- The video discusses the origins of great startup ideas using examples from Airbnb, Coinbase, and Stripe.
- Timing was crucial for these companies, as they found opportunities to create products that were 10x better than existing ones.
- Many people initially thought these ideas were bad or too difficult to execute.
- The opportunities turned out to be even bigger than the founders anticipated.
- Airbnb faced competition from VRBO and Couchsurfing, but their insight into facilitating payments and not charging hosts upfront set them apart.
- Coinbase recognized the difficulty of buying Bitcoin and aimed to provide a 10x better solution.
- Brian, the founder of Coinbase, faced skepticism but saw the value in portable online gold.
- Overall, being contrarian and solving personal problems were key factors in the success of these startups.

- The founder of Coinbase faced many challenges and skepticism in the early days, as people saw Bitcoin as a small and fraudulent market, making it difficult to get investors and secure a bank deal.
- Even the founder himself didn't fully believe in his own idea at first, but the simple promise of buying Bitcoin easily and securely turned out to be the basis for a successful company.
- Stripe faced similar challenges in the online payments space, where accepting credit cards was complicated and time-consuming before their platform came along.
- Stripe differentiated itself by focusing on creating a beautiful website and documentation for developers, which generated buzz and demand among the tech community.
- Both Coinbase and Stripe faced criticism for entering crowded markets and being seen as inferior versions of existing companies, but they proved their critics wrong by building successful products and executing their ideas effectively.
- The key takeaways are to not be deterred by existing competition if there is a genuine need for improvement, and to not let the opinions of experts discourage you from pursuing your ideas.

- Don't worry about experts' opinions if they don't have experience with the problem you're solving
- Don't assume you know the exact size of the market, as new use cases can emerge
- Don't be discouraged by people who say your market is small

The video discusses the origins of successful startup ideas using examples from Airbnb, Coinbase, and Stripe. It emphasizes the importance of timing and finding opportunities to create products that are significantly better than existing ones. The founders of these companies faced skepticism and challenges but ultimately succeeded by being contrarian, solving personal problems, and executing their ideas effectively. The key takeaways include not being deterred by existing competition, not letting the opinions of experts discourage you, and not assuming the exact size of the market.

Dalton Caldwell and Michael Seibel talk about where the ideas for Airbnb, Coinbase, and Stripe came from. Then they discuss what you can learn from these founders.

To create Rookies Mistakes we asked YC founders: Is there a simple fact you wish you knew when you started your company or a rookie mistake you wish you could take back?

Chapters (Powered by https://bit.ly/chapterme-yc) - 
00:00 - Rookie Mistakes
00:30 - 3 common themes
00:35 - 1. Timing
00:48 - 2. Idea
00:59 - 3. Market
01:10 - AirbnB
01:24 - Competition
02:47 - Payments
03:08 - Free listing
03:36 - Solving their own problem
04:35 - Used their own product
04:46 - What were the takeaways when they launched?
05:04 - Criticisms
07:35 - Coinbase
07:46 - Buying Bitcoin
09:22 - Not the first mover
09:33 - Online gold is 10x better than gold
09:54 - Criticisms
11:08 - Undercounted
12:10 - Impossible time raising money on demo day
12:31 - Stripe
12:39 - Context
14:14 - Peer problem
14:42 - Go-to-market
15:19 - What would a programmer want?
16:38 - Most expensive product
16:58 - Criticisms
18:46 - Contrarian
18:59 - They had to build great good products
19:33 - Takeaway
19:37 - Incumbents
19:48 - Don't care about experts
19:53 - Market Research
20:07 - Market math

In all 3 of these cases, these folks had the problem, they had experience, and in hindsight there was an obvious opportunity to make something 10x better.

But most people thought they were idiots.

And that's probably the overarching theme.

Hey, this is Michael Seibel with Dalton Caldwell.

Today we're going to talk about where do great startup ideas come from?

We've picked 3 successful YC companies to unpack this question, Airbnb, Coinbase, and Stripe.

And there are 3 common themes that we've seen through all 3 of these companies.

For each of these companies, there was a pre-existing product, pre-existing competitor, dominant, you might say, but there was an opportunity to make something that was 10x better than what existed.

Number 2, most people, founders and investors, thought these ideas were horrible, either because they were too hard to execute or because they just were bad ideas.

