Understanding Startup Failures: Resilience and Customer Engagement

Dalton Caldwell is Managing Director and Group Partner at Y Combinator. Prior to YC, he was the co-founder and CEO of imeem (acquired by MySpace in 2009) and the co-founder and CEO of App.net. During his time at YC, he’s advised more than 35 YC unicorns, including DoorDash, Amplitude, Webflow, and Retool, and has worked across 21 different YC batches. He’s also racked up more than 6,500 office hours with founders. In our conversation, we discuss:

• Why founders need to adopt the mindset “Just don’t die”

• The most common reason startups fail

• When to pivot, and characteristics of a good pivot

• The concept of “tar pit ideas” and examples of bad startup ideas

• Why investors say no to startups

• The importance of market size in investment decisions

• The pitfalls of founders over-delegating

• Effective ways to talk to customers

• 20 ideas Dalton is looking to fund

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Find the transcript at: https://www.lennysnewsletter.com/p/lessons-from-1000-yc-startups

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Where to find Dalton Caldwell:

• X: https://twitter.com/daltonc

• LinkedIn: https://www.linkedin.com/in/daltoncaldwell/

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Where to find Lenny:

• Newsletter: https://www.lennysnewsletter.com

• X: https://twitter.com/lennysan

• LinkedIn: https://www.linkedin.com/in/lennyrachitsky/

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In this episode, we cover:

(00:00) Dalton’s background

(04:41) The value of simple advice

(07:04) Dalton’s advice: “Just don’t die”

(08:39) Knowing when to stop

(11:45) Deciding to pivot

(14:26) Characteristics of a good pivot

(17:53) Knowing when to pivot

(19:03) Zip’s journey and finding a market

(21:22) Why Dalton says to “Move towards the mountains and the desert”

(23:45) Tar pit ideas

(26:49) Understanding why investors say no

(29:14) The importance of market size

(32:16) Avoiding over-delegation and hiring senior people too early

(36:43) Why startups fail

(40:30) Effectively talking to customers

(45:17) Examples of startups hustling to talk to customers

(48:01) Patterns of successful startups

(52:05) YC’s Request for Startups

(55:37) Early days of Silicon Valley

(01:05:33) Contrarian corner: growth hacking for early startups

(01:09:28) Failure corner

(01:11:15) Closing thoughts

(01:12:22) Lightning round

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Referenced:

• Y Combinator: https://www.ycombinator.com/

• Tiger Woods’s website: https://tigerwoods.com/

• Co-Founder Mistakes That Kill Companies & How to Avoid Them: https://www.youtube.com/watch?v=dlfjs_eEEzs

• Daniel Alberson’s LinkedIn post about Y Combinator: https://www.linkedin.com/posts/alberson_i-left-my-dream-job-as-a-product-manager-activity-7089677882431533056-jJ9H

• Companies in Y Combinator W17 Batch: https://www.ycdb.co/batch/w17

• Brex: https://www.brex.com/

• Retool: https://retool.com/

• Segment: https://segment.com/

• Mixpanel: https://mixpanel.com/

• Whatnot: https://www.whatnot.com/

• Andreessen Horowitz: https://a16z.com/

• Airbnb’s CEO says a $40 cereal box changed the course of the multibillion-dollar company: https://fortune.com/2023/04/19/airbnb-ceo-cereal-box-investors-changed-everything-billion-dollar-company/

• Rujul Zaparde on LinkedIn: https://www.linkedin.com/in/rujulz/

• Zip: https://ziphq.com/

• Lu Cheng on LinkedIn: https://www.linkedin.com/in/lu-cheng-973b7830/

• Avoid these tempting startup tar pit ideas: https://www.ycombinator.com/library/Ij-avoid-these-tempting-startup-tarpit-ideas

• Airbnb acquires Localmind to create crowdsourced advice about neighborhoods: https://skift.com/2012/12/13/airbnb-acquires-localmind-to-create-crowdsourced-advice-about-neighborhoods/

• Foursquare: https://foursquare.com/

• Razorpay: https://razorpay.com/

• Total Addressable Market: https://www.productplan.com/glossary/total-addressable-market/

