Avoid These Tempting Startup Ideas

Summary

The video script features a conversation with Michael Seibel and Dalton Caldwell discussing the concept of 'tar pit' startup ideas. These are consumer-focused ideas that attract many founders due to their appealing nature but are often difficult to succeed in, leading to a common cause of failure for new companies. The speakers use the analogy of tar pits, which trap animals with the illusion of a refreshing water source, to illustrate how these ideas can ensnare founders. They delve into why consumer ideas are particularly enticing and the high bar for success in this space, emphasizing the importance of understanding market demand and supply when choosing a startup idea. The conversation provides insights into the startup world's dynamics, the challenges of timing, and the need for founders to critically assess their ideas and the competitive landscape before committing resources. The advice is to pivot towards ideas with lower founder supply and higher market demand, using the supply and demand framework to increase the odds of success.

Takeaways

• 🌪️ **Tar Pit Ideas**: Many startup ideas are common and often fail because they resemble a 'tar pit' – they attract founders but are hard to escape from once stuck.
• 📉 **Commonality**: There is a surprising similarity in ideas across founders, leading to many attempting the same 'tar pit' ideas without success.
• ⚠️ **Slow Pivot**: Founders often don’t pivot away from these ideas quickly enough, which can lead to the downfall of their companies.
• 🕵️‍♂️ **Research**: Michael Seibel emphasizes the importance of research to understand why previous attempts at similar ideas failed.
• 💡 **Consumer Ideas**: Many 'tar pit' ideas are consumer-based, which are products or services marketed to individuals rather than businesses.
• 📈 **High Bar for Success**: Successful consumer products often have extremely high user engagement and word-of-mouth, without the need for aggressive marketing.
• ⏳ **Timing Matters**: The timing of a consumer product can greatly affect its success, with some ideas benefiting from a lack of competition or a new technology wave.
• 🎯 **Supply and Demand**: The best startup ideas have a low supply of founders capable of pursuing them and high market demand.
• 🚧 **Pivots**: Pivoting from a 'tar pit' idea to one with lower founder interest and higher market demand can be a successful strategy.
• 🧐 **Recognizing Tar Pits**: Founders should be aware of the emotional allure of 'tar pit' ideas and be willing to pivot when faced with evidence of the challenge.
• 💼 **Unique Expertise**: Founders with specialized knowledge or experience in a particular industry can leverage this for unique startup ideas with less competition.

Q & A

What is the term 'tar pit ideas' referring to in the context of startups?

Tar pit ideas refer to startup concepts that attract many founders due to their appealing nature, but are difficult to succeed in, often leading to companies getting stuck and failing to pivot away from these ideas quickly enough.

Why are consumer ideas often considered tar pit ideas?

Consumer ideas are often considered tar pit ideas because they seem attractive and have a large pool of potential customers, but they also face high competition, require exceptional product quality to stand out, and are subject to timing and market saturation.

What is the significance of the term 'supply and demand' in relation to startup ideas?

The term 'supply and demand' is used to describe the ratio of founders wanting to work on a particular idea versus the actual market demand for that idea. Ideas with a high supply of founders and low market demand are more likely to be tar pit ideas.

Why do many founders default to consumer ideas when thinking about starting a company?

Many founders default to consumer ideas because as consumers themselves, they are more familiar with consumer products and services. They also tend to be influenced by well-known consumer success stories and the visibility of consumer products in their daily lives.

What are some common challenges faced by consumer product startups?

Common challenges include understanding the high bar for success, timing the market entry correctly, and competing with incumbents who may have an unfair advantage. Additionally, consumer product startups often struggle with user acquisition without substantial marketing budgets.

How did Google initially gain users without any advertising or growth hacking?

Google gained users through incredible word of mouth. They provided a superior product that people wanted and evangelized to others. The quality of their search engine led to users actively seeking out and using Google, which helped them amass millions of daily active users.

What is the importance of timing in the success of a consumer startup?

Timing is crucial because it determines whether a startup faces little competition or is entering a saturated market. Early movers can capture user attention and habits before competition intensifies, giving them a significant advantage.

Why do some founders find it hard to pivot away from tar pit ideas?

