We closed Startup Asia Tokyo 2014 with a short but thought-provoking keynote from Kevin Hale, partner at the influential Silicon Valley accelerator Y Combinator. Seemingly unfatigued by the preceding two days of madness, Hale delivered an thought-provoking address that touched on Y Combinator’s ethos and the lessons he drew as the founder of Wufoo, an online form-building startup that sold to SurveyMonkey in 2011.
Hale also announced that the Y Combinator Startup School – the accelerator’s daylong conference where founders meet to share their stories – will come to Asia next year, though specific dates and locations remain undecided. Startup School ventured out of Silicon Valley for the first time year with events in New York City and London. Asian entrepreneurs looking to form ties with Y Combinator’s network of founders and investors will likely seize the opportunity to attend in 2015.
Keen to learn more about Y Combinator’s commitment to Asia, we sat down with Hale at the tail end of Startup Asia Tokyo 2014 to discuss complacency among startups, the pitfalls of “Silicon Valley style,” and which statistics founders shouldn’t care about. Below is an edited transcript of our conversation.
Tech in Asia: You built your first startup, Wufoo, in Tampa, and all of your employees worked from home. Here in Asia, location is a hot topic – some founders see location as crucial to the success of one’s startup, others see it as peripheral. How important do you think location is for a startup?
Hale: It’s a mix. At Y Combinator, since we’re focused on growth and numbers, we want startups to be where growth makes sense for them. If you’re market is global to begin with, we’ll ask them, “What’s best for your culture?” because it doesn’t really matter where they start. We tend to lean towards Silicon Valley in that respect. But we also work with startups like ClearTax, from India, which is basically trying to be the TurboTax of India. It makes sense for them to be in India, and we wouldn’t tell them otherwise.
Another thing is that we don’t have enough equity in companies to tell them what to do. They ultimately make their own decisions. So if a company says it makes more sense for them to be [wherever] they need to be, so be it. We tell them, all they need to be is cognizant and disciplined of how they run their company.
It’s easier [to do this] when you’re surrounded by other alumni in Silicon Valley, who can remind you of those values. It’s also easy and dangerous to get complacent in other regions, where you might think “I’m the best startup in this location.” You [then] don’t focus on being innovative, or being agile.
Can you elaborate more? What type of startups are prone to complacency?
It’s the ones that experience Silicon Valley, go back to where they came from, and then get a little complacent. It’s like arrogance. I think that’s where we got lucky with Wufoo. We started out in Silicon Valley, built it there, and then came back to Tampa but we didn’t lose any of that edge. We did our very best to stay disciplined and focused. Part of that was not having an office, restricting the meetings that we were going to have, and being focused on the numbers.
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When it comes to Asia, my biggest thing is that people often say they’re looking for startups that have that “Silicon Valley style.” I don’t like that phrase. I just like looking for smart founders. The values that we have at Y Combinator aren’t necessarily the values of Silicon Valley, they’re the values of what we think good startups are supposed to do. I think you can find those values anywhere.
Can you give a concrete example of a company that doesn’t have that “Silicon Valley style” but is still a great forward thinking team?
Last year I went to a conference in Korea and I met a startup called Memebox, founded by Dino Ha. He’s got one of those great companies that stood out from all the other Korea startups. It was a beauty box company, but he understood his market, and he had a strong sense of brand and product. He wasn’t a schmoozer. His English wasn’t very good, so when he came out to Silicon Valley, he didn’t do hard networking, which most people would associate with “Silicon Valley style.” He was very formal. He dressed really well, and most hackers in Silicon Valley certainly don’t. But he had everything that we would look for in a founder at YC.
It seems that when you refer to “Silicon Valley style,” you’re really just referring to a certain slickness, no?
Yes. I don’t look for any of that kind of stuff, or people talking buzzwords. Dino was very genuine and modest. He was like “Yeah, I have all this growth, but we just worked on the right things and it just happened.”
Right now we’re talking about qualities that you think are overemphasized in startup communities in Asia and elsewhere. As you’re here, at a large, hype-filled startup conference in Asia, are there any values you think are being overemphasized, either by startups or investors? Any talking points that have made you say to yourself, ‘I’m not sure that’s so important?’
I guess we are less obsessed about market. I think everyone loves Asia because it’s an exciting market. But we’re obsessed about Asia in a very different way. We’re like, “well, smart young people are over there, and they’re a good percentage of the population, so we should be be having some of them and we’re missing out on them.” We’re missing out on brain equity at Y Combinator by not having [these smart people] here. We don’t think, “We have to be in this market because it’s growing really big.”
So slideshows about smartphone adoption rates in Indonesia, or the abundance of Computer Science graduates in Manila, for example, do nothing to pique your interest?
You won’t see me ever talk about those things. They don’t matter to me. Good founders already kind of know that, and they figure that they’re following the right trends to begin with. I feel like talks about the market [potential] are to make VCs feel better about their decisions. But they’re not necessarily things that founders need to hear. Founders need to be passionate about the things they’re building, and they shouldn’t build something based off of a market overview slide. Building a startup is about making one person passionate about your product, and then 100 people, and then 1,000 people. Everything else is just handwaving, illusion, and a rewriting of history.
We can both think of another like-minded accelerator that basically has scouts all over the world, who look for exciting startups in specific regions. Why might Y Combinator choose not to do the same?
(Jokingly) Well… I’m here right now, right? Here’s the thing. YC is run as a true partnership, so no one tells anyone else what to do. Different partners who are passionate about different things will have the freedom to pursue those interests. I’m actually quite passionate about Asian startups. Partly because I’m half-Korean. But I want to come out here and realize that we’re missing out on smart people. It makes sense for me to ask, “What can we do about it to help those smart people get the resources we need?” I believe that everything else will take care of itself.
In your keynote, you said that you believe in startups, not small businesses. In your own words, what’s the difference between a startup and a small business? Have you ever worked with or funded a company you thought was a startup, but later turned out to be a small business?
The difference between a startup and a small business, in our opinion, is growth. A startup is the kind of entity that’s designed to grow and scale very quickly. They primarily use technology to help them do that, but there are a lot of different ways to do that. Companies that aren’t focused on growth, that just want to build the very best product, or something that’s great for their local town – they’re not focused on growth, they’re just focused on running a business.
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As for companies that want to be startups but turn out to be small businesses – well, if they really want to be a startup, they pivot. That’s the classic thing you do. Twitch is a good example. It started off as video-streaming, but the founders later figured out it wouldn’t scale. So they spun off Twitch.tv, which had a really enthusiastic audience. As a result, they ended up being a really great startup. Founders that really want to be part of startups follow growth wherever it may be. If they realize that something is not growing, and that they’re not a startup, they pivot to something that makes them a startup. If they decide they want to stay a small business, that’s their choice.
You also said in your keynote that investors tend to be optimistic. That struck me as an unusual thing to say, as I’ve met some cynical investors too. Which is more important as an investor, optimism or skepticism?
I think that’s the hardest thing about it. 90 percent of your investments you expect to fail, so I can see how it’s easy to get jaded. I think what YC does well is we constantly remind people that there are exciting startups out there. There’s always a batch coming in that renews our energy every single time.
Editing by Terence Lee; top image via Michael Holmes Photography
Y Combinator’s Kevin Hale on why ‘Silicon Valley style’ is overrated (#StartupAsia Tokyo)
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