Justin Kan, Founder, Twitch.tv
The Justin Show: Calendars, Cameras, and Y Combinator
Justin Kan doesn’t come off as the type who lives for the spotlight. Which is funny, because at one point he live-streamed his life, 24/7 for the whole world to see, for months.
That may seem like an unlikely path to a billion-dollar sale, but in fact, the early experiment in the world of live video got Kan and his partner Emmett Shear part of the way there. That unconventional level of dedication and curiosity is a testament to how these two have been willing to dive into the opportunities before them, leading them through a flurry of tech business successes.
Kan’s CV speaks for itself: He co-founded hit companies Twitch, Justin.tv, Socialcam, Exec, and is now a partner at startup incubator Y Combinator, which invests millions annually into tech companies.
A native of Seattle’s Capitol Hill neighborhood, Kan was not an obvious candidate for someone who would succeed in tech. He has a certain natural charisma, but studied physics and philosophy at Yale, neither of which is necessarily a match for a career in startups. However, he received a crash course in entrepreneurship from an early age by watching his mother run her own real estate business, and it seems to have stuck.
From there, Kan experienced his share of losses and ridiculously spectacular wins, developing a series of products that define the chapters of his fascinating career in tech startups.
Kan’s first digital product came about while trying to find his way as a soon-to-be college graduate. During his senior year at Yale, while Kan was struggling with the confusion of career choices and job options faced by all graduates, he saw potential to create a digital product: a drag-and-drop web calendar (this is in pre-Google Calendar days).
For the build, Kan recruited friend Emmett Shear, who was already an experienced programmer. “I didn’t know about web programming,” Kan says. “I didn’t know about programming, period.” The two were lifelong pals, attending the same school and college, with Shear acting as the Woz to Kan’s Jobs.
The duo named their calendar Kiko, and it was their first attempt at building a digital product. It was during the creation of Kiko when Kan taught himself to code, citing that he didn’t know it was possible to outsource programming to others. Knowing little of web startups, they formed Kiko with the vague notion that perhaps they could ultimately sell it to Google. By the time graduation rolled around, they’d cobbled together a basic web calendar. For the rest of that summer, in a small apartment without air conditioning, Kan and Shear worked on perfecting it daily.
So far, it’s a common story, but it takes a less common turn. That year, computer scientist and venture capitalist Paul Graham created Y Combinator, a summer program to provide fledgling startups with funding and guidance. Kan and Shear applied. While Graham didn’t see the potential in their calendar idea, he did see potential in Kan and Shear. During Y Combinator’s first ever batch in 2005, Kan was fortunate enough to have Kiko accepted into the program. They secured funding.
At that stage, Kan didn’t rate his expertise in programming. Or Shear’s, for that matter. “It was like the blind leading the blind,” he says. Still, after six months of pulling 80-hour workweeks, they finally launched a version of Kiko they were proud of.
And one month later, Google Calendar came out.
Adding insult to injury, “there was a web calendar coming out every month,” Kan says. “From the time we got into Y Combinator until Google Calendar came out.” Naturally, it was only a matter of weeks before Google had killed off its calendar competitors completely, including Kiko.
When ruminating on that time, Kan notes his primary flaw was not using the products they were making and not speaking to potential users about their needs—or at all. His advice? “Shorten your feedback cycle. Become your own customer. Build something and use it. If it sucks, change it to how you want.” Kan recommends entrepreneurs relentlessly hound their customers to see if they like the product. “If you do that enough,” Kan says, “you will actually have to build something that people want.”
Kan and Shear were sharing a small apartment, hemorrhaging their cash reserves at a rate of $1,000 per month, and they didn’t have another business set up. As Kan saw it, their only option was to mitigate their losses, exit Kiko quickly, and throw themselves into a new product.
But how do you sell a website? If your first thought was eBay, Kan and Shear landed on the same conclusion in 2006, as they licked their wounds following Google Calendar’s release. Sure, eBay can be an effective way to cleanly liquidate small assets, but it was a completely novel way to sell a company. Kan modestly maintains he can’t be credited with the concept. He’d borrowed the idea after seeing another company, a site called Jux2, sell on eBay for over $100,000. Kan says he would have been happy to get half of that and return some of their $70,000 investment to Kiko’s angel investors. After very limited interest in their eBay listing, on the final day of the 10-day auction, the number of bids suddenly spiked. Up to a quarter of a million dollars. “It shot up $100,000 in the last few minutes. After that, we thought, maybe startups aren’t so bad after all,” he laughs.