Founders may find it hard to pivot away from tar pit ideas because these ideas often seem promising and receive positive feedback, making founders emotionally invested. They may also believe they have discovered a unique solution that no one else has thought of before.

What advice is given to founders considering working on tar pit ideas?

Founders are advised to conduct thorough research, understand the high bar for success in their chosen field, and consider the supply and demand dynamics. They should also be open to pivoting if evidence suggests their idea is challenging and not gaining traction.

How can founders increase their odds of success when starting a company?

Founders can increase their odds of success by identifying startup ideas with a lower supply of founders and higher market demand, creating a product that users are passionate about, and avoiding common patterns of failure by learning from the experiences of others.

What is the role of Y Combinator (YC) in guiding founders away from tar pit ideas?

YC aims to communicate common paths of failure to help founders avoid them. They provide advice, share experiences, and offer insights to help founders recognize tar pit ideas and make informed decisions about whether to pursue or pivot from these ideas.

Outlines

00:00

🔥 Tar Pit Ideas in Startups

The first paragraph introduces the concept of 'tar pit ideas' in the startup world, which are startup ideas that many founders often pivot into but struggle to pivot away from, leading to failure. Michael Seibel and Dalton Caldwell discuss the prevalence of such ideas and the importance of recognizing them to increase the odds of success in a startup journey. They use the analogy of a tar pit, where animals get stuck due to its deceptive appearance, to illustrate how these ideas attract founders despite being hard to succeed in.

05:01

🚀 The Allure of Consumer Ideas

The second paragraph delves into why consumer ideas are so appealing to founders. It discusses how our everyday experiences as consumers influence the types of startup ideas we conceive. The speakers point out the influence of successful consumer stories and the lack of awareness about the high bar for success in consumer products. They also mention the significance of timing in consumer markets and how incumbents can have a strong advantage.

10:02

🌐 The High Bar for Consumer Success

In the third paragraph, the speakers use examples like Google and Facebook to illustrate the exceptionally high standard that defines a successful consumer product. They emphasize the importance of creating a product that not only meets a need but also generates such enthusiasm among users that they become its advocates. The paragraph highlights the misconceptions about the ease of consumer product success and the reality of the competitive landscape.

15:03

🕳️ Identifying Tar Pit Ideas

The fourth paragraph focuses on defining 'tar pit ideas' more concretely. It explains that these are not just challenging ideas but ones that emotionally compel founders to stay the course despite evidence of difficulty. The paragraph also discusses the common traits of tar pit ideas, such as their appeal and the positive feedback they often receive, which can make it hard for founders to consider pivoting.

20:07

🎰 Risky Ideas in High-Interest Areas

The fifth paragraph provides examples of tar pit ideas, particularly in areas like gambling and stock trading apps, which are currently popular but also highly competitive. It cautions against the assumption that because an idea is appealing or there's a perceived gap in the market, it will automatically succeed. The paragraph encourages founders to recognize when they are working on a tar pit idea and to consider the market demand and the bar for success realistically.

25:07

⛏️ Navigating the Startup Landscape

The sixth and final paragraph offers advice on how founders can increase their chances of success by understanding the supply and demand dynamics of their startup ideas. It encourages founders with specialized skills and insights into specific industries to consider the startup world as a viable path. The paragraph also presents a framework for a successful pivot, emphasizing moving from a high supply and low demand scenario to one with low supply and high demand.

Keywords

💡Tar pit ideas

Tar pit ideas refer to startup concepts that are initially attractive but ultimately problematic and difficult to succeed in. They are likened to natural tar pits that trap animals due to their deceptive appearance of being safe watering holes. In the context of the video, these ideas often trap founders because they seem appealing and are often pursued by many, leading to a competitive and challenging market environment.

💡Pivoting

Pivoting in a startup context means changing the strategy or direction of a business in response to new information or market conditions. The video discusses the importance of pivoting away from tar pit ideas towards more viable business models. An example from the script is the advice given to founders to pivot out of tar pit ideas to increase their odds of success.

