src=https://www.ycombinator.com/"https://ghost.prod.ycinside.com/content/images/wordpress/2019/11/s19-alumni-demo-day-300x200.jpg/" alt=\"\" width=\"600\" height=\"400\" class=\"alignnone size-medium wp-image-1104068\" srcset=\"https://ghost.prod.ycinside.com/content/images/wordpress/2019/11/s19-alumni-demo-day-300x200.jpg 300w, https://ghost.prod.ycinside.com/content/images/wordpress/2019/11/s19-alumni-demo-day-768x512.jpg 768w, https://ghost.prod.ycinside.com/content/images/wordpress/2019/11/s19-alumni-demo-day-1024x683.jpg 1024w, https://ghost.prod.ycinside.com/content/images/wordpress/2019/11/s19-alumni-demo-day.jpg 1600w\" sizes=\"(max-width: 600px) 100vw, 600px\" />\nRyan: And given you were so early on Firebase and have startup experience, why did you choose go through YC?\nYeah, we thought about that a lot. We have the network, and we feel pretty comfortable building a product. And there were some key things that we thought we really wanted. First, because Gold Fig is a developer tool, we thought that it’d be useful to tap into the YC community to get early users — just like Segment and Stripe did. And second, we wanted to use HN for recruiting engineers, because both me and my co-founder found Firebase that way.\nBut the actual benefit we got during YC was something completely different. I mean, we knew we needed velocity, a forcing function to keep shipping, launching, and re-launching. But once got in, we really had to step up our game. Here are all these incredible founders working on amazing ideas, and YC partners pushing you each week. Extremely high-concentrated messaging, like Kevin Hale telling us to focus on the one thing that’s important to our company right now. And Gustav telling us, “You should launch this thing and you should be embarrassed.” It’s not just a figure of speech. If you’re not embarrassed, you don’t care enough. You need to caveat that with what you’re building, but know that you can deliver a ton of value and it can still be janky.\nSo yeah, you can read blog posts online or watch the videos [about YC], but hearing feedback in person, and for 3 straight months, is game-changing. It pushed us to code more and launch more than we ever have. And we really didn’t know what was possible in us until we had people pushing us, people who wanted us to be as great as they thought we could be.\nRyan: And where are you guys now?\nWell… we did it! [Laughs.] I mean, we got through YC, and we just finished fundraising. But we’re just getting started. We haven’t hired anyone yet, and we’re trying to be thoughtful: company values, run rate, in-person or remote, all that stuff. We’re able to stay lean now, and maybe hire 3-5 people in the next year.\nAnd we’re doing what we did at Firebase: talking to developers, understanding what they need, and building. Just building. It’s great, because we’re back to solving a core problem for developers: working in a sea of different SaaS projects and online software systems, and trying to manage configuration, version changes and compatibility. Gold Fig’s ability to show them all in one place, undo changes, set up environments for new hires on staging vs. production, it’s all based on what we’re hearing from our users.\nI mean, at some point we were concerned that what we were building was too niche: only for people who had been burned by bad configs. We thought maybe it might be just DevOps managers or the security teams. Turns out, just about every developer has been in that situation. And it sucks. So now we have everyday developers to VPs of engineering reaching out to us to find out what we’re up to, and how we can help them.