# Dalton & Michael: How to deal with setbacks

**Author:** Dalton Caldwell, Michael Seibel
**Type:** Video
**URL:** https://www.ycombinator.com/library/IX-dalton-michael-how-to-deal-with-setbacks
**YouTube ID:** AWa4qZvtMuY

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Dalton Caldwell and Michael Seibel discuss the best approaches to managing the many setbacks startup founders can face
over the lifetime of starting and running a business.

## Transcript

it's like saying that you want to be a boxer but like after you get really good at boxing you'll never have to take a punch again it's like no the sport people that's the sport of the game we're playing all right this is michael seibel with dalton caldwell and today we're going to talk about dealing with setbacks needless to say in both of our startups we experienced a wide variety of setbacks and i think working with so many startups over the last 10 years what's probably become most obvious to

us is how i don't think i've ever seen founders who don't um get hit with a lot of punches like dodging the punches impossible like even i'll freeze another way you might dodge some of the punches but some of the punches are going to land so this is going to be a bit of a talk about what types of punches land and what you might have to deal with if you're in this game for a long time what do you think dalton did did y'all have a couple punches land over the years yeah i mean

that was that was my experience as a founder was taking punches constantly and i think what comes up in office hours with me a lot man is i think people want to talk to me about one specific thing and asking for advice about that thing and i'm happy to do it but a lot of what i want to encourage them to think about is the meta thing which is that the thing will keep happening over and over again and so developing a set of skills of identifying a situation of like oh this

is one of these where like something bad happened and approaching it is part of like the sun rises the sun sets bad things happen you know like it's this is this is as much a part of of being a startup founder as literally anything else versus thinking you you're never gonna have them or that each each setback is different they're not they just come just like every sunrise comes right so let's jump into the first area that produces setbacks investors in

fundraising the classic the classic i went in fundraise with this expectation i came out with a bloody nose and a black eye yeah i thought i thought they liked me i thought they were my friends i thought i was special i thought everyone else is raising you know everyone else is this oh i i got all the right intros i know they're interested in my thing i did the networking like it's it's some version of i

believed with good reason x was going to happen [Music] x did not happen wtf like like how dare they or the universe like you end up like going kind of nuts on feeling wronged by a person or a or a system or uh whatever you want to call it like someone did you wrong right what i think the scary thing about fundraising is that one fundraising process can produce so many of these experiences

so many of them and you know i remember personally the first full partnership meeting like we were raising a round like from a real investor and i had my first full partnership meeting and i remember thinking like this is it like this is you know this is destiny like this is gonna happen like you know it's taken me so many meetings to get here and i remember in front of everyone one of the vcs in the meeting eviscerated me for 45 minutes and everyone else was quiet and the person who like invited me to the meeting was

quiet and i just watched that person very logically take apart my entire startup almost in a way that i would have had our roles been reversed it was like it's like well they were they were probably right right they were right no no it wasn't they weren't wrong right but like you know in some way they were right in other ways i think we were right i mean our company did well in the end but precisely yeah yeah you you could take apart any startup logically at that stage like where there's no defense and i just remember leaving that meeting being like oh [ __ ]

like i can't imagine how i felt an hour ago compared to how i feel now okay literally those seem like two different years of my life we see this at yc where like you know statistically most folks don't get into yc this is the game and you see the way folks react to it in very different ways when we deal with the context of yc founders the best people who don't get in

realize this isn't a one-shot game yeah they apply again they make progress to their company like you know we we send a reject email to every company and like the best people will be like you know you're making good points we're gonna we're gonna improve on those things and we'll we'll apply again and i think that like they realize that that's that's a plus what like you like you you've earned some respect in that moment like put another way there's an opportunity to get an advantage even

when you feel like you just failed whereas almost the worst founders feel like oh now the game is off if i like curse it won't be counted because the you know it's the the time is over right like the you know nothing's counted after the clock runs to zero and it's like the game's not off like what are you talking about and we see this all the time with series a's where man i talk about this so much um no one puts out a press release when they fail to raise an a yeah so what's going on is most a's fail

but no one ever tells anyone but everyone tells everybody when it succeeds and so it creates this warped reality that everyone thinks everyone is raising a's and everyone has an easy time everyone but me is raising a series a everyone but me is having an easy time what's wrong with me and it's like no no no no no like i think it's just the virtue by which this information is shared and so people have this warped view of reality that causes everyone to think that they are personally

you know everything bad has happened to them and to no one else well and this touches on the next subject which is co-founders because you know this is something that i definitely experience you know my co-founders are reading techcrunch watching idiots raise tens of millions of dollars every day and then looking at me as the fundraiser being like hey mike like what's going on like there's a a couple of idiots with no products just raised 10 million from you know dotted off famous fund why why

is our series a taking this long and man co-founder fights suck you know co-founder disputes they are the in some ways i think it rocks you to your core more than investor issues because like that's your home like when your home feels broken oh it feels bad and yc we encourage people to do startups with their friends and i think that a lot of people think about that and they say well that seems so risky like if my startup