💡Consumer ideas

Consumer ideas are business concepts that target individual consumers rather than businesses or other organizations. They often involve products or services that are used by the general public for personal purposes. The video highlights that many tar pit ideas are consumer-focused, which can be challenging due to high competition and the need for exceptional product differentiation.

💡Supply and demand

Supply and demand is an economic principle that describes the relationship between the availability of a product and the desire for it among consumers. In the video, the concept is applied to startup ideas, suggesting that founders should consider the supply of founders interested in an idea versus the demand from the market. An example given is the low supply of founders for niche technical ideas compared to the high market demand.

💡Word of Mouth

Word of mouth refers to the informal exchange of information by spoken communication between people. In the context of the video, it is highlighted as a powerful marketing tool for consumer products, especially when a product is so good that users naturally recommend it to others, as was the case with Google's early growth.

💡Incumbents

Incumbents in a business context are established companies or products that have a dominant market position. The video discusses how new consumer startups often struggle against incumbents that have a strong customer base and brand loyalty, making it difficult for new entrants to gain traction.

💡Growth hacking

Growth hacking is a term used to describe creative and innovative marketing strategies aimed at acquiring a rapid increase in the number of users or customers. The video contrasts the myth of growth hacking with the reality that successful consumer products often rely on word of mouth and product quality rather than aggressive marketing tactics.

💡Web 3

Web 3, or Web 3.0, refers to the next generation of the internet, often associated with decentralized technologies like blockchain and cryptocurrencies. The video mentions Web 3 as a space where everything could theoretically be rebuilt, offering vast opportunities for new startups but also cautioning about the high bar for success in such a theoretical space.

💡NFTs (Non-Fungible Tokens)

NFTs are unique digital assets that represent ownership of a specific item or piece of content and are stored on a blockchain. The video discusses NFTs as part of the Web 3 space, suggesting that while they offer exciting possibilities, the bar for success is high, and simply adding NFTs to a project does not guarantee success.

💡Gambling software

Gambling software refers to applications or platforms that facilitate betting or gambling activities. The video mentions this as an example of a tar pit idea where many founders are attracted to the space due to its appeal, but the market demand might not justify the oversaturated supply of similar startup ideas.

💡Supply-side and demand-side dynamics

The video discusses the importance of understanding supply-side (founders' interest in an idea) and demand-side (market need for a product) dynamics when choosing a startup idea. It suggests that the best pivots occur when a startup moves from a space with high founder interest and low market demand to one with low founder interest and high market demand.

Highlights

The term 'tar pit ideas' is introduced to describe startup ideas that many founders are attracted to but often fail to succeed in.

Tar pit ideas are common and often not recognized quickly enough, leading to the failure of many companies.

The analogy of a tar pit is used to illustrate how startups can get stuck in ideas that seem promising but are actually dangerous.

Consumer ideas are highlighted as the most common type of tar pit ideas, appealing to a wide range of founders.

The importance of understanding the high bar for success in consumer products is emphasized.

The role of timing in the success of consumer businesses is discussed, with examples like Google and Facebook.

Founders often underestimate the quality of existing successful consumer products and the difficulty of outperforming them.

The concept of supply and demand for startup ideas is introduced as a framework for evaluating the potential success of an idea.

The speakers advise founders to research thoroughly and understand the market demand before committing to a tar pit idea.

The idea of discovery platforms for restaurants, events, and music is identified as a common tar pit idea.

The limitations of physical world offerings, such as the number of available restaurants, are discussed as a challenge for discovery platforms.

The emotional appeal of tar pit ideas and the difficulty founders face in pivoting away from them is highlighted.

Examples of other tar pit ideas include software for gambling and stock trading, which attract many founders but may not have high market demand.

The potential of Web 3 and blockchain technologies is discussed, but the need for practical applications beyond theoretical concepts is emphasized.

The speakers encourage founders with specialized skills and industry insights to consider entering the startup world, even if they don't fit the typical profile.

The importance of differentiating between ideas with high founder interest and low market demand versus those with low founder interest and high market demand is stressed.

Pivoting from a tar pit idea to one with lower founder supply and higher market demand is presented as a successful strategy.

The advice to avoid common patterns of failure and to create unique paths to success concludes the discussion.

