#268 – An Interview with Luke Iseman of yCombinator

Luke Iseman Of Ycombinato: This is The Amp Hour Podcast, recorded September 22nd, 2015. Episode 268, an interview with Luke of Y Combinator.

Chris Gammell: Welcome to The Amp Hour. I'm Chris Gammell of Contextual Electronics. And I'm Luke Oseman from Y Combinator. Welcome, Luke. Coming to us from across the pond in late night hostel of somewhere in England. Is that right?

Y Combinator: Yeah, in London. Sorry if you hear any drunk rugby players celebrating in the background.

Chris Gammell: We wouldn't have it any other way. That's great. I love it.

Y Combinator: Keep it interesting.

Chris Gammell: Yeah. So that's great, though. I mean, so Y Combinator, obviously we hear a lot about that these days. We hear about, obviously, the increasing interest in hardware, and that's what we're going to talk to you about. But before we get to that, why don't we hear a little bit about you? What's your background? Where do you come from?

Y Combinator: So I applied to everywhere except for where I got into college for electrical engineering. And then I happened to get into Wharton at UPenn for business. Literally the one place that I hadn't applied for EE. And I've kind of deferred my parents' advice, took that opportunity, and I've kind of been trying to catch up via my own projects ever since. So I ran a club during college. We set up computer labs in developing countries using donated equipment largely, as well as in inner cities in Philadelphia, New York, D.C. So that kind of, that was like, not circuit board level hacking, but kind of got me introduced to the concept that maybe we could reconfigure all this hardware around us to have at least a little more useful life. And got me addicted to traveling and really the opportunities to really just hack on physical things all around us. That's great. And from there, I graduated before, I was in the entrepreneurship program at Wharton like two years before entrepreneurship became cool. So everybody was kind of like, what are you going to do after school now? And I was like, that's a very good question. One of the only startups I found interested in hiring a business guy was down in Austin, Texas. So I worked for that for a little bit, worked for a software thing down there eventually, and then kind of got tired of sitting in a cubicle doing, I was doing business integration. So like biz dev, but integrating our software with partners. And it was a whole lot of time just sitting at a desk. So I kind of quit without a plan, traveled till I more or less ran out of money. And then on a lark, tried driving a bike taxi, one of the pedicabs in downtown Austin.

Chris Gammell: Oh, nice. I used to take those when I was, what's the nice way of saying that? Drinking heavily.

Y Combinator: Yeah, that happens in Austin sometimes. It does. Right, yeah. So at that time, I didn't know how to weld or anything. I'd like just figured I'd try driving one that was for rent. And then... Oh, because those guys usually make their own. Is that the idea? Some of them do. There's like two or three companies that mainly sell them. So long story short, I hacked one together, had a big argument with the city about getting it legalized and ended up over the next couple of years building a fleet of 20 of them of my own design. It was kind of like the ultimate lifestyle business. It was making about as much as I did like in my corporate job, but had...

Y Combinator: You know, I rode around the bike as my job and had 20 other bikes that my friends could do the same with. So that was fun for a while, but it wasn't like really world... It was a good lifestyle business. Like it was fun, but it wasn't technically challenging day to day. It was kind of physically challenging. So from there, I started taking more time to work on my own projects. Kind of in the same timeframe, I built a shield to do gardening via an Arduino. I called it Garduino and wrote about it for make, sold it as a kid, just like didn't promote it or anything. Super simple, like not sophisticated at all. Kind of iterated on that slowly over time. Worked on some other software stuff and eventually Garduino grew into GrowerBot, which was like a small Kickstarter I did several years ago, just like a more sophisticated Wi-Fi connected to Omron relays to control AC outlets hooked up to a pump or a light or whatever else you want in response to readings for temperature, humidity, light intensity, and soil conductivity as like a proxy for moisture.

Chris Gammell: Okay.

Y Combinator: So again, that was just like a small kit, kind of a fun thing to do. And then that interspersed with some other projects grew over time. And had a co-founder for something called, we called it initially Soil IQ. And it was basically, we got Yves Bahar to do the industrial design on it and some other really strong partners and did kind of a soccer out of the box, just works solar powered, looks really good. And that was the company with which I got into Y Combinator. So I worked on that for a while, which was, it was a lot of fun. And then I left that to kind of work on other things about a year and a half ago and did a big interactive art project for Burning Man, traveled a bit more, built a shipping container house in West Oakland to deal with the crazy real estate stuff going on in the Bay Area. And yeah, just kind of from there started helping out with some projects involved with Y Combinator. Essentially, Sam, who runs the program, was asking some interesting questions about like what he could do to better support hardware companies. And having largely bootstrapped my own stuff, I had a very cash conservative plan for what we might do to have a lot of impact without spending a ton of money because I'm used to starting my businesses. So buying a hundred bucks versus 10,000 of equipment is, you know, a big deal when it's out of your own pocket. Yeah.

Chris Gammell: Well, that's an interesting trend. You know, we've talked about that on the show before as well, just kind of talking about, I don't know if it's just a trend I've seen or if it's actually a thing, but like it feels like hardware people in general are kind of cheapskates. Do you see that?

Y Combinator: Yeah. I kind of like wrestle with it too because, I mean, I'm not retiring anytime soon, but like I have a little more money than I spend now. So I have to like force myself. I should not be using worn out drill bits like what I'm doing. Oh yeah. Yeah. Yeah. Um, yeah, I'm definitely a cheapskate. I think it comes because like hardware, I don't buy this whole hardware is hard thing. I think hardware is easier every year, but we. You hear that folks? Right. Our monkey brains, I think have to catch up with that a little bit.

Chris Gammell: Are you listening and troubleshooting right now? You're not doing it well enough.

Y Combinator: Right. Sounder better, soldier. It's, it's different than software, but like, especially at the prototyping stage, I'm hard pressed to think of anything when you're building like unit one of something. And if you're ignoring your, your cost for one unit, which you should pretty much always be doing on a high growth hardware startup, it's a little slower. It's a little more complicated in some ways than software, but this whole, like this whole, oh, hardware is so hard. I don't know. I mean, like we have a lot of pull advantages too. Like people expect to pay for hardware, unlike software, for example, you know, really, really helps as a thing to build a business around when people expect to pay you for it.

Chris Gammell: Right. Well, when I hear the hardware is hard thing, I think of two things. One is, you know, there's no, there's no like built-in distribution network, right? So there's nothing like click a button and now you're in the app store and now you have access to 10 million users or however many users are on there, right? Or however many downloads you might get by making it, you know, free or, you know, at cost, that kind of thing. You don't have the distribution network that software can have in theory. And then the other piece would be just no one expects manufacturing. I mean, just they, it feels like every time you're like, oh yeah, no, no, this, this really, you really got to, there, there's no, you know, it's a recompiling thing, right? There is no recompiling hardware there. It's like, you have to be perfect when you go to production.

Y Combinator: Right. And a lot of that's about like people setting expectations correctly. No one that I've ever talked to has told me that once you do DFM months and make a hundred of them for your, your tests, that it takes more than 18 months to make very large quantity, like to fulfill Kickstarter gone crazy. Problem is when people set backers expectations to be like, oh yeah, it'll be here next month. And then they get three months, right? 50,000 orders, right? That's, that's not hard. That's impossible, right? Like that just doesn't work.

Chris Gammell: Right.

Y Combinator: But if you go in with the distribution thing again, right?

Chris Gammell: I mean, like that's, that's like, someone's like, well, I backed a, I backed an indie video game and I clicked the button and everybody downloaded it. Right.

Y Combinator: Yeah. Yeah. That's the difference. It's definitely easier in some ways to get software out there, but I don't know, net, net, like, I think software is boring is more true than hardware is hard. Like you don't have barriers to people copying you like you do with at the end of the day. Yeah. Is a coupling of them, right? Like there's not, there's very few products that are just purely one or the other anymore.