Much of the success of Kan’s story wouldn’t have been possible, at least not in as compact a time frame, without venture capital firm Y Combinator. According to Forbes, it’s the most commercially successful seed accelerator in the world. Started in 2005 by Paul Graham, Jessica Livingston, Trevor Blackwell, and MIT professor Robert Morris, its notable startup alumni include Reddit, Airbnb, Dropbox, and 9GAG. Twice a year, the venture capital firm invests $120,000 a pop into a large number of startups (most recent number was 107 companies) for 7% equity.
Kan credits his and Shear’s success partially to being in the right industry at the right place and the right time. “I think a lot of it is that these people were all getting started during a time when there’s growth on the Internet. That’s still happening right now. Being at YC in the early days really gave us a lot of momentum to get our product out of the gate.”
With Kiko sold to Canadian firm Tucows, Kan was ready for a new project. He and Shear thought making their own live reality show on the web could be turned into a viable business. If you’ve seen the 1998 Peter Weir film The Truman Show, you know where this is going. They would make Kan himself the guinea pig. But at the end of 2006, early 2007, “we had no technical means to do live streaming, 24/7, not any idea how to,” Kan says. A small but significant setback, but they didn’t let this faze them.
In a sense, their goal was nothing less than to completely redefine the way people produced and consumed entertainment. Robert Morris, a famous computer science professor at MIT and one of the co-founders of funding firm Y Combinator, was one of the investors who handed Kan a check for $50,000 to make it. “Robert said he’d fund the idea if only just to watch me make a fool of myself,” Kan laughs. Justin.tv was born.
And the name wasn’t necessarily a result of narcissism. “It was called Justin.tv because I was the only one who volunteered to wear [the camera] around,” Kan says. Broadcast via a webcam attached to his head, he created a 24/7 live feed about his life, popularizing the term lifecasting. “It was very novel,” Kan says about the experience. “People wanted to watch it or just check in and see it because it was kind of a crazy idea.” He admits, “it wasn’t very entertaining, so they didn’t stick around. But in terms of my own motivation, I like doing new things and experiencing new stuff. It seemed like a crazy idea and something I’d learn from regardless of what happened. That was what sold me on doing it.”
Admittedly, Kan says they didn’t know much about creating interesting content. In fact, most of the content they created was them “sitting around on the couch using laptops.” After some time, Kan began to feel the pressure of having to be interesting all the time. Realizing that one subject being infinitely compelling was a stretch, they opened Justin.tv up, transforming it into a platform for people to be able to create and stream their own live content. “Soon after that, people much more interesting than us started broadcasting and it really took off.”
Q: What’s the one thing gamers like more than gaming?
A: Watching live video streams of other people gaming. As it turns out, this piece of knowledge was worth a billion dollars.
Justin.tv evolved. Its most popular content was streamed gaming, so Kan and Shear shifted their focus and re-branded. Kan largely credits his co-founder, Emmett Shear, for Twitch’s wild success. “Gaming was the thing that [Shear] really liked on Justin.tv. So when we came to pivoting, it was the thing he wanted to work on. Specifically, he approached all the gaming broadcasters and content creators on other sites and said, ‘What’s it going to take to get you to broadcast on Twitch?’”
Twitch is now a live video platform for gamers, which Kan describes as ESPN for gaming. In 2015, Twitch announced it had more than 1.5 million broadcasters and 100 million unique visitors every month. It’s a massive hub of overall Internet activity. According to a report by the Wall Street Journal, it accounts for nearly 2% of all traffic in the U.S. during peak hours. “I remember thinking, ‘If we got 10 million uniques a month, that would be amazing.’ Now, Twitch is around 100 million. It’s quite exceeded our expectations.”
Following Justin.tv’s pivot to Twitch, Kan also launched Exec in 2012 as an on-demand errand service, which morphed into a cleaning service. Inspiration came from Uber, as a mobile service that allows users to delegate tasks while tied up doing something else. The creation of Exec is a noteworthy aside here, because not only does it demonstrate the frenzy of Kan’s startup activities at the time, but also because if this were the story of any other entrepreneur, the success of Exec would warrant an article of its own.
Then in 2014, several big things happened in quick succession that would change Kan’s life permanently. Exec was bought by Handybook for $10 million in stock. Later in June of that same year, Kan became a partner at Y Combinator. And in August, he sold Twitch to Amazon.
