The Secrets of Y Combinator’s Early Success (with YC Co-Founder Jessica Livingston)

When I decided with Paul to start Y Combinator, I remember the most scary part about it was just telling my father that I was, like, quitting my job at an investment bank that had all benefits and had a secure, you know, salary and all of that.

I remember being so scared to tell him that I was doing this new idea that I couldn't even barely explain because we didn't really even know exactly what it looked like. It was just I'm doing an investment company with Paul. And I remember the first thing he said was, he looked at me, probably a bit shocked, and then he said, does it have health care coverage?

Like, that's what you care about as a parent. This is actually a real universal.

thing that people worry about. It was a problem for me when I was first trying to think of whether or not I would quit my job at Microsoft to go cofound Palantir with Peter Thiel. And in that case, I said no for this very reason. But we're really glad Jessica did take a step back and make the leap to start Y Combinator. It really made a huge difference to the future of startups broadly.

It really was Jessica's flair for bringing people together and making a safe and great environment that made Y Combinator even possible.

I had this, like, really kind of random background and, like, events I could run with an arm, know, tied behind my back. And so YC though was so much about about events and still is, like you you say. But back when it was just me, Paul, Robert, and Trevor, you know, the events were on a much smaller scale, but they were still events. The dinners were events.

You know, interviews essentially were events because we had people coming in and out the door, and you had to plan the logistics and what how do you greet people and have food for them while they're waiting and all that stuff and keep everything running on time. And then we do start up school, which was our big event every year.

And that, you know, was couple hundred people, but it would grow every year to hundreds and hundreds till it was like a thousand.

And so events were always a very important part of YC, and I was able to do those by myself for many years. Jessica's events were actually a key part of what YC was back then, and that lineage holds all the way to today. Jessica was sort of the original experienced designer when it comes to making.

a incredible experience. You know, we didn't know what we were doing, Gary. We just sort of put one foot in front of the other and said, well, we're gonna help him. We're gonna have these dinners once a week. And then Paul would cook the dinner, but I would like I remember I put, like, candles out. We'd light a fire in the fireplace.

I'd get cheese from Formaggio Kitchen, you know, lemonade and stuff from Whole Foods. So was like a dinner party every week. And these startups would come together and we'd have a guest speaker who we'd, like, scrounge up from our network. I mean, I I think I invited our someone from our investment bank to come talk about m and a. You know? Like, these guys needed to know about m and a.

They didn't at that point, but this this is what we were working with. We had patent lawyer and stuff like that. But it was still the model seemed really interesting, how people would come together once a week and they became friends and they'd, you know, tell each other about their progress that week. And, you know, Paul would advise them and I helped incorporate them.

I had sort of had to like because we wanted to save people the legal fees of having to hire a lawyer. So we thought, and this was totally novel at the time, we said let's create template documents to incorporate. And there were like seven different documents you needed. But you really it seemed complex, but you really just filled in the blanks here and there.

And so I would go sit down with the founders and say, okay. This is what you do, and this is what you have to think about. How much stock do you wanna allocate, and here's what it means. And then they'd file all the stuff and become companies.

Paul Graham gets a lot of deserved credit for creating Y Combinator, but I'd argue that Jessica was someone who really made it happen. YC as we know it today would not have existed without her as a part of the mix. It was the two of them collaborating, making things work that made the whole thing work. It was Paul and Jessica who set up the culture of success that permeates YC.

even till today. Turns out I love the freedom. I love working on my own projects, honestly. And had I been more self aware or more in tune with the kind of person I was, I wish I kind of had discovered that when I was 23, but I didn't. But I loved working on my own projects and with like, I loved working with Paul.

He was so, like, and amazing and we just everything we had so much fun working together, especially when it was just like the two of us. We just, you know, we'd split up for the day. He'd do his thing. I'd do mine. We'd come together at night and continue to talk about it. We talked about YC all the time, always coming up with ideas to improve things.