Transcripts

that's the tar pit talking it's like oh

this looks like a nice pool water no

one's no one's here drinking at it I'm

gonna I'm gonna go get a drink of water

from this pool right like no danger

quicksand

this is Michael Seibel with Dalton

Caldwell and today we're going to give

advice on pivoting by discussing the

startup ideas that Founders most often

pivot into and away from

we call these ideas

tar pit ideas

Dalton explain the problem here what's

going on

so here's the deal

it's surprisingly

um

a lot of people's ideas are surprisingly

the same across Founders and so when we

read the thousands of applications that

apply every batch and we interviewed the

thousands of companies every batch that

we do

there's a lot of uh common ideas

and specifically what we'll be talking

about today is tar pit ideas and we'll

explain what that means in a moment but

these are ideas that lots of people try

and they don't succeed and they don't

pivot back out of them quickly enough so

it's a cause of death for many many many

many many companies statistically are

some of these Target ideas so so I'll

put this back to you Michael Michael

explain why we would use the word tar

pit what are we trying to say what does

that mean I know you did some research

here

yeah did a little bit of Google in here

so

um a tar pit is

um a place where petroleum is kind of

coming up and seeping up through the

Earth

and it tends to be a great place to find

fossilized remains

dinosaurs other forms of life and the

reason why

is that apparently tar pit pools

resemble fresh water ponds

and so animals will come across them

think it's fresh water step in get stuck

because the tar is very sticky die start

to decompose that smell will attract

more animals and then you get this kind

of cascading negative effect which as I

say it out loud describes the phenomenon

in the startup world so perfectly yeah

it's it's not even funny yeah Tarpon

ideas

attract Founders to them they say and

they seem like good ideas they seem like

something people want you know it's

ideas that are like very appealing and

and the fact that there isn't already

famous companies solving them already

attracts more Founders do you see what

I'm saying like it looks like you've

come up with this amazing original idea

and the death of everyone that attempted

it is hard to see and all you see is

like a freshwater pool you're like oh

this is a wide open space but right

below the surface okay

yeah it looks good right that's why it's

so alluring and so and so look why are

we doing this talk or why are we telling

you this

we would love for this not to happen to

you we would love to not see the tens of

thousands of applications of people

working on these really rough ideas

and if you can manage to not fall into

the tar pit yourself your overall odds

of success in your startup Journey are

much higher that's why we're talking

about this stuff

well let's be clear not only do these

companies apply it and do we interview

them we have funded many tarponitis so

like we've seen the journey you know

from Founders NYC and them getting stuck

in this space too so a lot of what we do

at YC is we try to communicate the

common Paths of failure so you don't

follow them this is just another example

of that let's start so let's begin with

this the fact is

most tar pit ideas at least the ones we

see the most are the ones we're talking

about today are what you would call

consumer ideas

um consumer means you know the customer

is a consumer we'll talk about that in a

second but like let's let's dive into

that Michael why don't you kick this off

what what is a consumer idea what is a

consumer business so this is a product

that's being marketed to people

not companies

sometimes these products are free and

monetized with ads um social networks

are extremely common sometimes these

products are paid products you know the

whole gig economy I would describe as a

consumer business

um but you know it's a consumer business

because individual people use it and

it's a product that's not primarily

marketed to businesses

um that's where you know you're in the

consumer world yeah and there's some

Nuance here folks on the internet so we

don't need to get into a semantic debate

we're just trying to just go with us on

this definition just bear with us here

even if there's some Nuance to debate

about this so why do founders Chen tend

to choose consumer ideas so much why do

they tend to be Tar Pits et cetera et

cetera so yeah why is that Michael why

why is the average person applying to

ycee applying with a consumer idea well

I think it starts with we're all

consumers

we are all consumers and we are being

marketed products basically our whole

lives

and so often when we think about the

problems in our lives or we think about

the problems that interest us they tend

to be things that we would use or we

think we would use or we think our

friends would use

that's a big one what are others I think

that when we know stories about other

Founders or about startups most of the

stories we know are about consumer

Founders and consumer startups and

consumer successes so you think about

the hero worship of Steve Jobs or Mark

Zuckerberg or whatever and it's hard not

to think about these people because they

build products we all use every day like

if you spend your time watching

television and looking at apps and