doesn't work won't my friendship break and you know we always talk about the other side of that which is like if you don't have a strong relationship with this person when things go bad it's guaranteed to break you know at least if you have a friendship there's a fighting chance every cofounder relationship is always tested right and so you want to have enough connective tissue that like you can survive the inevitable friction and to think that there will never be friction that's not again not realistic and so you actually want to have enough of a relationship so when the inevitable friction happens

there's still a relationship and it's not just like boom so the other thing that comes up a lot is this concept of the magical deal and and i always love the magical deal because like the magical deal can punch you in the face when it doesn't happen and the magical deal can punch you in the face when it does happen because it turns out it's not as magical as you thought it's our first six-figure advertising contract with microsoft which we were like oh man this is it like this is this breaks open our entry

into the monetization game which required us to redesign our entire site go to la and produce a live television show lose way more than a hundred thousand dollars of money the show wasn't very good and complete waste of time and effort like literally three months of our lives like down the drain and if we think about the burn we had during that period of time like let alone we didn't make money on the advertising like the burn in the wasted opportunity

um and to me it's like wow but at the moment we were like these are the deals that will save the company like this is the most important thing happening you see that a lot right the the founder is like this is the magical here's the the potion this is what's gonna yeah i think it's that you reduce your entire startup to you just need one thing to happen and then you're on easy street i always picture you know at the end of the movie when they roll credits you know like something happens and then like the music plays and they you know roll credits like we won like i think people think that's how

life actually is and they're like yeah well once i get this deal you know roll credits and what's funny working with a lot of startups and when i was a founder is sometimes you'd get the deal and the credits don't roll you're like oh now what you're i thought the movie was over and then you're like [ __ ] i guess i guess we actually have to like run a startup still

okay we got to know i see michael like where are we rich like are we we won right we're successful we have to we have to break this news to people all the time to get into ycu that like it's still hard i love that too because i think founders have this moment have this thought in their head that that moment is going to be in the first two and a half years like the play the credits off it's it's all inevitable from here we'll be in the first two and a half years

and we talk to so many alums who are like eight to ten years to their ridiculously successful companies no music like no no credits no public companies no credits like like no they're still still doing it and it's still the same property like they have setbacks i think like it's no fun like these people have a hard time like they have constant setbacks constant setbacks i mean that's the game it's it's like saying like i don't know it's like saying that you want to be a boxer but like after you get really good at boxing you'll never have to take a punch

again it's like no the sport people that's the sport that's the game we're playing if you want to reach that like retire stop if you don't want to take punches stop playing this game um you had some thoughts on when a launch goes bad yeah i mean i think a lot of folks think that launches will be like the movie again i think i think we're we can't help but be influenced by television and movie and books where you know actual an actual realistic movie that

showed a startup would just be like people sitting at their keyboard typing all day not talking probably would be like lots of that punctuated by pretty boring conversations but that's not that's not good in a movie and so so anyway i think this translates to how people think a launch will go where they think they're gonna launch and everyone's gonna care and like things will happen to them and like you know like they have a movie in their head of all these like amazing things happening and all these users signing up and the reason it's really good to launch fast is to get that [ __ ] out of

your head as fast as you can and realize you put it out and no one cares whatever you thought like you this movie that you had is not realistic and what actually happens is like no one cares and sometimes they care a little and sometimes they care but in a bad way and they they're like you're bad and this idea is bad and it's like like you're like but i lost and everyone's like this is bad and you should feel bad

and you're like that wasn't what this isn't the movie i was i was promised a movie here i love that because it's like two levels worse than you can imagine bad is no one cares worse is everyone hates you people on hacker news are like you should be ashamed of yourself and you're bad and all of your ideas are bad and i could have built this in three days startups are dumb and you're wasting your time you know it's like it's not great

and so again the good thing about launching is you just get you flush this out of your system you're like yeah okay cool this isn't like the movie this is real life and here in real life you put out a launch and most people don't care most of the time and you just have to keep launching over and over and over again and like that's the work right well it the movie analogy is so perfect because when you think about the launches that most people experience i think one of the most famous types of launch that you would see in the world is a movie launch right it's a movie premiere that gives you the exact

opposite of impression of how a startup is right it's like a whole bunch of press whole bunch of hula hoopla a whole bunch of people watching that movie quickly and then it fading to nothing over the course of like a month or two whereas startup is the exact opposite of that it's like a whole bunch of nobody gives a [ __ ] for a really long time and then some point 10 years from now everyone really cares but i don't know that people experience those can you imagine actual time lapse of the facebook story like if so if there was a camera mounted on uh mark

zuckerberg's head for like the first 10 years what that would actually be versus what people think it was from watching the freaking movie like again like it was a lot of someone sitting at a keyboard writing code and like staring at graphs a lot and it wasn't that interesting like it was not entertaining not entertaining well and especially in the early days where it was exciting to move to another school like getting another population of 5 000 users was like excite was a big moment inside of the