\n","comment_id":"1104060","feature_image":"/blog/content/images/wordpress/2019/11/Screen-Shot-2019-11-22-at-12.58.25-PM.png","featured":false,"visibility":"public","email_recipient_filter":"none","created_at":"2019-11-22T03:02:22.000-08:00","updated_at":"2022-06-27T08:52:44.000-07:00","published_at":"2019-11-22T03:02:22.000-08:00","custom_excerpt":null,"codeinjection_head":null,"codeinjection_foot":null,"custom_template":null,"canonical_url":null,"authors":[{"id":"61fe29e3c7139e0001a710bf","name":"Ryan Choi","slug":"rchoi","profile_image":"//www.gravatar.com/avatar/36ba914c5f191f813e96db0296154469?s=250&d=mm&r=x","cover_image":null,"bio":"Ryan works with YC companies to find great engineers — from 2-person startups to larger ones like Airbnb, Stripe and Instacart.","website":null,"location":null,"facebook":null,"twitter":null,"meta_title":null,"meta_description":null,"url":"https://ghost.prod.ycinside.com/author/rchoi/"}],"tags":[{"id":"61fe29efc7139e0001a71184","name":"Employee #1","slug":"employee-1","description":null,"feature_image":null,"visibility":"public","og_image":null,"og_title":null,"og_description":null,"twitter_image":null,"twitter_title":null,"twitter_description":null,"meta_title":null,"meta_description":null,"codeinjection_head":null,"codeinjection_foot":null,"canonical_url":null,"accent_color":null,"url":"https://ghost.prod.ycinside.com/tag/employee-1/"},{"id":"61fe29efc7139e0001a71152","name":"Founder 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Startup","slug":"work-at-a-startup","description":null,"feature_image":null,"visibility":"public","og_image":null,"og_title":null,"og_description":null,"twitter_image":null,"twitter_title":null,"twitter_description":null,"meta_title":null,"meta_description":null,"codeinjection_head":null,"codeinjection_foot":null,"canonical_url":null,"accent_color":null,"url":"https://ghost.prod.ycinside.com/tag/work-at-a-startup/"},{"id":"61fe29efc7139e0001a71178","name":"#jobs","slug":"hash-jobs","description":null,"feature_image":null,"visibility":"internal","og_image":null,"og_title":null,"og_description":null,"twitter_image":null,"twitter_title":null,"twitter_description":null,"meta_title":null,"meta_description":null,"codeinjection_head":null,"codeinjection_foot":null,"canonical_url":null,"accent_color":null,"url":"https://ghost.prod.ycinside.com/404/"}],"primary_author":{"id":"61fe29e3c7139e0001a710bf","name":"Ryan Choi","slug":"rchoi","profile_image":"//www.gravatar.com/avatar/36ba914c5f191f813e96db0296154469?s=250&d=mm&r=x","cover_image":null,"bio":"Ryan works with YC companies to find great engineers — from 2-person startups to larger ones like Airbnb, Stripe and Instacart.","website":null,"location":null,"facebook":null,"twitter":null,"meta_title":null,"meta_description":null,"url":"https://ghost.prod.ycinside.com/author/rchoi/"},"primary_tag":{"id":"61fe29efc7139e0001a71184","name":"Employee #1","slug":"employee-1","description":null,"feature_image":null,"visibility":"public","og_image":null,"og_title":null,"og_description":null,"twitter_image":null,"twitter_title":null,"twitter_description":null,"meta_title":null,"meta_description":null,"codeinjection_head":null,"codeinjection_foot":null,"canonical_url":null,"accent_color":null,"url":"https://ghost.prod.ycinside.com/tag/employee-1/"},"url":"https://ghost.prod.ycinside.com/vikrum-nijjar-engineer-1-at-firebase-and-founder-of-gold-fig-labs-yc-s19/","excerpt":" Vikrum Nijjar joined as the first engineer at Firebase, and did whatever ittook to help the company succeed: scaling out infrastructure, shipping mobileSDKs, hosting 1-1 office hours with developers and even standing in as SRE for24×7 hour shifts… for over a year.","reading_time":7,"access":true,"og_image":null,"og_title":null,"og_description":null,"twitter_image":null,"twitter_title":null,"twitter_description":null,"meta_title":null,"meta_description":null,"email_subject":null,"frontmatter":null,"feature_image_alt":null,"feature_image_caption":null},{"id":"61fe29f1c7139e0001a71b4d","uuid":"8a0f88a3-2b5d-464c-8f92-b65351647ba5","title":"Updates for Startup School 2019 and Office Hours with Kevin Hale","slug":"updates-for-startup-school-2019-and-office-hours-with-kevin-hale","html":"<a href=https://www.ycombinator.com/"https://twitter.com/ilikevests/">Kevin Hale</a> is a Partner at YC. Before working at YC he cofounded Wufoo.\nKevin’s on the podcast today to do some Office Hours and talk about this year’s edition of <a href=https://www.ycombinator.com/"https://www.startupschool.org/">Startup School</a>.\nIf you’d like to sign up or learn more, check out <a href=https://www.ycombinator.com/"https://www.startupschool.org/">StartupSchool.org.

