Why does Silicon Valley keep producing outlier companies no matter when you arrive - and can you build one anywhere else? Qasar Younis has seen the question from every angle: as an engineer who sold his startup to Google, as a partner who helped scale Y Combinator, and now as a founder on his third company.
He unpacks the three pillars he thinks make the Valley hard to replicate - dense engineering talent, smart early-stage capital, and deep-pocketed acquirers - and pushes back on startup fandom, arguing the healthiest thing you can build is a cash-flow business that doesn't depend on investors. Along the way: timing, emerging platforms, diversity at YC, and why founders should work on problems they already know.
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But I thought what we'd do is talk a little bit more about you as an entrepreneur and your journey, which I think is always frankly fascinating, especially when dealing with founders. You were born in Pakistan, but you left when you were seven. How much do you remember?
A lot. Mean, I'm still, I would say I'm still quite Pakistani. I don't think you ever kind of leave that. We left for, I think, a lot of reasons people leave Pakistan. It's like a ****** poor country. And so we came to the US, grew up in the Detroit area, and kind of like I think many folks in Silicon Valley was an engineer and studied engineering.
My of foray into the Valley in entrepreneurship was really driven by watching my father kind of get kicked around a little bit in what is now Trump's America. Those manufacturing rust belt states have gone through the problems that mainstream America is looking at now twenty years ago.
And so I saw some of that growing up and thought, oh ****, and part of it was seeing my dad and saying, okay, have to own my own business. And then part of it is recognizing, I think, you know, software is going be a big thing.
I'm actually a mechanical engineer by trade, and then recognizing, oh ****, like there is real money to be made in software. If I've had one good thought in my life is recognizing software is gonna be big. Yeah. And so after, I was an engineer for a bunch of years, did an MBA and I literally sold all my stuff and moved to the Valley. It was about eight, eight, nine years ago.
When you moved to the Valley, did you get a sense that things were gonna start blowing up there or did did nobody really quite know? Well, know the funny thing is, no matter what, if any of you guys moved there or lived there or lived there previously, no matter when you get there, people think it's too late.
Think if you get there in nineteen ninety eight, are like, oh ****, all the good things have already happened, and now you're just on the wrong end of it. I definitely felt that in the late 2000s. Clearly, if you ask somebody now, they'll say, well not twenty seventeen, it's too late to go to the Valley.
So I think I'm I can beat you. I can remember joining an Internet magazine in nineteen ninety six and thinking, oh, I'm too late. Dan, I missed it. And so what's happened in the Valley is basically now you have these three pillars which support the Valley.
One is a large group of engineers. I mean the Detroit area probably maybe after Silicon Valley is the largest concentration of engineers in America. It's a huge automotive industry. Not still. Yeah, maybe not still. But I think even now though, the auto industry is massive.
Silicon Valley, when you talk about software engineers, has a huge amount of software engineers. Number two, you have a large amount of sophisticated venture capital or capital period, specifically early stage venture capital. There's a lot of capital in the world. I think good capital and smart capital is very rare.
Because the way venture works with these power law distributions, it's not a random coincidence that vast majority, over ninety percent of returns are concentrated to a handful of firms, which all are in the same neighborhood. The same In Sand Hill Road. That's not a coincidence.
What's really happening, more abstract level, as the world take Uber's a good example. As that money, that value is being concentrated to Uber, it's actually being concentrated to the owners of Uber. That's going to be a couple of Sand Hill firms. That's the second pillar that Silicon Valley has.
The third is acquirers. You drive from San Francisco to San Jose and you will pass by ten massive companies, and I don't mean massive, like they made a billion dollars in revenue. I'm talking about they're worth five hundred billion dollars You have the Apples, you have the Oracle, etcetera, So many that it's foolishly even to go down the list.
