MS

Michael Seibel

05/07/22

@ Y Combinator

We had three options: die in two months, try to break even, or get profitable.

DC

Dalton Caldwell

05/07/22

@ Y Combinator

Founders often ignore the reality of their startup's potential failure, which is an uncomfortable truth to discuss.

DC

Dalton Caldwell

05/07/22

@ Y Combinator

The concept of 'default alive or default dead' forces founders to be honest about their startup's survival.

DC

Dalton Caldwell

05/07/22

@ Y Combinator

If I don't raise any more money, I need to know if I'm going to die or if I'm going to make it.

DC

Dalton Caldwell

05/07/22

@ Y Combinator

Default alive means I may be burning money today, but my growth rate is high enough to become profitable before my bank account goes to zero.

MS

Michael Seibel

05/07/22

@ Y Combinator

Raising the next round of funding is often harder than founders anticipate, especially in a changing economic environment.

MS

Michael Seibel

05/07/22

@ Y Combinator

When you're default dead, failing to raise funds can lead to the end of your business, while default alive gives you more margin for error.

MS

Michael Seibel

05/07/22

@ Y Combinator

When you're default alive, you have control over your company's future, unlike when you're default dead and reliant on outside funding.

MS

Michael Seibel

05/07/22

@ Y Combinator

Investors often have different incentives than founders, which can lead to misalignment in priorities.

MS

Michael Seibel

05/07/22

@ Y Combinator

The math that founders use to pitch their companies is often a subset of what they need to run their business effectively.

MS

Michael Seibel

05/07/22

@ Y Combinator

Investors are biased towards metrics that may not prioritize the startup's survival, focusing instead on growth and revenue.

MS

Michael Seibel

05/07/22

@ Y Combinator

Paul Graham's concept of 'killer cure' highlights the opposing incentives between founders and investors.

YC

Y Combinator Cast

05/07/22

@ Y Combinator

The 'fatal pinch' concept highlights that many founders don't realize they're in a critical situation until it's too late, often leading to dire consequences for their startups.

YC

Y Combinator Cast

05/07/22

@ Y Combinator

Founders often mistakenly believe that spending more money will help them achieve product-market fit faster, leading to frustration and distraction from their core objectives.

YC

Y Combinator Cast

05/07/22

@ Y Combinator

It's crucial for founders to recognize when they are in a precarious financial situation and to act quickly to assess their runway and make necessary adjustments.

YC

Y Combinator Cast

05/07/22

@ Y Combinator

Overhiring is a common mistake that can lead to financial strain; founders should avoid this by ensuring they only hire when absolutely necessary.

YC

Y Combinator Cast

05/07/22

@ Y Combinator

Increasing ad spend to meet growth targets can backfire, as it often leads to longer payback periods for customer acquisition, making it harder to sustain growth.

YC

Y Combinator Cast

05/07/22

@ Y Combinator

It's important for founders to understand that the perception of needing to grow rapidly can lead to poor decision-making, such as overspending or neglecting financial health.

YC

Y Combinator Cast

05/07/22

@ Y Combinator

Successful companies often have to accept losses along the way; learning to take a hit is part of the entrepreneurial journey and can lead to long-term survival.

YC

Y Combinator Cast

05/07/22

@ Y Combinator

Founders often resist raising prices on their products, even when they are losing money on each sale, which can jeopardize their financial stability.

MS

Michael Seibel

05/07/22

@ Y Combinator

When a startup is losing money, it's essentially a wealth transfer from investors to consumers, and only a few companies will successfully navigate this situation by being very smart about their finances.

MS

Michael Seibel

05/07/22

@ Y Combinator

Companies like DoorDash understood the concepts of 'default alive' and 'burn rate,' which allowed them to manage their finances effectively even in challenging times.

MS

Michael Seibel

05/07/22

@ Y Combinator

Taking a significant hit to your growth rate can be necessary to achieve a sustainable business model, similar to how personal bankruptcy allows individuals to clear debts and start fresh.

MS

Michael Seibel

05/07/22

@ Y Combinator

In the startup world, you're judged on your performance over the last six to eighteen months, so if you can cut your revenue in half to become sustainable, it can lead to better long-term outcomes.

MS

Michael Seibel

05/07/22

@ Y Combinator

During a crisis, it's crucial to make tough decisions, such as cutting costs and increasing revenue, to ensure the survival of the company.

MS

Michael Seibel

05/07/22

@ Y Combinator

Before thriving, a startup must first survive, and sometimes achieving product-market fit takes longer than expected, requiring patience and strategic adjustments.

MS

Michael Seibel

05/07/22

@ Y Combinator

Investors won't force you to burn cash, but it's important to remain cautious and not react impulsively to suggestions that might lead to unsustainable spending.

MS

Michael Seibel

05/07/22

@ Y Combinator

In an operationally intensive business, it's essential to be significantly better than competitors at managing finances and operations to succeed.

MS

Michael Seibel

05/07/22

@ Y Combinator

Founders should be proactive in making tough decisions to steer their startups towards profitability, rather than relying on external pressures or advice.

MS

Michael Seibel

05/07/22

@ Y Combinator

When you're in control of your startup's direction, it alleviates the stress of relying on external funding, allowing for a more stable and confident approach to growth.

Save Your Startup During an Economic Downturn

Takeaways