0:00

Paul: sometimes I just, I look at all these other founders, right?

0:02

Jeff, mark, Larry Sergey.

0:05

Our peers and I just think, man, those guys got so lucky.

0:08

They really did. Yeah. It all just comes down to that first idea.

0:12

They were just at the right place at the right time. It's crazy how nobody thought to put stores on the internet.

0:19

Like of course. That's gonna be a trillion dollar business

0:22

welcome to Bad Startup Advice, a parody of the ego, bloated, founder worshiping

0:26

world of venture backed tech startups.

0:30

Each episode begins with authoritatively phrased, but ironically bad

0:33

advice on difficult and nuanced issues every founder faces.

0:38

After the jokes we put our serious hats and discuss the topic more Honestly.

0:42

I'm your host Paul. I'm the founder at Keeper.

0:45

I'm an innovator. I'm a visionary. I'm a tech messiah.

0:48

I started coding when I was six years old. Anyway, with me, is David also founder at Keeper?

0:53

Yeah. David: I'm all of those things as well. I started my first lemonade stand when I was five years old.

0:57

I haven't really looked back since. Paul: Yeah. Did you end up selling that business

1:00

David: or yeah, I sold it to my mom. Yeah. 7, 7, Paul: 8 figures.

1:03

Yeah. Something like that. Yeah. Yeah. It's not bad.

1:05

Not bad. For a first business. David: Yeah. You gotta sort somewhere.

1:10

Paul: episode number one. Your idea is the only thing that matters so building a startup

1:17

is a highly linear process. This is something people don't understand, right?

1:21

And the first point in that line is having the perfect startup idea it's

1:26

like finding true love . You see it from across the room, it touches its hair and

1:32

you don't have to think about it too hard. David: Everyone Has their own perfect startup idea and really only one.

1:36

That's the thing. Yep. Yeah. If you missed your chance, it's over. Yeah.

1:39

You might as well just be middle manager. Generally speaking, there are, there are three real time

1:44

tested methods here, right? Yeah. So the first one is the god mode spreadsheet.

1:47

You got your roses with with all of the solutions, Yeah.

1:51

nlp, Paul: ocr, social network, cryptocurrency, distributed ledger,

1:54

David: those are the tools that you're toolkit. Yep. and. in the columns you have every possible industry,

2:00

Paul: the bigger the better, right? Healthcare, shipping, logistics janitorial services, productivity.

2:05

Yeah. David: Think outside the box, right? China. China's.

2:07

China's a column. China's a good one. Yeah. Paul: And then you just play bingo, right?

2:10

Facebook for dogs David: Like n o P in China?

2:13

Paul: Or marketplace for toiletries, right? Yeah.

2:15

It just becomes really simple to mix and match.

2:17

You wanna have a hundred rows and a hundred columns at least.

2:20

And then at that, it. That's where the art comes into play.

2:24

, what I like to do is I put it up on my screen, and then I just take five

2:26

steps back and I take off my glasses.

2:30

Yeah. And I just I just see if anyone.

2:33

Pops David: out, and this is where Zucker brings a genius, right?

2:35

Like that spreadsheet's gonna be huge. So really what you wanna do is put on your Oculus yeah.

2:38

Get that spreadsheet in the metaverse. So you create a hallway of ideas, ideal hallway, and so you're just out

2:44

there you're, you have your goggles on your hands and arms are in the air.

2:47

Yep. And you're just feeling out Paul: literally it's like twister.

2:49

Whatever your. Is on. That's a good idea.

2:52

That could be the next billion dollar. Yeah.

2:55

I think the other. To keep in mind, David, I really like to advise the method where you pick

3:00

something, you know nothing about. Yeah, but it has a large market size.

3:03

Think like hundreds of trillions of dollars. Because you are a tech genius, right?

3:07

You're gonna step into that industry and naturally be an innovator.