Chris Gammell: That's true. Yeah. Well, and you know, personally, so from my experience, I, you know, I've, I've been moving over to the software side. I work in web, web stuff now, not as the developer, but as just like the, the product guy and seeing that stuff, even like, I just, I didn't even realize all the things that there were and like getting people to actually use stuff. I guess that's kind of the big difference too, is that like you mentioned people pay for your stuff, right? And that actually has a different feeling for me is that when some, when something's free, like would obviously Dave's not here, but you know, his stuff's off, all of his videos are free online. And because of that, you know, people have all these expectations like, oh, you should do everything I wanted to. I didn't pay for this, but it's that weird transition when someone pays for something. They're, they're always nicer. I don't know why, but like, it feels like just like on the, on the whole, maybe it's just a more limited audience, but you know, in terms of like customer interfacing, it's always nicer and less expectations for some reason.

Y Combinator: Huh. Interesting. I never thought about it like that, but yeah, I mean like the other thing is, I mean, with my grower bot Kickstarter, it was super small, like 70 units or something. Um, and I was freaking out that I was like a month or two late. I don't think any, I think the average backer, like 99% of backers, it feels like expect projects to be a couple of months late. I don't think they get nearly as worked up as creators of projects do. Like, I think people are a lot more forgiving, especially if they're, if it's like a niche thing where they're just excited that this new thing's going to exist. I think we're probably harder on ourselves. Most project creators are harder on ourselves than most backers.

Chris Gammell: What was the, what was the retail cost on the grower bot? Like what were people paying?

Y Combinator: Uh, I don't even remember. It was like three or four years ago. I think like there were different points. Like all of, all of my personal projects I've done, I'm behind on documentation on a lot of them, but like the container house and everything, it's all open source. Like, and I try to sell kit versions. So, you know, free open source plans as well as kit versions and then finished product. So there was a kit like with Garda, we know the cheapest kit was like $19 or something. I wanted it to be, you know, more important to me than like, I don't, I don't think we make really good customers, hobbyists. So for me, it's more about like building a community of people who will engage with the thing that you're doing. Even if I have to like, you know, if I had to work other jobs to support that, you should, I think it results in like, I don't know. It's, it's really tough to see any open source hardware projects that have, that have gotten like giant without really compromising the integrity of the project in a lot of ways. Right.

Chris Gammell: Like I have no idea who you're talking about. Nobody. Person, person that works for, for, uh, uh, in, in the VC world and a company that might have gone VC, but not with Y Combinator.

Y Combinator: Yeah. I mean, that's like, that sucks to see because I, I mean, I think there are some people who you shouldn't work with who can give you money, but like, really, I can't speak as well. I can't, I don't know anybody as well as Y Combinator, but for us, it's like, it's a bunch of hackers who want to see other cool stuff being built and they want to only help stuff that they think can be really big. Like if you just use that as a filter for what projects you admit, turns out like interesting things that you think will be really big with competent founders is a pretty good filter for things that are likely to make a lot of money as well. Like a lot of them will fail, right? That's the whole model, but it results in a really interesting network of really smart alumni. Some of whose companies succeed, some of whose fail, but it's also, it's a good filter for, you know, finding interesting people to work with as well.

Chris Gammell: Yeah. Yeah, definitely. Uh, going back to the expectations thing real quick on the, on the Kickstarter stuff. I feel like anything that's less than a hundred bucks is like just throw away, right? I mean, that's, that's like almost consumer level, not saying that they throw away the product, but just in terms of the, uh, in terms of the actual expectations on delivery and that kind of thing.

Y Combinator: Yeah. Um, I think it's a lot, I think that pricing matters a lot. Um, an interesting company from our last batch called Nebbia is a three to $400 showerhead. And if you had asked me buy a showerhead that costs more than $20, I would have laughed at you. I took a shower in Nebbia's shower and is that it's way more sustainable. So it's like 30% as much water as a normal shower. The reason people are buying it at, you know, a three to $400 price point, which is like way more than you need to pay for just the cheapest shower is because it's beautiful. So I thought that that a hundred dollar barrier and other prices like that, they'll think it does, but I think you can make exceptions to it. Like I think most people don't care whether their showerhead costs, most people don't even know whether it costs a hundred dollars. And if you make really beautiful, more sustainable things that people use every day, like Nebbia's done, people are more than willing to pay a couple extra hundred dollars for it, which is fascinating. Like I never, I didn't think we'd see that happen. Yeah.

Chris Gammell: No, no, no. I, I agree with that. But what I'm saying is that like, did, did, did Nebbia do a Kickstarter?

Y Combinator: They did. Yeah. Okay.

Chris Gammell: So did they deliver on time?

Y Combinator: They just did their Kickstarter during the last batch. So I think their Kickstarter, they started their Kickstarter during the batch and then it ended after demo day, which was really cool to see because their position then compared to like a lot of, a lot of companies with hardware historically are like, yeah, we're going to try to build this someday. And they don't have anything working to see our companies rapidly conversions that they show to users rather than get an iterate based on what people actually tell them. And then in the case of Nebbia and others, like programmers shortly after get to a big crowdfunding campaign. That's really cool to see like that for future investors. Then it's not just like, I think of it as like, until you have something to physically show people, you're just another smart person with an ambitious plan, right? Like in anybody you meet with is going to think of you that way. When you have actual hardware to show someone and then two, when you have people actually paying money for it, then it becomes really easy to convince someone who maybe doesn't understand every detail of your business why it's an interesting thing, right? Like people are proactively giving you money to ship this thing and here's a working copy of it right now. That's a whole, that's a much better discussion for an entrepreneur to have as opposed to the norm of I'm a guy with a plan who's going to someday build something. Yeah.

Chris Gammell: Yeah.

Y Combinator: Right, right, right.

Chris Gammell: Well, no, yeah. And I, but I, what my point was though, is that just that, uh, you know, like that, that threshold kind of thing is that that's where, that's where people start to actually care, right? So that's, I agree with your points about having a piece of hardware that actually is working. That's going to help you sell the higher margin type stuff there, especially like, you know, shower heads type thing. Um, but just the expectations are different, you know, depending where you are, right? Um, you know, less than a hundred bucks, the expectations are whatever, but up in the $300, $400 level, people are really buying into that kind of thing too. So, so that's why I'm sure that they're, they're going to have, uh, you know, the people that are actually in there are going to be a strong community. So.

Y Combinator: Yeah, definitely. I think you're right. Um, one of the cool things that I hope to see companies do is, you know, your, your marginal cost goes down substantially with later iterations as you learn more about manufacturing and as you produce more of something. So I'm excited to see people do like initial thousand to 10,000 at a higher price point. And then over time, reduce the cost and have it be like this normal thing. It's less exclusive and it's cheaper and it's, you know, cheaper to make and cheaper to sell. So I think that could be, especially with things like Nebio where it's got a sustained, a strict respect to it. I think that could be a really cool way for companies to grow over time, but yeah, less than a hundred dollars. I totally agree with you. You're, you're, you're well in territory where you can kind of just get, if you provide some interesting updates, I feel like, I mean, I'm thinking of the Kickstarter as a bit of a Kickstarter problem and the VGoGo problem back like over a hundred of them. A lot of them are like stupid small things or cool small things like comic books or whatever. But yeah, if it's below a hundred dollars, I don't really, I'm not checking in on the, on the campaigns as much.

Chris Gammell: Right. Exactly. Exactly. Yep. Yep. Yep. So could you give us a feel for, so people are coming into Y Combinator there. You said that they might have, they might have an idea or they might, obviously if they have a prototype, they're in much better shape. But like, how far do you expect them to get by the time I, if people don't know as well, could you explain demo day as well? Like, so start to finish, what do you expect people to see as a hardware company coming into a program?

