- New startup ideas that really work
tend to take only a few forms.
New tech, new behavior change in society, or new regulation.
As you think about whether you want to work on a startup idea,
whether it's starting it yourself
or deciding whether to work at a startup,
I want you to ask what great investors ask themselves
all the time when they meet a startup.
Why now?
Let's get started.
The whole reason why there's opportunity in startups
is actually technology.
And technology progresses on a curve,
linear, super linear, and exponential.
Here's Lex Fridman and Ray Kurzweil
talking about being able to predict the future
through technology.
- I mean, I did OCR in the 1970s.
- Optical character recognition.
- Yeah.
So we were able to do that in the '70s,
and I waited till the '80s to address speech recognition
since that requires more computation.
- So you were thinking through timing
when you're developing those things.
- Yeah. - Has its time come?
- Today, we're talking about why now
because that is the key question.
And given tech curves,
you can predict when things become viable
the way Kurzweil did when he pioneered
optical character recognition and speech recognition.
Today, the frontiers probably revolve
around things like large AI language models,
computer vision, blockchains,
but they might actually
still be some of the oldest ones out there,
like mobile phone adoption
or number of transistors on a chip.
These are all powerful technologies
that are driving new things that human beings
are now capable of doing.
And when you start a startup
or you're trying to evaluate a startup,
it's one of the best things to evaluate.
And let's take a concrete example.
Almost anyone can look at a smartphone today and say,
"Wow, that really changed the world."
But what you might not know is that for many, many years,
even a decade before the successful iPhone debut,
there were attempts like this one.
- [Presenter] And it was a telephone.
It was essentially going to be a smartphone
with a lot of intelligences.
- When we were talking
about reinventing telephony, we meant it.
- [Speaker] We're trying to make something that people love.
We needed to be like your watch, your glasses, your wallet.
- [Speaker] We decided to make everything.
That meant we were custom building every piece, it's insane.
- [Interviewer] How small will it finally be, do you think?
- Someday?
It is your wrist watch.
- This was the beginning and what became, I think
the most important company to come out of Silicon Valley
that nobody's ever heard of.
- That was a clip from a great movie called "General Magic."
Named after, of course the company
that tried to make a smartphone
at the moment that the tech was not ready yet.
And here's what that looked like.
In 1994, this device cost 1,400 bucks.
It had only one megabyte of RAM.
A 4,800 BOD modem which is about 480 bites per second.
And they had a monthly data fee of $400 per month.
13 years later, Apple and Steve Jobs
delivered the iPhone 1.
- Well, what we're going to do is get rid of all these buttons
and just make a giant screen
A giant screen.
- The iPhone 1 costs $499.
It had 16 gigabytes of storage
and 2.5G cell network
which was about 300 kilobytes per second.
So about 16,000x the storage, 600 times faster network
and it cost 1/3 the price.
In tech, orders of magnitude improvement
is not just possible.
It's actually the key to breakthrough.
The most powerful things you could work on
come on the back of not a 50% or 2x improvement
but on 16,000x better, 600x.
Look for the 10x, look for the 100x.
That's why tech is the most powerful thing
because it is the driver for those 10x, 100x
and 1000x improvements that change things
and leave them changed forever.
Why now?
Sometimes, the answer is it literally can only be done now.
That was true for the iPhone and that was a perfect storm.
Now technology is huge
but the next why now once technology is broadly available
is actually the human mass behavior change that happens.
The smartphone was an amazing business
that was hard won by Apple and Google in the end.
But that's often just the beginning.
These technological innovations stack.
Here is a graph of smartphone adoption
as a percentage of population.
And so you can see that the smartphone
went from something that was very fringe.
Not a lot of people had it to, suddenly, everyone had it.
And right around 2012 was when Instacart happened.
That's the grocery delivery startup that I funded.
When I was at Y Combinator.
The founder sent me a six pack of beer
and I said, "What the heck is this?"
I downloaded it and I saw the future
literary right before my eyes in my iPhone.
It's a huge part of Initialized's first fund
and it's returned the whole fund several times
off of that one investment.
But to know why now for Instacart,
you actually have to understand the history
that happened right before it.
You have to look at Webvan
which was a huge failure
that raised over 396 million from Sequoia and Benchmark
and yes, even SoftBank.
This was 1997.
So literally 25 years ago, the company ended up
losing over 800 million dollars and shutting down in June, 2001
which really marked one of the last gasps of Web 1.0.
When Instacart came around 11 years later,
people were wondering, why now?
And it turned out to be one of the most powerful why nows
I've ever seen up close.
- What has changed today
and why this is the first time in history
where a company like Instacart is actually possible
is because of smartphone penetration.
There hasn't been a time where smartphones
are are so prevalent that everyone has them.
And as a result of that, were able to to utilize
the people who have them to pick and deliver the groceries.
So when you want to order groceries,
we connect you with someone who can pick those groceries
and deliver them to your door.
So this is the same reason why Uber and Lyft exist today
when they couldn't have existed 10 years ago.
So, we think, in our opinion,
it's actually price selection and convenience.
All three of those are important.
It's not just one thing.
And with Instacart,
I think that customers can get all three of those.
- Today, Instacart has been churning out profit
and it's a household name.
Their software is eating all of grocery.
And they wrote a why now
that was also the driving force for Uber, Lyft and DoorDash,
all multi-billion dollar startups today.
Funny story, my partner Kim-Mai Cutler
actually wrote the first article in 2012 on TechCrunch
about Lyft's pivot into the first citizen driver service.
This was even before Uber did UberX.
Before that, Lyft was called Zimride
and they were a ridesharing app that let people do
long haul rides better than posting on Craigslist.
Zimride becoming Lyft was the pivot of a century
and all because it was behavior that drove a giant why now.
