# Jessica Livingston on how to build the future

**Author:** Jessica Livingston
**Type:** Video
**URL:** https://www.ycombinator.com/library/JB-jessica-livingston-on-how-to-build-the-future
**YouTube ID:** nFOC-cgIWaY

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Jessica Livingston is a co-founder of Y Combinator. For this video, she speaks with Sam Altman about what she’s learned
about the best startup founders and more.

## Transcript

hi everyone my name is Sam Alman and this is how to build the future today our guest is Jessica Livingston the founder of YC combinator where I now work y combinator has funded 1,500 startups and they're worth more than $70 billion in total more than 10 of them are worth a billion dollars or more so in terms of how to create a unicorn uh Jessica Livingston probably knows more about this than maybe anybody else in the world so we are super delighted you came here today to talk to us thank you for having me what I really want to get

out of you is how Founders get on a path to build a huge company so you have now for 11 years seen Founders come in when they're just two or three people and an idea and sometimes those Founders go on to do nothing most of the time sometimes they create a small success and sometimes they create these companies that really transform the world and N YC has been very fortunate to be involved in a lot of those Airbnb Dropbox stripe the list goes on and what I think would be really helpful is to talk about what the

companies do during y combinator uh that allows them to then go on and build these super impactful companies so what have you observed the very best companies do when they're brand new well I've now seen more than a thousand companies go through YC so I'm very familiar what these companies do during YC um and I'm first going to say that there's not really One path for everyone necessarily and a lot of times these successful startups get started almost AC accidentally um but when

they're at the point where they say yes I am going to take this company seriously I'm going to apply to Y combinator and then they they come here to Silicon Valley for three months um the most successful Founders I've noticed are totally focused on two things building their product and making something people want which of course is our motto um and talking to their users and they do not let themselves get distracted by any anything else um and that seems so obvious but uh what's not

obvious is how easily distracted Founders can be by lots of other things going on um and the the most successful startups are like hyperfocused on their product what are some of the things that distract Founders that seem like good ideas at the time oh um there's a lot of these um and in fact in a talk that I gave at the female Founders conference a couple months ago I referred to some of these things say like the startup equivalent of wolves and sheep's clothing CU they really do seem like

you're doing business um a few of them are um talking to big companies to try to form Partnerships in an attempt to get better distribution or somehow um you know get more users to do a lot of PR before you've nailed down the product um to talk to Corp Dev people um when you're you're not thinking about being acquired um yet you'll still have meetings um with these people or you'll

take meetings with investors when you're not in fundraising mode just to sort of build a relationship I mean though or go to going to conferences networking events all these things that seem like important things to do as part of your business are not important in the very early stages when it's critical to build your product and how do you know when you have hit the product as you just said well I think when you have people using it like you you can measure your growth and you can measure how many users you

get and are they coming back are they paying for your product I mean that's just the greatest thing of all if you can charge for your product and and that that growth rate is is going up so for all the YC companies that have gone on to be these sort of household names did they all do this during YC where they just focused on their growth rate writing code talking to users and are they the companies that ended up ignoring everything else uh yeah pretty much if I had to think back on the most successful startups all during YC they were super focused and they weren't all over the place in terms of

ideas that they were working on or things that they were doing um they were definitely Focus did they have big plans even during YC like could Brian chesy of Airbnb have told you during YC here's how we're going to be a $25 billion company and here's what we're going to look like seven years later I don't think they would have gone that far I think that all of the most successful Founders have ambitious plans um and they certainly start a lot smaller like they seem much less

important when they're first getting started but I think the founders do have a grand plan I have to believe though that when they're all in the earliest phases none of them can predict just how big they'll be I don't think Brian Chessy um knew that they'd be where they are today and how much strategizing do you think that companies do about how they're going to get from here to the next step to the step after that like during YC or they really just focused on trying to make a few users really happy or are they thinking about well we need