Kan recalls Twitch was staffed by around 170 people at the time, which is impressive growth for a company that didn’t exist three years previously. After a bidding war with Yahoo and Google, Amazon bought the three-year-old game-streaming platform for about a billion dollars. “I definitely didn’t predict the outcome at the end, which was selling it for $970 million dollars. We never guessed that in the beginning,” Kan says. “I think it was a pretty amazing outcome.”
After selling Twitch to Amazon, the big question became: If you had no pressing financial needs for the rest of your life, what would you do next? It’s a question most of us deal with on a hypothetical level. What would you do? Retire? Start a band? Paint?
For Kan, the answer landed him not far from where he started, at Y Combinator. “I’ve come full circle,” he says. He’s happy on the other side of the table now, funding startups and meeting with starry-eyed youngsters driven by a dream in pursuit of VC. “There, we fund and advise companies,” he says. “What Paul did for us, we’re doing that for other companies.”
Oh, and did we mention he’s started an electronic music company on the side? “It’s called The Artist Union. I started it with some friends of mine in electronic music,” Kan says. “We’re building tools to help electronic music artists promote themselves on social media. That’s more of a labor of love because I just really like electronic music.”
Now it seems Justin Kan can’t brush his hand against anything without it turning to gold. “What I really like doing is discovering new products, using new products, building them and then making sales,” he says. And he makes it all sound so easy. According to Kan, the biggest problem that might be preventing startups from the same success is simple: “Lack of focus. People don’t focus on just one thing. They never built something that has product market fit.” So how do you know when you’ve found product market fit?
“Your product is growing. Customers keep coming. People like it. They report back to you that they like it. That’s basically it.” Of course it’s never quite so easy, but Kan sure has a way of making it sound that way.
8 STEPS TO STARTUP GROWTH
Justin Kan provides the ultimate guide to successfully launching, and growing, your startup.
- START IT NOW, AND START IT QUICKLY
If you haven’t gotten your business started, you should just start now because it’s never been cheaper or easier to start a company. The first step is the hardest. If you have an idea, just start building it now. Obviously, I work at an accelerator, so I’m a little biased. I think we are able to help companies a lot. But you shouldn’t let investment, or lack of it, prevent you from starting a company. The best founders will just push on and build independently of any investors.
- PROVIDE VALUE TO CUSTOMERS
Once you’ve decided to take that first step and you’ve started your company, you need to figure out how you can actually provide value to customers. The key thing to do is to actually go and talk to some customers, aggregate some requirements and then build something that meets those requirements.
- TEST AND ITERATE
The third thing is to test that. Make sure that they actually want to use it by giving them the product, seeing what happens and being honest with yourself about if they’re actually using it. If you just do those few things over and over again, I think you can’t help but be successful.
I think the most successful entrepreneurs are relentlessly resourceful and refuse to give up or to get roadblocked by anything. Outside of that, you really should be just focusing on your product until your product is growing. All those other things can be a distraction.
- MAKE UP FOR LACK OF EXPERIENCE WITH HARD WORK
We worked really hard the first two years. We were basically working all the time, seven days a week, 80 hours a week basically. After those first two years, we started moving more towards normal hours. I think we made up for a lot of lack of experience with just hard work in the beginning.
- ONLY HIRE WHEN YOU REALLY NEED TO
Only hire when you’re super struggling to actually do that work. Don’t hire in advance of anything. You really only want to hire when you really need someone to do that job, probably because the existing team is drowning.
- KNOW WHEN IT’S TIME TO PIVOT
How do you know when it’s time to say uncle? When your startup is not growing anymore. When things aren’t growing on the Internet, they’re usually about to die because the Internet itself is growing. There are more people every day and every month. So your relative share of the market is shrinking over time if you’re staying the same. For us, it was pretty clear when the writing was on the wall.
- LEARN FROM THOSE WHO HAVE DONE IT BEFORE
The best thing to do is get advice from people who have done it before. You can go get funding from an accelerator or raise money from some angel investors who are, hopefully, experienced in entrepreneurship. Build a community of entrepreneurs. Meet other people who are slightly further along the curve than you are. That’s always good to do.
- The exact process of coming up with, developing and selling your startup idea
- When to pivot and the signs to look out for
- What startup accelerators like Y Combinator are looking out for
- How to hustle harder than everyone else around you and gain the competitive advantage
- Why you should bet on the founders and not the startup itself and the wins that come with it
Full Transcript of Podcast with Justin Kan
Nathan: Hey, guys. Welcome to another episode of the Foundr Podcast. My name is Nathan Chan, and I am your host, coming from you live from Melbourne, Australia. So, I’m really, really excited about today’s episode. It’s with a founder called Justin Kan, and he co-founded a company called Twitch.tv, which is a platform that allows you to record yourself gaming. So, it’s essentially a piece of software for gamers, and it just took off. And what’s super amazing is he sold that company to Amazon for close to a billion dollars, which is absolutely insane. Justin came out of Y Combinator, which is considered the biggest and most famous, and most successful incubator or startup accelerator in the world.
