# Dalton & Michael: Simple products that became big companies

**Author:** Dalton Caldwell, Michael Seibel
**Type:** Video
**URL:** https://www.ycombinator.com/library/DT-dalton-michael-simple-products-that-became-big-companies
**YouTube ID:** G7TMqY7gkGY

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Dalton Caldwell and Michael Seibel talk about OpenSea, Gusto, and the importance of building simple products that solve
a real problem.

## Transcript

a product that doesn't work with lots of features is infinitely worse than a product with one feature that works and again like let's play that out let's play that out right imagine if it's like they were like you get health care and you get benefits and you get 401k and payroll and none of those features work and sometimes we lose the money yes it's like you would hate them you would hate that that sounds like verizon or something you know exactly hey this is michael seibel with dalton

caldwell and welcome to rookie mistakes we asked yc founders for their rookie mistakes so we could share them with you and help you avoid them here's the first mistake that was written in in my company we tried to accommodate more than one use case in our product before nailing a single use case and proving out that they even existed business serving that customer yeah this this is super common it's definitely a problem we call this

boiling the ocean right it's you're trying to do something that's basically impossible or intractable and all of your instincts are to build a complete fully formed product without getting a single user in your mind you have this elaborate plan and so your your plan to start the elaborate plan is to build it all at once before getting a single user i think that every founder starts their company with the lie in their head that they know about what their customer wants and they

know how to solve the problem and the more you build before putting your product in front of a user the more you just let that lie go wild whereas as soon as you get something in front of a user you can actually learn how many of my hypotheses were correct and how much of this stuff was just the lie that got me started doing my company a useful lie but maybe not the best lie if you want to solve your user's problem i also think there's a little bit of i'll invent the term google itis like people looking at companies that they

use today and not understanding what they looked like at the beginning yeah they're just looking at google and a current product you're like oh we're the next amazon so we're gonna build everything amazon has and not hey when amazon started it was like a really simple website that just sold books it didn't do anything else like i think it didn't even do that that well wasn't that fair let's talk about some other examples though you were mentioning that open c is a good example of something that

started super simple yeah i mean look open c is a company in the zeitgeist it's really famous it feels like it came out of nowhere if you're like a like a normal person you're like wow open c what a huge deal well open c was in yc in 2018 and you know it was a rough start they they changed their idea they were working on something else to begin with and they pivoted into open c and they actually spent something like a year to two years grinding it out with this really simple

website that just let you buy and sell nfts and like barely worked and they shipped tons of features they shipped like once a day or once a week constantly they didn't build their own wallet like if you use openc today you'll notice this you have to use a third-party wallet there's all these other things they didn't build and by grinding away and being super focused on the simple use case they got something that people wanted they got network effects and then boom we all woke up one day and this is one

of the hottest companies you know in the world and everyone wants to invest and you know they're worth billions of dollars well don't forget the two or three years they were grinding away in obscurity just trying to make the dang thing work doing the simplest thing that had basically no features the feature was a website to buy an nft and transfer to someone else you know what i'm saying it still has a lot of work to do on the basics before they add really complex features there's a lot more basic work to do on that

thing and so again like the story here is the reason that thing worked is they started simple and they made the simple thing work and now they're adding more complexity to it and so if someone wanted to like compete with them or make an nft startup they should be doing the simple fundamentals first and not try to get feature parody with with all these other companies first you know i totally agree i remember you know when gusto um went through yc because they were

actually in my second batch in winter 12. and another example of you know if you look at gusto today you would say oh you can do payroll you could do benefits you can see your org chart you can do 401k like it's like this tool chest full of amazing hr tools when gusto started it was a company named zen payroll it did exactly one thing your payroll back then if you didn't use zen payroll you'd have to call up adp

and adp would bring someone to your office for you to sign stuff so that you could run payroll and then every month you had to call someone on the phone and say yes i do want to run payroll this month like like that was state of the art and then gusto said we can just do that online and all that's all it's going to do and you're going to love it and you're going to sign up and you're going to forget about it because that's what good payroll is right you forget about it and so like imagine a version of of gust or zen

payroll that had a lot of features but constantly didn't pay your employees like like a broken version a product that doesn't work with lots of features is infinitely worse than a product with one feature that works and again like let's play that out let's play that out right imagine if it's like they were like you get healthcare and you get benefits and you get 401k and payroll and none of those features were and sometimes we lose the

money yes and it's like you would hate them you would hate that that sounds like verizon or something you know like exactly that's a great way to learn a hated company is to have a lot of features that don't reliably work all right here's the next one that was written by yc founder um they wrote we copied another successful business model from an overseas market and wrongly assumed that product market fit was a given if the product works in

country x it's going to work in country y we scaled up hiring quickly and burnt a lot of money before we realized that the users we were selling to did not want our product this is something that happens so commonly and what's tricky is that investors often like funding these ideas because they're so simple right this is a very simple thesis if blank works here it should work there so oftentimes these companies like get money but then fail after getting money how