to build up a monopoly and so in airbnb's case we'll have that because we'll have one Marketplace or is it really just like let's build this product people love and see where it goes I really do think it starts as let's build this product and see where it goes in some cases let's solve our own problem and see where it goes I'm specifically thinking of stripe I mean they built that product because it was a pain in the ass for themselves they were solving something for themselves so I do think that they are saying let's build

this and see where it goes however I think that the most successful ones do have that grander Vision I remember specifically during YC Airbnb said to themselves and and I think uh to investors we plan to become the eBay of space like they were nowhere near the eBay of space at that point but they had that vision and they were working toward that how much does the idea matter like you you said Airbnb came with this idea that

turned out to actually be the eBay of space um but a lot of Founders I think don't get started because they don't yet feel like they have the idea that can be the hundred billion dollar company so how important do you think it is to get the idea just right at the beginning or to just get started with something and then figure out where to take it I am of the mind of just get started with something um and that's because we are funding companies at such an early stage that we're really funding the companies for the founders and for the attributes

of the founders do they seem determined have they been able to ship something in the past do they seem you know open-minded about things um are they domain experts a lot of times they don't get the idea right the very first time um they might be in the general vicinity of being right but then they have to adjust their idea some Founders totally fail with their idea and have to have to change completely but I think it's more important um to get started with something build it

because your idea is always going to evolve I mean Airbnb is like to me one of the most famous examples of an idea that has evolved right they came to us um with their idea which was at the time renting out airbeds in your home while you were there during conferences like that's pretty focused right and then they they said okay now we're going to rent out airbeds in your home but not during conferences then it was renting

out your own home so it it morphed and did all of that morphing happen during the YC program no it did not happen specifically how long did it take um I think it I want to say it took about a year um I'm not 100% certain but I remember what happened specifically was Airbnb was always very strict about the host being home so that they could provide breakfast because it was airbed and breakfast.com um and then the famous story is that air or airbnb's one of

their hosts was Barry manalo's drummer and he had this great place in New York City and he contacted them and said hey Barry's going on tour I'm going to be gone can I just rent out my my apartment while I'm not there and like the airbnbs were like oh that doesn't really fit with what that's how they figured out that's how they figured out how to like rent out whole spaces and to this day I think that that's like the majority of their business but it took something like that to get them to even consider doing it C could you tell the story of

what you thought the first time you met the Airbnb Founders when they came in to interview for YC I mean I know they were in kind of a rough place they were totally out of money every investor had said no to them yeah yes we actually did not know what a rough place they were in I know that now from hearing stories but they and this was 2009 right this was actually in the fall of 2008 we did the interviews in November and for people that weren't around in the fall of 2008 it was really a grim time to be doing a startup in Silicon Valley because the

macroeconomic conditions had collapsed the macroeconomic conditions had collapsed no one knew what was going to happen Angels were know closing their checkbooks people oh we're going to hold off on investing it was really sort of a a scary time um and so I I do remember we went into interviews saying we're only going to choose companies that we think could make it profitability really quickly on their own and then they can like live as a cockroach because you just weren't sure they'd be able to raise any money at all right we weren't sure that they that come March at demo

day that we had no idea what what investors would be doing and so we were really sort of frightened it would be a disaster if we had this big demo day and none of the startups could get more funding that would be bad so we were very strict so um the airbnbs came in they were sort of a last minute addition to the the interview process I remember um Michael cyal one of the partners here said hey can you slot these guys in they're really good least come uh have

them come in so we said fine and I remember during the interview uh Paul tried to change their idea we thought this idea of like renting out airbeds was a little weird um what did he try to change it to I don't even remember it's embarrassing good thing he didn't I know I know but he did try to like pitch them a new idea and they were like no no um and and that's just one of those things they knew they were on to something because they themselves were hosts and that is one of the key things um about