00:25 – Stats from Startup School 2018\n<a href=https://www.ycombinator.com/"https://youtu.be/kyYHUXxyjvI?t=1m45s\%22>1:45 – Updates for Startup School 2019\n<a href=https://www.ycombinator.com/"https://youtu.be/kyYHUXxyjvI?t=8m15s\%22>8:15 – Sign up at StartupSchool.org\n<a href=https://www.ycombinator.com/"https://youtu.be/kyYHUXxyjvI?t=8m50s\%22>8:50 – Sean Maina asks – In the early days of Wufoo, how did you give a great customer experience?\n<a href=https://www.ycombinator.com/"https://youtu.be/kyYHUXxyjvI?t=11m30s\%22>11:30 – Design affordances\n<a href=https://www.ycombinator.com/"https://youtu.be/kyYHUXxyjvI?t=13m45s\%22>13:45 – Sunil Tej asks – How was Wufoo 10x better than the market when they just got started?\n<a href=https://www.ycombinator.com/"https://youtu.be/kyYHUXxyjvI?t=17m45s\%22>17:45 – Building an audience before a product\n<a href=https://www.ycombinator.com/"https://youtu.be/kyYHUXxyjvI?t=20m15s\%22>20:15 – Wufoo’s growth\n<a href=https://www.ycombinator.com/"https://youtu.be/kyYHUXxyjvI?t=23m30s\%22>23:30 – Coming up with the idea for Wufoo\n<a href=https://www.ycombinator.com/"https://youtu.be/kyYHUXxyjvI?t=27m30s\%22>27:30 – Companies pivoting during YC\n<a href=https://www.ycombinator.com/"https://youtu.be/kyYHUXxyjvI?t=29m\%22>29:00 – Building a product in an unsexy space\n<a href=https://www.ycombinator.com/"https://youtu.be/kyYHUXxyjvI?t=32m30s\%22>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?\n<a href=https://www.ycombinator.com/"https://youtu.be/kyYHUXxyjvI?t=43m30s\%22>43:30 – Sivaraj Ghanesh asks – How do you gauge the size of a market?\n<a href=https://www.ycombinator.com/"https://youtu.be/kyYHUXxyjvI?t=46m\%22>46:00 – Tips for Startup School success\n<a href=https://www.ycombinator.com/"https://youtu.be/kyYHUXxyjvI?t=50m15s\%22>50:15 – Advice on vetting cofounders\n<a href=https://www.ycombinator.com/"https://youtu.be/kyYHUXxyjvI?t=53m45s\%22>53:45 – Sign up at StartupSchool.org\n<hr />\n<div id=\"backtracks-player\" data-bt-embed=\"https://player.backtracks.fm/ycombinator/ycombinator/m/133-updates-for-startup-school-2019-and-office-hours-with-kevin-hale\" data-bt-theme=\"orange\" data-bt-show-art-cover=\"true\" data-bt-show-comments=\"true\">\n</div>\n<script>(function(p,l,a,y,e,r,s){if(p[y]) return;if(p[e]) return p[e]();s=l.createElement(a);l.head.appendChild((s.async=p[y]=true,s.src=r,s))}(window,document,\"script\",\"__btL\",\"__btR\",\"https://player.backtracks.fm/embedder.js\"))</script> <script> \n(function(p,l,a,y,e,r,s){if(p[y]) return; \nif(p[e]) return p[e]();s=l.createElement(a); \nl.head.appendChild((s.async=p[y]=true,s.src=r,s)) \n}(window,document,'script','__btL','__btR', \n'https://player.backtracks.fm/embedder.js')) \n</script> <script> \n!function(n,i,s,c){n[s]||(n[s]=function(i){n[s].q.push(i)}),n[s].q||(n[s].q=[]), \nc=i.createElement(\"script\"), \nc.async=1, \nc.src=\"https://c.bktrks.com/utils-1.0.0.all.min.js\", \ni.head.appendChild(c)}(window,document,\"BTUtils\"); \nBTUtils(function(use) { \n var options = { \n autoplayLinks: false \n }; \n use('backtracks-autolink', options).init(); \n}); \n</script>\n<hr />\n<h1>Subscribe</h1>\n<a href=https://www.ycombinator.com/"https://itunes.apple.com/us/podcast/y-combinator/id1236907421/">iTunes
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Jasper Kuria of Capital & Growth interviewed YC Partner Paul Buchheit about his experience as employee #23 at Google and his key investing insights.

