Save Your Startup During an Economic Downturn

Dalton Caldwell and Michael Seibel discuss Paul Graham's essay "Default Alive or Default Dead." They share strategies to cut your company's burn rate and keep your startup alive to see another day.
Paul Graham's essay: www.paulgraham.com/aord.html
Trevor Blackwell's startup growth calculator: growth.tlb.org
Apply to Y Combinator: yc.link/DandM-apply
Work at a Startup: yc.link/DandM-jobs
Chapters (Powered by bit.ly/chapterme-yc) -
00:00 - Introduction
00:23 - Default alive or default dead
02:14 - The calculator
02:59 - Founder's distraction - Fundraising game
07:32 - Fundraising leverage
09:57 - Math are different
11:29 - Kill or cure
15:37 - The fatal pinch
19:22 - Tough decisions when default dead
19:40 - Headcount
20:46 - Ad Spend
22:50 - Raising prices
25:16 - Personal bankruptcy - Taking a big hit to growth rate
26:28 - Twitch's pirate ship
32:22 - Takeaways
32:27 - Survive to thrive
33:15 - To burn or not burn
34:06 - 10x better if operationally intensive business
#ycombinator #startups #burnrate

[@ycombinator]

When was your startup on the verge of dying? What methods did you use to save it?

[@quasa0]

A question for you: is there an email to propose video topic ideas?

[@ycombinator]

@@quasa0 Not currently, but you can add topic ideas to a KZbin comment (we try to read most of them)

[@quasa0]

@@ycombinator Sure! Would be cool if there was more coverage on the struggle of switching from "future founder" to an actual founder. All those mentality of "find the problems, not ideas", "find problems by working at the forefront of your industry" kinda don't match up with like "leave your job at FAANG". There's lots of smart people, engineers, etc. who are binging through your videos and reading books (myself including) but are still lacking the idea of how to do begin doing things on their own. I usually tend to either overthink all the struggles that are in the way of an idea, or being stuck in this "i have no idea what problem to solve that wouldn't be 1 to n but rather 0 to 1 thing" The midwit meme basically

[@quasa0]

@@ycombinator this is mostly the struggle I think. Once you actually started doing something and you have some knowledge on best practices (like lean startup) you can keep on going on your own, and most of founders don't even watch yc videos as they don't have time 🙃 So yep would be cool if you could focus on greenies founder wannabees

[@vlogmoinc5597]

Watch y combintor videos

[@zeedeo_]

Dalton and Michael bring so much energy and a deep understanding and approach. Thanks for sharing!

[@salv9]

These videos are incredibly helpful and give a brief moment of therapy… a moment of hope/escape… one of my favorite parts is when you explain trends from what other founders say/do/ask in your office hours. Personally find it comforting when others worked through these things… too much exposure to fake success or survivor bias content out there!! We never get to hear about the challenges. We are working so hard to get to product market fit… we’re bootstrapped and now are low on staff with underpriced product to “learn” from our customers as we add more features… We decided to explore taking in capital. I will follow this advise to carefully spend the money if we do raise on perfecting product market fit and not just blowing it all in non-essential hires. Personally I would love more on - product market fit - bootstrapping - operation hires if you are a visionary persona (according to EOS) - more on what to do when you are turning the ship to avoid dying - leaning into strengths and handling weaknesses - frameworks on how to focus in times of stress or when feeling overworked - more on mental health

[@MukundaKrishnaswamy]

Glad to see that you guys are finally talking about building responsible businesses. This addiction to OPM and its glorification by the investment community has pushed many solid business ideas down the drain. In the last 24 months, many startup founders were more focused on raising their next round rather than figuring out their product and the business model. Glad the easy money dried up! Let us get to the basics.

[@Okeh_Emmanuel]

I haven't missed a single episode with Dalton and Michael. You guys bring the P into Practicality

[@ManiDoraisamy-GDE]

Paul Graham swiped clean all the important startup advice. Still, when I hear it through the lens of Dalton and Michael, its new. Especially the part where Michael explains the come to jesus moment at Twitch is both honest and hilarious. Its like PG essays are theory and these videos are practice.

[@Neonb88]

Yeah it's always super cool to hear about their lives, the stories of other founders they know about!!!

[@kc0tlh]

This was an EXCELLENT breakdown of this topic. Thanks Dalton and Michael!

[@bloodaid]

My startup is default alive, per your definition. I'm glad I'm in this position.

[@Sondre7]

Love these conversations, thank you so much for making them, some of the best on the internet

[@Withlindaandrews]

Thank you for keeping it real!

[@romeo72899]

Thank you for doing this. Really appreciate it

[@MatthieuLepineFr]

YC: "know your users. Build something they want by bringing value to them." Also YC: knows us, founders (YC users) better than ourselves. Makes us want to join YC by bringing value to us. Good job YC 🤓

[@dosesandmimoses]

This is a great conversation about the balancing act that entrepreneurs walk with financial viability!

[@hmak2009]

Amazing content! These sessions are the Buffet and Munger AGM for startups.

[@maestbobo]

jesus christ... what a cringe thing to say

[@yorimoigig]

Here comes my favorite weekly dose of wisdom!