looking at your iPhone with for most of

your waking hours it's hard not to be

thinking about consumer app ideas right

like I get it

um I get where I get where it's coming

from we rarely meet a Founder that's in

love with Cisco or Oracle you know and

and that makes sense exactly

and and so I think we get told these

stories and so I think by default if

you're thinking about starting a company

You by default come up with consumer

ideas because it's what you know it's

what you think every startup is as a

consumer especially if you're not as

familiar with how the startup World

works yeah

um

and this is rough why is this rough

Michael why is why is it hard

doing consumer stuff so I think there's

two challenges here I think the first

challenge is people often don't

understand how high the bar is

the consumer products that they use they

don't realize how actually good they are

and how many others existed and failed

so that's the first thing and I think

the second thing and we should get into

this a little bit more is that I think

that timing tends to be very important

in consumer so I think sometimes people

don't realize

um when timing is helping them in a

consumer business and when timing is

actually harming them and existing

incumbents can be

um have an almost unfair advantage yeah

I I think from our perspective or from

my perspective reading applications

let's start with this calibration of

what good looks like because again

imagine the the the person applying with

an idea for a consumer social network

it's unlaunched they found you know they

believe what they're doing is like brand

new and they don't really know what the

bar is let's talk about the bar quickly

um for something let's just talk about

Google I'll throw that one out really

quickly yep I was in college when Google

came out

and

it had incredible Word of Mouth

you had to manually have heard of it on

the internet somewhere I think I heard

of it from slash dot you would have to

go into your web browser and type in

google.stanford.edu yep

right there was they didn't do any

advertising there was no growth and they

got

there's no growth hacking they just had

a website and they got millions and

millions and millions of people to go

out of their way every day to open a web

browser and go there

okay and they have tens if not hundreds

of millions of daily active users now

they make something like half a billion

dollars a day

on the ads on their website

um

and again like if you think about them

when they were startup let's zoom into

that

they spent no money on user acquisition

they needed to know branding they didn't

no marketing they just built a really

good product that people really wanted

not only did the people wanted like they

people evangelized it like my roommate

in college saw me not using Google and

like scolded me and said you're using

the a bad search engine you've got to

use Google like that's way past like

liking something right it was obviously

bad and famously

the I the product was so good the

founders didn't really want to run a

startup they tried to sell the

technology yes they tried to get Yahoo

to buy it like the founders were

disinterested in running a startup

but people wanted their products so

badly

that they got pulled into it yes

isn't that weird and again this is the

sign this is the bar for a lot of these

consumer ideas is you make something

that people are so obsessed with and is

so high quality

you you don't have a choice basically

like you as a Founder get pulled this

direction that you weren't even sure you

wanted to take that's a sign of like a

pretty good consumer idea okay like

that's a pretty good bar if we look at

Google in historical contexts

um is there another example if you want

to talk about your man like you know

Facebook is extremely similar you know I

believe the stat was within 48 Hours of

Facebook being released at Harvard 75 of

the campus was using it and when

um I think Peter Thiel and Reed Hoffman

invested the average time on site per

user was two hours a day

and so it's like

holy crap and did they spend money on

marketing and did they you know no no

and I think that's what's crazy is that

like oftentimes people don't communicate

the truth about how these products

actually started like most people don't

realize well they weren't there in the

early days they don't realize and you

know you might hear some later stories

about Facebook growth hacking and the

Facebook growth team and all this other

[ __ ] yeah that's not how Facebook

started like people pulled the product

they were pissed when Facebook wasn't at

their University and again I think this

is a lesson on what the bar is for

Consumer this is why we're telling you

these stories is that the really iconic

consumer companies they tend to have in

common

really excited users that use their

product a lot and the and the founders

of these companies weren't like begging

people to use them per se they weren't

paying a bunch of money in ads they

weren't like all those kinds of tactics

weren't what they did they just actually

made

products that people became obsessed

with very early on frankly so I think

that is the first thing is this bar

let's talk about timing a little bit

here because I think that you and I were

fortunate enough to do startups

during kind of two big

let's say kind of uh explosions of

