YC
Paul Buchheit - Startup Investor School Day 2
@ Y Combinator
03/07/18
Takeaways
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Paul Buchheit
03/07/18
@ Y Combinator
Meeting founders and making investment decisions is more of an art than a science, and you often have to lose some money before becoming an expert.
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Paul Buchheit
03/07/18
@ Y Combinator
I've been involved in startups for about 20 years and investing for the past 12 years, during which I've invested in hundreds of companies and interviewed thousands of founders.
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Paul Buchheit
03/07/18
@ Y Combinator
I realized I needed to stop and reflect on my investment decisions to identify patterns that led to favorable or unfavorable outcomes, aiming to improve my future investments.
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Paul Buchheit
03/07/18
@ Y Combinator
I'm not limiting myself to good ideas; many of my ideas are not good, but this is relevant to startups because often good ideas look bad initially.
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Paul Buchheit
03/07/18
@ Y Combinator
For a startup to be successful, it often has to be something that larger companies would dismiss as unimportant or stupid, as they wouldn't overlook obvious opportunities.
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Paul Buchheit
03/07/18
@ Y Combinator
Google started as a research project at Stanford called Backrub, and when Larry Page and Sergey Brin tried to sell it to big internet companies, they were rejected because no one thought search was important.
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Paul Buchheit
03/07/18
@ Y Combinator
Being extremely lucky is crucial in the startup game, and as accredited investors, you're already among the luckiest people on earth.
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Paul Buchheit
03/07/18
@ Y Combinator
I ended up at Google because they had a product I used and loved, and I was really into Linux, which was a key factor in my decision to join the company.
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Paul Buchheit
03/07/18
@ Y Combinator
My first angel investment was in a Y Combinator company called Wufoo, which returned 44 times my investment when it was acquired by SurveyMonkey.
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Paul Buchheit
03/07/18
@ Y Combinator
I invested in Justin.tv, which aimed to livestream everything, and while it struggled initially, it eventually pivoted to Twitch, focusing on video game streaming, which became a huge success.
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Paul Buchheit
03/07/18
@ Y Combinator
The founders of Justin.tv went on to create successful companies, with Emmett Shear becoming the CEO of Twitch, which is now estimated to be worth around twenty billion dollars.
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Paul Buchheit
03/07/18
@ Y Combinator
The most important thing when starting a company is having a really great team.
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Paul Buchheit
03/07/18
@ Y Combinator
I managed to convince Brett Taylor to co-found FriendFeed with us; he was frustrated with the slow and clunky product at Google Maps and rewrote the entire JavaScript front-end over a weekend, making it ten times faster.
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Paul Buchheit
03/07/18
@ Y Combinator
FriendFeed generated a lot of buzz but struggled to grow because we competed with Facebook, which became a formidable competitor.
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Paul Buchheit
03/07/18
@ Y Combinator
The lesson is to find people who are smarter and more insightful than you; I only want to fund founders who are better than I am.
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Paul Buchheit
03/07/18
@ Y Combinator
It's critical to find great founders; if they are better than you, they will have better insights and know more, allowing you to trust their vision.
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Paul Buchheit
03/07/18
@ Y Combinator
Meraki is an example of a startup that impressed me; they built their product without raising money, scraping together resources to create a viable business.
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Paul Buchheit
03/07/18
@ Y Combinator
Juicero is the opposite of what you want in a startup; they spent a hundred million dollars on a product without ever talking to customers, which ultimately failed.
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Paul Buchheit
03/07/18
@ Y Combinator
Cruise, founded by Kyle Vogt, is an example of a founder who tackled a seemingly impossible problem by creating their own streaming media server, which was crucial for their survival.
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Paul Buchheit
03/07/18
@ Y Combinator
Investing in things that aren't software is okay if you believe in the founder's expertise; there are many great opportunities in biotech that could lead to significant exits.
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Paul Buchheit
03/07/18
@ Y Combinator
I missed out on investing in Dropbox because I canceled a meeting with Drew, which was poor investor behavior and cost me a significant opportunity.