Y Combinator: So quick overview of how it works. Two times a year, we have a class or batch. We call them winter and summer applications are open. Now you should, anyone listening should apply. Okay. Okay. Yep. And how it works is you apply online, should take you a couple of hours maybe to fill out the application. What's really cool is, and what I remember most from when we filled out ours is it's really questions you should be asking yourself anyways. So even if you don't get in or even if you don't submit it for that matter, these are like questions you should be thinking about. Like, how will you make money? What is the equity division? What are you understanding about this market that your competitors don't? So really basic questions that it's easy to sometimes forget to regularly check yourself on as a startup. So people apply online and then small proportion of them get invited to interviews. For interviews, we fly everyone here, person interviews with several partners in the room. And then that evening, very little ambiguity, offer to spot or not. If you're offered a spot, it's essentially $20,000 for what boils down to basically 7% of your company and your team. Founders are expected to be here for the three-month badge. During that badge, basically you're getting as much or as little help as you want. So some startups, you know, you can basically do YC still and not get a lot out of it. But the best startups will be doing their own thing like 80 hours of the week, as in talking to customers and iterating on their product. And then they'll kind of basically on Tuesday nights, we have a dinner and some time for office hours. They'll kind of come to those, get good general advice. And then also as issues come up, just ask us honestly, like whether it's disputes between founders or questions about how to scale into retail, whatever comes up. They'll just basically ask us and ask our alumni, very targeted ones that get the most out of it. And then in terms of what we expect companies to do over the course of the batch, every company is different and they all have their own challenges. Every company is after the same thing, which is... Right, becoming a billion dollar company, right? Right, exactly. So we don't break out hardware differently. Same, they're all different. We don't break out hardware differently. It's in totally mixed with software. We have biotech as well. And I didn't... That struck me as really strange, to be honest, like when I was applying and when I was going through with my company. But the more I think about it, the more sense it makes. There should be few to no excuses for why a hardware startup at the very earliest stages, like ignoring manufacturing everything, because that often comes later. The very early stages on like ignoring your incremental cost per unit, there's very few things that a startup doing hardware cannot do nearly as quickly as a startup doing software. Like it should never take you more than an extra week, whether it's getting populated PCBs or a 3D printed enclosure or whatever. It shouldn't take you more than a week longer to do any aspect of your project at the earliest stages.

Chris Gammell: Okay, I'm going to challenge you on this because I'm sure that you've met this challenge already in the past. I mean, doesn't that depend... I mean, maybe this is more indicative of the companies that are there, but like, doesn't that depend on complexity? Like I imagine a sensor attached to a Bluetooth device, yes, you can get that going. But if you have like multiple PCBs and interconnects and everything else, like what is the level of complexity that you're seeing for products that are hardware products coming through?

Y Combinator: That's all over the place. A caveat to this, like I'm leaving out largely because I don't understand it well enough yet. I'm leaving out a lot of the biotech, although that is becoming, that's looking a lot like when you start to look at the wet lab stuff, like renting benches and the biotech hacker spaces that are popping up. It's starting to look a whole lot like hardware did 10 to 20 years ago. Yeah.

Chris Gammell: Yeah. There's one in, there's one in Oakland. There's a workspace in Oakland, isn't there?

Y Combinator: There is. Counterculture. And then I was just at GenSpace in New York, which is doing really cool stuff. And then there's BioCurious in the South Bay. Even the locations where they're popping up, it kind of echoes like what happened with initial US hacker spaces, right? So I'm leaving out the details on that and then leaving out like giant stuff. Like we've funded a couple of companies working on nuclear energy. I'm not smart enough to come up with a low cost iteration style for them.

Chris Gammell: Well, we had time to activate the material, but containment, we didn't have time for the containment. That's in version two. We're going to be growing a demo day. Yeah.

Y Combinator: Oh boy. But yeah, I mean like on the more complex stuff, it can take a little longer. But if you really empower yourself to not, and this is hard because we are, like you said earlier, we're all kind of cheapskates in some unreasonable ways. Like ignoring whether your PCB or your assembly on it is going to cost, you know, $10 or $12 per square inch empowers you to get a lot of stuff done. And then because our companies are building on the body of knowledge of like 900 plus other companies that have gone through before, and we're starting to, I think we're probably, we're nearing triple digit of those that have been hardware. You're not just finding a PCBA on your own. Part of my job is to make sure that I have like three answers for where you should get any of this done that have been recommended by previous YC startups. And the cool thing is we're starting to see forward thinking vendors who are doing what AWS and other software guys do with incubators, where they basically give, and even broader, they just basically give away hosting to early stage startups because they know some small proportion will grow into big customers. I have a PCBA, a couple of them now that are giving discounts, some of which are now switching to actual straight up credits on assembly. Some even covering components for the first like several, it's not a huge amount of money, but like first several thousand dollars for my startups. What's cool is that gets you to pull the trigger, right? Like you'll send a board earlier than you would when you have that credit. It's totally irrational, right?

Chris Gammell: It's not my money, right? I mean, that's, no, that makes sense. I would do that too. It's like, well, I can burn one, you know, like if I have to, if I have to, you know, bodge it later, if I have to pay for the next one on my own, at least I've gotten the easy mistakes. Totally.

Y Combinator: And then what, like when you think about that over the course of a product being developed, when you come at it from a software like perspective like that, where from day one, we're basically asking you, why aren't you shipping yet? That really changes the pace overall. Like there's no one giant thing we do. It's just that overall attitude. And that applied to every little thing in hardware that results in our companies moving really quickly and delivering some amazing products.

Chris Gammell: So how much would it be? So like, I also think about some of this stuff would, I think about the software side and the stuff I've learned about software and things like that, minimum viable. Obviously we've had Eric Reese on the show before, and he's talked about minimum viable product for software and hardware and stuff like that as well. And, and I wonder, is it like, are some of the YC companies doing like cardboard prototypes almost where it's like, well, imagine this now lights up and has a screen kind of thing, or is it actually to the point where, or is it more like, well, we have a Raspberry Pi with a, you know, a off the shelf, you know, TFT board from Adafruit or something like that. And then we'll get the cost down later by spinning a custom. Yeah.

Y Combinator: I mean, I think it should be both. I think it should first be literally, I mean, before you even build anything, like what, because so much, there's such weird stuff that happens with economies of scale. Like you now have what is by all accounts, a pretty decent tablet from Amazon for 50 bucks. Right. And that's, yeah, their new fire seven inch tablet is very similar in spec to what the Nexus seven, which I hadn't loved was. And I'm sure it's like locked down a bunch of stupid ways that people fix quickly. But that's like, that's in the U S prices. When I was in Shenzhen, like a year and a half ago, I bought a tablet for like $18 that had two SIM cards, a micro SD, a TV tuner for under $20. So like you should fundamentally step back, I think. And before you build any like connected consumer device, ask yourself, like, are you sure this isn't an app or couldn't be an app? And before you build like custom screen and all this other stuff, that's going to cost you so much more to do in small to medium quantities. Just ask yourself, like, are you sure this isn't just a sensor connecting over Bluetooth or wifi to utilize like a cell phone or a tablet that everyone who's likely to buy your product has to do most of the lifting. Right. So like stepping even before you start building anything, talking to people and figuring out like, is this something that anyone actually wants? Right. My favorite example is with, with some of my work on the gardening sensors. I was, I spent a lot of time trying to optimize for this little half watt solar panel that I was using. I wanted that to cover all of my wifi. Like I wanted it to basically run forever with like a couple hours of questionable quality sunlight and started looking at battery chemistry because I wanted something. Plants can do it. Come on. I should have been able to. And I decided I needed it. I just assumed I needed it to send readings every minute. And then as I talked to more users, turns out like nobody cares. If you send readings four times a day, people are thrilled. And that, you know, obviously the power load for that is drastically less, like it's like a thousandth as much as the power that I was trying to optimize for. So it becomes like talking to users a little bit more, a couple more hours, actually asking people what they want would have saved me literally hundreds of hours of, of development work over optimizing for something that it turns out nobody cares about.

