YC
Elad Gil and Pejman Nozad - Startup Investor School Day 3
@ Y Combinator
03/09/18
Takeaways
YC
Y Combinator Cast
03/09/18
@ Y Combinator
The hardest part about investing is deciding how to make investment decisions and organizing a consistent process to evaluate founders and their businesses.
PN
Pejman Nozad
03/09/18
@ Y Combinator
You should look for ideas that seem stupid within a large company, as some of the best ideas often appear foolish initially but can lead to significant success.
EG
Elad Gil
03/09/18
@ Y Combinator
When investing, prioritize markets over teams, as a strong market can drive success even with a less competent team.
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Elad Gil
03/09/18
@ Y Combinator
A great sign of a market is when customers are willing to pay a premium for your product, indicating product-market fit and genuine demand.
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Elad Gil
03/09/18
@ Y Combinator
Evaluate whether you would personally use the product being pitched, as this can indicate its necessity and potential success in the market.
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Elad Gil
03/09/18
@ Y Combinator
Understanding the 'why now' factor in a market is crucial, as it helps identify whether a market is truly saturated or if there are still significant opportunities.
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Elad Gil
03/09/18
@ Y Combinator
A defensible business model is essential for long-term success, and real moats, such as network effects, are more valuable than perceived ones.
EG
Elad Gil
03/09/18
@ Y Combinator
When evaluating a startup, consider if they have a product ready at the time of pitching, as having something tangible is crucial for investment decisions.
YC
Y Combinator Cast
03/09/18
@ Y Combinator
I invest in smart people who present a compelling vision, but often they fail to execute because there are underlying reasons preventing them from building something substantial, like regulatory constraints.
YC
Y Combinator Cast
03/09/18
@ Y Combinator
Fast learning is crucial; for instance, the CEO of Pinterest rapidly internalizes information and learns more than others about various topics, demonstrating the importance of adaptability in leadership.
YC
Y Combinator Cast
03/09/18
@ Y Combinator
Founders must excel at selling their vision to attract team members, secure investor funding, and convince customers to buy their products, with different styles of persuasion being effective depending on the market fit.
YC
Y Combinator Cast
03/09/18
@ Y Combinator
Determination is key; Doug Leone from Sequoia emphasizes the importance of understanding whose voice drives you during challenging times, as it reflects your motivation and commitment to your startup.
YC
Y Combinator Cast
03/09/18
@ Y Combinator
Many investors mistakenly follow trends set by others, like benchmark investments, without conducting their own due diligence, which can lead to poor investment decisions.
YC
Y Combinator Cast
03/09/18
@ Y Combinator
I regret passing on Lyft's Series C at a $90 million valuation, as they are now valued at around $9 billion, highlighting the importance of understanding market dynamics and not assuming a winner-take-all scenario.
YC
Y Combinator Cast
03/09/18
@ Y Combinator
Valuation matters, but it shouldn't be the sole focus; understanding the potential return on investment is crucial, as a single successful investment can significantly outweigh losses from others.
YC
Y Combinator Cast
03/09/18
@ Y Combinator
It's a mistake to project your own decisions onto founders; instead, consider what the founding team is likely to do, as their approach may differ significantly from your expectations.
YC
Y Combinator Cast
03/09/18
@ Y Combinator
A bad team can sometimes be a neutral signal; context matters, as individuals may perform differently under different circumstances, and past experiences with them may not reflect their current capabilities.
YC
Y Combinator Cast
03/09/18
@ Y Combinator
Investors should maintain a supportive role, helping founders navigate challenges rather than prioritizing their own interests, which can lead to detrimental outcomes for the startup.
YC
Y Combinator Cast
03/09/18
@ Y Combinator
Bad advice from well-known investors can mislead entrepreneurs; it's better to admit uncertainty and direct them to someone more knowledgeable than to provide incorrect guidance.
YC
Y Combinator Cast
03/09/18
@ Y Combinator
Founders sometimes prioritize their own interests over the company's, which can lead to poor governance and decisions that harm investors, such as structuring deals that favor themselves disproportionately.
YC
Y Combinator Cast
03/09/18
@ Y Combinator
Trust is crucial; untrustworthy behavior can prevent investors from writing checks.
YC
Y Combinator Cast
03/09/18
@ Y Combinator
Great investors develop intuition to judge people and founders, and they advise founders to be honest and direct.
PN
Pejman Nozad
03/09/18
@ Y Combinator
I shouldn't be here as a venture capitalist; I don't have a formal education or traditional background, yet I've invested in over 200 startups, with seven valued over a billion dollars each.