3:10

Whatever you've learned in the past about an industry, it's gonna hold you

3:13

David: back. Throw it out. Yeah. Right away. Yeah. It's why the world exists the way it is now.

3:16

Yeah. And not the way it should Paul: be. Everybody else is an idiot.

3:19

That's the thing to remember. If you're gonna be a visionary founder

3:22

, yeah. Okay, So you've got your perfect idea.

3:25

David. What do I do David: now? Yeah. So the next thing you do is you don't tell anyone.

3:29

Don't tell. Yeah. That is a classic founder mistake, right?

3:34

Oh my God. You go and tell your, I don't know, your wife, your husband.

3:37

Yeah. Your close friends. Don't do it. Next thing you know, you have a dozen competitors.

3:41

Yep. Paul: cuz the way that things work, right? Everybody wants to be a founder.

3:44

Right? Everyone worships us. So I think if they find out that you have an idea, right?

3:50

They're gonna, they're gonna quit their jobs They're gonna go and build your dream.

3:55

David: Immediately it becomes a b line, sprint to the finish line.

3:58

Even Paul: investors, a lot of investors actually secretly want to be founders.

4:01

David: Yeah. That happens all the time. They're all the time. Yeah. This is classic founder tragedy.

4:05

That's why Paul: I never say what we're doing. It's always

4:08

David: stealth. Ideally, you don't even tell your users, your employees, the best companies.

4:12

Yeah. Like they pivoted, they claim to have pivoted.

4:14

Like you have your Slack they were working on the video game.

4:16

Next thing they're messaging app. No, come on. They knew what they were doing.

4:19

That is genius. One of the stealthiest moves

4:21

Paul: I've seen. Yeah. All right, jokes aside, start up.

4:28

Ideas are hard, there's no formula. I do think there are a few principles the first principle is founder market fits

4:34

David: so contrary to our bad advice from earlier, your individual

4:37

expertise does really matter, Paul: I think this is a common mistake that I know I made

4:42

There's this assumption that just because I don't know about something,

4:45

therefore I maybe were the first ones to think of it and that's just never true.

4:49

. Yeah. If you're actually the first one to think of something, it's probably idiotic.

4:52

That almost that never happens there are so many founders just try

4:57

Googling . I know it's scary when you have an idea you wanna pretend

5:00

like it's gonna be the only one. It's actually crazy how often that happens.

5:03

David: Yeah. I go out there and I'm like, okay, what? This thing should exist Does and it does

5:07

Paul: exist. It does. Of course it exists. Of course it does.

5:10

Yeah. Yeah. And so that's why there are thousands of travel apps and food delivery

5:14

apps and note taking apps, and. Marketplaces for task rabbits and, just there's a lot of founders.

5:20

Yeah. So yeah. So you sit down and you think, what is my uniqueness as a founder?

5:23

and ideally it's uniqueness from other founders, right?

5:26

Remember the founders are mostly, privileged straight,

5:29

single males in their twenties. So think about what makes you different yeah.

5:33

It has to be some uniqueness. So make a list of your.

5:35

Past work experiences. What did you do?

5:38

What frustrated you most about that work?

5:40

Hobbies. I think the second one is staying humble.

5:44

And the theme here is, there's this inherent, drive to just ignore,

5:50

like not actually research it David: There is a tendency, I think, for folks that rush to

5:54

build , and it makes sense, right? It makes sense. Like you're, as a so founder, you, you are a builder.

5:58

Paul: It's a lot easier to just be building something than staring into

6:02

the abyss of wow this might be hard.

6:04

But the thing is, you have to do both . You have to spend some of

6:07

your time staring into the abyss. And you have to build it.

6:09

You can't do one or the other. Remember that ideas evolve.

6:12

Whatever you thought, sitting your ivory tower would solve a particular problem.