• Lenny Bogdonoff on LinkedIn: https://www.linkedin.com/in/rememberlenny/

• Milk Video: https://milkvideo.com/

• Lessons from working with 600+ YC startups | Gustaf Alströmer (Y Combinator, Airbnb): https://www.lennyspodcast.com/lessons-from-working-with-600-yc-startups-gustaf-alstromer-y-combinator-airbnb/

• How the most successful B2B startups came up with their original idea: https://www.lennysnewsletter.com/p/how-the-most-successful-b2b-startups

• Collison installation: https://news.ycombinator.com/item?id=18400504

• Stripe: https://stripe.com/

• Patrick Collison on LinkedIn: https://www.linkedin.com/in/patrickcollison/

• John Collison on LinkedIn: https://www.linkedin.com/in/johnbcollison/

• Tony Xu on LinkedIn: https://www.linkedin.com/in/xutony/

• Grant LaFontaine on LinkedIn: https://www.linkedin.com/in/grantlafontaine/

• Ryan Petersen on LinkedIn: https://www.linkedin.com/in/rpetersen/

• Lessons on building product sense, navigating AI, optimizing the first mile, and making it through the messy middle | Scott Belsky (Adobe, Behance): https://www.lennyspodcast.com/lessons-on-building-product-sense-navigating-ai-optimizing-the-first-mile-and-making-it-through-t/

• YC’s latest Request for Startups: https://www.ycombinator.com/blog/ycs-latest-request-for-startups

• ERPs: https://www.ycombinator.com/rfs#new-enterprise-resource-planning-software

• Commercial open source companies: https://www.ycombinator.com/rfs#commercial-open-source-companies

• New space companies: https://www.ycombinator.com/rfs#new-space-companies

• A way to end cancer: https://www.ycombinator.com/rfs#a-way-to-end-cancer

• Spatial computing: https://www.ycombinator.com/rfs#spatial-computing

• New defense technology: https://www.ycombinator.com/rfs#new-defense-technology

• Bringing manufacturing back to America: https://www.ycombinator.com/rfs#bring-manufacturing-back-to-america

• Better enterprise glue: https://www.ycombinator.com/rfs#better-enterprise-glue

• Small fine-tuned models, as an alternative to giant generic ones: https://www.ycombinator.com/rfs#small-finetuned-models-as-an-alternative-to-giant-generic-ones

• Reid Hoffman on LinkedIn: https://www.linkedin.com/in/reidhoffman/

• Sam Altman on X: https://twitter.com/sama

• Sean Parker on LinkedIn: https://www.linkedin.com/in/parkersean/

• Owen Van Natta on LinkedIn: https://www.linkedin.com/in/owen-van-natta-444a7/

• Marc Andreessen on X: https://twitter.com/pmarca

• Picplz 1, Instagram 0 as VC firm Andreessen Horowitz chooses photo app rival: https://www.reuters.com/article/idUS2587232395/

• Gustaf Alstromer—How to Get Users and Grow: https://www.youtube.com/watch?v=T9ikpoF2GH0

• Getting to Yes: Negotiating Agreement Without Giving In: https://www.amazon.com/Getting-Yes-Negotiating-Agreement-Without/dp/0143118757

• Founding Sales: The Early Stage Go-to-Market Handbook: https://www.amazon.com/Founding-Sales-Go-Market-Handbook-ebook/dp/B08PMK17Z1

• Founder-led sales | Pete Kazanjy (Founding Sales, Atrium): https://www.lennyspodcast.com/founder-led-sales-pete-kazanjy-founding-sales-atrium/

• The Sopranos on HBO: https://www.hbo.com/the-sopranos

• The Wire on HBO: https://www.hbo.com/the-wire

• Columbo on Prime Video: https://www.amazon.com/Columbo-Season-1/dp/B008SA89HA

• Oura ring: https://ouraring.com/

• Apple watch: https://www.apple.com/watch/

• SiPhox: https://siphoxhealth.com/

• Dalton & Michael on YouTube: https://www.youtube.com/playlist?list=PLQ-uHSnFig5Nd98Sc9I-kkc0ZWe8peRMC

• How Future Billionaires Get Sh*t Done: https://www.youtube.com/watch?v=ephzgxgOjR0

• The Student’s Guide to Becoming a Successful Startup Founder: https://www.youtube.com/watch?v=O5KCB2p6SB8

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Lenny may be an investor in the companies discussed.

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