That doesn't exist anywhere else in the world. Those three things think have created this environment where no matter when you show up to the Valley, other ecosystems have versions of that individual, but they don't have all those three things. The next wave of things, whether we can talk about what those things are going to be, I think whoever comes then in twenty twenty five or two thousand thirty, they'll say, We're a little too late.
So yeah, think that probably the only good idea that I had was, Okay, software is going to be big and to move to the Valley. I hadn't planned to ask you this, but just a quick segue. You can ask anything you want. Absolutely, I know, it's all a no holds A more controversial debate because I think everyone always wants to hear like But you talked about the concentration of capital in the Valley and everyone knows that, that's a big deal.
Constantly I have to sort of remind entrepreneurs that the reason that Truro in Cornwall doesn't have lots of startups is because there's not a concentration of capital. There's capital. There's capital in a lot of places, but specifically at early stage capital, when I mean early stage capital, I mean people who, if everybody in the room got one hundred thousand dollars and we could spend it on startups, people would spend it very differently.
There's going be maybe one person in the room who's actually going to allocate it the right way. It's about the smarts as well as the capital. Hence why a lot of property money could save flooding in from the property market sort of ends up kind of sloshing around doing all the wrong things, especially to begin with.
Just a quick segue actually, because you reminded me of something that's a big topic at the moment, is the rise of ICOs, initial coin offerings, And the sort of tulip bubble effect of that at the moment, the South Sea Bubble. Do you think that that's going to be an alternative funding mechanism for startups?
It's very tough. I think the best investors in Silicon Valley very openly admit that they know virtually nothing. I have no idea what's going to happen to ICOs. Intuition There must be a lot of chat. You must Yeah. There's lot of conversation about it.
I'm doing my third startup right now. We're talking about fundraising and people are like, oh, forget Sandhill, just go and do an ICO. I was like, my intuition is it doesn't it seems like it's not sustainable, but I mean, mean, I just too old?
Like literally the other thought that I have is like, maybe I'm not embracing And maybe there's not the smarts involved. Yeah. It's capital, but not the So in twenty fourteen roughly, I invested in probably eight blockchain companies that year, which is a **** ton of investments going That is a lot, yes.
Especially in twenty fourteen. Yeah, yeah, exactly. I remember, obviously I've been super interested in Were you caught up in the hype? No. So that's what I thought. In twenty fifteen, twenty sixteen, I was like, some of these companies are not doing well. Some are.
One of them is. I don't know. Was this the right decision? And then you have this, again, this huge interest in in in the in the market. The point is I don't know. I I'd literally the punch line is I don't know. I I don't know.
I can tell you personally, for my third company, I'm not gonna do an ICO. So maybe that's like something. I'd still because it's not purely about getting capital. Who you get as a board member is really important. Even though, you know, I've I've spent a lot of time investing, I've done two start ups, had some financial success, I still, like, recognize how important having an independent board member who can tell me, Hey, you're seeing this business the right or the wrong way.
There's too much emphasis on getting capital. You need that person to stare you at the whites of their eyes, as it were. Yeah, and to like, Oh, the business is not going well. I was just talking about this right But, he just finished his book, Into Thin Air, which is or earlier this year.
It's about this, like, failed Everest climb in in nineteen ninety six or or this kind of calamity. Bunch of people die in Everest in nineteen ninety six, and it's an author talking about it. And on on his descent, he meets a climber who is clearly doesn't know you know, they've they've lost oxygen.
They clearly don't know where they're at, and he has to make this decision. Like, am I gonna are are both of us gonna die, or are one of us gonna live? And and so you meet folks in the start up ecosystem who are on the side of the mountain who are completely delusioned, that don't know up and down.
And that's what a lot of money gets you. It gets you, like, all these long runways with people with businesses that might kind of in zombie state. And so just raising capital is not enough. I think that's what's unique about the Valley. You know, a couple years ago, I I had a year a talk in Europe, and the first question was, you're very pro Silicon Valley, do believe that?