6:17

There's a good chance it doesn't. First of all maybe that problem isn't actually a problem, or maybe

6:21

the solution is way less interesting

6:24

David: than you had hoped. And this kind of leads into our next point, which is

6:26

contrary to the secrecy at all. At all costs method.

6:30

You do actually, what you wanna do is actually talk to everyone.

6:33

Everyone. The reality is that, no one wants to steal your shitty idea.

6:37

No. Even the best ideas, like at some point you're gonna have to

6:41

ram it down people's throats. yeah.

6:43

And, , and so what you really want is as much feedback as you can get.

6:46

Paul: Yeah. I think the key to doing this successfully, is a skillset that

6:53

think is maybe the most underrated as a founder that I know I have

6:57

struggled to build, over the five years that we've been doing this.

6:59

But it, but is the most important skillset in my opinion. And it is, separating your ego from the business, right?

7:06

It's knowing that, okay, I'm gonna pitch. And maybe I'm wrong, but that doesn't make me an idiot.

7:11

That doesn't mean that I'm stupid for having talked to all my friends about

7:15

this, and then two weeks later be like, psych that I'm not doing that anymore.

7:18

It's okay. Yeah. It's hard David: though because obviously there, there are times where

7:21

you've, you feel like you've. Sunk, yeah. A decent amount of time and effort.

7:24

And so if the feedback comes, back pretty negative it can hurt, but it's

7:28

important to keep that perspective. You're trying something different.

7:31

Yeah. Difficult And you have to be open to the possibility

7:34

Paul: you're wrong and you are gonna get criticism, right? Unless they're trying to be nice to you, which is a useless conversation,

7:38

you're gonna get some version of, oh, the market size isn't big enough.

7:42

How are you gonna make money? What about the competition?

7:44

You're gonna get some version of that and so if that dissuades you, that's

7:48

probably a sign that you shouldn't do it. you should get to a point, you should talk to everyone about it.

7:52

Where you've heard all the, yeah, you've heard all the responses.

7:55

You can answer any of those questions yeah. You've got rebuttals and you're comfortable with the fact

7:59

that no one actually knows. Neither do you this is the risk you want to take.

8:03

Yeah. The, David: Realistically the best. Spot you can end up in is there are a couple of underlying

8:09

assumptions to your idea Yeah.

8:12

That are somewhat unknown and you have a hypothesis or thesis on

8:15

the market or a particular angle and you're willing to defend that.

8:20

And some folks are gonna disagree. Oh yeah, they should.

8:23

Paul: Yeah. The other thing you'll wrap your head around as a early stage founder is

8:28

just the dynamics of venture capital. Unlike a lot of activities in your life leading up to this

8:33

point that had a high chance of success, and some predictability.

8:36

This is an activity that is designed to have a 5% chance of succeeding

8:41

and turning into something valuable. Yeah, if you're lucky, I think if you're lucky, 5% chance what?

8:45

Have you ever done anything in life that has a 5% chance of success

8:49

but committed wholeheartedly thrown away your life for this thing.

8:52

You don't do that. And so it's just a very weird thing to get used to, and 5% is great by the way.

8:57

Because, that's why Inve venture capital exists is because that

9:00

5% has an outsized, a hundred x return, which makes the EV worth it.

9:05

Yeah. David: And that's another important point, which is you don't need

9:07

to prove with certainty that you're gonna make it right.

9:10

Yeah. The flip side of this is VCs know that the best a startup could do

9:14

is have a 5% chance of success. Yep.

9:17

And so it's okay if there are serious unknowns.

9:21

For a vc. It's fine they have their risks spread across a portfolio companies.

9:25

Yeah. And so you shouldn't feel. you need,

9:29

Paul: Certainty. Yeah. I actually, I think it's much more impressive to just dig up the bodies

9:35

and put 'em right in front of the person you're talking to and identify them.

9:38

Be like, look, here are the three reasons not to invest.

9:41

I used to pitch like this during seed, yeah. You shouldn't invest if you don't think that, the market size is big enough

9:46

just pull those things forward and have a mature conversation about it.