So he came out of Y Combinator, and, you know, he was in the, I think it was first batch of people in Y Combinator. And he’s just got a wealth of knowledge and he’s now a partner at YC. He invests in other startups and he’s really on the ground in Silicon Valley, just knowing what’s up and seeing where, you know, people are stumbling, seeing what’s holding people back, seeing what these customer acquisition channels are that are working, seeing how to build and grow in a really fast-growth startup. So, I really think you’re gonna enjoy this one, guys. I really enjoyed speaking with Justin. He’s a really, really great guy. He shared a ton of gold.
So, look, that’s it for me, guys. If you are enjoying these episodes, please, please, please do take the time to leave us a review. It helps so much more than you can imagine on iTunes, Stitcher, SoundCloud, wherever you’re listening. And yeah, look, I hope you have a great day. Thank you again for sharing your earbuds with me. Now, let’s jump into the show.
So, look, thank you so much for taking the time to speak with me today. I’m just gonna ask you the first question I ask everyone that comes on, and that is how did you get your job?
Justin: Well, I started off as an entrepreneur when I graduated from college. My friend, Emmett, and I started a company called Kiko, which is a web calendar, kinda like Google Calendar. It wasn’t very successful to be honest, but it started us off on startups. And then, you know, we kinda had a look back and founded a couple of startups, including Justin.tv and Twitch. And then, now I’m a partner at Y Combinator, and, you know, that was a natural progression from being an entrepreneur for me.
Nathan: Awesome. And when it came to Kiko, you actually… You sold that company, right?
Justin: Yeah, we sold it on eBay after. It wasn’t very successful to be honest. But we wanted to recover some of the money back for our investors, and so we decided to try to list it on eBay for sale, like the code base and then the site. And it turns out there were a couple of people interested and we ended up selling it for about a quarter million bucks to Tucows in Canada.
Nathan: You know, that sale is quite insignificant compared to your last sale to Amazon, close to a billion dollars with Twitch. Now, I’m sure a lot of people will be really interested about how that all came about and how you got into the e-sports business because, you know, Twitch is such a massive company. Can you tell us, like, first of all, you know, you started Kiko, you sold that company tells us like about the whole YC experience and how that all started, and how that’s been so increment… Like, just tell us a little about that experience.
Justin: Well, okay. So, where do you want me to start?
Nathan: Let’s start with you started this company. At what point didn’t you think it was going to work?
Justin: Kiko, basically, we were kind of like working on the calendar. Not many people adopted it. It honestly wasn’t very good. It was kinda like an Outlook-style, drag-and-drop calendar. And so we ended up deciding, “Okay, let’s build something else.” And so we built a bunch of other things, none of them really were very successful. We just weren’t very focused. And we ended up deciding, “Hey, let’s shut down this company. We need to sell the company. We’re kind of out of money.” So we did the eBay, we sold it on eBay. And then we got funding from, you know, for our next company, from Paul Graham of Y Combinator, and that idea was called Justin.tv. Actually, we had gone and we pitched him something that was entirely different from Justin.tv, like another idea, and he didn’t like it. And he asked, you know, “Do you guys have any other ideas?” So, we kinda pitched him this idea of doing our own, you know, live reality show on the web, and he liked that. Actually, Robert Morris, one of the other YC partners originally, who was a professor at MIT, a famous computer science professor, was like, “I’ll fund that just to see you make a fool of yourself.”
Nathan: Oh, man.
Justin: Yeah. We ended up starting Justin.tv and kinda spent about six months building the site, getting the live streaming solution going, and brought on two more co-founders, Kyle and Michael, two friends of ours. And then we ended up kinda going live with this show. And, eventually, it kinda grew to a pretty big site, about 30 million people every month. But it climbed out and we realized we needed to do something else in order to, you know, kinda keep our company going. And so we brainstormed ideas, and one of those ideas was a site focused on just gaming. Emmett, my co-founder, Emmett, had come up with the idea because he really liked the gaming content that was on Justin.tv. And so we started working on that, and kinda, it grew into what is today, Twitch.
