Dalton & Michael: How to deal with setbacks

What do you think, Dalton? Did did y'all have a couple punches land over the years? Yeah. I mean, that was that was my experience as a founder was taking punches constantly. And I think what comes up in office hours with me a lot, man, is I think people wanna talk to me about one specific thing and asking for advice about that thing, and I'm happy to do it.

But a lot of what I wanna encourage them to think about is the meta thing, which is that the thing will keep happening over and over again. And so developing a set of skills of identifying a situation of like, oh, this is one of these where like something bad happened and approaching it is part of like the sun rises, the sun sets, bad things happen. Yes. You know?

Like, it's this is this is as much a part of of being a startup founder as literally anything else versus thinking you you're never gonna have them or that each each setback is different. They're not. They just come just like every sunrise comes. Right? So let's.

jump into the first area that produces setbacks. Investors and fundraising. The classic the classic. I went in to fundraise with this expectation. I came out with a bloody nose and a black eye.

Yeah. I thought I thought they liked me. I thought they were my friends. I thought I was special. I thought everyone else is raising, you know, everyone else is this. Oh, I I got all the right intros. I know they're interested in my thing. I did the networking.

Like, it's it's some version of I believed with good reason x was going to happen. X did not happen. WTF. Like like, how dare they? Or the like, you end up, like, going kinda nuts on feeling wronged by a person or a or a system or whatever you wanna call it. Like, someone did you wrong. Right?

What I think the scary thing about fundraising is that one fundraising process can produce so many of these experiences.

Constant. Well, they.

So many of them. And you know, I remember personally the first full partnership meeting. Like we're raising a a round like from a real investor and I had my first full partnership meeting and I remember thinking like this is it. Like this is you know, this is destiny. Like this is gonna happen like you know, it's it's taken me so many meetings to get here.

And I remember in front of everyone, one of the VCs in the meeting eviscerated me for forty five minutes and everyone else was quiet. And the person who like invited me to the meeting was quiet. And I just watched that person very logically take apart my entire startup almost in a way that I would have had our roles been reversed. It was like it's like Well, they were they were probably right.

Right, Michael? They were right. No. No. It was it wasn't they weren't wrong. Right? But like, you know, in some way they were right. In other ways, I think we were right.

I mean, our company did well in the end. Precisely. Yeah. Yeah. You you could take apart any startup logically at that stage like where there's no defense. And I just remember leaving that meeting being like, oh shit. Like, I can't imagine how I felt an hour ago compared to how I feel now. Like, literally,.

those seem like two different years of my life. We see this at YC where like, you know, statistically most folks don't get into YC. This is the game. And you see the way folks react to it.

in very different ways. When we deal with it in the context of YC founders, the best people who don't get in realize this isn't a one shot game. Yeah. They apply again. They make progress with their company. Like, you know, we we send the reject email to every company and like the best people will be like, you know, you're making good points.

We're gonna we're gonna improve on those things and we'll we'll apply again. And I think that like they realize that that's that's a plus what? Like you like you you've earned some respect in that moment. Like put another way, there's an opportunity to get an advantage even when you feel like you just failed. Whereas almost the worst founders feel like, oh now the game is off.

If I like curse it won't be counted because like the, you know, it's the the the time is over. Right? Like the, you know, nothing's counted after the clock runs to zero. And it's like, the game's not off. Like, what are you talking about? And we see this all the time with series a's where.

man, I talk about this so much. No one puts out a press release when they fail to raise an a. No. No. So what's going on is most a's fail Yep. But no one ever tells anyone. But everyone tells everybody when it succeeds. And so it creates this warped reality that everyone thinks everyone is raising a's and everyone has an easy time.

Everyone but me is raising a series a. Everyone but me is having an easy time. What's wrong with me? And it's like, no. No. No. No. No.

Like, I think it's just the virtue by which this information is shared. And so people have this warped view of reality that causes everyone to think that they are personally, you know, everything bad has happened to them and to no one else.

Well, and this touches on the next subject which is co founders. Because, you know, this is something that I definitely experienced, you know. My co founders are reading TechCrunch watching idiots raise tens of millions of dollars every day. And then looking at me as the fundraiser being like, hey Mike, like what's going on?