Chris Gammell: Well, that is a lesson that could be, I think that could be extended to every single industry in the world. Like that is, that is the role of like, like interfacing with customers, marketing with customers, that kind of thing, like product facing marketing. My goodness. Like that, that is, I think about the other companies I've been at before too, where you're like, why are we doing this? And then you go talk to the, you know, a marketing person or salesperson. They're like, well, this one really important customer wants it. And you're like, do they really, really want, like, are they going to pay for this? And this is kind of what Eric was talking about when he was on the show too. Is he, are they really going to pay for this? Will they pay for it right now? And if the answer is no, then why the hell are we doing this? You know, like that.

Y Combinator: And it's a lot of stuff like that, that is blindingly simple when you actually hear it. And a lot of it is just, just like saying the really simple stuff like that, that after you hear it, you're like, yeah, of course we shouldn't build this feature that no one's going to, that nobody cares about and nobody's going to pay for.

Chris Gammell: Right. Well, and I don't even think about it as like a feature that no one's going to use. I think it's a feature, well, there, there is definitely that, but like, I think about the one where it's like the one where someone's definitely going to use it, but the fact is it's going to take six months to make it, to include that kind of thing. Right. So coming from the test industry world, there's always like some crazy ass feature or measurement that someone needs that no one else does. And it's not like an add on or anything like that. It's just in everything. And it's like, yeah, that took six extra months. And so who are you pissing off by, by shipping later because of that?

Y Combinator: Right. Exactly. And then the really, the really interesting thing is like finding, I think the best entrepreneurs do this crazy balancing act where they're insanely committed to making their thing happen. But then on the deep, like they have their vision and they're uncompromising on that. But then on the details, they apply straight up Eric Ries style optimization, right? Like they're going to make this company happen in this category. They have this broad vision, but then the details of how they get there and what feature set exactly that has, those are all open to optimization based on users. So it's a weird balance because you want like the bold vision, like this person's going to move the world, but also the willingness to do so in a way that people, that people actually want.

Chris Gammell: So the thing that I always balked at was like thinking like when I think about, obviously I come from a technical background and what I think about is like, well, the best products are going to be the most complex ones, right? To, to have a really successful company, you need to have a really standout technology. And it just doesn't seem like that's the case as much, so much as having good timing, having good attention to customers and having a good team that can execute all that stuff. I mean, does that resonate with you or is that, is that wrong?

Y Combinator: No, I, I agree. And like, I think timing is part of it for, it depends on how, like how far out you're looking at it, right?

Chris Gammell: Well, my, my friend was talking today about, he was talking to me today about Webvan, which I don't know if everybody knows about. It's like, it was like a delivery service in the late nineties for like, for like food service delivery. And it keeps bringing up to me because I was, I was raving about being able to get food at 10 at night that was like custom made in San, last time I was in San Francisco. And that's like a, just a thing now it's like, everybody does that. Whereas in the nineties it was like, no, this doesn't, it doesn't happen yet. No one, no one pays with their phone. No one orders food from strangers like that. I mean, there's delivery services, but you're calling a restaurant kind of thing.

Y Combinator: Yeah. That one, like at least you can make a kind of rational argument for text advanced, blah, blah, blah. Frankly, podcasts are one of the weirder ones for me. I don't know why everyone is all right. Like podcasts were around in what late nineties. They were fully technically early 2000s at the latest.

Chris Gammell: I think 04 was the first ones that really were called podcasts. Yeah. Oh, the late nineties was more like, uh, was like posting a, what was that called? Oh God. Real audio format stuff to like a file, you know, they were streaming. I remember that. I used to listen to 2600 like that.

Y Combinator: Yeah. Yeah. Yeah.

Chris Gammell: That was a good example. Yeah.

Y Combinator: Yeah. And then all of a sudden, like in the last year or so, it's become this mainstream thing. That one to me, there's like with Webvan and stuff like that, you can argue that some sense, blah, blah, blah. But with pot, there's some unpredictability, like no matter what you do, I think you have to keep in mind that stuff can go wrong with any one idea, with any one startup. And I think the best entrepreneur is just like maintain some perspective around it, right? Like this is a good problem to have the privilege of being able to try and fail at starting a business. It's not the end of the world, right? Like you're not going to starve to death. We're all going to be okay.

Chris Gammell: Like you can find other cool stuff to build. You're going to eat oranges and hot dogs like Elon Musk did. You ever read that story? Yeah. I mean, that's amazing.

Y Combinator: And like, you know, the best part is that he's saying that not, I mean, I think partially to brag, but partially because he looks back on it with nostalgia. Like when I maxed out my credit card starting the bike taxi thing, I mean, every entrepreneur who's gone through that, I feel like misses times like that. It was hard, but you look back, it's like a good hard, like it's a stress. The term I think in psychology is you stress, like healthy stress, where it's not stress like, oh my God, what am I going to do? It's stress like you're pushing yourself to near your limits. And yeah, it sucks at the time, but in retrospect, you're like, that was so cool that I was able to do that.

Chris Gammell: Right. It's like the dad in Calvin and Hobbes. He's like, it builds character, right? That's the thing he always says there. There you go. Right, right. Shoveling snow builds character. Right? Yeah, no, no. The thing with Elon Musk, so if people don't know, like he did this thing where he was, he was just proving to himself he would never really starve because he'd live on 30 bucks a month or something like that. And he ate oranges and hot dogs. And the only thing I came away from that story was not that like, oh, well, obviously he could survive. It's who the hell would eat oranges and hot dogs? Like, why is that the food that you would choose? There are so many other options.

Y Combinator: That's a pretty weird one. I mean, I would do like pizza and beer, cheap pizza. And I mean, that's pretty much what I do anyways.

Chris Gammell: Right. So you mentioned podcasts. We should also mention, so one of the podcasts I've come to love is Startup. And in the second season, they go to Y Combinator, right?

Y Combinator: Yeah, they, I think the Dating Ring, I'm not sure if they're still called that. I listen to one or two episodes of it. I'm not up to date on it. But yeah, Dating Ring was a portfolio company. There still is. That whole thing is, that's a tough one. That's just so made up, right? Like, that's, that too. I mean, I like it and I need to catch up on it. But that's like the, there's another one, KQED is doing a podcast. It's a public radio station in the Bay Area. Interviewing people who make podcasts. I'm like.

Chris Gammell: Oh, yeah, that's a little meta for me too.

Y Combinator: I'm sure it's going to be great. I just need to suspend like the, the, what is it? Like navel gazing? Is that the term? Yeah, exactly right. Yep. Yeah.

Chris Gammell: Yeah. It's a little much. Or like when people write poems about poetry and songs about singing and comedians talk about being comedians on the road. It's like, I don't relate to this. I'm sorry. So. Right. Yeah. Yeah. That, and you know, so, so what about that though? I mean, cause obviously you're, I mean, you've come in, you started with an action, you know, building a company, that kind of thing. And you've come into that. So, and then you've been part of the program and now you're helping run the program. There is a lot of crap around this now. You know what I mean? Like there's, I see all these, like these television companies are putting out calls for doing reality shows around this crap. And like, and when I say crap, I mean like, like just startup culture. And it seems like it's, it is that kind of meta navel gazey kind of stuff. So what, what's the deal with that? I mean, is that gonna, is that gonna fall off or do you not even pay attention to that or what's the deal?

Y Combinator: I mean, it's like, I joked earlier about like when I went through school entrepreneurship, not being cool yet. And I'd prefer that like to this. I don't want to have to filter out because there's a lot of really smart people with really prestigious degrees. And, you know, we could, if we put out a call for ex Googlers starting companies, we'd get, we'd probably get a thousand applicants.

Chris Gammell: Right. Yep.