Suddenly, big mobile workforces were not just possible.
They became huge billion-dollar industries.
Now, I'm a technologist and we may love technology
but I have to admit, there's a very powerful type
of behavior change that is a third kind of why now.
And it might be a bit foreign to you and me
but it's still a key driver
of why certain startups can happen at certain times.
I can't think of a more extreme example
of this than actually Uber.
Here's Bradley Tusk, famously one
of the people behind getting Uber approved
in many cities, including Washington D.C.,
the primary American power center of the mall.
- We started in 2012 in D.C. actually.
So we launched in D.C., was going well
and taxi to taxi's typical thing.
They got a member of the city council to put in a bill
basically that would outlaw Uber.
And at the time, we didn't know if this would work or not
but we sent an email from Travis to all of our customers
saying, Look, if you like this thing,
you want to to keep using it, we need your help.
And the course of a week, 50,000 people organically
reached out to the city council and said,
"I want this thing."
Now, do we kill the bad bill?
We passed our bill unanimously, including voted for it
by the sponsor of the bad bill who then voted for us.
- Regulation is a crazy double edge sword.
It can limit and destroy your business just as much
as it can support it and make it possible.
Working with the government
is like any other enterprise partner, only way more fraught.
They're the elephant
and they can either raise you up or crush you.
Your job as a founder is to find the former
and avoid the latter.
When I was at Y Combinator,
I remember meeting Parker Conrad when he was working
on one of his first startups, Zenefits.
And the thing that really jumped out
at me in his YC application was actually
one of the big reasons I wanted to fund him.
He had pointed out that Obamacare was about to roll out
and that meant that millions of small businesses
and medium-sized businesses would be mandated
to offer health insurance.
That turned out to be a mega trend need
that drove huge adoption of not just Zenefits, but gusto.
And yes, even Parker Conrad new decacorn startup, Rippling.
When the government comes and says X needs to happen,
there's a wave of business activity
that is going to rush towards that thing.
And if you can spot that before it happens.
It'll be you who figures that out first.
Now if you ask what's the why now right now,
when it comes to regulation,
I'd say the biggest enduring one facing us today
is climate change.
Here's initialized investor and partner Kim-Mai Cutler
who wrote that first Lyft article
on TechCrunch back in the day.
This is what she sees in this space.
- In my lifetime, I've never seen a moment like this
where the political consensus around climate change
has never been more urgent
or more obvious or more inescapable than right now.
- It doesn't take much to realize climate change
is happening all around us.
Whether it's wildfires, record temperatures or storms,
the likes of which we've never seen.
And there's change of foot now in DC and the halls of power.
- And so, those climate disasters,
those effectively manmade climate disasters
created the political will for the Inflation Reduction Act,
which is the first of its kind.
The largest climate package the United States has ever done,
has ever seen before.
And that's going to lead to lots of different incentives
around decarbonizing our entire economy and the way
that Americans live.
And that's a huge opportunity
for entrepreneurs to latch onto right now.
- One of the hottest startups in Silicon Valley today
is the one Kim led a series A in, called Pano,
which is fighting wildfires.
One of the worst disasters plaguing the American West.
And it's something computer vision is here to solve.
- We had a policy of the last 100 years
of suppression where we didn't allow any fires
and fires had to be put out by the early morning, every day.
And so we've accumulated this huge fuel load
over the last hundred years
that in combination with higher aridity
because of climate change is setting off these mega fires.
And so we're going to have to head towards this world.
Where we're actually having more managed low intensity fires
versus uncontrollable, unpredictable mega fires.
And to do that, you're going to have to have
a lot of tech frankly, to do it.
That's going to have to be situational awareness
from smart cameras that can identify smoke plumes
and triangulate where fires are
and how fast they're spreading across a train.
We're going to have to do that going forward.
And in Pano, which is a deal that we did
the series A for is part of that.
They're a network of computer vision-enabled cameras
monitoring huge amounts of terrain
across multiple content continents.
Australian here helping first responders,
utilities and private landowners figure out
how to identify and manage wildfire on land.
- Pano is going to be a huge business
that solves a giant societal problem.
Kim-Mai Cutler's an amazing investor
when it comes to this third kind of finding startups
with a strong why now?
Because governments are one of the largest forces
in our lives, like it or not.
And where that works to a founder's favor
is that unlike big tech that's totally opaque,
unlike private corporations,
governments are generally built to be open systems
with governance and policies that when done right,
are transparent to everyone, including you.
Regulation is the largest,
hairiest and most difficult to handle why now
for any startup.
But it's the one you should always be aware of.
You might not be interested in the government
but the government is interested in you.
Technology, behavior change and government regulation.
Those are my three why nows I want you to keep in your mind
as you evaluate any startup idea.
Those aren't the only three
but those are the ones that I have seen up close
and we funded dozens of billion dollar startups
that have made it based on those three.
Wired writer Paul Ford says, "Watch for the curious
and interesting intersections between very large things.
Look for the points of contact or points of conflict.
Pick two enormous forces and wonder how they connect."
And where those intersect is the one big question, why now?
That's why we're here
and that's why I'm so glad you found my videos.
That's why I hope we can get there together.
I want you, yes you, to be the creator
of a better future for all of us.
Technology continues to change our world
and if you can build that technology,
you can be the lever on that fulcrum that moves everything.
This is the mission.
You can get the skills, you can build your people networks,
you can learn how to do this and you're on the right path.
If you ask the right questions,
Product market fit will find you.
Alan Kay says,
"The best way to predict the future is to invent it."
What future will you invent?
Let's go get it.
So that's it for this week.
I've actually made almost 100 videos that help you
on your journey to be a founder, builder or manager.
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As always, thank you for watching.
I'm going to be watching the comments
to answer any questions you might have
about starting a company, and I'll see you next week.