Nathan: Yeah, okay. Awesome. And I’m just curious, like when it came to, I guess, having a 24/7 live feed about yourself, what triggered you wanting to do that, and how do you think that you guys got that to take off?
Justin: It was really a novel, right? So, I mean, people wanted to watch it or just check in on it, and see it because it was, like, kind of a crazy idea. It wasn’t very entertaining so they didn’t stick around. You know, in terms of my own motivation, I like doing new things and kind of experiencing new stuff. And it seemed like a crazy idea and something I’d, like, learn from regardless of what happened. And so, we, you know, that was kinda what sold me on doing it.
Nathan: I see. And when you guys pivoted, did you ever plan to… Did you ever think that you would get it as far as you did to sell it to Amazon? Did you ever think that that would happen?
Justin: Well, I mean, you know, definitely not, you know, in terms of the outcome at the end. You know, selling it for $970 million, you never guess that in the beginning. So, I mean, I think it was a pretty amazing outcome. Even when we were working on Twitch, when we were tuning into Twitch, I remember thinking, “If we got 10 million uniques a month, that would be, like, amazing.” And, you know, now Twitch is around 100 million MAU, so, you know, it’s kind of quite exceeded our expectations.
Nathan: Yeah, wow. And were you the first batch ever at Y Combinator? In the first batch?
Justin: Kiko was in the first batch in 2005.
Justin: Kind of come full circle in, you know, our partner there.
Nathan: Because, yeah, what’s really interesting is this was the set…that batch was the same batch for Dropbox and a few others, right?
Justin: Well, actually, Dropbox was just funded in 2007.
Nathan: Okay, gotcha, gotcha, gotcha. So, was there any notable startups? Because I know you’re really good friends with, like, all these…like, it’s just like a massive, call it a tight-knit community that you’re part of.
Justin: Yeah. A lot of us were getting started together in the early days, are still friends, you know. Like, for example, I was in the first batch, we were batch mates with Reddit, the founders of Reddit, Steve and Alexis. And then, like, in San Francisco in 2007, when we were starting Justin.tv, we got to know the guys from, like, Weebly and Xobni, and Dropbox. And so, you know, a lot of us are, like, still pretty good friends and see each other regularly.
Nathan: Yeah, wow. And do you think that that, like, kind of influence is where you guys are able to build these high-growth companies? Like, why does that occur do you think?
Justin: Well, I think a lot of it is these people were all getting started during a time when there’s growth on the internet, I mean that’s still happening right now. And, you know, being at YC in the early days where they gave us a lot of momentum to be, like, kinda get our product out of the gate. So, I mean, I think that’s kinda where we started off in terms of, you know, who’s successful and who’s not. I think there’s a little bit of survivorship bias but I think there is a big aspect. It’s just like sticking with it, you know, and iterating against a set of customer needs, right? Like, the people who I know have been successful from those early days all, like, basically built their company and continued building it, and continued talking with customers, and building what people wanted, right? And eventually, you can’t help but be successful if you just do that enough.
Nathan: Yeah, okay, interesting. And tell us about your next company. Like, what are you working on now? You sold Twitch to Amazon for $970 million. Like, do you retire now? Like, that’s a lot of money. Like, what’s next? You get bored after a while, right?
Justin: Yeah. So, I mean, my full time job is working at Y Combinator. And there we fund and advise companies, you know, kind of doing what Paul did for us, for other companies. Outside of that, I started a company called The Artist Union with some friends of mine in electronic music. We’re building tools to help electronic music artists promote themselves on social media. And that’s more of like a labor of love because I just really like electronic music and I wanted to do something in the space. You know, after that, I just invest and try to take it easy and learn new things. I mean, that’s, you know, I think that’s enough jobs for one person, you know.
Nathan: And do you still get the thrill that you used to when you were working at running and building Twitch?
Justin: Yeah, I mean, I think it’s still exciting to be building new products. That’s what I really like doing is, like, discovering new products, using new products, and building them. And so, to me, it’s still exciting. Like, I like to learn new stuff. I like starting from zero to be honest, even if it’s, you know, like Twitch is such a huge scale. That’s like pretty awesome. But I also like just building something new, you know, just for myself or a small people.
Nathan: Yeah, I guess that’s the really rewarding thing as an entrepreneur, to be able to build something from scratch with your own two hands.
Justin: Yeah, it’s kind of like…well, it’s like building anything, you know, yeah.