Because that's that's one of the things that we did at YC. We changed things on the fly.

You know, we always were experimenting with trying to improve things. Well, what if we just tweaked this? Would that improve it? And that's why I think I mean, YC's constantly being improved. You're improving it. You know, a lot of the partners are improving it, but you gotta be open to changing things a little bit.

Working at YC is super fun even now, and that's one of the more counterintuitive things that I'm really thankful for, actually. The more fun you have at work, it doesn't feel like you're working and you don't work a single day in your life. And the weirdest thing that I've learned as I spend more time around YC is that the more fun we have, the more successful we actually become.

And that's because what is fun, what is something that gives energy, that's also the thing that seems to solve a lot of problems,.

create product market fit, find teams that actually work in the world. I think Paul and I were each each other's, like, perfect cofounders because we were so different in many ways, but we were so similar. We shared the same values. We wanted the same things. We treated people. We had the same, like, moral compass, if you will.

But we had totally different skill sets that were so foreign to the other. Like, I don't I think Paul was still, like, amazed that I was able to open up a bank account, you know, like, because that would stop him in the in his tracks. And, of course, Paul is, like, a genius for startup ideas and things like that.

And he's, you know, very much he'll say whatever he thinks needs to be said, and whereas I'm, like, behind the scenes and I don't talk to people, you know, publicly. We're just different different personalities, but it worked perfectly. So picking the right cofounder is critical. Great cofounders.

like PG and Jessica are actually incredibly complementary. When one person is strong at one thing, the other person might not be as good at it and vice versa, and it actually works. The whole package coming together means that the sum of the parts are worth far more. You get something that you could not have on your own.

It was Paul Graham and Jessica Livingston coming together in the way they did that created this environment now where as many as five to 12% of the founders who go through any given batch, they go on to create startups worth a billion dollars or more. It all starts with getting it right in the experience and the design of that experience. I had all of these.

startups that I was working with, helping, advising, seeing fail, seeing succeeds, all of this shit that you just see when you're funding, you know, 80 startups, a hundred startups. I mean, by the time I left, the batches were getting pretty big. So you just see a lot of it.

But don't forget also that every Tuesday night, we would have a Mark Zuckerberg come or, you know, some famous successful startup come talk. And I was I pulled up my chair, you know, right next to the YC founders in the audience. I never missed a talk because I learned so much from them.

So I have crazy stories coming at me from like the YC founders who are just getting started, then you have the kind of crazy stories in hindsight that were by the way, back when I was there, people were sharing stuff they had never shared publicly, you know, and and because they trusted the YC audience and we had a rule, you're not allowed to tweet about anything that's shared and for many years, secrets were kept in the office, in the YC office.

So I was learning about it from that end too. Then I did, you know, the Founders at Work book, learned a lot from that. And during startup school, I would often be the one interviewing the speakers. Like, if they didn't wanna prepare a presentation, I'd interview them. So I loved learning about them from, questions that I had from that.

So I was just having all of this input come in, and I think I can't help but wanna do something with that, you know, and I love talking to people. I love hearing about how people overcome adversity in any in any way, but especially in startups. I love hearing stories about that. I love talking to these super successful famous people who tell me about how they couldn't raise any money. You know?

Because everyone starts out the same way. You know? You're nobody when you start, you know? And it's just I find it very inspirational because I do I've always believed and I still believe that anyone who is sufficiently ambitious and determined and reasonably smart can start a startup. Like, anyone can do this if they want to. So I just hope you know, I I like to continue sharing stories.

from the most successful startups because I just feel like it'll just inspire more people to do it themselves. So that's it for this week. I'm so glad you could hear a bunch of the stories that have never really been told on camera. If you like this episode, click the link in the description and go listen to the Social Radars anywhere you get your podcasts.

It's one of the best new podcasts that tells all the great stories that are sort of untold around the best founders around YC, and it's hosted by none other than Jessica Livingston and Carolyn Levy. Thanks so much for watching to the end, and I'll see you next time.