consumer products right web3 I'm sorry

Web Two

that was a Freudian slip web 2 and and

mobile

and so

why was it easier to make a consumer

company in 2005 2006 2007 or a mobile

company in 2010 2011 12 13 14 what was

happening in the 2000s a lot of people

had gotten broadband and they had gotten

computers

and they were bored and they're when if

you if back in that era you just

launched something cool

people were bored and you were basically

competing with television or something

and so again when you think about when

Facebook came out they weren't competing

with attention from a bunch of other

social networks they were competing with

nothing

and so these college kids on the

campuses back then it was like crack how

addicted people got to this thing and

they would have people using them

multiple hours a day looking at

everyone's photos leaving comments

poking and liking it was like

so addictive

because there was nothing remotely

competing with those hours for the day

well and it's interesting because like

I'll put this in perspective like you

know we were both in school during this

period of time and like everyone would

have a computer screen but at least in

our dorm room there'd only be one

television right and so practically

speaking everyone was in front of their

computer a lot more

um during that period of time of course

College gives great broadband and the

big incumbents the entertainment

incumbents were all on TV

so they were all battling each other on

TV and then on the web there weren't big

incumbents

and you know of course Myspace was there

but Myspace was nowhere close to as

powerful as like an NBC or a CVS or a

fox was on on television so I think that

was like a really big thing that people

didn't realize is that the devices were

there all the hardware was there all the

connectivity was there

but the consumer products Weren't There

Yet bam perfect place and let's be clear

very similar in the smartphone game

right very similar yeah we all had

smartphones and there was an app store

and you at that era if you were building

mobile apps right when the iPhone came

out you could have made some pretty

basic stuff and got a lot of users

the bar was quite low in historical

perspectives because like

you know people wanted to do stuff with

their iPhone whereas now in every app

category there's dozens of things

um it's so right like it's you had to be

in the right time and right place for

some of those ideas right so we've we've

kind of talked all around it but let's

let's kind of

Pin the Tail here like what is a tar pit

idea let's really dig in what are we

talking about here

um a tarpet idea is a consumer idea that

many people try

um it's an idea

part of the reason it's a tar pit and

not just a hard idea is it has to feel

sexy or you have to get lots of

encouragement to work on it you're

likely to get positive feedback

something about it will emotionally make

you not want to Pivot away from it again

this is kind of what's weird about why

we use this term

is if you are not obstinately unwilling

to quit working on it then it's not a

tarpet it's just a regular bad idea it's

just a regular idea if you're not like

and so a true tar pit is one that you

will be defensive about when you are

presented with evidence that the idea is

challenging

you know the funny thing is and I think

you keep on saying it is that like these

are not ideas where it appears like

there's no hope

and

sometimes ideas in these spaces work

right which is kind of the definition of

like there's there's hope

so I Think It's Tricky and I think what

we're trying to say is that not don't

build ideas in this space it's just like

going with both eyes open know the game

you're playing you know like going with

both eyes open know the bar so one of

them is

an app to discover new things and new

things could mean new restaurants new

events New concerts new bands new videos

it's basically Discovery and the pitch

goes something like this discovery is

broken

it's hard for me like

there's all these good restaurants that

I don't know about and yes Yelp exists

and Google exists but I want to hear new

recommendations from my friends or I

want a machine learning recommendations

and I have this problem I've talked to a

bunch of people I follow the YC advice

of talking to my users and many people

are telling me they would love

to find a better way to discover new

restaurants or music again all these

things is a very similar pitch so they

would love to discover it and so we know

people want it so I have personal

experience with this one and I think for

the longest time

I agreed like I was like yes this needs

to exist and

as I got older I learned something that

was slightly depressing but is proven to

be true the magical place doesn't exist

right like there is a finite number of

restaurants that are open tonight

that's it and like you wanting there to

be a better option doesn't mean that a

better option exists and I think this is

what's so tricky is that like the world

seems Limitless but for these physical

things it's actually fairly limited

every day people go on Yelp search the

restaurants in their neighborhood don't

like what they find and are frustrated

but that doesn't mean that there are

restaurants that don't they don't know

about that that just means that what

exists is not sufficient and ditto for

parties Dittos for events and concerts