have you seen this i think i think what we want to believe is banners and this applied to me too is that by getting validation from investors or the press or my friends or employees or winning a startup competition whatever that meant it was good and that that was the validation you know hey i've got i've got validation and it's pretty frightening to realize that you can get validation from all

those things and it could still not work you know and that getting the stamp of approval like ultimately you're responsible for the thing works or not and no one it's like no one else's problem to make it work other than the founder you're kind of you're kind of on your own on this one um and so it's almost like it's like thinking that if you can pass the driver's license test to get a driver's license it means you're a good driver like i think all of us that have a driver's license know

you can still be a pretty bad you know there's a lot of variation in the quality of driving and lots of people can get into trouble with their driving habits even though you have a driving license there's no and there's no mechanism you know unless you get pulled over like things have to go bad or you get unlucky for an authority figure to get involved but for the most part you can get into all sorts of trouble even though you have a driver's license that's how i view this is that you know you can have your startup license hey i have a website i got you know i got an article i i raise some money but man you can really do poorly

and no one's gonna stop you yeah i think this also comes from historical context like by that i mean i still think that most founders are kind of looking back to what's worked in their past and almost everything that's happened in their past almost everything they've learned they didn't have to learn from first principles they didn't have to observe personally right you learn physics from a physics teacher and so i think what's so tricky is what we're basically saying is that like all of the ways that you learned in the past

don't work here you actually have to go observe the problem talk to the people who have the problem try to figure out what's going on and iterate whereas like no one learns things that way in school like no one's like hey like we're gonna drop a rock off of a building see it fall and then figure out what happened right you never learn physics that way and so i think that what happens is that when these founders go into startups they're looking for the teacher is the teacher is the cheat right like how much harder would it be to learn physics without the teacher right it's

funny like you know people people email you and me sometimes after these videos they watch these videos and our whole point is go talk to customers go figure it out and they email us and they're like can you give me advice like they kind of aren't getting the video the point of these videos at all which is what we're saying which is a little bit frightening is that authority figures don't have the answers for a lot of these questions and if you're looking for authority figures to tell you your idea is good you still aren't really getting the point of these videos

we're kind of telling you you have to go get ground truth answers from customers and that you really can't substitute anything for ground truth answers no it doesn't suck yeah that sucks sorry i wish i could tell you that i had all the facts i feel like we can't make it not suck but isn't it nice that we're just being honest with you and being like this is exactly how much it's gonna suck you know it's not

it's not easy what i find distressing though is how investors often get this wrong investors often believe that founders don't need this ground truth or you can just take solution from a and put it in place b and work give companies money those companies start doing company building hiring the exacts hiring the team and this happens why i see companies all the time you know you talk to them two years later and you're like you know they come to you and they're like it's not working and this happens why i see companies a lot they'll go raise a lot of money

ignore us for two years come back when it's not working but they have a team of 50 and be like michael dalton like what happened it's like well did anyone like your pro like did you solve any problem for anyone like or like let's look at a core stat right like you charge people what's your revenue look like you're you know and then well we're not really focused on revenue right now we want to grow we want to grow we have to increase the nu we know this company personally i won't say it is we have to increase the number of customers who could buy us

before we increase the customers who do buy us it's like well it's a great logic yeah it's good i do what is comforting to me though is that when the runway gets down to about 12 months the magical thinking starts fading you know suddenly it's funny don't you wish you could bottle up like if you see someone's performance say there's you know you have 18 months of cash the first like you know 15 months

when someone's back is against the wall the quality of their decisions get much better if there is a way to like gamify like if you bottle up the quality of execution and thinking and like i don't know we see people do great work it's just you wish they would do this great work when their back is not against the wall again it reminds me of being in college or something yes where the papers do yeah and you know you didn't go to the class you didn't show up to anything and then like in the final 24 hours you like

you do great work but you could have done that the whole time and not had a whole fire drill right is that a shame it is a shame you know the only solution that's worked for me is just like do companies that have such a hard time raising money that it's always a fire truck um but yeah you know it comes back to you that like the best founders are disciplined what you talked about is that's discipline right that's doing the right thing when no one's forcing to you or no situations

forcing you to and i think that too often genius is mistaken for discipline it's like you know a lot of people think oh this person out executed all their peers because they were smarter and it's like that assumes the peers were actually working on the thing they said they were working on as opposed to like hiring and going to conferences and talking to reporters disciplined to avoid the distractions um i mean that should be comforting a lot of people it's like yeah for every ounce

of discipline you have you can probably lose five ten ounces of intelligence and still outperform you know yeah that's a great point it's funny how many people that we see again let me think about how to phrase it with like you'd think they'd be really good at a lot of things but they i'm not sure what they do with their time they have a great resume but it appears they just don't really do work and the people that sit down and do the focused work and again we all know what this is like and think back to college