Y Combinator: And the fact that startups are kind of now seen as like this career step for people, it sucks because it makes it harder to filter out who's actually crazy enough to do. Like start founding a startup is not the way to maximize your wealth. It's the way to be a crazy person who would rather like accept likelihood of running out of money for chance of changing the world. Right. Like you want to maximize your wealth. Do be like employee number 10. Yeah. Right. After companies are founded. It's something that you know is going to do well. Right. Exactly. I think like the best way to do that, if you're just can do kind of earlier stage stuff, but I always want a paycheck and I want to like, I don't want to be a founder. I'm scared of it for whatever, or it doesn't fit my risk profile. Like stay to right over your vesting cliff at a series of startups that aren't in exactly the same industry. So it's not totally correlated risk, but go around and do that in a decade, have like two years of vesting at five of them. And then like, you know, you're still getting paid. You're not bearing the primary risk, but you're also not like the guy. I mean, that's important. We need more people doing that. Then you just wait it out. Yeah. Yeah, exactly. I mean, it's like, it's a portfolio. Yeah. It's, it is tough to filter when like so many brilliant people are starting startups. You got to like maintain some craziness to it. Right. Like you need people who are going to stick around and, you know, come downturn or come any of the many inevitable startups, startup setbacks that they'll face. Like you need people crazy enough to irrationally stick around because otherwise it's just boring and they're not going to succeed.

Chris Gammell: Yeah. That makes sense. I kind of think about it like, uh, like I always kind of laugh when I look, so I have some friends that were like in music programs in college and stuff like that. And some of them were doing classical stuff and that's fine. And, but like one or two of them were doing like jazz and like the institutionalization of jazz, like this, this music that was just like completely figured out as it went along and all that other stuff. And now there's like structure around it and, and there's like a path through it. Now you can get like a master's or PhD in jazz. It just doesn't really, like, it doesn't really register for me. You know what I mean? Like it's, it's, I, Armstrong did not have a PhD. He just figured shit out. You know what I mean? Like that's, that's what I think about.

Y Combinator: Right. Like that's, that's a good change in perspective as well. Like if you think about, should I be an artist playing on, like, should I play or start a startup as my way of, you know, moving the world and pursuing something that makes me happy? Then you arrive at a very different conversation and perspective than when you think about it as should I stay as employee number 5,000 at a giant company or start a startup, right? Like you should be doing it because it's what you're passionate about. From like the perspective of an artist or someone else who makes significant sacrifice in what their average income is going to be to change the world. Because like, otherwise it's literally not worth doing. Right. Right. Yeah. Which is, and I think that's like at the best, that's what we can do. At the worst, it becomes just like this thing where everybody during upturns, we start up to put on their resume and during downturns, everybody runs away. So yeah, I mean, it's, I would rather it was a little less cool.

Chris Gammell: Damn it. It's cool. Ah, we've talked about, I mean, we've talked about that on the show too.

Speaker ?: Right.

Chris Gammell: Just like the fact, you know, and Dave and I have talked about that, like, you know, just wait it out. Hardware is, it's hot right now. It's, and that kind of gets some fervor around it for sure. But if you've enjoyed doing this stuff, just keep doing it, right? I mean, because it is going to go away at some point and then it'll come back again and go away again and yada, yada, yada, back and forth cycles, right? So, and that's fine. I think, I think a lot of our listening audience isn't into it for a long time.

Y Combinator: Yeah. I mean, there's always going to be strong demand for smart people willing to work hard on technically innovative things, right? Like all of the listeners are going to, they're going to be okay. There's going to be more work for them than they can possibly do.

Chris Gammell: So getting back to the hardware stuff. So you guys are in the South Bay, which I don't know why, but that always surprised me. So you guys are like the Sand Hill Road, like Silicon Valley, just straight up Silicon Valley stuff, right?

Y Combinator: Yeah. I mean, we're, I think technically like 10 miles, five, 10 miles away from actual Sand Hill Road. Okay. Yeah. It's basically like people kind of, and I think we'll see this increasingly different regulations and different demand in different places for things like biotech. But we're seeing a lot of companies that are very location linked. Um, like we just had a company called Chaldol that is like web van, Amazon fresh style stuff combined with like warehousing in Bangladesh and the way that Bangladesh, Bangladeshi population density works is like integral to their business. They've taken advantage of the lack of fresh local, et cetera there. So it's very specific to theirs. They come for three months for us to coach them and to grow their business. And they still have increasingly companies go back and forth and maybe have some employees there. Um, with drones, we've started to see that as well. Like flirty is a drone delivery company in our latest batch. And well, permissions are way different in New Zealand. They have like actual trials with customers who will pay them money to deliver things in New Zealand, which you can't do yet here. So they were back and forth a lot.

Chris Gammell: Um, interesting. Yeah.

Y Combinator: Basically like counterintuitively, you know, one would think that, oh, it's all remote and it's all software, blah, blah, blah. But having people here in person is, you know, it's really important. It's key to the program, I think.

Chris Gammell: Yeah. I'm actually, I'm always surprised too, that there's, I mean, it just, I mean, not necessarily with YC or with other startups, but just how much infrastructure is still in the area? Because I always think about, you know, there was so much coming up 50s, 60s, 70s as, as, you know, the, as the Silicon Valley, as, as there were still tons and tons of the actual silicon being made there. I can imagine that there's tons of support stuff around there, machinists and equipment makers and all that other kind of stuff to support the fabs and all the labs that were there. But then that stuff started to move away. But what I was surprised at is just the amount of board houses that are still there, the machinists that are still there, I mean, those are still shrinking, but I, I was surprised there were still so many given the, the relatively high cost of, of location.

Y Combinator: Yeah. I think a lot of them for medical and for aerospace, there's still like, there's still a meaningful amount of aerospace stuff, especially. Things that have margins, basically. Right. Exactly. Like super high margin. And it's funny seeing them like try to engage with startups. It's like, no, this is not a, this is not a three-year project and there are like twice as many zeros on the end of that price as there possibly should be.

Chris Gammell: Right. Right. Have you heard of Shenzhen? Right. Yeah. No, that happened to me actually. We, we got some, we got some, we, you know, we put out for bids for, for, for tooling for some plastics that I was working on at one of my past companies. And like, like factor of five, factor of 10 difference in terms of tooling costs. Like you just can't, there's no, like, there's no salesmanship there. There's no, like, there's no buddy, buddy system. It's like, dude, you can't come close. You go back to the, I mean, you have to, they have to make their way on the, it might be because their costs are actually like that, but they have to make their way on those higher margin businesses. So it's kind of tough to get that cross pollination they hope for. Yeah.

Y Combinator: It's interesting to see, like, I don't know if you know, Nick's in plethora of labs, their stuff. I do.

Chris Gammell: Yeah. Yeah.

Y Combinator: That things like that, like adding some automation in, I think will help reduce, like, it's unclear to me exactly how much of that Nick would probably know offhand, but how much of the cost of getting a part, like, let's say an aluminum mold for injection. How much of getting that made is the human labor compared to, like, the actual machine time? I mean, material costs is next to nothing, especially with, like, aluminum or steel.

Chris Gammell: Right. Yeah. Because you're going to, I mean, if you're buying that in bulk anyways, you're going to get pretty much the same costs. I think it might be a little different with the electronic side of things. So, yeah. And to explain plethora as well, plethora is like a CAD and CAM solution where you basically, you put the stock, you pick a stock material out of the actual material they have on hand and you put that into your CAD program. Then it does the CAM around it and then the robot loads it into a machine. It cuts it. So there's very human, minimal human interaction. Um, so that's Jeremy and Nick do that at plethora. Um, but I think that's a little bit less. So for the component stuff, because as you know, and as a lot of our listeners know, so much of the supply chain stuff happens in the Shenzhen area. I mean, some of it's like, if you're buying from TI, you're probably buying from TI and you're going to get the same pricing here or there if you're at the right volumes and they like you the same. But, you know, if you need to get those jelly bean parts, you're probably going to be able to get the jelly bean parts a little bit lower cost. And just the, you know, like the stuff that kind of adds up over time when you're in Shenzhen, it feels like you're going to get a little bit more of those savings, maybe with a reduction in quality.