My views are slightly changing. I think it is so expensive in the Valley that it does make sense maybe to start a company in LA or Portland or Seattle or maybe New York. I still Well, it's like a conversation I had with a VC in Valley ten years ago, and I said, Why don't you invest in London?
He says, Well, I've got a company in Berkeley, but that's thirty miles away. Yeah, yeah. I mean, exactly. That's like an adage, don't, know, do you want to invest in something you can't drive to? You're putting five million dollars into something and if you can't see where that money is being used, that's a little scary.
So that's just practical. But I can tell you just from my own third startup, I can build it wherever I want. Why am I building in the valley? It's like, think on the increment, like it is expensive, but there's enough like, there's upside potential upside.
It's this weird word, sophistication. I don't know what that really means. A lot of European entrepreneurs have built companies and then put, say, a couple of founders or a founder into the valley, keep the engineering in wherever the hell it is. Yeah. That seems to And I've funded companies like that.
I've funded a bunch of European companies that have that model upfront. We can just go down this long list of multi office companies. Super risky. Do you think that works as well? Super risky. Or do you think the team should be in the Valley?
To please don't I can only tell you what I would do as a founder. I would not have a distributed team when we're young. Distributed team multi office Yeah. I I think like two years into the company's history, can have a and I think we will.
We're an autonomous vehicle company. We're building software Wait a second. Let me just go Distributed team at the early stage and then later get together or early together? Early together. There's something about five, eight, ten, twenty people working together and setting a pace and like a rhythm.
And then when you break out, it's like they carry that music with them. Carry the culture with them. Yes. Exactly. We're just basically talking about anything now. I wanna This has completely gone off the record. What was it like? No, but no, it's interesting.
I think a lot people are interested in that view, because obviously I get asked time and time again, Mike, surely can I build a company from Europe? And I'm like, obviously I'm in favor of that. But you have different Let's just get a little lower leveled in there.
I think you can build a great company in wherever, in London, in Barcelona, in Shanghai, Just know it's harder. So if you have a choice as a founder, might make a I think your view is a little too Silicon Valley, that sense. Yeah, it is definitely. A little, it's definitely.
Let me unpack slightly what I think you're saying is that because you're so close to the biggest platforms in the world, Google's Apple Arc hit, you'll bump into someone in a bar in San Francisco and they'll say, Listen, Facebook is gonna work on the Alexa killer, and that's happening.
Basically, you've got a six week lead time faster than you would be if you were in Shanghai or whatever. Yeah, that's true. I would say, given a different analogy, if you wanna be an actor or an actress, you can be that in many cities in the world.
But if you wanna work on blockbusters, you gotta be in LA. Right. That's just the reality of the situation. And it's fine, you know, not to work on blockbusters. You know? No no one had you know, did the Tom Cruise movie is not what everyone needs to build.
And and, you know, you can build great software companies everywhere. So I I think that that's the point is it's it's not a coincidence that there's so many of those big companies in the same area. What's it like being in YC? It's an amazing place.
I I think YC is very unique because it's kind of a factory. Funding two three hundred companies a year Why do you think they developed into this enormous sort of machine? How did they do it? What was the special source? I think everyone looks at YC in twenty seventeen and tries to figure out why YC is successful.
But you really got to look at YC in two thousand and five, when it was started, and why it was successful from 'five to Brim First for three or four years. I I fall into that category of people who I so I had a company that YC funded in two thousand ten.
I didn't join YC as a founder because I wanted to be part of YC. I joined it because I was a Paul Graham devote. You know, I read and I consumed everything from Paul. And so I remember going to the YC interview and just, like, shaking Paul's hand and thinking, like, wow.
This is a real person. Like, you know, you just keep reading and reading, and it becomes, like, an abstract thing. This person did an abstract thing. And so those people, those founders in that o five to ten vintage, including, you know, companies like Stripe, companies like Dropbox and Reddit and Airbnb and Twitch and a lot lot of great companies that come out of YC.
