The number of founders I've talked to basically sets our version of we're not growing as fast as cursor.
So therefore we should pivot or do another idea.
And when you look, you're like, you have the best product in your category.
Like for some reason I feel like sometimes founders kind of think startups are just kind of fungible.
You know, it's like, oh, I could make DoorDash or I could make like GitLab.
And it's like, that's not been my experience.
This is Dalton plus Michael.
Today we're talking about a topic on every founder's mind.
So Dalton, I'm not growing 10x year over year.
That means I should shut my company down and go get a job at Google, right?
Because I saw on Twitter that investors will only invest in me.
I think Andreessen put out a video saying, if you don't have that, your company is bad or something.
If I were to parody it, because I don't remember it exactly.
It's like, if I don't have a million ARR in the first week, it's just like, it's over for me.
And like my life prospects are bad now.
I'm like, I'm married or have kids.
I felt like that was great marketing, by the way.
Rage bait marketing in practice.
Everyone's talking about A16Z now, right?
I don't know if that's the, hey.
Look, all media is good media, right?
So anyways, let's try to unpack this a little bit.
Companies are growing faster than we've seen in the B2B SaaS era for sure.
Maybe not faster than we saw in the consumer era, but we can get that aside a little bit.
But certainly that's happening.
I think we should try to steelman both extremes here.
So let's talk about the growth Israel side of the coin.
If you go look at the App Store, OpenAI has been number one in the App Store for the past couple of years.
Right now, I think Sora is number one, which is also OpenAI.
And only Cal is the revenue growth real and the consumer growth real of AI tools.
And B2B tools that are using the APIs is real.
Well, and you're saying from the revenue side, from the product side, the OpenAI product is 10x better than anything that existed remotely similar to it five years ago.
Imagine if you're a good expert.
Imagine you had a time machine and you gave someone access to this and they would just be like cooking, right?
It's like pretty good, right?
It's like now everyone has it.
Like giving someone Google in like the late 80s.
So that's on the plus side, on the minus side, what's going?
Like I'm quoting someone.
I forgot where I read it, but it's sort of like these days, annual recurring revenue is often not annual nor recurring nor revenue.
So every aspect of the term is wrong.
It's basically you see a lot of creative accounting.
Where people are reselling API calls to Anthropic.
They're upside down on it.
They're multiplying the numbers by 12 to make an annual number.
Have it be non-recurring.
It's actually just run rate revenue.
There's always like bullshit creative accounting going on.
Let's go down in that like so much deeper.
I'm running a service that has a monthly subscription.
an estimate because I could cancel it and that is correct.
I'm running a service that has like a usage rate like AWS where like I can pull all of my files from S3 tomorrow and never pay Amazon another cent.
Turn that into ARR is a little okey.
I don't want to name names, but there are a large number of products that YC founders use that I've spoken about, and they say things like, if I were to pay for the tokens to do this directly with open AI or Claude, it would cost this.
This product charged me this divided by two.
Um, why not get a 50% discount per token?
So point being, there's a lot of creative accounting for how you define growth rates.
Um, there's people that are, you know, maybe you have an LOI, maybe you have like a email.
Oh, we're going to definitely use your thing.
And then you count that as ARR.
I definitely seem like impressive logo on website.
And it's like, it's a big pie.
It's a million dollar pilot.
But like I've seen situations where they're doing pilots with six companies.
So the logo is on six different.
And it's like, is that an enterprise deal?
Is that like a locked in scalable thing?
Or was that just kind of our demoing and seeing what's going on?
And so the point is the following.
Are there startups that are actually growing at 5X or 10X?
Greater than 5X review or 10X review?
Especially in small scale.
Are there startups that go from zero to a million ARR in some form or another faster than we've seen in the past?
And I think partially we've talked about this before, but it's because big companies are willing to purchase the stuff.
It used to be really hard to get a big logo and they don't mind spending money.
Yeah, they can see value.
They don't mind spending money.
But I think if you're a founder and you're depressed and you're like ready to shut down your company because you're only growing six X year over year, don't do it.
Or like just like that's just like self-defeating bad names.
I think the best way to think about this from an investor perspective is that you're going to be judge relative to your direct peers.
And so let's say that you're doing voice AI, vertical voice AI.
You are going to be judged based on how fast the other vertical voice AI companies are growing.
Because if you're an investor, like I'm running a series A firm, you're picking lines between them.
I'm looking at a lot of companies that are building in the space, maybe not competitors, but they're comparables.
And yeah, I am looking on a relative basis, how the companies are doing compared to each other.
But I'm also taking the time to dig into how real the contracts are.
I'm digging into if the product is good.
Like there's all this nuance that is an investor that I would dig into.
And so the way I would extrapolate this as a founder is realize who your comparables are, realize who you're going to be judged against.