and I think

you know this is an honest it's an

honest mistake right it's a very honest

mistake because there is a problem I

don't like the restaurants in my

neighborhood or my city right I've spent

years of my life working on music

discovery

and I understand the problems

one of the problems is that we think

that the other users are like us and

people like to say they want to discover

new music but in practice people like

popular music from a small number of

bands

just like with restaurants do you know

what something we've learned from

doordash over the years

is most people order like McDonald's and

stuff like the average year they're

comparable or the burger from somewhere

else that's what people like they're not

ordering like really esoteric strange

dishes

and and this is one of those things

where I'm sure there's people they're

gonna see this video and be like you're

wrong the thing with these ideas is it

makes people emotional

and it makes them want to debate or it

makes them want to like something about

it makes you feel like the you figured

something out and the world is wrong and

you have the vision there's something

weird about this and these Discovery

startup ideas really bring this out in

Founders again we've been there I've

worked on this stuff I get it and so

again we're saying if you're working on

this kind of stuff we're interested in

it do a lot of research and understand

that the reason those that came before

you it's not that they're stupid

it's not that they've never thought of

this before it's not that they haven't

shipped anything before like just

realize that's the tar pit talking it's

like oh this looks like a nice pool no

one's no one's here drinking at it I'm

gonna I'm gonna go get a drink of water

from this pool right like no danger

quicksand

right Dalton I must be the first person

who've ever discovered this problem

I just realized that gen Z doesn't like

Facebook very much I just invented this

idea no one has ever thought of this

before

no one's ever yeah the bar is higher

folks

um here's some other recent kind of tar

pit ideas just to share with people

software to help people bet or gamble on

things or things that um people saw a

lot of The Game Stop fun things with

Wall Street bet so

options stock trading stuff for very

active Traders this is very common right

now and again maybe some of these ideas

are good but I want folks to realize

what a high percentage of all founders

applying to IC apply with these types of

ideas it's a very popular set of ideas

and so you need the bar is higher if

you're going to be working in that kind

of space you can't just be like

self-evidently people like to gamble

people like stock trading but they don't

like Robin Hood therefore my startup

will succeed like that is not um

that is not a compelling argument uh by

itself okay no for sure not and

um

I think that the

probably the last thing is is kind of in

this world of web 3 right and and you've

talked about this a lot

web 3 opens up so many possibilities

because it's the idea that everything

could be rebuilt and like what couldn't

be more exciting to a young founder

coming into a world with that that feels

like everything's been built

to be told oh no everything's going to

be rebuilt in this way

the the challenge is is like that's a

very theoretical concept right Dalton

like yeah how do you dig a Little Deeper

you want to put that into practice and

ideally you want to ideally you have

something deeper then and so therefore

we're going to add tokens or therefore

something something nfts like the bar is

higher and again speaking of nfts

remember open c i I interviewed those

guys I remember doing office hours with

them and what I will tell you is openc

was not theoretical

they launched they had users they had

graphs they made money it was like

actually something we could unders that

made sense and wasn't all wishful

thinking so you've got a theory about

this whole game so here's something

here's a theory I'd like to share with

everybody like let's think about

Founders and startups let's talk about

supply and demand

and the argument is this

there's many startup ideas that have

very large supply of Founders that would

want to work on them

and there's some startup ideas with a

very low supply of Founders that want

and not just want have the skill set to

work on them still with me so for

instance let's imagine the startup idea

is one where as a consequence of being a

Founder you party with celebrities and

your job is to party as many celebrities

as possible

yes I think the supply of Founders that

are excited about that and again a lot

of this is the uh the music Discovery or

the concert Discovery if your startup

ideas hey I want to help people discover

new concerts to go to as a consequence

of working on that startup idea you're

going to go to a lot of concerts and you

have a lot of fun yay and so there is a

huge pool of people out in the universe

that would love to work on that startup

idea okay

on the other side of the spectrum the

supply of Founders that would want to

build open source developer

orchestration tools

pretty low

and for and there's some people where

that stuff is great like right it's just

it's not you have to be technical you

have to be a programmer like there's all

these like boxes and filters you have to

pass through

to think to yourself I'm going to work

