Michael And Jason Seibel Talk About Lying And Cheating On Numbers In The Tech Startup Game

Michael And Jason Seibel Talk About Lying And Cheating On Numbers In The Tech Startup Game

Seibel cheating
Y Combinator CEO and partner Michael Seibel speaks during TechCrunch Disrupt San Francisco 2019, Oct. 2, 2019 in San Francisco, California. (Photo by Kimberly White/Getty Images for TechCrunch)

Don’t lie about your numbers when pitching your startup. It’ll hurt your reputation and there’s almost no statute of limitations on having a bad reputation, say Michael and Jason Seibel on their podcast, Life, Work And Startups.

Michael Seibel is partner and CEO at the Silicon Valley-based Y Combinator accelerator program. Before joining YC in 2013, Michael co-founded Justin.tv, which became Twitch Interactive and eventually sold to Amazon for $970 million. He also co-founded Socialcam, which participated in Y Combinator, raised angel financing, and ultimately sold to Autodesk Inc. for $60 million.

Jason Seibel, Michael’s younger brother by 15 years, studied computer science and graduated in 2020 from the Massachusetts Institute of Technology. Jason was a researcher at MIT’s Computer Science and Artificial Intelligence Laboratory.

Using a new model for funding early-stage startups, Y Combinator has helped launch more than 2,000 companies. These include Stripe, Airbnb, DoorDash, Coinbase, Instacart, Dropbox and Reddit.

Twice a year, YC invests $125,000 in “a large number of startups,” working with the chosen companies for three months to help them refine their pitch to investors. Each cycle culminates in Demo Day, when the startups pitch to investors.

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Fast Company described Y Combinator as “the world’s most powerful start-up incubator.” Fortune called it “a spawning ground for emerging tech giants.”

Michael has written and spoken extensively on the YC application process and how founders can make the batch or trip themselves up.

It’s not uncommon for startup founders to lie in the application process, the Seibels said. As the startup world becomes “more normalized” and expectations rise, so does lying about revenue, lying about traffic, lying about growth and lying about deals.

“As YC has become more popular, we’ve actually had to train ourselves to detect these sort of things and kind of put some protections in place in the admissions process to make sure that we’re catching these things,” they said in the podcast.

Founders probably don’t grasp that once you’re caught cheating, especially in the early days, “it could basically be, you’re done,” they said. “You are flirting with a career-ending decision and I think that’s not well understood from a founder’s perspective because most of the founders are just living their experience.”

Investors speak to each other, the Seibels warned. “You would be surprised how often someone will bring up a person or a company and then the note will be like, ‘Hmm. Yeah, you don’t want to deal with that.’ And then it’s just like automatic disqualification … You don’t even really want to know the details. Like what I don’t know doesn’t hurt me.

“So often, what founders don’t realize is there’s almost no statute of limitations on having a bad reputation.

“If you screw up your reputation, especially in a startup world, it can be game over and it can persist because people know who you’ve worked with in the startup world,” they said.

The Seibels advised listeners to be honest about the numbers, “even when you get into the employment world. There are other worlds where people go and reference, check you, boom. And it won’t even be that someone will say something bad. They won’t even tell the story. They’ll just be like, ‘Yeah, I don’t know.’ And I’m like, ‘That’s enough, that’s enough ice.'”

The Seibels said they’ve found that when people consider cheating, they think they’re going to get some short-term gain, because 99.9 percent of startups die. Right?

But they have no concept of how horrible the long-term costs are. “And almost always, the case is that they’ll get exposed. Because it’s so hard for startups to succeed, I think that sometimes they think, ‘Well, if I cheat this week’s or month’s numbers, I’ll make it up next month.'”

There’s no recovering from that kind of cheating, the Seibels said. “You can’t just study harder and make your start better.”

Having said that, the Seibels have a lot say about founders being persistent.

Second-time founders tend to have an easier time fundraising, even if their first startup was a failure, they said. On the second attempt, they’re “a little bit de-risked. I know they’re not going to take the money and do something bad with it. I know they can at least hire a couple of people. I know they can at least launch something. And so on the flip side, I think people are too hyper-focused on executing on their current company and they’re not thinking about this as a life decision where maybe it’s their second or third or fourth company that’s going to be the one that really makes it.

“But if they destroy their reputation, they’ll never have the chance to do two, three and four. And it’s scary because like, man, this thing stretches over years.

“There are people who, once you get the mark, maybe you should leave the country. If you want to do startups, it’s that bad.

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Cheating to make the numbers a little better is not worth it, they said.

“Anyone who’s seen the tricks a number of times probably can detect the fact that when you change labels on the … graph, or when you make the graph square versus like, you know, all the things you think you’re doing, it’s kind of like when you wrote a paper and you triple-spaced the line.

“Your teacher’s probably seen that move before. Actually, it’s hard to cheat which is another reason why probably you shouldn’t do it.”

On Aug. 31, Michael tweeted about the podcast made “with my brother Jason who is 15 years younger than I am.”

Michael said he hoped the podcast “can be somewhat of a bridge between the perspectives of people who are slightly older in tech, like myself, and people who are just starting out, like my brother.”

Other topics featured in the Seibel podcast include:

  • Being a Founder in 2006 vs. Today
  • Mentors
  • How to Make the Most of College
  • Planning Your Life After College
  • What If JustinTV Didn’t Work Out?