Like there's a a couple of idiots with no products just raised 10,000,000 from, you know, dot it off famous fund. Why why is our series a taking this long? And, man, co founder fights suck. You know, co founder disputes, they are the in some ways, think it rocks you to your core more than investor issues because like that's your home. Like when your home Yeah. Feels broken, well, it feels bad.

At YC, we encourage people to do startups with their friends and I think that a lot of people think about that and they say, that seems so risky. Like if my startup doesn't work, will will my friendship break? And you know, always talk about the other side of that which is like if you don't have a strong relationship with this person, when things go bad, it's guaranteed to break. You know?

At least if you have a friendship, there's a fighting chance. Every co founder relationship is always tested. Right? And so you wanna have enough connective tissue.

that Yes. Like you can survive the inevitable friction. Yes. And to think that there will never be friction, that's not, again, not realistic. No. And so you actually wanna have enough of a relationship so when the inevitable friction happens, there's still a relationship and it's not just like, boom.

So the other thing that comes up a lot is this concept of the magical deal. And and I always love the magical deal because like the magical deal can punch you in the face when it doesn't happen and a magical deal can punch you in the face when it does happen because it turns out it's not as magical as you thought.

It's our first six figure advertising contract with Microsoft which we were like, oh man, this is it. Like this is this breaks open our entry into the monetization game which required us to redesign our entire site. Go to LA and produce a live television show. Lose Sure. Way more than a hundred thousand dollars of money. The show wasn't very good and complete waste of time and effort.

Like literally like three months of our lives like down the drain. And if we think about the burn we had during that period of time like let alone we didn't make money on the advertising like the burn in the wasted opportunity. And to me it's like wow but at the moment we were like these are the deals that will save the company. Like this is the most important thing happening. You see it a lot.

Right? The the founder is like, this is the magical Here's the the potion. This is what's gonna I think it's that you reduce.

your entire startup to you just need one thing to happen and then you're on easy street. I always picture you know at the end of the movie when they roll credits, you know, like something happens and then, like, the music plays and they, you know, roll credits like we won. Like, I think people think that's how life actually is. Yeah. And they're like, yeah.

Well, once I get this deal, you know, roll credits. And what's funny working with a lot of start ups and when I was a founder is sometimes you get the deal and the credits don't roll. You're like, oh, now what?

You're like Where's the music? Still here. Where's the happy music? I thought the movie was over.

And then you're like, shit. I guess I guess we actually have to, like, run a startup still. Okay. We got into YC, Michael. Like, where are we rich? Like, are we we won. Right? We're successful?

Oh, good. We have to we have to break this news to people all the time to get into YC that, like, it's it's still hard. I love that too because I think.

founders have this moment have this thought in their head that that moment is gonna be in the first two and a half years. Like the play that credits off, it's it's all inevitable from here will be in the first two and a half years. And we talked to so many alums who are like eight to ten years to their ridiculously.

successful companies. No music. Like no no credits. Like no public companies. No credits. Like like Nope. They're still they're still doing it. And it's still the same profit.

Like they have setbacks. I think Yes. Like, it's no fun. Like, these people have a hard time. Like, they have constant setbacks.

Constant setbacks. I mean, that's the game. It's it's like saying like I don't know. It's like saying that you wanna be a boxer but, like, after you get really good at boxing, you'll never have to take punch again. It's like, no, the sport people that's the sport. That's the game we're playing. If you wanna reach that, like retire or stop. If you don't wanna take punches, stop playing this game.

You had some thoughts on when a launch goes bad.

Yeah. I mean, I think a lot of folks think that launches will be like the movie. Again, I think I think we're Mhmm. We can't help but be influenced by television and movie and books where, you know Yes.

Actual an actual realistic movie that showed a start would just be, like, people sitting at their keyboard typing all day and not talking probably would be what like, lots of that punctuated by pretty boring conversations. But that's not that's not good in a movie.