And then number 3, and I think the coolest 1 of them, is that each of these opportunities turned out to be bigger than the founders even knew when they started.

1 of the things that I think is really interesting to set this up is that existing products did exist, right?

So what were you using before Airbnb, Dalton?

Yeah, for context, I think if you've only seen Airbnb, you think they came up with the idea.

That's probably if I talked to my mom, she'd say, oh, Airbnb is a great idea that those founders dreamed up.

But back in the day, I was already using VRBO before Airbnb was even funded by YC or existed.

There was also a very popular startup called Couchsurfing, which was quite similar to Airbnb and it had a lot of mindshare, had a lot of, it was a big network.

And so it kind of felt like the third rate entrant to a crowded space at the time.

I remember when they were in NYC, that was my perspective.

Because I'd used VRBO personally, and I thought it was

1 of the reasons why I was actually excited about working with the Airbnb folks was because using couch surfing was so painful.

And so I think that, you know, first thing when it comes to timing, I think they nailed this hardcore.

They weren't first, but the existing products weren't great.

And I think it's interesting to talk about why the existing products weren't great because honestly, that's important.

I would argue that there were 2 fundamental facts that made the existing products not good.

The first is that VRBO and Craigslist did not facilitate payments.

So when you arranged in a house share with someone or staying in someone's apartment, you still had to pay them either in cash or check or wire and there was a lot of friction because there's 2 people who don't know each other having to trust each other to transmit payments.

I think the second problem that VRBO had was they charge hosts to list and if you think about the core insight of this market, it's that hosts are the game.

But if you charge them upfront to be on your site, like you're probably doing it wrong.

Existing product did not, there were 10x improvements that could be made.

I think the second thing that was really interesting was that they were solving their own problem.

Like most people don't realize that Airbnb started because Joe and Nate needed to make rent money.

And there was a big conference going on in San Francisco and they basically rented out room on their floor to host people so that they could make some money.

And It's funny, because we always talk about personal problems, but not being able to pay rent, that's a real problem, right?

And that doesn't sound like a vacation rental, which was what I was used to seeing on VRBO, which was vacation rentals.

I think it was interesting at the time that a lot of people realized that they could use their property to make extra money.

And it's not a coincidence that this happened around the same time as the OA crash, where a lot of people needed to make an extra buck.

And suddenly they realized, oh, I have an asset right now I can make some money on.

Then I think the last thing is they used their own product.

Airbnb didn't realize the insight around facilitating payments, around accepting payment when they launched.

They didn't have an insight when they launched.

Brian came and spoke to YC recently and he shared the story that when he used his own product and he forgot to bring money for payment and the host thought he was a fraud, he realized, oh crap, like our site needs to allow people to pay.

So it's funny because these insights seems obvious now, but Dalton, back in the day, put your investor hat on.

Why did everyone think, oh, this is dumb?

1 was renting a house when someone is already home.

Renting a room in a house with a hoster there was like the ultimate, unappealing, scary, bad thing that no 1 wanted to do, especially older folks.

a lot of money and can afford nice hotels.

Why would I want to go stay in a stranger's apartment in Manhattan?

So it was extremely unappealing idea of people worried about those sorts of things.

And then like the other insight I have for you on this 1 is it was seen as uncool and impure when you're building the community at this time in history to charge money for it.

Like the couch surfing ethos was a very like communal, community-based, pay it forward, social collective action, decentralized goodness thing.

And to be commercial was extremely in poor taste.

And remember, Michael, you and I both were the founders in this era.

All of the messaging that was bombarded from us, from everyone, all of our peers, is that making money isn't cool and being commercial isn't cool.

And what they should have done is get as big as they could and get 100 million people on Airbnb and then charge once they built the network.

Build the network first and then charge, right?

Like, again, you went through this as a founder, man.

Isn't this what you would have been told?

I mean, Twitch became big when we started diversifying our business model and they started accepting direct payments from users in addition to ads, but that was seen as dumb back then.

So clearly, and of course this is gonna be a common theme, if they had listened to most of the investors or most of the founders at the time, Airbnb wouldn't exist.

Yeah, it'd be like, well couch surfing is free so your plan is to build something like couch surfing but with no users and you're just starting and you're going to charge money for it?