9:50

Because I think what happens to a lot of founders is that they try to hide

9:54

the things they're uncertain about and it causes their pitch to be weak.

9:57

It makes the person listening to 'em not trust them because they can tell

10:00

that you're trying to hide something. David: A lot of times the investor can tease out those concerns and

10:05

so the fact that you're trying to sweep them under the rug, in the

10:08

best case, makes them not trust you.

10:10

But in the worst case it means, they think you don't understand your own business.

10:13

Paul: Yeah, I feel like early stage investing is 90%

10:15

psychology and 10% actual logic.

10:18

No one actually knows what's gonna work and what's not gonna work, but

10:21

they are reading you as a founder, are you trying to run away from the truth?

10:24

Are you lying to yourself? Are you, able to stay confident in the face of unc?

10:30

that matters in many ways. A lot more than the idea.

10:33

Yeah. So we can talk about a few more specific things.

10:39

When we went through YC in 2019, there was definitely a theme in what investors

10:45

wanted to invest in always gonna be true.

10:48

And so in our case, the theme that I, that shocked me as a founder

10:51

was that basically 80% of the companies in our YC batch, were b2b.

10:56

And I remember thinking like, like, why? But you would think that more people would just build for the consumer.

11:02

Like it makes sense. There's a lot of huge consumer businesses.

11:04

Like why build b2? And I think this comes back to this fallacy that we alluded to in the bad

11:09

advice section, which is that, a good startup idea isn't just like some gap

11:15

in the world that you want to fill. There has to be a reason why it's venture backable.

11:20

And it just so happens that B2B is a lot more venture backable because

11:23

of the network effects and bottoms up approach that a lot of enterprise

11:25

software could take, which just didn't exist in B2C in the same way.

11:28

Yeah. Keeping in mind that just because there's a problem, and just because

11:32

you have a better solution doesn't mean it's a good venture back.

11:34

But David: what are your thoughts? So what are your thoughts on catering to that?

11:37

So there's a world in which you say, look, here's what VCs

11:40

right now are investing in. Do I want to proactively pursue a business idea in that space, or

11:46

is that kind of an independent. Ax axis.

11:49

So my, my example here is in 2021 there was definitely a flurry of startups

11:54

that kind of did Neil Bank credit card?

11:56

FinTech and these companies raise a ton of money. Yeah.

11:58

But now they're all in a dock fight. They're, the competition is super stiff.

12:02

None of them have any moat. And it's yeah, they raise money.

12:04

But are they actually better off for Paul: it? Yeah, hindsight is 2020, but I'm trying to think of the counterpoint.

12:11

I'm trying to steel man this are there cases where everyone was

12:14

doing something and you should too, delivery apps, , probably not.

12:18

Are there any cases David: If you can actually win in the space, the thing is there

12:22

is gonna be a winner probably. Yeah. And so you're gonna get this survivorship bias where the winner is gonna go out

12:28

there and say, look, I was, that's true here at the time, the trend materialized,

12:33

Paul: so it's, yeah, I guess that's true. Amazon wasn't the only, there were a bunch of e-commerce startups at the time.

12:38

I think. You better be confident in your abilities as an operator.

12:43

In those industries, oftentimes the competitive advantage is raising

12:46

more money and hiring better people.

12:48

And so if you have a competitive advantage in those things, then yeah, go for it.

12:52

And, David: and being a great operator that could go to the market.

12:54

It's a dog fight you have, it's a dog fight. Yeah. It's about getting market share.

12:57

Paul: I think that's a fallacy that a lot of people make because they

12:59

think oh, an idea is as simple as just picking a trend and then pitching it.

13:02

Technicians will always frame a fundraise as this is a a chat, G p T based concept

13:07

marketing, vertical SaaS platform. And you, and it'll be framed as they must have just started

13:12

with , what can we apply chat TBT to?