And so so anyway, I think this translates to how people thinks a launch will go, where they think they're gonna launch and everyone's gonna care and, like, things will happen to them and, like, you know, like, they they have a movie in their head of all these, like, amazing things happening, all these users signing And the reason it's really good to launch fast is to get that shit out of your head as fast as you can and realize you put it out and no one cares.

Whatever you thought like, this movie that you had is not realistic. And what actually happens is, no one cares. And sometimes they care a little and sometimes they care but in a bad way. They they're like, you're bad and this idea is bad. You suck. You're like you're like buying lunch and everyone's like, this is bad and you should feel bad.

And you're like, that wasn't what I this isn't the movie. I was I was promised a movie here. I love that because it's like, two levels worse than you can imagine. Bad is no one cares. Worse is everyone hates you. Yeah. People on Hacker News are like, you should be ashamed of yourself and you're bad and all of your ideas are bad and.

I could've built this in three days.

And startups are dumb, and you're wasting your time. You know? Yeah. It's like it's not great. And so, again, the good thing about launching is you just get you flush this out of your system. You're like, yeah. Okay. Cool.

This isn't like the movie. This is real life. And here in real life, you put out a launch and most people don't care most of the time. Yep. And you just have to keep launching over and over and over again. And like, that's the work.

Right? Well, if the movie analogy is so perfect because when you think about the launches that most people experience, I think one of the most famous types of launch that you would see in the world is a movie launch. Right? It's a movie premiere. That gives you the exact opposite of impression of how a startup is. Right?

It's like whole bunch of press, whole bunch of hula hoopla, a whole bunch of people watching that movie quickly and then it fading to nothing over the course of like a month or two. Whereas a startup is the exact opposite of that. It's like a whole bunch of nobody gives a shit for a really long time and then some point ten years from now everyone really cares.

But I don't know that people experience those. Can you imagine actual time lapse.

of Yeah. The Facebook story? Like if some if there was camera mounted on Mark Zuckerberg's head Yeah. For, like, the first ten years, what that would actually be versus what people think it was from watching the freaking movie. Like, again, like, it was a lot of someone sitting at a keyboard writing code and, like, staring at graphs a lot, and it wasn't that interesting. It it was not entertaining.

Not entertaining. Well, and especially in the early days where it was exciting to move to another school. Like, getting another population of 5,000 users was like.

excite was a big moment inside of the company. Yeah. Well and again, if the actual movie would be them sitting at their desk in the house being like typing some stuff into a terminal being, like, okay. We just launched a new school. And they're, like, yay. Yay. You know what I'm saying? Like, there's no music.

There's no backing track. They're just kinda sitting there staring at a screen being, like, okay. Oh, wait. Something just broke. Fuck. Oh, hold on. Sight's down. Okay.

Sight's down. Alright. Alright. Well, it looks good. Alright. Sight's back up. Alright. Cool.

I'll be back. Yeah. And so I think movies hurt us here. I guess they're good because they inspire us. But I think movies mess people up a lot of of what they think normal is. Well, the other thing that I think movies screw up is is legal.

So I remember getting our first angry letter. And like during my startup career, I went from angry letter from law firm, getting sued by the company owned by the prime minister of Italy, getting sued by the UFC, getting very aggressively invited to testify in front of congress about sports piracy issue.

Like, it was like, that first letter I thought was a disaster and if only it described all the other shit that was gonna described all the other shit that was gonna happen. Like, I might have just quit. Like, I might just shut this down. And like, I remember having this conversation with YC founders now because it'll always be like, oh god, we got sued. And I'm just like, and? Like, like, welcome.

to running a business. Like, you got sued. Like, check that box off. It just comes with a territory. Like, there's no way to avoid it. Like, there's not there's not a universe where you could do big things and not have these setbacks where folks will tell you you're over. Folks will tell you, you know, you're bad and you should feel bad.

Well, those are the two maybe those are the two kind of silver linings. Right? I think that the two silver linings like one, everyone you respect out there who's doing great things is dealing with all this stuff. And so that should make you feel good. Like every single person you respect who's done something hard has dealt with all this crap and 10x more.

So you're not getting some hand some bad hand.