yeah you know lots of reasons to not work on something um if you could bottle up those moments where you're actually doing focused work the people that succeed just seem better at that that's actually the criteria that they seem better at if you if you looked at their calendar if you shadowed them or something the folks that are really good at this are just better at doing focused work there's kind of nothing else i mean at least yeah and by the way you can't you can't really change your raw intelligence but you can get better at this like this is

a little bit like working out like you can you know if doing focused work for someone who likes to procrastinate is a little bit painful the more they do it the less painful it gets you know and so hey you know smart people certainly have an advantage but man hard workers hard workers are dangerous [Laughter] hard workers are dangerous lazy people are um you know as a startup founder lazy people lazy competitors are your friends

yeah it's good when your competitors are focused on the wrong things yeah um along these same lines like i wanted to i wanted to talk about what we learned from uh hardware crowdfunding a little bit yeah so so here's the here's the issue if you need to manufacture a lot of a product it's much cheaper to do a big order in quantity right follow me like say we want to let's talk about t-shirts let's say we want to create dalton and michael t-shirts it's much cheaper to do an order for 10 000

than it is to do one at a time right of the same t-shirt ten thousand seam t-shirt yeah makes sense right and so crowdfunding and kickstarter made sense because you could raise you could sell the t-shirts at once we actually had a yc community that's called teespring didn't work out but it was like a way to order a bunch of t-shirts and a quantity and um then you get a big pile of money and then everything goes perfectly and you engineer it and you manufacture the product and all the backers of your kickstarter get the product and everyone's happy and you write you know you right off into the sunset right that's how it works right michael like

that's exactly and then you then you're apple again i don't think people are going to get the irony we're being i'm i'm being facetious for my foreign friends that don't get the irony so in practice michael what actually happens what do we see with all these companies at crowdfunding no idea how to build it no idea how much how much building it would cost no no idea how much the thing should cost so they're charging users for a product that they don't even know what the right price is the people who buy it have no idea how long it's going to take to build which

is only matched by the people who are building it having no idea how much it takes to build and we haven't even gotten to the best part no idea whether the thing actually solves the problem for the person but a lot of money up front and god like a lot of expectations a lot of untested plans you know well that's that's what's funny is like when you think about it it seems like the greatest thing in the world to be able to raise money from a crowdfund for your hardware company but in fact there's no

sure way to make strangers on the internet hate you like like it's a really great way to become like infamous on the internet is to be like you know here's here's a a cooler with a blender on it and it's like 200 and back my kickstarter and then you like don't ship it and like you send out updates the dog ate your homework and oh it's chinese new year like i don't know like happens and like man people don't people really

hate you you're like a villain for like and thousands of people spend a lot of time trying to like track you down yeah and get the refunds and calling you a scammer like it kind of we've seen this ruin people we knows lives doing this kind of thing i think that more and more there are other areas of the startup world that are starting to resemble this kind of model and i think that it's hard man it's it's so hard because i remember the run-up to hardware if you're a hardware company everyone else

was doing this you look like an idiot if you weren't crowdfunding you know and so like it kind of goes back to the like hey man sometimes when everyone's doing something it doesn't mean that's gonna work like yeah crowdfunding was what like a six seven year cycle yep and i think it still could be cool like like there's situations where it's a it's a tool i just think i think our startups seven eight years ago thought it was a panacea they thought it was the solution yes like if you were a hardware company the only way to do it was to do a crowdfunding always

right and now it's just it's a tool that you could bring to market but honestly you know what the real story here is is usually do it after you've shipped and manufactured a couple of versions already like i think best practices if anyone here is doing a hardware startup um think best practices is you don't do it at the early stages and you do it later when you have like v2 v3 and you're ready to manufacture at scale because then you won't create thousands of enemies on the internet that think you're trying to scam them you know and again like all these people

had good intentions i don't think anyone like no one was actually trying to scam anyone but intent doesn't matter to strangers on the internet does it michael no you know there is one better strategy do a software company a lot easier a lot easier yeah and then and then in all things lines you know clearly there's a lot of stuff happening in crypto and this relevant to this but just just be aware if you take money from people at scale yeah on the internet they rightfully will hold you accountable and i just don't know if peop it looks like people

are handing out free money on the internet and i get why people want that just understand that there's a cost and if people think that you you know rugged them if you're if you rubbed the people with your thing you know it's gonna be bad for your life right like there's a cost like there's no there is no free lunch i think in this sense and so you know just be aware of that i i don't and again i know people that have been on the other side of this um it's not great if they start trying to

track you down and it can change your life forever i mean like literally forever like like there are a few things in the startup world that kind of are like one shot kill and and you know this is one of them you screw up with enough people's money it never leaves you like you get that permanent wikipedia page that's not what's not what you want all right well that was a good wrap up great chatting dalton

you