company yeah well and again if the actual movie would be them sitting at their desk in the house being like typing some stuff into a terminal being like okay we just launched a new school and they're like yay you know what i'm saying like there's no music there's no backing track but they're just kind of sitting there staring at a screen being like okay oh wait something just broke [ __ ] oh hold on sight's down okay all right all right well it looks good sites back up all right cool i'll be back

and so i think movies hurt us here i guess they're good because they inspire us but i think movies mess people up a lot of what they think normal is well the other thing that i think movies screw up is is legal so i remember getting our first angry letter and like during my startup career i went from angry letter from law firm getting sued by the company owned by the prime minister of italy

getting sued by the ufc getting very aggressively invited to testify in front of congress about sports piracy issue like it was like that first letter i thought was a disaster and if only it described all the other [ __ ] that was gonna happen like i might have just quit if i just shut this down and like i remember having this conversation with yc founders now because it'll always be like oh god we got sued and i'm just like

and like welcome to running a business like you got sued like check that box off it just comes with a territory like there's no way to avoid it like there's not there's not a universe where you could do big things and not have these setbacks where folks will tell you you're over folks will tell you you know you're bad and you should feel bad well those are the two maybe those are the two kind of silver linings right i think that the

two several lines like one everyone you respect out there who's doing great things is dealing with all this stuff and so that should make you feel good like every single person you respect who's done something hard has dealt with all this crap and 10x more so you're not getting some hand some bad hand like everyone gets this handle but it's not about you this is just the thing this is just the game this is the thing is that you're gonna every day have to deal with things that feel like

setbacks well and you can get i think that's the second silver lining here is you can get good at this right like you can get good at dealing with these setbacks you can actually get better over time you can learn how to take a punch you can't control whether or not you're gonna have setbacks you can't you have to like let it wash over you but you can completely control your reaction yeah that's 100

like what happens in your brain after a setback happens is within your control and so you want to have acceptance yeah some bad stuff's going to happen and i can't fix it but man you have a lot of choices in how you deal with setbacks and it could be anger it could be fear it could be bartering it could be denial like we've seen it all but this is something that you can practice and get good at and the folks that are great at whatever their thing is again like whether it's athletes or whether it's people putting out music or making movies

like how do they like you can get better at dealing with like criticism or people not caring and like you can just do that that's your choice like no there's no structural reason you can't have a better or more productive reaction to the setback right one this is the only thing that i would add to that is that you're the example like in so many things in startups the punch in the face is the moment where you can still win points how you react influences how your

co-founders react how your employees react influences how they will react when bad things happen to them and so like the the the uh victory you can rescue out of the jaws of defeat for any of these setbacks is reacting in the way that you'd want everyone else around you to act react and like in some fun ways it's like if people see you taking punches while they'll or not take punch as well and one day you're gonna have a large organization and you're not gonna be

there to cover everyone and there will have learned from you they'll learn the good from you or the bad from you but they'll learn from you and i think that's what's fun you know sometimes this kind of stuff happens at yc and it's i actually like i love it like i love when people are freaking out and i'm like oh it's gonna be fine because it's like it turns out freaking out doesn't help anyone and it turns out if someone in the room's like ass gonna be fine everyone like pauses for moments like me

well [ __ ] maybe it will be fine to be really tactical what i what i tell people to do is you do an inventory and you're like okay are we running out of money okay um do we still have a product like are we are we in legal trouble like are we arrested um okay uh like are we am i am i in jail know okay well could could things have been worse like is this recoverable like like you kind of

just do an inventory where you check in you go you know reboot the whole machine yeah and you're like well how bad is this because sometimes it is really bad i'm not lying i'm not gonna lie to you sometimes it's real bad yeah but a lot of the times you do this inventory and you like you're like okay well we have we have three years of runway and you know we can do that okay ah this isn't bad and that that inventory i like to call that the worst case analysis like i actually like to like okay this bad thing happens what are the

five things we're most afraid of now and like when we say them out loud do they just sound less scary because they didn't happen it's like oh all of our customers are going to leave have they have they left has anyone even emailed you saying they want to leave like no learn how to get better at this because this is the game learn how to take a punch learn how to get good at doing hard things that's that's the message yeah and it's weird because it's a super power right like in some weird way the coolest thing

about a startup is that like if you even if the company fails you can get this superpower i mean it's great like you this is a great person to have in your family this is a great person to have in your friend like someone that's a rock yeah someone that will listen like oh something's bad let me listen like let me assess the situation tell me what's going on okay so this okay that all right like i could see why this is a setback but you know seems like everything else is going okay so like that's a valuable person to have around

oh man all right well to wrap this up bad things are gonna happen your reaction is completely under your control use it as an opportunity to get better at taking punches and be the example for the people around you by uploading yourself you can uplevel your team too all right man great chat sounds good thanks man [Music] [Music] you