Y Combinator: Yeah. Um, yeah. And like people over drama, like there's so much drama around like, oh, where am I going to make this with some entrepreneurs? And it's like, who cares? Like make it effectively somewhere that can do it at a reasonable cost. Um, our best startups, like I don't care whether Nebbia's showerhead costs them 40 or $50 to make and neither should they, what they should be worried about is making it awesome. And right. And building this brand that people don't, that people continue to be willing to pay like drastically more than the commoditized versions of things for their branded better things. Right. And that's, that's, I mean, it's a lot easier to say than to pull off, but when startups can do that, that's like, okay, cool. So most of these things that people will tell you are so difficult, like a lot of it comes down to squeezing bomb. A lot of it comes down to over promising and under delivering. And when you have startups that are selling at like, you know, 90, like their, their bomb is 5% of what they're selling for. Then. Yeah. You, you get a lot of wiggle. Yeah, totally. And then when you look at stuff with some software and some services built in, then it starts to be like, oh, okay. So like most of these things that are hard to do really well, you can pay extra for and yeah. You know, it doesn't make the problem go away. It's not suddenly a non-issue to manufacture, but it becomes a lot easier when you can be like, okay, I'm not squeezing. My bomb is not making or breaking my business. Cause most of those companies like, I mean, I'm hard pressed to think of an exception to this. Like what giant billion dollar world changing company worked because they were able to squeeze their bomb a little tighter. Right? Like I can't think of any, can you?

Chris Gammell: Especially, well, no, especially at the beginning. I mean, that's, that's the thing that optimizes over time for sure. But I think the other thing too, is that if you're, I think that also comes down to market as well. Like if you're in a marketplace where you have to compete on price, or if you're already starting out competing on price, you're not going to, you're not going to do well regardless. Right? I mean, because bigger guys are going to be like, oh, well, I've, I've got rock bottom costs, right? We're both selling this thing for a hundred dollars and you're starting to be that, that, that fly that I'm swatting away. Okay. My product's $80 now. What are you going to do about that? You can't afford to, to drop your, your, your retail price, $20. Right. Because that means that you have to take 40% off your bomb or something.

Y Combinator: Totally agreed. And Amazon is widely rumored to be selling these new, the $50 tablet I mentioned, they're selling it supposedly at cost because it's subsidized. Like they make so much, um, they could cut that to, they could give, I mean, how many tens of thousands of those away before it would even like be something that investors care to note and maybe react to with their, their stock price would probably go up if they gave away a hundred thousand of those, frankly.

Chris Gammell: Like, you know, uh, regarding the Amazon stock price, I have no idea what the logic is behind that. They're like, Hey, we haven't had any profit for the entire existence of our company, but yeah, that price just keeps going up on our stock. So I don't understand it. So I agree if they, if they're like, we're losing more money. Yay. We're, we're making more money. Yay. Right.

Y Combinator: And like, if you or I had just kickstarted a $90 tablet, we'd be like, okay, so now we're bankrupt. Right.

Chris Gammell: Like exactly. Exactly. Right. Because I, I laid out the costs for, for tooling and, and I made a mistake and now I have to redo that. And yep, it's all over.

Y Combinator: Or, but what gets really interesting is if like you made a beautiful tablet that had like some crazy custom enclosure that people are thinking about it as like an object of desire somewhere weird between fashion and technology and brand where they're like, yeah, this is the cool thing to have. I paid a hundred dollar.

Y Combinator: My Nikes and I'll pay $300 for this $50 tablet that looks beautiful. Has like, you know what I mean? That's, that's, that's, what's really hard to think about like nap, having startups navigate, but there's so much opportunity there, right? Like to divorce.

Chris Gammell: I guarantee some of, some of our listeners right now are like screaming. If you're screaming at your radio or your podcast player right now, we hear you because like, honestly, with the, you know, Luke and I are both, you know, we're hardware people, right? We don't, I think, you know, feeling that at first is really frustrating, right? Because we, we do what we can to optimize those bomb costs. That's what we're around for. That's what I think about myself is I'm there to make something low cost and not low cost, but you know, that is a big differential between what we're cost and what we're selling it for and all the other stuff raising that, what we're selling it for feels fluffy. But honestly, that's where you get the most bang for your buck, right? Because there's only so low you can go. You can't get any closer to zero, you know, that zero is as low as you can go.

Y Combinator: And it's, I mean, it's like us learning a bit more about how these crazy things like branding and actually selling to users work makes us able to do so much more damage, right? Like really entrepreneur, whereas, you know, getting a little better at antenna design. I'm not, I can't get, can't get too excited about that. I mean, it's important, like people need to optimize that, but it, it doesn't, it's not something that at the early stages is going to make or break your startup. And to me, there are just so many opportunities for us to do extremely early stage things, like thousands of company long laundry list of just no, not crazy advanced. Like we're not talking about fresh out of the lab, like new categories of sensors, just commoditized hardware. Things that to me don't exist should and could be like extremely large, like a hundred million dollar plus markets, especially when you start looking at B2B, like T-Bot is this company in our, one of my favorite companies in our most recent batch. And they're a little kiosk that some years in Canada put up near their school in a mall. And it's like 10 or 60 in like 10% interval proportions to the exact degree water temperature that you want. You can do custom blends, like no person there. You can make custom high end tea blends yourself. It dispenses them and they're growing quickly. Not because they like engineered something crazy, but hardware to deliver this thing that turns out people really care about having high quality tea. They're willing to pay like, I mean, tea costs next to nothing, even for tea. Right. Right. Even the best stuff. Right. So they're selling like maybe 20, 30 cents worth of ingredients for $3 or so. And then as they started like getting more trial customers, turns out this is like one of the most profitable things people who own little cafes or just have spare shop, spare space in their restaurants or retail areas. It's one of the most profitable things per square foot that they can do. So it's like, oh, wow. There's so many things like that. And it's execution is not like, it's a non-trivial challenge to execute stuff like that, obviously. But there's so many things like that where like, you know, yeah, there's cool optimization stuff they'll do to get their bomb lower to make their every aspect of it work better. But just like, you should to make a business out of that with largely commodity stuff. There's so many opportunities like that.

Chris Gammell: I feel like it's kind of the difference too. Like, I think this is a big differentiation too. It's like, when I think about some of the things that, you know, our listeners have talked about or are interested in, a lot of it is projects and learning about new technology, stuff like that. But like, I kind of differentiate the product side of things because like you're saying, you know, a lot of it is this commodity level stuff where the interesting thing might be the supply chain or it might be the software side, that other stuff. I mean, that's kind of just in my head is the differentiation is product versus project. And, you know, it's, it's almost, it almost kind of, it kind of parallels the, you know, if you, if you really enjoy doing something for the technology, you might want to keep that as a hobby because it's going to get bastardized if you try to take it to the marketplace because there's going to be realities to it. And that's, that's just kind of how I see that kind of stuff of, if you want to do all of the fun stuff, don't try to necessarily make it a product. But if you want to make an interesting thing that can, like you said, can, can actually affect, affect the marketplace and the environment, that kind of thing, then yeah, then, then go figure out what works and make that. Yeah.

Y Combinator: Like take, I mean, if you want to do like a BLE project instead of doing another BLE dev kit, because there are, in my opinion, very strong ones. And unless you have like some hocus pocus that I'm not thinking of that everybody's going to want, instead of like doing another BLE dev kit as a maker to sell to other makers, think about like the damage you could do by doing a beautiful BLE connected device that you just do even one of, like don't even sell it and then just put it out there, document it well, and have that be a portfolio piece for you where like when 20 startups in my next batch need on very quick turnaround. Yeah. To do some BLE stuff.

Y Combinator: You are like the first person they find because your beautiful portfolio, know what I mean? Like that seems like a better way to keep your project how you want it rather than having to compromise it to try to sell to the crappy customer that me and every other maker would be for you. Right. I think that's something that like some people are doing their jobs at. And that can also be like, I think, quite lucrative. Plenty of companies want early stage hardware stuff done. And there's not, there's not hundreds and hundreds of people willing to do it.