Like everyone gets this hand. But it's not about you. Yeah. Is just the thing. This is just the game. This is this is the thing is that you're gonna everyday have to deal with things that feel like setbacks.

Well, Anne, you can get I think that's the second silver lining here is you can get good at this. Right? Like, you can get good at dealing with these headbacks. You can actually get better over time. You can learn.

how to take a punch. You can't control whether or not you're gonna have setbacks. You can't. You have to, like, let it wash over you. But you can completely control your reaction. Yeah. That's a % like, what happens in your brain after a setback happens is within your control. And so you wanna have acceptance.

Yeah. Some bad stuff's gonna happen, and I can't fix it. But, man, you have a lot of choices in how you deal with setbacks. It could be anger. It could be fear. It could be bartering. It could be denial. Like, we've seen it all.

But this is something that you can practice and get good at. And the folks that are great at whatever their thing is again, like, whether it's athletes or whether it's people putting out music or making movies, like, how do they like, you can get better at dealing with, like, criticism or people not caring. And, like, you can just do that. That's your choice.

Like, no there's no structural reason you can't have a better or more productive reaction to the setback. Right? One, this is the only thing that I would add to that.

is that you're the example. Like, in so many things in startups, the punch in the face is the moment where you can still win points. How you react influences how your co founders react, how your employees react, influences how they will react when bad things happen to them.

And so like the the the the victory you can rescue out of the jaws of defeat for any of these setbacks is reacting in the way that you'd want everyone else around you to act react. And like in some fun ways, it's like if people see you taking punches well, they'll learn how to take punches well. One day, you're gonna have a large organization and you're not gonna be there to cover everyone.

And they will have learned from you. They'll learn the good from you or the bad from you. But they will learn from you. And I think that's what's fun, you know. Sometimes this kind of stuff happens at YC and it's I actually like I love it. Like I love when people are freaking out and I'm like, oh, it's gonna be fine.

Because it's like, it turns out freaking out doesn't help anyone and it turns out if someone in the room's like, oh, it's gonna be fun. Everyone like pauses for a moment. It's like, well, fuck. Maybe it will be fine.

To be really tactical, what I what I tell people to do is you do an inventory. Yes. And you're like, okay. Are we running out of money? Yep. Okay. Do we still have a product? Like, are we are we in legal trouble?

Yes. Like, are they Are we arrested? Okay.

Like, are we Who am I? Am I injured? You.

know? Okay. Well, could could things have been worse? Like, is this recoverable? Like like, you kinda just do an inventory where you check-in, you go you know, reboot the whole machine. Yeah. And you're like, well, how bad is this? Because sometimes it is really bad.

I'm not lying I'm not gonna lie to you. Sometimes Sure. It's real bad. Yep. But a lot of the times you do this inventory and you're like you're like, okay. Well, we have we have three years of runway and, you know, we can do that. Okay. Oh,.

this isn't bad. And that that inventory, I like to call that the worst case analysis. Like, I actually like to, like, okay, this bad thing happens. What are the five things we're most afraid of now? And, like, when we say them out loud, do they just sound less scary? Why? Because they're they're they didn't happen. It's like, oh, all of our customers are gonna leave.

Have they have they left? Has anyone even emailed you? Like saying they wanna leave. Like, no. Learn how to get better at this because this is the game. Learn how to take a punch. Learn how to get good at doing hard things. Message.

Yeah. And it's weird because it's a superpower. Right? Like, in in some weird way, the coolest thing about a startup is that, like, if you even if the company fails, you can get this superpower.

I mean, it's great. Like, you this is a great person to have in your family. This is a great person to have in your friend. Like, someone that's a rock. Yeah. Someone that will listen. Like, oh, something's bad? Let me listen.

Like, let me assess the situation. Tell me what's going on. Okay. So this okay. That alright. Like, I could see why this is a setback, but, you know, seems like everything else is going okay. So,.

like, that's a valuable person to have around. Oh, man. Alright. Well, to wrap this up, bad things are gonna happen. Your reaction's completely under your control, use it as an opportunity to get better at taking punches, and be the example for the people around you. By up leveling yourself, you can up level your team too. Alright, man. Great chat.

Sounds good. Thanks, man.