What do you think Brian saw when he was getting rolling?

I was around back then and I was trying to buy Bitcoin back then too.

And I remember the Coinbase YC application really well in the whole historical context.

So to set this up for people, circa 2011, 2012, it was really hard to buy Bitcoin, Really hard.

I remember looking into it around 2011 and there was a step of sending money orders like going to Western Union and sending a money order to some foreign country.

But I didn't because it just seemed too much like a total scam.

Like if you ever send money orders to foreign countries, something is going wrong in your life.

Gox was the biggest and largest Bitcoin exchange back in the day.

And it went down a lot and got hacked and everyone lost all their money.

Gox was like you can get money in but you can't ever get any money back out.

That was the environment where Koko Coinbase was coming in.

Gox was an acronym that was magic the gathering online exchange.

It was originally a website to trade magic cards that they pivoted into Bitcoin.

And so anyway, the historical insight was buying Bitcoin was something people wanted to do, but all of the options were pretty bad.

I think what's really interesting about this is we come back towards he wasn't the first mover, was not the first mover, but the product that existed was so bad that a 10x better product was actually within reach, like it was actually possible.

I think the other fun insight here is that like portable online gold is valuable, like it is 10x better than gold and so as something you might want to have, If you think gold is something that you might want to own, and it seems like the market does like owning gold, portable online gold, strictly better.

So I think out of maybe all 3 of these founders, Brian was exposed to the most shit takes, the most people saying this was not going to work.

Like, explain all the reasons why Coinbase is not supposed to work and Brian should not be a successful founder today.

Well, at the time, People saw Bitcoin as a tiny market that it was going to crash, that it was a bubble.

It was synonymous with a lot of actual fraud, right?

Also, getting a bank deal was impossible.

It's not like other founders didn't want to start something like Coinbase.

Based exchanges were incredibly hard to start.

And this is the reason why all the exchanges at the time were offshore, was the regulatory environments were different in different places.

Another thing I want to note is even Brian in his YC application didn't really believe in his own idea because what he basically applied to YC with was the P2P transfer parts.

It was the idea that he could build something like PayPal to do P2P transfers.

And that the buying Bitcoin part, that was just part of it.

And so isn't it funny that even he kind of undercounted the simple promise of buying Bitcoin in a non-sketchy way with a debit card in the US and not getting hacked and losing all your money.

That was enough of an insight to be the basis for like a $100 billion company.

He didn't need to do all this other stuff.

But to your point, and following the pattern, a valuable insight that he learns after starting the company, right?

Like you don't have to have all the valuable insights before you start.

Well, you remember what the Coinbase product was back in the day, right?

It was a website, you logged in, You put in how much Bitcoin you wanted to buy and you push the button and you buy it.

You know, it was probably the simplest products.

It was 1 of the simplest products I've ever seen.

But it doesn't solve the right single problem at the time.

And I think that the way that this is kind of embodied was that, fully embodied how bad of an idea people thought this was is that he had an impossible time raising money on Demo Day.

And so if he had taken the Demo Day signal, the investors signal of, oh we don't want to give you money and quit, we don't have Coinbase.

So you had dabbled with payments pre-Stripe.

How easy was it to accept credit cards online pre-Stripe?

I have set up before Stripe existed, I set up accepting credit cards for my companies twice.

Once in 2002 or so, believe it or not, when I was very young.

And to get a merchant credit card account was like applying for a mortgage.

And so it was a possible thing to do, but I would call it gnarly and the opposite of easy in every way.

And so that was, so, and I also remember when Stripe came out, I was actually in the Stripe beta.

I was 1 of the first hundred customers of Stripe way back in the day for my third company, the third time I went to accept credit cards.

In terms of make so many people buy, when it came out and I read about it on the Hacker News, I immediately wanted Stripe.

We were authorized .NET users too at Justin.TV and Twitch.

And perfect example again of like a taste of the good stuff, but so hard to use.

It took us 3 months to start accepting credit cards.

I think there was a 30-page contract that we had to read and figure out a sign.

I think Another really interesting thing about Stripe was that it was a problem that they saw their peers in YC have.

So literally they were seeing all of their friends in YC not, like going through all of the pain of Authorize.net and they were hearing this story over and over again.