Chris Gammell: Right. Right. Yeah. I'm actually, I've, so I've gone to a couple of the hardware startup events in San Francisco now too. And, and talking to people there, I'm like, I'm like looking around, I'm talking to people and they're like really excited about hardware. I'm like, this is great. And then I'm like, so what do you do? And they're all like, oh, well I do software and I'm looking for people that are, can help me with hardware. And I'm like, no one here makes hardware. What the hell, man? Like, like you said, it's opportunity, right? That's not necessarily a bad thing. It's just that they see, they see something they want in the world. And for better or worse, you know, some, some of the ideas are good. Some of them are terrible. And, but yeah, like you said, it's opportunity for people that want to build and help build that kind of stuff and have expertise.

Y Combinator: To be clear, I don't think that you need like this guy in a startup who is the guy doing sales. Like I think that technical founders, whether they're doing hardware or software, don't give themselves enough credit. Like it's not, it's pretty natural to, it's a little awkward sometimes, but it's pretty natural to go out and talk to customers about something that you care enough about to start a company around. Like you too can go and sell to customers, no matter how technical and siloed you were in a, in whatever past big company job, there's nothing, there's no magic around it. You'll learn more and it's harder to do. It's hard to do really well, but like that's part of, I think your job as an early stage entrepreneur to kind of be willing to do all of that. It'll make you a better engineer if you should be building.

Chris Gammell: Right. No, no. I think, and I think, you know, we've talked about on the show a bunch as well. You know, when you're at a gathering with a lot of engineers there or just people building projects, there is nothing that will get someone out of their shell more than talking about the project. So that can be, that can actually could be a strong focal point of, you know, now it's just you're showing your project to people that might actually want to buy it. So that's good. Yeah, totally.

Y Combinator: Yeah.

Chris Gammell: So I did want to ask about, so I mentioned that you guys are in the South Bay, but, you know, what about like resources and stuff like that? I mean, do you guys have labs down there or do you have partners or how does that work? If someone, if someone applies and shows up to YC with, you know, just an idea or an early, early prototype, how are they actually building that stuff out?

Y Combinator: Yeah. So I thought that would be like a much bigger thing that I had to spend time figuring out, like how to get access to all kinds of elaborate equipment, blah, blah, blah. What ended up happening is I ended up having about a $10,000 budget to build, call it a mini lab. So it's literally a couple of 3D printers, one resin based, one FDM. We'll probably add another FDM as soon as a good cheap laser cutter comes out. I'll get that. But it's basically like a couple of reflow stations, some Arduinos, some sensors. It's a subset of what I had as like a hobbyist and doing a couple hardware startups. Nothing elaborate. And I think that's about the right amount. You can, if you have some like crazy custom thing that you need done, the danger is that you spend a bunch of time focusing on that crazy custom thing instead of asking yourself, like you should basically do one of it. And then if it's such an important part of your business that you need to have it, it should be something that you're able to charge for and justify having someone else do.

Chris Gammell: Right. Hire a machinist or hire a layout engineer if you really have something crazy for like DDR3, that kind of thing.

Y Combinator: Yeah. And it's like you are going to not be making this yourself unless it's like some custom. I mean, I hope to see some companies. Like I was just reading about the guy that started, one of the scientists behind A123 Systems is doing a new lithium ion startup. Oh, cool. And he's changing how they deposit the, I guess it's lithium slurry. Apparently, everybody except for his new thing being innovation that some startups are doing where like that's the actual innovation. So like obviously they're an exception, but in general, if you're doing something crazy custom, you're probably like, we're experts in our fields where we start companies. So we get way into the weeds and have to pull ourselves out of like doing everything ourselves, being too cheap about it and doing it in-house, right? Because like unless it's a core part of your business, there's probably no reason why you should be spending space, expensive employees and time in the Bay Area to be making more than a couple of something that you're machining, for example, right? Like it's not very expensive to send things, you know, two day air from Shenzhen. And it's very inexpensive to have very skilled shops there make 10 or 100 or 1000 of your widget. Right. So actual devoted lab, we have something weird, like they need to water jet, cut something out, send them to tech shop. There's a couple of really good networked 3D printer things. A bunch of my startups have recommended Fictive. There's a couple higher resolution overnight companies that like, and again, I have to check myself on this when I order parts from them for my own stuff, like you should not care about it costing 60 versus $80 to have an overnight 3D printed, you know, good resolution SLA or SLS part. Right. Right. And like that difference, it's really easy to obsess over that because we're cheap.

Chris Gammell: Right.

Y Combinator: That's a waste of your time to worry about.

Chris Gammell: Yeah. That, that, uh, I totally agree about that. And I think that, I mean, these, I mean, these kinds of things too, it's like the fact that you're, if you're finding something that's like 60 or 80 bucks for an overnight print too, like that, that seems, that seems cheap to me. I mean, personally. So.

Y Combinator: And then like, I mean, there's one thing that I really want that I haven't found a good answer for, a library of materials and the tactile stuff. Like I want a button library because, you know, you read reviews on Wired or wherever about new products and they talk about how buttons feel like the click and people care about that, but there's no, I have no good way short of like telling my startups to go 50 different variants from DigiCare or wherever. Yeah. There's no good way to really tell that stuff without actually seeing it.

Chris Gammell: I don't, I don't know if you ever fixed that one though. I mean, like, like honestly, one of the best days for me was like when the connector vendor would roll in with suitcases or when the button vendor would roll in with suitcases. So maybe.

Y Combinator: I mean, I think that's part of it. Like just getting them to send me a copy of their suitcases. Yeah. Yeah. Yeah. That's, that's important. And it's, yeah, I think it's just some, I mean, there've been a couple attempts like this one hackerspace I saw in Seattle had a materials library. It's since shut down. It wasn't metrics. It was one of the other big ones there.

Chris Gammell: Uh-huh.

Y Combinator: And some universities have them. There's like high-end academic new material subscriptions you can get, like where they send you like AeroGel the month it came out. Wow. But in terms of commodity stuff, like it's really, I guess you just have to go there or just get them to send you a full library.

Chris Gammell: See, I think that's kind of the, that's the magic. You know, we, obviously we've, we've seen a lot of videos on YouTube and people in a lot, you know, a lot of our audience has been to Shenzhen before. But like, that is the magic of the markets, you know, any, any place where like with that, where you have the hands-on, you know, just being able to pick stuff up and be like, click, click, click, click, click. Oh yeah. No, that, that's it. Or it isn't it. Or, you know, this is the right size or it has the right opaqueness that I'm looking for. Like there, yeah, I don't, I don't know, man. I think that, uh, in terms of like, like I agree with the library, but I don't know about the online stuff. I don't know if that's really possible.

Y Combinator: Uh, yeah, I think it's, it's just gotta be in person. That's another interesting thing. Like Shenzhen's not far or expensive to get to. So you're seeing a lot more, like I just got, uh, I'm a member of Ace Monster Toys in Oakland and I forget who it was, but somebody, um, was heading there and they're like, Hey, anybody need anything from, I'm totally butchering the pronunciation, but Hwakhyang Bay. Hwakhyang, Hwakhyang Bay. Hwakhyang Bay. Hwakhyang Bay. Hwakhyang Bay.

Chris Gammell: Yeah.

Y Combinator: Um, and now it's at the point where people are going back and forth regularly enough, or if we, you know, communicated a little better, we could be like, here are five parts on Taobao that I used Google translate to identify. And while you're there, please get these for me. And, you know, it's, it's entirely feasible that like 20, 50 of us could get together and be like, Hey, here's this guy who buys parts off Taobao for us and then shifts it to us. And like, that's not a very elaborate thing to set up for small samples.

Chris Gammell: Hey guys, I'm here today and I have a new startup where I am disrupting suit, extra space in your suitcase. We are like the Airbnb for suitcases going to Shenzhen.