Those founders created great companies and that created a brand. And so people who go to YC in twenty seventeen are different from the people who went to two thousand and five. And that's not saying necessarily that people are less successful. They might be even more successful today than two thousand and five.
But if you're trying to replicate a YC, you should look at the early days of YC. Right? But you joined YC. You did your company, TalkBin. Yeah. That was sold to Google. Yeah. You joined Google for a bit. What was it like being in Google?
Mean, I saw What was the contrast? I feel like I'm saying everything is amazing, but YC and Google are both really were amazing experiences for me. Think Google continued What was qualitatively interesting about being in Google? I have not Or do think they're still the same company?
Yeah, still have lots of friends at Google. My co founder, this third company is a Googler, ex Googler as well. I think there's not a company in, maybe this is different in twenty seventeen, but certainly when I was there, the talent bar at Google is legitimately very, very high.
Like, I don't wanna make a qualitative statement. I wanna make an absolute statement. It's better than Facebook or Snapchat or whatever, but it's incredibly high. And when you when you work around people who are, the best in the world at the thing that they do, and there's, like, thirty thousand of them, that that that that's amazing.
One of the things that though people make mistake about Google, they're you know, I hear this, and I always like to correct it. People are like, Google is great because they had a great culture. No. Google is great because that has has a ******* printing press of money.
And that printing press allows you to employ, and like I had individual engineers making millions of dollars on my team. That gets you the best people. So just millionaire engineers. Yeah. Yeah. And that gets you the best people. So so and the the best we constantly talk about the best people make the best, yeah.
Would you advise startups to concentrate on cash in that way? Yeah. Get them a cash machine together? One hundred percent. I mean, this is something the view, how that Y seats a view I hold with my third company is, you gen and I say this as a former I mean, still angel investors, as an investor is, it's bad to build a business that requires investors.
Like, I hate this I hate the entire, I mean, the entire, like, you know, fandom around startups is is really scary in a way. You mean the celebration around raising money type of thing? Yeah. It's it's like, do you see people celebrating, like, people starting coffee shops?
Yeah. It's like very similar. Actually, doing a small business and doing a startup is like, people are like, oh my god, this is amazing you opened up coffee shop. People are like, no, good luck. This ****** gonna be hard. Like that's basically like, oh, you're opening a restaurant?
Good luck with that. That's gonna be ******* awful. Like that's what people say. Like they don't end up like with startups, they're like, oh my god, you must be amazing. It's like, no, it's not. It's it's not. So I'm in the business. I say we're in the business of building businesses, and the best thing you can do for a business is have cash flow, so you're not dependent on any external force.
But obviously, you're an investor and you just talked about how Sandhill Road has a concentration of capital. That's the machine, is it not? Yeah, the ideal situation is you find a business that pushes out cash, then you can grow organically or you can accelerate that growth with a large influx of outside capital.
That's the ideal situation. When you have companies that are raising fifty one hundred million dollars and they're not making revenue, that's scary. That's super scary. I completely understand There are a few like that. Let's go I can completely understand the Google example, right?
Google is not making money until several years into its company history. So that's the nuance we have to these general, plethy, one liners we say are just almost they just fall apart when you actually put it into action. So generally speaking, you want a cash flow business.
But I will fund companies that are not making cash flow. Sam Altman asked you, we're running out of time, I've got so many more questions I wanted to ask you. Sam Altman asked you to join YC afterwards, and asked you to scale the organization, what did you think about, what strategies you put in to do that?
Can you apply that to other things? Yeah, so YC was, from two thousand and five to roughly twenty thirteen, was a family business. I mean, was Paul and Jessica's business and they actually funded it themselves. And I think when a slew of partners, Sam being the leader, myself, Kevin had like a long group of people who came in, the first thing we needed to do is move the family business to an institution.