Founders is that like when when you're using your own product or solving your own problem you have all this like these insights that no one else has and the airbnbs were renting out their their room in their apartment because they couldn't pay their own rent um so they had a lot of insights into this it's sort of funny given the current controversy around Airbnb that Airbnb started as an affordable housing company I you know it's it's outrageous so um they were using they were using

their own product they had these insights that it was this wonderful experience when someone comes out of town to have hosts that can help them and show them around and and they they knew they were on to something so um they convinced us that their idea had legs and that their users you know the few users they had loved them um I remember more about the founders though um I really lik the founders they were very um convincing when they spoke you could tell they had thought about this

problem a lot um they didn't have all the answers by any means but they just seemed like they had thought about this a lot and I remember also they brought in as a gift um these cereal boxes Obama O's and cap Captain McCain or something and this was the 2008 presidential election this was 2008 presidential election and they had made these serial boxes with like Cheerios and Captain Crunch in them and which sounds so silly because they're just serial but I remember they said oh yeah you know we

designed these and then we went out and got Cheerios and we stuffed them in there and glue gun the boxes together and we've been giving them away and I thought oh my God these guys are like glue gunning the cereal boxes and they why were they doing this um they really were doing this because they were out of money and this was like a Hail Mary um for them and they they did wind up making a lot of money from these but to us they were doing it as sort of a fun thing because they're Airbnb they provide breakfast coincided with the

presidential elections but the original driving reason was just like they couldn't raise any money they couldn't raise any money anything they could to survive oh my god when you we again during the interview we did not know these stories but when you hear the stories of the um problems that they had trying to fund raise prior to YC it's crazy they had one investor like leave in the middle of a pitch just walk out without even saying good goodbye by uh no one believed this idea was good or or

certainly would be big did did you know at the time that the idea could be great or was it for you really just a bet on those three guys as Founders I have to admit it was more of a bet on the three founders they seemed really good I I did sort of like the idea of of being able to stay in people's homes but I I have to admit I was I was not thinking it was going to be huge just cuz that story was so interesting what was it like when you met the cison brothers I think they were 19 and 17 when they started stripe and

they came in and said we're going to do this crazy thing and we're teenagers and we're going to take on the financial system of the world how does that conversation go well I have to admit we met Patrick years earlier when he was 16 or 17 still living in Ireland because he um looked up Paul and we had them over for dinner so it wasn't like we first met them at a YC interview um we we I think Patrick was working on some other idea first or something and

we had you know high regard for him he certainly was good at building things and he had like a Wikipedia app so we knew he was like a talented programmer um he introduced us to his 16-year-old Brother 16 there we go he was 16 when we met him John was um and I'm trying to remember when they said oh we're going to take on the financial industry I think we were kind of like do you realize how hard this is and like you don't have connections um but they were Intrepid they were like well we don't have

connections we'll find connections and they just that that is actually a really good question that you bring up because it shows how determined they were and how focused they were and I mean you think like the head of a bank is going to take a 19-year-old startup founder seriously it seems pretty impli ible right um but they were good enough that they were able to convince um these Banks to work with them are there other traits in in in the founders that go on

to really change change the future um besides determination that separate the very best Founders from the mediocre Founders have have you noticed any other traits that kind of Founders should aspire to that really want to have a big impact yes um if I had to say the most important traits of the most successful Founders I've already mentioned determination that is by far the most important quality more than intelligence more than

intelligence more than previous success you know in school I mean remember when we started ycombinator our um hypothesis was oh we'll just fund all the best hackers from MIT and Harvard and they'll turn out to be great startup Founders that is not true that is absolutely not true um a lot of them are are good um and in fact Patrick was from MIT but um it's it's not true for the most part determination is the most important thing again um sort of understanding

your users and building a product with a great user experience um is second most important um not being distracted not um getting lured down these paths that aren't going to be um important for building building your your product um being flexible minded I've always felt is very important because you know you have this idea and you test it out and it doesn't always work the first time and so you have to be able to say okay I

thought I was going to do this but let's try this even though I have like a lot of energy vested in this let's try this direction you really have to be open-minded um and then ultimately you have to be a good leader um you have to be convinced vincing and a good leader because you are going to be convincing employees to join you you're going to be convincing investors to invest in you um when you do get to the point where you're doing deals with bigger companies you have to convince them like your whole world is convincing people and so