Y Combinator: Yeah. I haven't checked on it lately, but a year ago we funded a company basically, it was called, I think it was called Backpack that was essentially selling spare capacity because things like GoPros are super expensive or like iPods are substantially more expensive in India and other developing countries than here. So it was, yeah, I don't know what they're doing lately, but I like India.

Chris Gammell: I think on a long enough timeline, those kinds of things always end up with doing, with moving drugs.

Y Combinator: Yeah. That's an easy one to make fun.

Chris Gammell: Right. Right. Wow. That's pretty funny though. Yeah. Yeah. I mean, it's tough, right? I mean, having that hands-on is like you said, it's so important for, and I think that kind of points to the fact that you guys are really focused on that, right? You are doing user-centric stuff, right? So testing and understanding what users actually want in a product. And that is, again, that is a big piece that I've noticed as well. You know, coming from the hardware world, going to the software world, even just like talking to designers. I didn't even realize designers were a thing, like web design versus coding or developers type thing. I didn't even realize that was a thing where people are actually crafting those experiences. I guess the similar thing for hardware would be like industrial designers, stuff like that, but I could never afford those. But I didn't even realize that was a thing. And when you get to that echelon of like, especially the consumer where you're, that's like a point of differentiation that like just the importance of those small details and having someone there to kind of tap you on the shoulder and be like, the small details matter, they actually help you make sales, that was very foreign to me. So it's good. I mean, it's good you guys are doing that.

Y Combinator: Yes, that's important. And I think the most powerful thing that we do is get our entrepreneurs to get us and all, you know, any industrial designers that they have on their server, the smartest entrepreneurs get us and all those consultants out of the way and ask users. Because like at the end of the day, those are your customers and it's like blindingly obvious when you say it, but difficult. And you need to keep checking yourself on it as you start a company to actually do to just focus on what they actually want. Because that's, that matters way more than what I or anybody else giving you advice could possibly tell you.

Chris Gammell: Right. Yeah. Yeah. No, that I'm, I'm learning that one the hard way too. So that brings up a question about hardware though too. So does that mean that all of the hardware is consumer level hardware? Are there any like industrial or medical or anything like that?

Y Combinator: Yeah. I don't know as much about the medical stuff. We have like some medical, um, an increasing number of biotech and then B2B is really interesting. Like T-Bot, for example, their, their customer that they're selling to is a retail outlet. Uh, my friend Brian had an interesting company called Transcend Lighting. That's doing a really good indoor LED based grow light. Um, and he's selling to the emergency. Um, I want to see more B2B. I think there's just a lot of opportunity there and it's, it takes some more thought. Like it's easy for us to be like, why doesn't this thing exist for me as a consumer to use every day? Right. Those are kind of like easier opportunities to see than like, why is this, you know, why is this truck, this freight moving network, like 20% less efficient than it should be? And how can I solve that? You know what I mean? Like those are, I think, harder opportunities to see. Yeah.

Chris Gammell: They're, they're, unless you're in that, that, uh, or coming from that environment, you're not going to understand all of the things you have to go out and actually kind of find those opportunities before you start building something versus being like, well, I want an internet connected fishbowl. And, uh, there might be other people that want that. And right. Yeah.

Y Combinator: So that kind of, what's cool though, is that like, and this is, we have a strong body of this with, with some of our more successful software startups where they're selling to small businesses, selling to other companies. And like, they expect to pay people who are running their own businesses and larger companies too. But I think small businesses can be easier initial customers because they can just like, it's a guy to talk to sometimes to get stuff done. Um, they are used to paying real money for things that make them more money or otherwise make their lives easier. So it's, it's cool. It's not that different. I think like with T-Bot, for example, I think we'll see more companies that do hardware initially to businesses and then learn from that and get some exposure to then launch like consumer versions. I think that could be a really interesting thing that isn't that explored, especially things that are like, you know, make sense for, that are, you know, things like a tea dispensing robot, for example, that are way more expensive to build at quantity 10 or quantity 100.

Chris Gammell: Right.

Y Combinator: Then they will be to make at like quantity 10,000.

Chris Gammell: Right. Yeah. It's not going straight to building a Keurig, which is, you know, has to be bottom of the barrel costs. But, you know, you start to understand more about what people actually want in a tea so that when you do go to a consumer level, then that actually does make sense. Right. You can actually understand that, oh, no, no, there should be temperature variation versus, you know, just having something heat up like a, like a standard coffee maker does. Yeah, totally.

Y Combinator: I think that's like, I, I don't know. And that's something that they'll literally know from people making that they probably already know from thousands of cups and they'll know from tens or hundreds of thousands of cups in the next couple of months. People actually adjust the temperature. Like, do they care about what temperature exactly tea is being dispensed at?

Chris Gammell: And I mean, it's like big data for cups of teas, huh? It's like, uh, there you go. I see the distribution of, of temperatures and stuff. Yeah. That's, that's pretty cool. Um, well, I should, uh, I should let you go. Cause I mean, I know it's, it's getting pretty damn late there. Um, what, uh, how, how do people go about signing up or applying rather? What, what's the, I mean, you mentioned this about a couple hour process, but where do they actually go to do that?

Y Combinator: Super simple. It's apply.ycombinator.com. Um, we take like, we have no religion about categories of companies, number of hardware compared to number of software. I am biased. Obviously I want us to be 99% or no only 80% or 19% biotech and 1% software. But I'm obviously biased. Um, a little bit. You are like, I'm, I'm worried that people get intimidated out of applying. Cause like we have a prestigious brand. You should apply. Like it doesn't hurt to apply. And in fact, applying, getting rejected, showing progress and applying again is one of my favorite things to see people. Really? We really like to read applications where someone got rejected and then showed a bunch of progress. Like that's someone who's kind of a moving train, right? They're going to get their thing done. And then it's just a question of like, whether we want to be on board or not, but it's, you know, they're kind of executing regardless. So long answer short, apply.ycombinator.com. I want to see a lot more hardware applicants.

Chris Gammell: I think I would be more scared of getting it because of what it would mean. You know what I mean? Like I could throw an idea on there, but, but like, honestly, like if you get it, if you, if you get accepted, it's like, Oh shit, I got to build this thing in three months. Like, Oh boy. Yeah. So no, that's, that's.

Y Combinator: Yeah. I mean, like you should apply for something you care about. Like it should be something that you are willing to make substantial sacrifice in your life to, to make exist. Or if you already have a prototype, even better. I mean, good, but like certainly not a requirement. If I applied without a working prototype, I would probably before interviews, if I got an interview, I would have together a half working prototype and start showing it to people personally. If it was something that you could do that for, and it probably is if it's consumer facing,

Chris Gammell: but yeah, I mean, or at the very least, as we've talked about on the show before, make sure you bring your other hardware so that you show that you have the pedigree to make other things right at the very least. That's what I would say.

Speaker ?: Yeah.

Y Combinator: Like you don't want to just be a guy with an idea. Anything you can do to differentiate yourself from that norm is positive.

Chris Gammell: And it'll probably get you accepted in the first place. Right. All right. Well, Luke, how can, uh, how can people find you? Are you Twitter? Are you a Twitterer? Uh, yes.

Y Combinator: A bit. L. I'm an L. L I S E M A N. My website, which I don't update enough is lukeiseman.com. And yeah, feel free to reach out with questions. If people do apply, I'm shoot me a note, luke at ycombinator.com. I'm happy to look at your application and I'll give you honest feedback. And yeah, regardless of whether you do it with YC or something else, I want to see more, more smart hardware people starting interesting things. Awesome.

Chris Gammell: Well, thank you so much for being on the show. We, I, I, I, I think this kind of helps shed some light on, you know, where you guys are going and, and where you guys have been, uh, and where you've been too. I think it's been really interesting. So thanks for being on the show and sharing your story. Thanks for having me. All right. We'll talk to you soon. Thanks. Bye.

Speaker ?: Bye.