13:14

The hammer looking for a nail. But I think the much more realistic thing that actually happened with Jasper was.

13:19

They were experts in selling to content marketers and building

13:23

software for content marketers. And then they just happened to apply this tech to it.

13:26

so I think it's much, it's a much better idea to start with a problem than the solution

13:30

David: based. It actually happened for us too. So we started with like finding write offs for freelancers.

13:34

And we do use GPD three now and so it was a nice case where this was a tool

13:39

that could augment our product, but definitely not the other way around.

13:43

Paul: I think it makes fundraising a little bit harder because investors

13:46

don't have, they can't look at someone else that raised on these

13:50

terms and make a comparable deal. They have to evaluate it from quote unquote

13:53

David: first principles. Paul: So let's talk about, so you have your idea

13:56

let's talk about what that moment feels like the sort of true love

13:59

moment of, of being a founder. what does that look like?

14:03

What do you do next? How do you know David?

14:06

I don't think you David: do know. Yeah. I think I think there was a lot of uncertainty the whole time.

14:10

Yeah. , I don't know,

14:13

Paul: years, three years, . David: Yeah.

14:15

I think it's actually a fallacy to to say, oh, at this point in

14:18

time, yeah, I had it written on my napkin and that's when I knew.

14:21

Yeah, I think you have the idea.

14:24

You've talked to people. It seems like there's something to it, but there are some obvious.

14:28

Big concerns. Yeah. You go and look at those concerns you alleviate some of them new ones come up.

14:34

It's just a constant iterative Paul: process. Yeah.

14:36

And I think that the challenging thing, we had this moment where

14:41

we had raised money, right? And we had this idea and it was like, all right, it feels like you're

14:44

sitting on a secret and the secret. This is a stupid idea.

14:48

. Yeah, exactly. And think it's important to just, it took us a while, but we eventually had

14:54

a narrative, an internal narrative, where we picked a direction.

14:57

Our job is to run in that direction and find out if there's

15:00

anything at the end of that road. David: Exactly. I think this goes back to the 5% probability of success.

15:04

Yeah. I think it's okay if you yourself believe that it's only, hopefully you

15:07

believe it's higher than five, you can have ex extreme doubt yourself about.

15:12

Yeah. Yeah. Paul: And that's not, the other tricky part is obviously as a

15:15

founder you have to be persuasive. And if you're gonna get anyone to, join your shitty company, you

15:19

have to be passionate about it.

15:22

And the trick there is don't try to pitch your solution . Pitch the problem.

15:27

Yeah, pitch the problem. Cause that's the part that's actually true.

15:30

You don't really know if your solution is gonna work or not.

15:32

You can talk about like the traction you have and the vision you have

15:35

but spend most of the pitch getting 'em excited about the problem.

15:39

Yeah. That's the way to stay authentic while. I think what a lot of founders do is they make the mistake of thinking that

15:43

their job is to be heman for everything.

15:46

Like they're infallible. Their solution is perfect, and no one will join them unless they also

15:50

understand that the solution is perfect, which is just not true.

15:53

You're just, you're setting yourself up for failure. Yeah.

15:55

Yeah, I think you're right David. You really won't know.

15:58

We have this moment where we, our retention just wasn't good.

16:02

Yeah. Like really bad. Like people, people were just leaving in drove.

16:05

And we have this, leap of faith moment where we're like, okay.

16:08

I guess if we just keep improving the product.

16:10

Yeah. Is this fixable or is this existential Yeah, at some point.

16:14

Yeah. I guess they'll stick around and Yeah.

16:17

And, look, we're not some shining, example of the perfect unicorn, but it was true.

16:21

Retention did improve and you don't know until you.

16:24

Yeah. And then of course, this is the classic, strong opinions, loosely held thing, but

16:28

some amazing companies were built who did give up on their initial idea, who stopped

16:33

running in a direction and pivoted.