Nathan: So, I’m curious. When it came to scaling Twitch because, yeah, it’s such a massive company, like my little brother uses it. And I said I was speaking to you today, and he was really excited. I’m curious, you know, and this is something that I’m struggling with right now is going from founder to CEO. Like, you know, when you’ve never run a company before, it’s quite a challenge to manage people and also when you’re scaling and building your team. Like, what advice do you have in regards to that, Justin?
Justin: Well, I mean, if you’ve never done it before, it’s okay because you can learn, right? Like, it’s pretty, you know, I think there’s a couple of things you can do to learn how to, like, kinda do the things you need to do in the startup outside of building product, right? You know, the most important thing is that you build something that people actually care about and wanna use. And after that, you know, everything else is like, it kind of follows naturally and is easily learnable, right? Like, the best thing to do, I think, is get advice from people who have done it before. So, you know, you can go get funding from Accelerator or raise money from some angel investors who are hopefully experienced in entrepreneurs and entrepreneurship. Or, you know, like build a community of entrepreneurs like me, other people who are slightly further along on the curve than you are, you know. That’s always good to do and that’s something that helped me, you know, a lot.
And certainly, you know, all those things like hiring people, managing people, you know, raising funding, those are the things that you can learn a lot from, like, reading online and getting advice from people who have done it before. The key is just, like, always keep learning and don’t be intimidated by doing something new, you know.
Nathan: In regards to, you know, just having, like you said, creating something that people want, what are some other, like, do you think really powerful things that you did to grow Twitch so far besides, you know, drawing on people that have done it before?
Justin: Sure. All the credit really goes to my co-founder, Emmett, who, you know, gaming was the thing that he really liked on Justin.tv. And so when we came to pivoting, it was the thing he wanted to work on. And so we had a team that started working on gaming and, specifically, what he did was he went to all the gaming broadcasters and commentators on other sites and said, “What’s it gonna take to get you to work on Twitch or to broadcast on Twitch?” And, you know, they’d come up with some futures that they wanted or things that they really cared about. And he would basically aggregate them and tally them, and then build the things that people wanted most. And then those users would eventually come on and they’d bring all their viewers with them. And so, you know, we kind of repeated that process over months and months, and eventually, the ball got rolling.
Nathan: I see. And when it came to building the company, before you sold it, how many staff did you have?
Justin: When the company sold, it was about 170, I think.
Nathan: Yeah, okay, wow. And when it came to hiring, you know, what advice do you have on that? Especially when, I guess, you know, you’ve got your co-founders, you’ve got your core team. Like, you know, what advice do you have on hiring and hiring to scale?
Justin: Well, think that it’s always easiest that in the very early days when you’re hiring, it’s easiest to hire when you’ve done the job yourself. You really wanna, like, understand what the, like, skills you need to do the job are yourself in order to hire for that. And I think it’s really hard to hire for founders, especially early founders who have to hire for things that they haven’t, like, actually done themselves. So, my advice is always, like, kinda dive in or have one of the founders, like, dive in and do that job first before you try to hire for it, you know, especially in the very early days.
Nathan: I see. And what about managing? Like, do you have any tips or advice you would have for people around managing, and managing people, and building like a really strong, powerful, cohesive team?
Justin: The things that most early-stage founders get wrong is they don’t, like, they’re not clear with what their expectations are. You know, you don’t set out like success and failure criteria for projects. I think that’s like the first thing to do. The second thing is, like, meet regularly with, you know, your employees and team. Like, set regular one-on-ones. Those are kinda like the two basic things that I think, like most new founders, like, get wrong. You can avoid probably, like, 80% of the problems if you just do those two things.
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When it comes to early stage founders, there’s so many things you can focus on, whether it’s product, marketing, raising capital, learning about cash flow, all these different things. Because you’re surrounded by so many successful entrepreneurs, what are the most important traits that you’ve found in super successful entrepreneurs?
Justin: I think the most successful entrepreneurs are relentlessly resourceful and refuse to give up or get blocked, or blocked by anything. You know, outside of that, you really should be just focusing on your product, enjoy your product as well. Like, all those other things are, like, can be a distraction and if you don’t have a growing product.
Nathan: And also, when it comes to, like, hiring, how do you actually know what to hire next when you’re scaling up? How do you work that out?
Justin: Just only hire the jobs where it’s like you’re super struggling to, like, actually do that work, right? Don’t hire in advance of anything, right? Like, you really only wanna hire when you’re like you really need someone to do that job, probably because like the existing team is, like, drowning.
Nathan: And what did you guys do around culture for Twitch? Was there anything specific that really helped to build the culture and the team out, and made it an amazing company to work for?