And the institution is just things like, you know Processes. Yeah. Processes. And and how how to how to make sure the company can grow. And we you know, the YC was breaking a little bit in the sense of we had more founders and partners to help the, you know, the companies themselves.
So just like figuring out, like, the mechanics of how the business runs. And but there's a really important lesson there, which is, you know, Paul has this great essay, do things that don't scale. Why see scale? And then clean things up. I think that's the right order, rather than having a pristine process and then trying to scale that.
You were also in charge of YC's affairs and events and also creating the Female Founders Conference. I did create it. Helped to scale it. Diversity is a big issue at the moment. There's lots of sexual harassment and cases going on, and it's a big topic.
What's your opinion about that right now? I think it's a pretty ****** up situation. I think that's the Did you think that that was happening for years and unsung or not talked about, or do you think that these recent revelations are of lost to At least from my perspective, I didn't see it, but I'm not a female founder.
It's hard for me to project what was the reality. But I think we at YC know it's problem, not sexual harassment specifically, but the fact that folks like female founders or ethnically, you know, disenfranchised founders like African Americans or even, frankly speaking, immigrants to some degree, which is kind of strange, right?
Immigrants are such a kind of core value of Silicon Valley are kind of sometimes pushed out. And so we actively try to, like we, things we did at YC is we would look at how many Latino founders applied and then how many got accepted to make sure that there isn't bias within the partnership as we're actually picking.
You actually did put that in the process in for that. Yeah, exactly. And we did that across the board. So I think generally speaking and there's like a real capitalist motivation there, which is like there's, you know, the like half the population is women.
Right. Like, there's probably a lot of great companies made just to serve that user base. I mean we certainly fund companies to serve the upper one percent in Silicon Valley, so it seems like a logical thing to do. I think it's both positive and it's like somewhat Do you think YC and perhaps the Silicon Valley generally is becoming a little bit more aware of itself, perhaps more internationalistic or something?
Yeah. I think so. I mean, what's happening is, like, this was a cottage industry. You know, like, people didn't know, like, in nineteen ninety six who John Doerr was or, like, who Mark Andreessen is. Like, now, like, a lot like, you'll meet people who know who Mark Andreessen is, and that's kind of crazy.
I mean, I was in I was in West Africa last fall, and over the driver's shoulder, you know, he's using WhatsApp and Google Maps. I worked on Google Maps for a bunch of years, and I know the WhatsApp team really well. And it's kind of mind blowing that you can be, you know, halfway around the world, and literally the products that you and your friends work on are in the hands and are being used by people.
So the shadow of Silicon Valley now is just very broad. And so for the first time ever, people are looking back at the Valley and asking, okay, what is this thing doing? What are VCs? What are startups? And I think that's why you have some of this just more spotlight on the valley.
Right. Because there's more influence. I'm gonna throw in two quick questions to make sure we're efficient. What do you think are the big new platforms, big new emerging technologies that people should be working on in the next couple of years, and also what are you working on?
I don't know what you should be working on as a founder. That's what's great about the capitalist system. Right? Everyone everyone like, if you look at Google, in nineteen ninety eight, two companies went public that were doing search, and Google was founded that year.
If you were giving advice to somebody in nineteen ninety eight, you know what you would say? Don't ******* start a search engine because two just went public this year. Right? So it's very hard to say what you should or should not be working on.
So I would say, you know, work on things that are, you know, you as a founders perceive are real problems. I'm biased towards software because it scales better, but that doesn't mean that you can't do a restaurant or you can't do like a shoe company.
There are a lot of great businesses out there. Software scales really well. Food delivery company. Yeah. What you think is a problem, then you have some special, like, background in or insight into. I think, like, that's a little What are you working on?
So I'm doing an autonomous view. It's not, we haven't talked about it publicly yet, so I'll keep it pretty short. When will you? I don't know, next few months. I mean, it's not like a Is it computer vision? No, no, no, no, no.