[@markg5986]

This. Is. AWESOME! Thank you so much.

[@margaretcezar1109]

Oh thanks for the heads up Dalton and Michael. Yes. I'm fine just grateful how lucky we are everyday compare to others. 🙏

[@BladeofLight1996]

Timely video given current macro conditions!

[@derek-yap]

Thanks for the honest conversation. It makes me feel better about staying lean and not being focused on raising money.

[@RoadmapMBA]

Loved this - and super useful BEFORE we raise money! Thanks guys 🙏🏻

[@chapterme]

Chapters (Powered by ChapterMe) - 00:00 - Introduction 00:23 - Default alive or default dead 02:14 - The calculator 02:59 - Founder's distraction - Fundraising game 07:32 - Fundraising leverage 09:57 - Math are different 11:29 - Kill or cure 15:37 - The fatal pinch 19:22 - Tough decisions when default dead 19:40 - Headcount 20:46 - Ad Spend 22:50 - Raising prices 25:16 - Personal bankruptcy - Taking a big hit to growth rate 26:28 - Twitch's pirate ship 32:22 - Takeaways 32:27 - Survive to thrive 33:15 - To burn or not burn 34:06 - 10x better if operationally intensive business

[@MoniCastApp]

It is an important concept, and relatable in all stages of the startup.

[@testpurpose5845]

the two man I genuinely ❤️ . After all , people like them takes all of us from 0 to 1 .

[@thomasshakelton]

The Killer or Cure part was eye opening

[@ayo3284]

So glad I found your channel..just subscribed

[@TarotPolitics]

I really love Michael what a big heart he has. I love Dalton too. This is great. Great chemistry. Excellent info. So helpful. Bless you.

[@darknessguy4221]

I FUCKING LOVE THESE SERIES!!!

[@lofi_Insomnia_]

I'm a huge fan of this series. I can'r stop watching it everyday while laughing and thinking at the same time. Please keep making these!

[@iftekharriyad3006]

Great video and important advises.

[@YoannBuzenet]

That content is really great. Thanks!!

[@truedreams1]

I would say that new companies that don't have any product or client before starting are default dead by default. Unfortunately, just knowing that isn't enough to prevent your company from dying. I knew that when starting my company and the solution that I had in mind for that was keep to costs close to zero. Except I did spend a considerable sum on leads that I didn't get a positive ROI on. Having clients or a ready product before starting is a better idea IMO, so you start off default alive.

[@B8R8]

I turned down 20 million dollars and still didn’t take a cent from a VC. I’ll be fund raising soon when I’m ready and I’m not worried about all those things because I solved a problem in FinTech and filed for the patent not just in the US but also around the world. I’m taking an honest approach and no need to BS needing more money. BTW I’m going to fundraise way less than 20 Million because I don’t need that much in order to move forward and I’m confident in the equity.

[@imbones0074]

All the best..currently working on my own fintech startup

[@Dorian_Barber]

2:40 oh snap I run a barbershop and my app launches very soon.

[@gajusgajus]

Such a great episode

[@o.h.w.6638]

I’m building my founding team right now. These videos are everything. 🙏

[@lenisghio]

soooooooooo good (as always)

[@TheBoysies]

I have a request for a future video from you guys. Would you be able to film a full length office hours with a business, that isn't "for show". By that I mean, the other ones previously have been uploaded in front of a live studio audience and it's quite rushed, typically only being 10 minutes per business. I like the format where a startup pitches where they are at currently and then the way that YC replies. I know it's more effort on your end to arrange something like this, so no worries if it doesn't align with your schedules. Maybe you could even follow a company over multiple episodes as well. I've found watching the live studio audience office hours as a great chance to show theory meeting practice. Keep up the good work. If it's watch time that your worried about, I think you could relook at your SEO strategy for the video title as "office hours" doesn't necessarily translate to what you are doing and if you explored something along the lines of "Billionare Founders coach Startup Founders" or something, it would probably garner more interest to a wider group.

[@danta2811]

Cool idea! On another note, I think the SEO title you suggested may attract a crowd that is opposite of what YC want in founders

[@TheBoysies]

@@danta2811 yeah good point Dan. I was just worried that if they looked at the relatively low view count comparatively of the other videos of "on stage" office hours that they have done and engagement rate it might put them off making a new video in this style, potentially citing a lack of interest. I'm just trying to highlight that they haven't quite reached product market fit from a viewers point of view in the office hours context yet when mentoring a business at least from my perspective. I think there's a lot of untapped value that they could explore here in this space. I think even if they did the office hours with a company who went out of business three months later and was never heard of again it would be incredibly instructive.

[@techronin_]

You guys are like a tech version of a Hollywood buddy movie. Hilarious!

[@sonictailsandsally]

Where was this about two years ago?! This advice is gold!

[@TheCainak]

Brilliant!

[@james.morris247]

I appreciate these videos

[@yourcompany1170]

Good stuff here!

