April 29, 2024 • 46min

Michael Seibel: “The Godfounder” Discusses Justin.tv, Twitch, and Y Combinator

Pattern Breakers

In this episode of Pattern Breakers, Mike Maples Jr. interviews Michael Seibel, partner and managing director at Y Combinator. They discuss Michael's journey from Yale to becoming a startup founder with Justin.tv and Twitch, to his current role helping founders at YC. The conversation focuses on Michael's unique insights into what makes startups successful, particularly around achieving product-market fit.

0:00

-0:00

Key Takeaways

Product-market fit is the hardest thing to achieve in a startup, with the lowest percentage chance of success compared to other startup tasks
Founders often lie to themselves about having product-market fit when they don't, using metrics like fundraising success or arbitrary milestones as false indicators
To find product-market fit, founders need to use their "product brain" rather than their "business brain" - focus on solving real user problems rather than trying to predict billion-dollar businesses
Fear is a useful tool in startups if used correctly - it can signal the path founders should be walking and the hard things they need to face
There is a stark difference between pre and post product-market fit advice - founders need to be careful about consuming the wrong advice at the wrong stage
Straying from the pack and being willing to do things differently than other startups is often necessary to find true product-market fit
Having a supportive family and relationships outside of work can be a major stress reliever and source of balance for founders

Introduction

In this episode of Pattern Breakers, Mike Maples Jr. interviews Michael Seibel, partner and managing director at Y Combinator. They discuss Michael's journey from Yale to becoming a startup founder with Justin.tv and Twitch, to his current role helping founders at YC. The conversation focuses on Michael's unique insights into what makes startups successful, particularly around achieving product-market fit.

Topics Discussed

Michael's Background and Path to YC (0:00)

Michael shares how he went from studying political science at Yale with aspirations of becoming a Supreme Court justice to co-founding Justin.tv:

Met Justin Kan at Yale and initially disliked him, but became close friends after being kicked out for a year
Joined Justin's cross-country trip to start Justin.tv on a whim, thinking "When's the next time your best friend is going to call you and say, let's start a company? This feels like a one timer."
Justin.tv eventually spun out into Twitch (acquired by Amazon for $970M) and Socialcam (which Michael ran, acquired by Autodesk for $60M)

Michael began advising other startups like Airbnb, which led to him joining Y Combinator part-time in 2013 and then full-time in 2014.

Characteristics of Successful YC Companies (19:22)

Michael outlines some common traits he's observed in successful YC startups:

Founding teams with deep personal connections that can survive tough times
A strong technical co-founder and team-wide appreciation for software
Predilection towards action - not just talking, but doing and making progress
Enthusiasm for YC and willingness to engage deeply with the program

The Challenge of Product-Market Fit (21:56)

Michael emphasizes that achieving product-market fit is the hardest part of building a startup:

It has the lowest percentage chance of success compared to other startup tasks like fundraising, hiring, etc.
Founders often lie to themselves about having product-market fit when they don't, using false indicators like fundraising success
It requires proving some of your initial assumptions wrong, which can be scary
Indifference about users makes it much harder to achieve - you need to genuinely care about solving their problems

Michael contrasts the "product brain" vs "business brain" approach:

Product brain comes from being a user and identifying real problems
Business brain tries to predict billion-dollar businesses, but is usually wrong pre-product-market fit
Founders should focus on their product brain to solve real user problems rather than trying to predict huge businesses

Traps That Prevent Product-Market Fit (30:54)

Michael highlights some common traps that prevent startups from achieving true product-market fit:

Selling dollar bills for 75 cents - artificially boosting growth through unsustainable pricing or promotions
Cheap money masking fundamental issues - using venture capital to buy growth without understanding true user needs
Fear of charging sustainable prices - not getting real feedback on whether users truly value the product

Using Fear as a Tool (33:12)

Michael argues that fear can be a useful tool for founders if used correctly:

Fear is often a signal of the path founders should be walking
Advises founders to look at their to-do list and do the items that make their stomach hurt
Some founders attack fear head-on, others put themselves in high-pressure situations to perform
"All of those horrible moments will be the best stories when this works"

Pre vs Post Product-Market Fit Advice (35:56)

Michael emphasizes the stark difference between advice for pre vs post product-market fit companies:

Pre-PMF: Founders should engage directly with users and be hands-on with core problems
Post-PMF: Focus shifts to scaling yourself through hiring and delegation
Consuming the wrong advice at the wrong stage can be detrimental
Criticizes investors who don't recognize this difference and give harmful advice

Straying from the Pack (39:01)

Michael discusses the importance of being willing to do things differently:

The average YC company dies, so striving to be average is a losing strategy
Strategies that work in school or big companies often don't apply to startups
Gives example of founders questioning if they need to raise money when already profitable
Cites Zapier as a success story - raised $1.2M but never spent it, remained profitable

Family and Work-Life Balance (42:28)

Michael shares his perspective on the importance of relationships outside of work:

Having a supportive partner and family can be a major stress reliever when doing hard things
Provides a healthier counterbalance than substances for dealing with startup stress
While it may seem harder, it's more sustainable and rewarding long-term
Credits his wife as one of the most important reasons for his success

Conclusion

Michael Seibel's journey from political science student to successful founder to YC partner gives him unique insight into what makes startups succeed. His emphasis on the challenges of achieving product-market fit, the importance of solving real user problems, and the willingness to stray from conventional wisdom encapsulates much of YC's philosophy.

For aspiring founders, Michael's advice centers on staying focused on users, embracing fear and challenges, being willing to do things differently, and maintaining balance through relationships outside of work. By sharing both his successes and struggles, Michael provides a realistic yet inspiring view of the startup journey.