Avoid These Tempting Startup Ideas

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