And you know that's a good hint for people out there looking for ideas.

It's like if all of your smart technical friends are complaining about the same thing, maybe it's a real problem.

Now last insight that I think that they had, Talk to me about their go-to-market and specifically about understanding that their customers were developers and not business guys, because I think that was revolutionary at the time.

The really clever brand promise or marketing stance or whatever you want to call it they had, was to try to make the most beautiful website they could with the most beautiful documentation that was every programmer's dream.

They constantly asked themselves and pushed themselves to say, what would I want or what would a programmer want?

And this is so different than every other processing company because it was built for basically business people.

Like the customer was not the, The programmer who had to implement Authorize.net was not the customer.

It was like someone getting paid, you know, 20 bucks an hour or something to implement the code.

Whereas this was like, they went nuts at making something that developers would just freak out about.

Every developer would copy the Stripe documentation, copy the Stripe website.

It was like if Steve Jobs had to design a payments company, it would be Stripe.

And they totally did this on purpose, but what this created is a lot of buzz on hacker news and around nerds basically that, hey, have you seen this Stripe thing?

And so It was a hot commodity to be able to get into Stripe and be able to use it.

You were seen as well connected if you got the pleasure of getting to use Stripe.

It was like a favor they were doing you to let you use their product.

That's what a great job they did in making the website and documentation excellent.

What I love is that when the Stripe founders came to speak at YC, the other detail they added was it was the most expensive product in the market.

Like to make sure people really wanted it, they didn't give it away for free, they didn't price it comparably, they made it more expensive and people were still desperate to use it.

Like that's how you know you have an insight.

Like when you're the most expensive thing, speaking of Apple, and people still are desperate for it.

1, what are 2 teenagers doing in the banking space?

The government regulation, it's the most regulated space in the fucking world, right?

Like we're gonna handle hundreds of millions of dollars of everyone's money.

I think the second 1 is that, even subtracting the regulation, they needed a bank deal.

They needed Wells Fargo to let them start using their Rails.

As an early stage startup, they need to get that, which at the time seemed impossible.

And then of course, I think the last 1 is that, you know, PayPal existed.

There was a really popular company where it felt like PayPal was a quarter step away from this, right?

And it was like, oh, even if you start doing well, PayPal can go here instantly.

It was seen as a crowded market with huge companies with hundreds of employees, thousands of employees.

And it's the classic thing, again, the knock against YC companies at the time, is YC would just fund crappy versions of existing company.

Like the third rate knockoff version of something actually good was what YC companies were.

I don't know if people remember that, but that was the reputation of YC companies is like, oh yeah, they'll take an existing idea that's good and they'll make like a less popular version of it.

Which kills me because Like in all 3 of these cases, these folks had the problem, they had experience, and in hindsight there was an obvious opportunity to make something 10x better, but most people thought they were idiots.

They had to be contrarian to walk down this path because if they had asked 10 startup experts, 10 investors, 10 fellow founders, 8 of them would have told them that they were stupid.

Like you can't take for granted, You can't, we can't, you know, talk on a whiteboard and plan our strategy and when all of these founders had to actually do it and the doing it part was the hard part.

Like all, All these people had to execute and build a product that people loved and actually worked in.

All these people built products that handled hundreds of millions of dollars and they couldn't lose the money.

So the actual execution bits, talk is cheap, execution is hard.

Execution is expensive and all these folks had to execute.

So I think what the takeaway here is, if we can sum this up, 1, you shouldn't give a shit if there's an existing product in the market.

If you're a user of that product or your friends are users of that product and they all hate it, then you should not give a shit.

2, you should not give a shit if most of the people around you who you believe are experts don't think this is a good idea.

Especially you shouldn't care if they're not going to be users, if they have no experience with the pain of using the existing product.

And then 3, be very careful about your initial market math.

Be very careful about pretending that you know how big the market could be.

It turns out with so many of these transformational technologies, there are use cases you can't dream of that once you build a 10x better product, other people will do.

And so each and every time these founders were presenting, oh we have a market size of blank.

The next time they raised money, they could say actually we made a mistake.

And so don't be discouraged if someone's like that's a tiny market.

That's kind of a bullshit thing that would have killed all these companies.

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Where Do Great Startup Ideas Come From? – Dalton Caldwell and Michael Seibel