[@YourCrew]

I want to add something to the Daltons argument in the fatal pinch chapter. He said that it doesn’t make sense to buy a dying company. I have an opposite view on this. Assumed there is a company with a good product and solution for some reasons sales are decreasing, retention is high etc. I would look into the root cause and see whether the team lacks execution power in some areas. This presents an excellent opportunity to buy a company for cheap, exchange the management for a more capable one that is able to grow the company and sell it for a fortune. What do you say?

[@jaredbeckwith]

Stayin alive!

[@DavidProrok]

When the startup is just 1 or 3 people working together and bootstrapping, how do you calculate default alive vs default dead?

[@bradmesser4807]

The part between the naive startup founders vs sophisticated startup founders and their differences of flying into the mountain vs flying close by is such a big difference. I was on the edge of my seat and sweating while they said it.

[@thetrends5670]

All three startups died in past 2 years, rejected from VCs and incubators, learns a lot but not sure about the path ahead.

[@fa11en1ce]

Keep going. You got 4 more tries left. Make sure you aren't repeating the same mistakes.

[@hmak2009]

@@fa11en1ce why 4?

[@TheKitchon]

At minute 22, it's like, "if we don't fly the plane into the mountain, we'll crash into the clear field that we might be able to walk away from..."

[@akifyaldir]

There is no issue or complexity for great teams who extremely believe in success. As always. It just needs to work with more details and think more about the future needs to survive efficiently.

[@msrkittty]

A+ content

[@darrylr]

Great! Wonderful advice, obvious stuff, and yet.... 😞

[@elenamustatea2264]

are there any YC startups younger than 5 years default alive then? Doubt it massively

[@karenrowe4872]

"No one wants to buy problems" - Dalton.

[@anshnanda]

What if I don't make any revenue?

[@mijodivic6866]

There is solution if your company goes to zero. 1. Be only in company. 2. Work until you have sale. 3. Open new company. 4. Put that new revenue in new company. 5. Repeat

[@derek-yap]

Also, I'm pretty sure I own the two shirts Michael and Dalton are wearing. Lemme guess All Saints and Brixton?

[@jlindsay]

The reason is the same doctors and lawyers fresh out of school or worked at large companies, are not expised to buisness, they left in the field of law, medical engineering

[@tegaogheneovo5881]

the boyz

[@ash000us]

You guys were really harsh this time

[@jonathanschwartz4615]

What if your bank is suddenly insolvent?

[@loslosbaby]

Most investors are allergic to KNOWING.

[@snacklearn1224]

Checkout a 2 mn summary here: kzbin.info/www/bejne/hYm4h4CXotanY6s

[@loslosbaby]

IMHO: HBO's "Silicon Valley" is a documentary.

[@loslosbaby]

Michael: your choices in your C2J meeting at Twitch were all different "taking the L's" ...do you feel you took > 1 L?

[@andu896]

Feedback: give feedback without sounding arrogant.

[@BrodieTheAthlete]

🙏🏻🙏🏻

[@tech-spectra]

Listening to this is a master class in why modern business is screwed when based on the consumer-capitalist paradigm. When a investor has 'leverage' at the cost of the founder, this is not good business, it is being an exploitative douchebag. Plain and simple. I graduated #YCStartupSchool a number of years. Was not funded. In fact, I only got funded once I left and completely changed my approach and at this time we are about to enter our next funding cycle, which does not involve conventional VC's whatsoever. Because with VCs really, you cannot run a truly ethical company as VCs are only interested in a profit return - which of course they would be as that is their purpose. Nothing to get mad about - just don't be surprised if you can't run a company the way you want to when you're only focused on profit over literally everything else. Profit without true value or utility behind it is unsustainable. Hence the market right now. Speaks for itself.

[@pedrolazaro9309]

cc in portuguese pleeaasseeee

[@loslosbaby]

Venture Debt is evil. Venture Debt is the Adjustable Rate Mortgage of the startup world.

[@landryplacid4065]

It was called "fast" 😂 for a reason.

[@facundomarino10]

founders are so out of their mind these guys have to remember them a company needs to be financially stable to be good. basic corporate finance from centuries ago.

[@techronin_]

It’s a buzz kill man. Hahahaha

[@grimsk]

:)

[@hyeonilchoi7630]

Let's safely use smartphones, etc. ; 스마트기기. 안전하게 사용합시다. Have good traditional make toself~. ; 좋은 습관을 만들어요. 😃🙂 영상, 잘 봤습니다. 재미있네요. 그냥, 적어보네요. 개발. 재미있죠. 또, 교회. 다녀보세요. 기독교. 전화도 해보세요. 사회에서 쉴 곳. 하고 싶은 말이네요. 좋은 하루되세요. 저의 댓글, 봐 주셔서 감사합니다.

[@romanerrandonea7791]

Hello, I am the CEO of Elexion, an information brokerage platform. We are engaging with people in Silicon Valley to learn about emerging issues in communicating this information to Latin American entrepreneurs! If you are a citizen We would like to know the problems that are occurring. Write us....

[@rkara2]

Man you guys give terrible advice. What you should be saying is for startups to focus on the problem that they are solving. And encourage them to do that, rather than make money. If you just focus on making money, then how the hell are you ever gonna solve peoples problems. !DA

[@olemew]

Being financially stable is bad advice? lol, you're sleeping