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Paul Buchheit
03/07/18
@ Y Combinator
I regret not investing in Airbnb when I had the chance; I was focused on my own startup and missed the opportunity to meet with them before they signed with Sequoia. If you move slowly in investing, you're likely to face adverse selection; companies that take too long to engage may not be the best opportunities.
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Paul Buchheit
03/07/18
@ Y Combinator
When you identify a promising company, be decisive; either invest quickly or risk losing the opportunity.
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Paul Buchheit
03/07/18
@ Y Combinator
There's no such thing as value investing in startups; investing based solely on perceived bargains often leads to losses.
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Paul Buchheit
03/07/18
@ Y Combinator
If I'm disappointed by a startup's price, I should consider investing more, as it often leads to regret when I don't.
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Paul Buchheit
03/07/18
@ Y Combinator
Investing out of pity for founders rarely yields returns; focus on strong, capable founders instead.
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Paul Buchheit
03/07/18
@ Y Combinator
Invest in optimism and the future you want to see, rather than the future you fear; this mindset can lead to better investment outcomes.
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Paul Buchheit
03/07/18
@ Y Combinator
Good numbers alone can be misleading; always assess whether a company is genuinely creating value rather than exploiting temporary inefficiencies.
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Paul Buchheit
03/07/18
@ Y Combinator
The founders are critical to a startup's success; I evaluate them based on their communication skills and depth of understanding.
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Paul Buchheit
03/07/18
@ Y Combinator
Great founders can articulate their vision clearly and move quickly; if I struggle to understand their plan, it's a red flag.
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Paul Buchheit
03/07/18
@ Y Combinator
Startups often accomplish a lot with little; successful founders find ways to be resourceful and efficient.
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Paul Buchheit
03/07/18
@ Y Combinator
Look for startups that pursue ambitious or unconventional ideas; these often attract top talent and can lead to significant innovations.
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Paul Buchheit
03/07/18
@ Y Combinator
Determination is the most important trait in a startup founder; without it, they may give up when faced with challenges.
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Paul Buchheit
03/07/18
@ Y Combinator
Investors should be cautious of founders who have easy backup plans; true commitment is essential for startup success.
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Paul Buchheit
03/07/18
@ Y Combinator
I prefer founders who have faced failures; they are more resilient and better equipped to handle the challenges of building a startup.
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Paul Buchheit
03/07/18
@ Y Combinator
When evaluating biotech companies, the demand for their product is often clear, but the challenge lies in their ability to deliver on that promise.
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Paul Buchheit
03/07/18
@ Y Combinator
I love unpredictable ideas like streaming live from a camera on someone's head, as it allows for quick testing and iteration.
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Paul Buchheit
03/07/18
@ Y Combinator
The speed at which a startup can iterate is a strong indicator of its potential success; great companies release updates quickly instead of waiting years.
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Paul Buchheit
03/07/18
@ Y Combinator
As investors, we need to move fast and assess if founders are also moving quickly; asking about their recent accomplishments can provide insight.
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Paul Buchheit
03/07/18
@ Y Combinator
A blog post titled 'A Little Bit of Slope is Worth a Lot of Y-Intercept' emphasizes that we should invest in companies showing growth potential, even if their current revenue is low.
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Paul Buchheit
03/07/18
@ Y Combinator
When evaluating founders, I look for their willingness to act decisively and quickly, rather than delaying for complex plans.
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Paul Buchheit
03/07/18
@ Y Combinator
Clear and concise communication is crucial; if I can't understand what a company does after a ten-minute interview, that's an easy no for funding.
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Paul Buchheit
03/07/18
@ Y Combinator
Most investments won't succeed, and it's easy to overthink and miss good opportunities; I try not to let past failures cloud my judgment.
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Paul Buchheit
03/07/18
@ Y Combinator
Having too much funding can be a liability, as it may lead founders to avoid engaging with customers and reality, which can hinder their success.
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Paul Buchheit
03/07/18
@ Y Combinator
Investing in areas I know well can be tricky; I often find that I need to unlearn my assumptions to avoid missing out on good opportunities.
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Paul Buchheit
03/07/18
@ Y Combinator
It's important to learn from past mistakes while also being cautious not to let those experiences overly influence future investment decisions.