Justin: Well, I think with Twitch, you know, Emmett, who became the CEO when we pivoted Twitch, didn’t really like had one really key observation, which is that the customer was the broadcaster, you know, not necessarily intuitive. You might think that, like, we should focus on viewers, right, because there’s more viewers. But his insight early on was that broadcasters are what’s going to bring all the viewers, right? So, if we make the broadcasters happy, more viewers will come and Twitch will grow.
And so, I think that was one of the core things he thought of. It was pretty easy, actually, to, you know, lots of people wanted to work at Twitch, right? Because Twitch is a…it’s like a video game company, right? Like, it’s interesting subject matter, right? So, there was a large base of people who wanted to work on Twitch because, you know, it’s gaming.
Nathan: I’m curious also, when it came to attracting talent, like how did you guys work out, you know, stock options and stuff like that, and how much you wanna give up of your company?
Justin: I mean, we probably went around like standard distribution of, you know, for Silicon Valley companies. And I’m not sure that we did anything exceptional there. But I think that now, with the talent being much more competitive, especially with, you know, how much funding is going in the tech ecosystem. It’s more and more important to, like, compensate your early employees, like, with more stock because they have a lot of options. You know, they can go and start a company. They can go and work for, you know, Facebook or Google and get paid probably a lot more than you can pay them. People have a lot more options now.
Nathan: And in regards to that, like, what are your thoughts on bootstrapping versus raising capital for your idea if somebody has an idea. Do you believe, you know, go to an accelerator like Y Combinator, get traction first? You know, there’s a lot of arguments against both aspects. What are your thoughts and what is your advice for somebody that has an idea?
Justin: If you have an idea just start building it now. I mean, I think applying to accelerator. You know, obviously, I work at an accelerator so I’m a little biased. I think applying and going to an accelerator role. I think going to Y Combinator is good, and I think we are able to help companies a lot. But, like, you shouldn’t let an accelerator, you know, doing one or not, change your trajectory or like, I mean prevent you from starting a company or, like, continuing on with your company, you know. The best founders will, like, just push on and continue, like, building or just building kind of independently of any investor.
Nathan: And when it comes to, you know, now you work at YC and you invest in stocks and advise stocks. What do you find is the biggest problem and the most common trait for startups that fail or don’t make it?
Justin: Probably a lack of focus. They weren’t, like, focus on a limited enough thing, and they never build something that has product market fit.
Nathan: And how do you know when you’ve found product market fit?
Justin: Your product, you know, it’s growing. Customers keep coming and it’s growing. That’s basically it, people like it. They report back to you that they like it.
Nathan: Okay, because that’s something that I know a lot of people do struggle with. They don’t know when they’ve found product market fit.
Justin: Yeah. Well, I mean, have you found a channel that attracts customers, right, and that scales? And do those customers like it and continue to use your product?
Nathan: Okay. And when it comes to focus, do you think that founders are working…these founders, they’re working on too many different things? Like, can you delve a little bit deeper in, like, how they’re not as focused as they should be or they’re not focused enough?
Justin: Sure. There’s, like, lots of work that, things that, like, appear like work that are actually not work. They are fake work. For example, going out and getting press about your company is probably fake work because it doesn’t actually give you any users or really any value. It might be a good bootstrap to get a few users initially, but after you are growing, you know, it doesn’t really do anything for you, except maybe do signaling, right, which is probably not important for whatever stage of company you’re at.
Like, for example, going to conferences and speaking about your startup is probably fake work because it doesn’t actually help you get any more users or make any more revenue. For some companies, that’s not true. Like, for some companies that sell the startups, that might be, you know, that might be real work. But for many companies, it’s fake work. Like having coffee with random people, that’s, like, fake work. It doesn’t, like, actually help you grow your customers or, you know, make more revenue. Lots and lots of things that people are, like, appear like work, but are actually fake work.
Nathan: So, what should people be focusing on?
Justin: You should talk to your customers to figure out what they want. You should build the things they want. Then you should test your hypothesis to see if you actually built what they want, and then you should just do that over and over again until you have an extremely successful company.
Nathan: Love it.
Justin: And you should do anything that’s, like, that’s the first order, anything that’s second order, right? Like, for example, maybe you can’t build things fast enough because you need to hire engineers, so then you need to hire engineers. Or maybe, you know, you can’t build things fast enough because you don’t have any money to hire or pay those engineers, so you’ve got to go raise money. But everything should be, like, one order away from, you know, those three things: talking to customers, iterating on your product, and then testing whether you’ve actually built what they want.