you have to be able to communicate your idea and and convince people why they should care about you more than any of the other hundreds of startups out there so now I'd like to talk about your startup whyc combinator and and how you started that could you tell us the story of starting y combinator yeah it was it was very much uh started in the same way that a startup is started um where Paul and I had this idea we we really felt that that the investment world was broken um if you were an early stage

startup and you just wanted to like test something out you either had to go to a VC and get $5 million which is virtually impossible at that early stage or you had to know someone who was rich and could give you money um and we thought there could be something better we thought there could be like a standardized branded form of funding so if you wanted $25,000 or whatever you could come to YC combinator and we'd um make it very easy for you so uh we

thought okay let's start an investment company and it was just going to be Paul and me and then we sort of lured in his old co-founders Robert Morris and Trevor Blackwell to be part of this even though they were full-time on something else and we said gosh none of us know anything about Angel Investing well let's learn so how should we do that let's fund a whole bunch of companies at once and we'll learn a lot so we set up a website and we said come join the

summer Founders program it was back in Cambridge Massachusetts in it was for the summer of 2005 and we started working on it let's just say in January and and we posted um an application um we wanted to change a few specific things we wanted to make it very easy for people to to find us and apply they didn't have to have a connection to us um we had an application of like 20 questions um we wanted to make it very simple on our side um we're giving you

$112,000 you know per startup or1 18,000 if you had three founders but it was very specific amount for this amount of stock and our paperwork is going to be real straightforward you can see it in advance um and we're going to make the decision that day we'll interview you and tell you that night and that never happened back before us no one got a same day decision for the most part so uh 200 people applied um they had known about Paul because of his his essays you

were one of them I was came out from Stanford I remember that interview very well um and um we found eight companies to fund that summer and we learned very very quickly into the three months that funding startups in a batch was incredibly powerful and it was powerful in that you could teach them all sort of the same things at once um and they became colleagues because starting a startup as one or two people is very lonely and very isolating and back then

in 2005 there was no information online about early stage startups at at all um so no one knew what they were doing so it was sort of a nice atmosphere so even yator was an example of this start with an idea you don't know much about build something people want and iterate yes yes and we started small light and start small do it lightweight start small and evolve and we realized we had dinners on Tuesday nights which actually we still have to this day and we have guest

speakers come in we had paperwork that we gave them I personally helped everyone incorporate their company um what else did you spend your time on that first summer oh my God what didn't I spend my time on like as any startup there was like too much for everyone to do um Paul spent his time advising the startups on their ideas because I didn't really know that much about startups I was doing everything to get y combinator up and running I mean we had to get our office we had to cook dinners I was

going grocery shopping and Paul was cooking the dinners um we were recruiting speakers to speak that summer this is not what most people picture doing when they think about starting a really important company so I think it's good to note that like this is in fact oh my God there's so much unglamorous work that Founders have to do early on and you just have to do it um but I I mean I was delivering air conditioners to different people um we we had eight startups in that batch and they were all living scattered around the Harvard Square area and there was a heat wve and

we were like we can't have our Founders not being able to work so I went to Home Depot and I bought like 10 air conditioners and delivered them to everyone when did you know that summer that YC combinator was going to work um we had a feeling pretty early on like first couple of weeks I would say within the first month we're were like this is really interesting and people are working on very interesting ideas I mean you were working on location stuff on your phone this is before Reddit was in there we're very interested in readit

um the Justin TV and twitch guys Justin and EMT were working on a calendar unfortunately Google Calendar launched and killed them but I mean that these are these were interesting things um and so we were very excited about the ideas it's a great story about investing in people that it was Justin's third y combinator startup I think that ended up being a billion dollar exit yeah yeah yeah y fed him three times and it worked out on the third and it worked out the third time a charm yes I mean this is

again going back to you're funding the people um Justin and EM EMT were a great team um I'll just this is a bit of a tangent but it's important to remember they were College roommates and like best friends or growing up and so they had known each other for a long time and had this like great trust and so when they wanted to build something they were both excellent programmers you know and that's as good of a bet as you can make on2 how is it that Co to have co-founders at all and then how