on developer orchestration

you know this is my passion

and so that's on the supply side some

ideas a lot of people want to work on

because it's cool and sexy and fun you

hang out with cool people some of them

you know how many people could start a

Quantum Computing startup what's the set

of people in the universe that could

credibly start one of those Michael 20

people

100 okay yeah no hundreds okay so very

small Supply now let's talk about the

demand side Michael what is the demand

for an unlaunched undifferentiated

social app

zero right think about how many apps

launch on a lot in the App Store every

day folks

hundreds thousands I don't know like

most people don't search in the app

store for absent launch that day to

download them and try them out people

are busy they don't care and then and

then also on the demand side what's the

demand for high quality software that

solves a major business problem so that

companies can run more efficiently in

some industry really high yeah like

think about again you have to know what

industry you're doing let's take your

most expensive workers yeah let's take

your most expensive workers and make

them 50 more productive it's something

like retool I guess would be an example

oh here's a no code tool to help help

you uh let your non-technical people

effectively be coders to build all these

dashboards what's the demand for a

product like that

infinite

people want that and so I think what you

yes when we're talking about heart pit

ideas what we're describing is ideas

that have the largest

of oversupply of Founders that want to

start them relative to market demand

I think you can think about this in

terms of like being on the job market or

something if you don't really have

differentiating skills from other

candidates it's just going to be harder

than if you have really differentiated

really special skills that stand out

from the crowd

I think what's interesting about this

concept is how many founder or how many

potential founders

are sitting somewhere with expertise

and they don't think the startup world

is for them like for example we funded a

mining software company

from you know this founder in Australia

who used to basically work for a mining

company building software to tell the

company like how to like deploy all this

really expensive equipment and not lose

money

and I think that there are probably

hundreds of people like this founder

who would never think that the startup

world is for them because they were to

think the startup worlds for people

making stuff for creators or social

networks

I I think this is almost a plea to

people who are experienced and don't

think they're startup people it's like

you might be a startup person like if

you've solved an esoteric problem in a

large industry or you have Insight on it

you could be a startup person and solve

that problem for the world like

you might be you might have a more

unique perspective startups aren't

exclusively apps to discover restaurants

again like like no there's too many of

them no and kind of like my my last set

on this

I think the best pivots are when a

founding team

recognizes these things of the supply

and demand theory that I'm that I'm

discussing

and they find an idea

with a lower supply of other people

doing it and with larger demand from

customers and that when you move when

you move from a lots of Supply Founders

low demand to low supply of other

Founders high demand

that's a good pivot I would that's

that's brexit that's retool that's I

mean we have so many examples of this

stuff

um that's one framework I would have for

describing what makes a great pivot is

moving in a good direction on both of

these vectors well and this might be

torturing the metaphor but basically

what we're saying is

instead of moving towards what looks

like the easy fresh water Pond but

that's a trap

you move towards the mountains the

desert right the places that people

don't want to go

but you know when people find gold they

usually don't find it in the middle of

downtown Manhattan you know but they

usually have to go far away and so I

think that

those companies are really encouraging

to work with in YC because you think to

yourself if you continue to walk that

path away from the tar pit even if you

start with a tar pit idea

great and you know honestly we fund

folks with tarpet ideas because we have

we have the a thought that maybe they'll

pivot out and many of them do which is

kind of cool to watch look in closing

folks out here know do your research

know what the bar is think about the

supply and demand thing and you know

give yourself the best best odds for

Success this is how you create luck and

so one of the reasons we want to put

this there is we would love to see more

Founders kind of recognize this Dynamic

we're describing and make some moves on

the supply and demand side because I

think that'll meaningfully increase your

odds of success so just think on that

and take it from us because we can't

tell you what the play to win is but

like we think it's our responsibility to

tell you the plays that we see losing

all the time

you know and and if you can avoid the

most common patterns of death

you can perhaps chart a unique path to

success and and that's if any advisor

tells you they can do more for you than

that

be wary all right Dalton great chat

thanks okay

[Music]

thank you