Nathan: And when it comes to, I guess, work ethic, Justin, I’m curious. Like, to build a company like the size that you did with Twitch and sell it for close to a billion dollars, like, what was your work ethic like? How many hours did you work? Would you say you worked, you know, 80-hour weeks for a long period of time? That’s something I always find really interesting.
Justin: Yeah. I mean, we worked really hard the first two years. We were basically working all the time, like seven days a week, you know, like 80 hours a week, basically. You know, after those first two years, we kinda started moving more towards like normal, you know. I think we made up for a lot of, like, kind of lack of experience with just, like, hard work in the beginning.
Nathan: You know, a lot of companies or, not really companies, I guess, other entrepreneurs now are coming to Silicon Valley to try and make their startup, give it the best chance of success possible. Do you believe it can be done out of the Valley, and what are your thoughts around that?
Justin: Yeah, I think you can build a startup from the outside of the Valley, but I think that the most successful companies get started here because there’s this access to capital and talent here that there isn’t anywhere else. And, you know, starting somewhere else, you just don’t necessarily have that.
Nathan: We’re almost done for time, Justin, so I have one last question. And that is what are three action items for startup founders, early-stage entrepreneurs that you have? You know, you’ve listed a lot of things that you think people should be doing, but what are the three key takeaways that, you know, any questions that you wanted me to ask you that I haven’t asked you? I’ll just let you, you know, just finish off there.
Justin: Okay, three key takeaways. I mean, I guess the first thing is, like, if you haven’t been started, you should just start because it’s never been cheaper or zero to start a company. If you’ve been thinking about it, you should just, you know, the first step is the hardest. I guess the second thing would be, you know, once you’ve decided to take that first step and you’ve, like, started your company or whatever, you need to, like, figure out how you can actually provide value of some customers, right?
So, the key thing to do is to, like, actually go and talk to some customers and aggregate some requirements and then build something that meets those requirements, right? The third thing is, like, test that. Like, make sure that they actually wanna use it by, like, giving them the product and seeing what happens and being honest with yourself about, are they actually using it? And if you just do three things over and over again, I think you, like, cannot help but be successful.
Nathan: Yeah. I was just gonna say just on that, man, you make it sound so easy. Like, do you find, like, in YC a lot of people and the startups, and founders that you meet, a lot of people don’t do that?
Justin: Well, I mean, I think that they, like, don’t. I know because we’ve had experience with doing this, where we weren’t, like, actually doing it. And we weren’t being honest about whether our, you know, we were being successful or not. We would, like, kind of build something that we thought people wanted, but we would have not based on, like, actually talking to them. And then they would come out and maybe, like, some people would use it, maybe not. But we weren’t making, like, iterative improvement, and so it wasn’t, like, getting better over time, you know. So, it was like a way to exist, but not actually, honestly assess whether we were being successful and continuing to become more successful at the time, and that’s where I think people get stuck.
Nathan: And how long do you think somebody should keep working on something until they know when it’s time to pivot? Like, for you guys, like with Justin.tv, how did you guys just know when enough was enough? Because you talked about, you know, being relentless, and sometimes, you know, you could just keep going forever. Like, you could’ve kept going forever on Justin.tv, right, until you ran out of funding?
Justin: Well, it was not growing anymore, so when things aren’t growing on the internet, they’re usually about to die because the internet itself is growing. And, you know, there’s more people, you know, every day, every month, so your relative share of the market is shrinking over time if you’re staying the same. So, you know, for us it was pretty clear. The writing was on the wall. We had to do something new. I think that answer is kind of different for every company but, you know, just because something… I think a lot of people use the excuse that it’s not working to give up, and that’s not necessarily the right answer, either, right? Because if you don’t stick with something, you’re not gonna ever make something successful because almost nothing is successful at, like, day one.
Nathan: Yeah, okay, awesome. Yeah, just want to finish off. Like, with the e-sports business, what’s your thoughts on, like, just how crazy it is? It’s not that crazy here in Australia, it is… But compared to, like, some of these countries like Korea and stuff like that, it’s almost like an Olympic sport. And what are your thoughts on that?
Justin: I think, you know, it’s pretty amazing. Like, it far exceeds our expectations. We never thought we’d be a, you know, we never thought Twitch would be a 100 million MAU. That’s pretty awesome.
Nathan: Awesome. All right. Well, look, we’ll wrap there. Look, thank you so much for taking the time to speak with me. It was an absolute pleasure.
Justin: No problem. All right, Nathan, take care.
Nathan: You, too, bye.