important is it that the co-founders have a pre-existing relationship like that I think it's critical um I think I think there have been cases of successful startups with one founder but I'm sure they will tell you it's extremely hard and overwhelming emotionally draining you have no peer uh who you can rely on for moral support and and holding all of that you know it's a big burden for people emotionally I think also at the very early stages

there's so much to get done that you need more than one person doing it you know you can't be out fundraising and building the product at the same time so yes it's important to have a co-founder it's not impossible um I will say it's critical that you know your co-founder well um because if you don't if you like meet at a hackathon and think do you ever see that work out rarely I'm trying to think of an example and off the top of my head I can't think of an example wow um of two people who were introduced

or sort of bolted on to each other at the last minute ever working I'm I'm sure there are examples of it has having been work but I can't think of them um the the relationship becomes so stressed as the startup goes on its path I mean you have like import you could get sued and you have to deal with this or you get an acquisition offer that's really tempting and that cause can cause friction you know so so many things can cause friction and tension it's really like a

marriage and I know we all laugh at how um we compare founder relationships to a marriage but in many ways it's kind of like that there's a lot of Truth to that yeah yeah so you said about within the first month you could tell YY was on to something but how when did you first realize that YY was going to be as big as it has turned out to be did you have any idea of that that summer I don't think we had any idea of that that summer we knew we were on to something and and after that summer um we knew we

had to come out to Silicon Valley that was an important next decision for us we knew that people could easily copy us and we didn't want someone else to be the Y combinator of Silicon Valley like we wanted to be the Y combinator of Silicon Valley and I remember Paul saying we got to go out there and I remember thinking like ah we have two months to do this was that really driven by not wanting to be copied uh yeah wow we did not want someone else to be the Y combinator of Silicon Valley you noticed that with great startups a lot that they really don't they really hate their they really

hate getting copied I think that's an interesting point well you know I think no one likes getting copied absolutely um it's it's unpleasant I'm used to it by now um and you just can't worry about it you're always if you are building something great you're going to get copied um so anyway so we came out here and that was also very important for us cuz we didn't have Rel relationships in Silicon Valley we didn't know the investors out here and that's when we started to meet the investors and that's an incredibly important component of Y

combinator um that we have you know great relationships with investors and they they come do our demo days and they invest in our startups because again we are like first gear for startups we're helping them get started and then we want to introduce them to like wonderful later stage investors so once you you got to Silicon Valley and started running the program out here then did you know it was going to be really big not yet not yet I think I think when we had a feeling that it was going to be

really good was when I you know Reddit got bought and that was very exciting news for us but I think like when Dropbox started getting some traction then we thought like whoa this could be a contender here this is you know someone doing really really well and you were funded and our so our companies were sort of flourishing and that that's when we knew I think I think this could be and what is it like looking back now and you know why comment has become this this pretty

influential thing that has impacted a lot of people and a lot of Industries like looking back is there anything you're like Well if I knew YC was going to be as important as it's become I would have done this differently or anything that any lessons that you take away or is it just like well this happened and I was only ever looking one step ahead at a time you know there's always things that you do a little bit differently um possibly we would have hired more Partners earlier on so that we could have accomplished more I mean

for for many years it was just Paul and me fulltime and so there was only so much we could do so we didn't do much Outreach and we you know I I wish maybe we could have done more of that earlier on um but you know in the grand scheme of things there's not there's no like massive massive mistake I think we sort of grew organically and what is it that you did as you were growing organically that has made YC work so well you know Rec someone recently told me there are

now 2 200 accelerators around the world oh God however all every billion plus dollar company so far ever to come out of accelerate I think there's 11 have have happened in part of YC so that's you know a great credit to you and Paul but what did you do in the early days that set up YC to to do this well there are a couple things and you know sometimes I would be nervous about sharing some of our secret weapons um but I'm going to share one because it