Jasper : You came up with Google’s “Don’t be evil” motto in 2000. Sixteen years later, do you feel they have stayed true?

Paul : They’ve done about as well as an organization of their size can do. It’s tough to be that big and not make a few mistakes. The issues become very complex.

Jasper : What are some mistakes they’ve made?

Paul : Some of the things are debatable, but an example would be their entry into China. They cooperated with the Chinese government which was controversial. People said, “Oh, that’s evil.” But there’s a difficult tradeoff because they eventually got out of that market and now Google simply isn’t available in China. Which is the greater evil? It’s hard to say, but I think they came over to the edge.

Jasper : You also created Gmail while at Google. What is the Gmail creation story?

Paul : Larry Page assigned the project to me. He said, “Build some kind of email something” and chose me because I had an interest in email. I tried to create a web-based email service in 1996, shortly before Hotmail, but didn’t complete it.

The idea was that email in the early 2000s hadn’t advanced in a long time. There were these clunky desktop programs and webmail was terrible–Hotmail gave you 2MB of storage, Yahoo gave you 4MB and the interfaces were slow and inefficient. I wanted to make a great product that I would want to use, while also incorporating modern features like search and conversations.

Jasper : Google made what was then a controversial decision by targeting people with ads in email. Was that part of the original vision?

Paul : That came later. One of the big questions inside the company was, how does this thing pay for itself? One camp thought we should charge for it but I didn’t like the idea because you are not going to serve a billion people that way—most people have limited budgets. I was interested in making it freely available and came up with the ads system.

Jasper : Let’s talk about Y Combinator. You now have several partners, a couple of divisions, a new CEO and plans for global domination–all the partners recently visited countries in Europe, Latin America and Africa. How does the partnership work?

Paul : It is a fairly equal partnership where each person has as much autonomy as possible since most of us are former founders with self-directed personalities and strong opinions. One of our main challenges is, when you have fifteen people like that, how do you keep them all working together happily?

A key principle we have adopted is, for most decisions, there is no need for unanimous support. If three partners agree on something they can do it.

All the partners also participate equally in the investment profits.

Jasper : Sam Altman has said that the only criterion Y Combinator uses to evaluate applying companies is, “Can this be a $10 billion plus company?” like Airbnb and Dropbox. While this model works great for a fund, there is an Early Exits movement that suggests individual entrepreneurs have a much higher likelihood of success when they raise less capital and target exits in the $20 million range. What do you think this view?

Paul : The math does not support this strategy but if other investors want to try it that’s fine. Also, it is not just returns we are looking for but really impactful companies. When you sell too early you don’t realize the full potential.

For example, Facebook had an offer from Yahoo for a billion dollars, which everyone told Zuck to take. Fortunately, he said no. Had he said yes, it would have been another failed Yahoo acquisition and Facebook would not have nearly as much impact. The reason we have these big and influential companies is the founders believed in a long- term vision.

Jasper : You are an angel investor in your individual capacity and have made over 200 investments. What are some key lessons you’ve learned? Feel free to talk about mistakes or even your anti-portfolio i.e. companies you passed on that became successful.

Paul : I think the biggest counter-intuitive lesson is that investing purely on the quality of the idea is inversely correlated with success. The really great companies are largely indistinguishable from the terrible ones when judged simply on the idea. To be good at it you have to meet the founders and assess how good of a founder they are.

My favorite anti-portfolio example is Airbnb. Michael Seibel (Y Combinator Core CEO) emailed me their deck before they joined Y Combinator and I couldn’t help but think “Wow, air mattress rental? That’s a terrible idea!”

Jasper : What do you think is the most important factor for startup success? The three most common answers I hear are product-market fit, timing and team. Based on your comment, I would assume you are in the team camp?

Paul : That’s a false trichotomy. Those factors are all closely interrelated. Certainly just having a good team with a made- up idea is not going to work. And obviously timing is a big factor. To be truly successful you must have all the ingredients.

Take Google, for example. Larry and Sergey are super smart and recruited a great team. They also tackled an important problem and had impeccable timing–they raised their Series A in 1999 when it was still possible and didn’t spend it all. In the late 90s, most founders who raised a big round squandered it all on super bowl commercials!

When the crash came it wiped out all the other startups which was great for Google because we could hire from everyone else without competition. Clearly you need to have all the ingredients.

Jasper : What are some things that turn you off when an entrepreneur pitches you?

Paul : The biggest one is made-up ideas. The best startups come from personal experience. It was something you or someone you know needed. Occasionally, I’ll ask a company, “Why do you think is a good idea?” And they’ll say, “Oh, I read an article in TechCrunch.” You have to understand it at a deep level. It can’t just be something you read.

I also like people who get things done. If you’ve been working on your startup for two years and have nothing to show, that’s a pretty bad sign. I’ve discovered that most people are really good at finding obstacles. I don’t fund these people.

Jasper : Do you have any parting thoughts or advice for entrepreneurs?

Paul : Just get started and deliver now. You should have a long term vision but must also act right now, have near term deliverables and be in contact with the customer. Don’t disappear for years working on this thing, completely disconnected from the world. An extreme example of this is, I wrote the the first version of Gmail in a day!

Author

Jasper Kuria