PN
Pejman Nozad
03/09/18
@ Y Combinator
In 2014, I received the Ellis Island Medal of Honor for my contributions as an immigrant, but that moment doesn't define who I am today.
PN
Pejman Nozad
03/09/18
@ Y Combinator
I arrived in the U.S. in 1992 with only $700, didn't speak English, and spent all my money calling a girl in Iran, leading to my first job at a car wash.
PN
Pejman Nozad
03/09/18
@ Y Combinator
I took pride in my job at the car wash, which helped me improve my English and eventually led to a job at a yogurt shop where I slept in the attic to save money.
PN
Pejman Nozad
03/09/18
@ Y Combinator
Building relationships with customers is essential in sales, especially for high-value items like Persian carpets.
PN
Pejman Nozad
03/09/18
@ Y Combinator
I sold over eight million dollars in carpets in one year, primarily to tech industry clients, which inspired me to become part of the tech community.
PN
Pejman Nozad
03/09/18
@ Y Combinator
I learned the importance of networking and building relationships, which helped me transition from selling carpets to investing in startups.
PN
Pejman Nozad
03/09/18
@ Y Combinator
I proposed to my boss that we should pivot from selling carpets to investing in tech, leveraging my connections in the industry.
PN
Pejman Nozad
03/09/18
@ Y Combinator
Despite a rough start with poor investment outcomes, I focused on connecting people and hosting events to build my network.
PN
Pejman Nozad
03/09/18
@ Y Combinator
I was the first investor in Android and played a role in the early days of Dropbox, emphasizing the importance of relationships in investing.
PN
Pejman Nozad
03/09/18
@ Y Combinator
I learned to do whatever it takes to support my founders, even if it means performing small tasks like making tea.
PN
Pejman Nozad
03/09/18
@ Y Combinator
Be truthful to yourself and understand your strengths; leverage them in your endeavors, just like I did in my investment career.
PN
Pejman Nozad
03/09/18
@ Y Combinator
I made a significant mistake by not investing in Facebook when I had the chance, which taught me to recognize exceptional founders without overanalyzing.
PN
Pejman Nozad
03/09/18
@ Y Combinator
I believe the best founders are those who have a personal connection to the problem they are solving, rather than just chasing trends.
YC
Y Combinator Cast
03/09/18
@ Y Combinator
Connecting people with cars to those who need rides is a fundamental idea behind many successful startups.
YC
Y Combinator Cast
03/09/18
@ Y Combinator
The best founders are those who truly understand the problem they are solving, which drives their persistence even in tough times.
YC
Y Combinator Cast
03/09/18
@ Y Combinator
I look for founders who are self-aware and confident, but who also take risks before raising their seed round.
YC
Y Combinator Cast
03/09/18
@ Y Combinator
Building a company is an emotional rollercoaster, so I seek founders who are not easily rattled by challenges.
YC
Y Combinator Cast
03/09/18
@ Y Combinator
The best founders are extremely focused and persistent, often trying different approaches until they succeed.
YC
Y Combinator Cast
03/09/18
@ Y Combinator
I admire founders who are healthily paranoid, double-checking their decisions while being kind and putting their teams first.
YC
Y Combinator Cast
03/09/18
@ Y Combinator
A good CEO is like a captain of a ship, knowing the direction and being loyal to their team, even willing to go down with the ship if necessary.
YC
Y Combinator Cast
03/09/18
@ Y Combinator
I look for founders with a long-term vision, focusing on making customers happy and creating jobs rather than just getting rich quickly.
YC
Y Combinator Cast
03/09/18
@ Y Combinator
Drew from Dropbox shared that in ten years, he envisions reducing workdays from five to four, highlighting a mission-driven approach.
YC
Y Combinator Cast
03/09/18
@ Y Combinator
Investing in startups is complex, and understanding whether to put more money into a company requires deep conversations and analysis.
YC
Y Combinator Cast
03/09/18
@ Y Combinator
When evaluating early-stage investments, I consider the total addressable market, competitive dynamics, and whether people are already paying for the product.
YC
Y Combinator Cast
03/09/18
@ Y Combinator
The best companies often have a total addressable market that isn't obvious at first, as seen with Uber's expansion beyond just the taxi market.
YC
Y Combinator Cast
03/09/18
@ Y Combinator
To get started in angel investing, write about your industry to attract founders, look for adjacent non-competitive companies, and leverage your network.
YC
Y Combinator Cast
03/09/18
@ Y Combinator
In co-founder conflicts, it's essential to communicate openly, as most relationship issues stem from communication breakdowns.