would be great if people copied this but they won't um one of the most important things is that is that why commentator always started to be founder friendly we were not doing this to make money um we were doing this to see if we could encourage more startups to get started because we felt that would be good for the world like more people starting startups more Innovation that's good for the world um and so we didn't do it thinking we could make money and we weren't trying to like squeeze out the

best deals in every situation um we were always driven by what's best for the founders what's best for the startups our terms and our investment paperwork are very founder founder friendly um and I think that's attractive um good Founders who want to be treated fairly and not be taken advantage of um it's interesting you see that among many of YC's most successful Founders they're they want to make a lot of money but that is far from the primary motivation yes you cannot be the most successful

startup founder if you driven by money you have to be driven by a greater purpose so YC's version of this was just like it'd be good for the world to treat Founders better and have a lot more startups yes yes now we hoped we made some money because we couldn't keep self-funding for the rest of our lives we couldn't be self- sustaining if we didn't make some money and by the way for many years we didn't make money it takes remember that people forget that time people forget how long it takes to to make money as an investor um so we were always driven by like this

benevolence um and I think it's still part of our DNA I truly believe that um I think we gave great advice um you know surprisingly hard to get from investors yes yes um there are some great investors out there that do give great advice but for the most part getting really good advice um is hard I think Paul Graham's exceptional at giving startup advice and and helping people with their ideas um and quite honestly um telling people like hey

you're doing this you're doing it wrong don't do it that way in a way that's very straightforward um and and and Founders can respond to that pretty quickly um what else what are our you know what are the important things about us I mean we've always attracted from the very first batch that you were in I believe we attracted you know talented um Founders and they've gone on to be role models and attract other

people that are talented like kind intelligent Founders and so I think it's just sort of grown organically and and spread and we've kept a pretty pretty great community of Founders over the years so there are a lot of people that have realized startups are really great ways to impact the world and get new technology built and distributed uh and at a young age now people are realizing they may want to start a startup someday so if you're an ambitious you know teenager or college

student uh what should you spend your time on if you know someday you want to start a startup well um there's a lot of things you can do to sort of prepare yourself to be a startup founder um the first is learn to code um there's a lot of great online courses now if you don't already know how to code but I would strongly recommend that everyone learn to code even if you're not great you at least know how to do it and it helps you sort of Judge other programmers um build stuff with people

it doesn't have to be like the next Facebook um which by the way did start out obviously as a little project um when it got started but just build something that you might like to use try to solve your own problem um work with other people I mean especially if you're in college that is just the best place to meet potential co-founders um and and get to know people and and talk about interesting problems and try to solve them it does not have to be the next startup but it

will at least get you thinking about problems it will get you like practicing launching something and listening to users and talking to users and after that if you're not ready to start a startup right away go work at an early stage startup you can learn so much working at an early stage startup um that you wouldn't working at a big company uh so that's probably my best advice of what to to do to to prep to become a startup founder great okay last question yeah um you are probably the

most successful female founder in Silicon Valley at this point so do do you have advice uh for other female Founders or aspiring female Founders about what to do well it's definitely a subject I think about a lot because um when we first started why commentator there were very few female Founders uh they were scarce um and I'm pleased that there are more these days and there just continue to be more and so I've spent a lot of time trying to help the um the women

that we've funded to become more successful uccessful um so that they can go on to inspire people because you have to have those Role Models so that you can think gosh maybe I could start a startup um but I will give some advice based on my own experience you can't worry too much about what everyone's saying and all the noise and like oh it's so much harder as a woman yes it's harder as a woman I've been discriminated against you know it's but I have always kept focused on my

product and you know what I'm doing and I I don't listen to all this stuff going on and I'm like building a product that people love and I think that the women we funded would say the same thing they're startup Founders you know they're not like necessarily like female startup Founders they're first and foremost startup Founders and they are caring about their product and their users and they are totally focused on that um and so my advice is like just do it start a company apply to YC

commentator um and and you know build something people want great well thank you so much for joining us and finding my company and hiring me um it was great thanks a lot thanks Sam