And if you want to be able to keep raising, be better than average.
I love that you're talking about these comps, because the number of founders I've talked to who basically said some version of, we're not growing as fast as cursor.
So therefore we should pivot or do another idea.
And when you look, you're like, you're not even in a space that could support this level.
Like, you know, it's like, you sell enterprise software, it's not self-serve.
Like, how would you be able to grow as fast?
Like, or you're growing, you have the best product in your category.
Like, why would you care about cursor?
It's a completely different category.
And for some reason, I feel like sometimes founders kind of think startups are just kind of fungible.
It's like, oh, I could make DoorDash or I could make GitLab.
And it's like, that's not been my experience.
You probably couldn't have made either, but it's probably much more likely you'd have made one than both.
And so I think when people
That's when they can psych themselves out.
I also think that there's a bit of a question about what phase are we in?
I think you and I have this kind of really interesting perspective because we've seen multiple cycles now because we're old as fuck.
And like, I think that we just experienced very late stage B2B sass.
which I would argue is like, at least I found fairly depressing, but like, you know, it was, hey, the technology hasn't changed for years, right?
And now we're in this kind of probably a cycle that to us would feel like early web apps or early mobile apps.
And I think sometimes people don't understand like how little things have firmed up yet, like,
When the game's early, like, yeah, like, well, it's hard to predict what will have stand power.
Hard to predict what will have network effects.
And I am fully expecting to be surprised.
I know that's a weird way to think about it.
Yeah, I don't trust my ability to predict.
What is enduring and what isn't.
It's kind of like, do you remember the vet that Sam made?
where he was like, these YC companies together will be worth like X billion dollars.
And if you look at the list of companies, there's some really good stuff in there.
I think Stripe was on the list.
But then there was like Teespring.
And like, it's because of the time, I remember the time it was taken off.
Stripe and Teespring seems like equally good startups to me.
And so even when you're completely in the know, it's hard to predict what's going to be sticky and what's going to be the enduring company.
I love that you said expect to be surprised because like if we think back through 20, 25 years intact, how many name brands have we seen just fucking member palm?
Yahoo is one of the biggest companies in the world.
And now it's just like this like ad tech stuff.
That's a different thing.
Like there's so many examples.
And what's funny is it's like, when you think about some of those examples, it wasn't they're going to win.
It was like the game was declared over.
Like by the time Google was going, Yahoo was already declared the winner.
It was like the biggest and most important internet company.
There is no kind of like permanent winner.
But I think this is what when founders could encourage themselves like, man, just take a look at some of the like dinosaurs.
And like, you might realize something that looks great today, you have no idea what the shelf life is.
And again, for the record, I have no idea how sticky cursor is versus cod code and stuff.
I mean, again, we'll make investments on stuff like this.
But if you feel like, okay, Dalton, bet your life on what's going to happen and what's sticky.
It's like the dumbest moment.
I don't know what's going to stay us.
To me, I think like the lesson I learned from YC in these phase, fun, smart people and just see what happens.
Smart people will figure it out.
And like lean back and like maybe my takeaway from more later stage sauce was like the variance is a little bit less.
I can't predict necessarily who's going to win, but the variance in outcomes is way, way less.
Whereas now, how do we know that we know how to even use the tools we have right now?
You know, it's like, I always talk about this example of like, how long did it take us to squeeze the most out of a mobile phone?
How long did it take us to squeeze the most out of a web browser?
Like the idea that a new model drops and we know the best way to extract value out of it is like the biggest joke I've ever experienced.
positive or actionable thing from hearing this like, oh, everyone's growing faster than me.
I did see a couple of companies apply to standard capital in our last funding cycle where it was a company that had been around two or three years and it wasn't really growing fast.
And so they did like a crazy pivot nine months ago and it totally worked.
Okay, that was pretty smart.
Like I saw people do AI pivots that were well thought through even though they're
two or three years in their startup.
And I asked them, well, why did you do this?
And they're like, well, we weren't growing fast enough.
I think this has been a bit of a, and we'll see how it works out, but I've definitely seen people who I would describe as had some interesting insights, but poor tools as the B2B SaaS thing kind of came to a close, where with AI, they can actually do, they can create way more value for their customer.
So like, oh, like, yeah, we got this contract with the customer and like we can do this much.
And then we wake up and it's like, oh, it turns out we can do this much for our customer.
Oh, now they want to talk to us more.
Like, oh, we're getting meetings we weren't getting before.
Oh, we're making them more like, and it's like, yeah, you got better tools.
Like get back in the game, you got better tools.
It's like, you got better pads.
I think that anyone who's discouraged is like, man, better tools are coming out.
This is a great time to be doing it.
Don't get discouraged by someone making it.
Don't be discouraged and don't be accepting of slow growth.
Be inspired with great tools.
You should be able to go faster than before.