Is it LiDAR, LiDAR? No, no, we're not doing sensors. No. We're doing infrastructure based on boring software stuff. Charging? No. No. Batteries? I keep saying things until I say yes. No. None of those things. Okay. But the point is like You met Musk?
No, no. So what I would say, I can tell you on like, know, to answer the question, what should you work on? You know, I was an automotive engineer for seven years. Right. I spent a bunch of years in Silicon Valley and I'm trying to fold You were at GM, right?
Yeah, exactly. So trying to like fold those two things in. So when I when I talk to founders and say, you know, should I work on? They work on something that you know. You know, at at HBS, they had this stat where it's like seventy percent of companies are founded by people from the industry that they're from.
I'd like I think that's real that's probably venture backed companies. I think that's probably really accurate. That intuitively sounds correct. I think if you're a founder and you find yourself thinking, like, wouldn't it be cool, that's probably a bad company. That's not really Wouldn't it cool? Yeah.
Wouldn't it be cool? No, it wouldn't be cool. That's not how businesses are built. Businesses are built to like, what does the market want and can I supply the market? But to give you a more like direct answer Yeah. Of I think emergent platforms, I mean, went through this phase over the last six months a year.
Yeah, you must be sort of looking at things. Yeah, from a founder perspective, I think the three that we, me and the team looked at deeply, were emerging platforms, obviously autonomous vehicles, that's what we ultimately worked on. I think that's going to really happen.
I think there's a lot of talk about ARVR, but I think the issue that we had as founders, I'm not talking as an investor. Was like, there's just not, there's not, I think it was like a hundred thousand people use VR a week in the world.
Like it's the amount of people who are using VR is not a lot, Yeah. Which is a problem if you're trying to build an app, you know, either we're we're getting really into the weeds. But if you're starting a company, you should either work on the platform or the application layer, in my mind.
The platform or the application layer. And the platform, you can kind of emerge to have that WinTel scenario where you can actually own Android or iOS. Or you wait and the platform is adopted enough, and then you work in the application layer. So if you look, there's a bunch of that start in the And then sometimes people oh, sorry to interrupt.
Carry on. Yeah. I think if you look at like iOS and Android in 'seven, 'eight, 'nine, 'ten, you have a bunch of apps that start. But it's not a coincidence that WhatsApp, Snapchat, Uber, all these companies all start in a like twelve month window.
My assessment, I don't know if this is true, is it takes a while for the platform to get established, and then there's a tipping point. And so when Instagram comes, there were actually filtered photo apps before, like Hipstomatic. Why don't we talk about Hipstomatic?
Yes, exactly, yes. It's because the platform has to essentially mature to the point where when the Instagram founders are looking, they naturally think to build in social. Because there's enough people who are using an iPhone in their group of friends. So there's like the really abstract things about how a platform emerges.
So with VR, AR, like we as founders were like, it seems a little early. Like we could be six months to a year early and then it's literally somebody could doing the exact same thing. You know, six six months later could actually be the big company and we we miss.
So timing is really important. The third thing platform we looked at deeply wasn't cryptocurrencies or was was voice. Like voice is like getting to that magical moment of you have distribution in people's house through Alexa and Google Home and and some other products.
And that the actual software that that, you know, is doing some of the processing is now sufficiently sophisticated. We can build interesting applications. So that's what we looked at. When I look at investing as an angel investor or when I was at YC, I don't think about those things.
I look at the founder, and I think, do you do you have an interesting insight? Do I think you're, like, capable? And I'm writing c checks. So, after a while I was like, okay, let's do this. It's not a real science. It's as much of an art.
Would you agree sometimes that people don't build the platform first, they build the application first, and then realize that they've come up with the application for a potential platform? Yes. Mean in the sense In the way that, for instance, Facebook was designed to reunite you with your college friends, now all of a sudden, ten years later, we're logging in to other websites because of Facebook.
Yeah, yeah. So platform is such a bastardized word. What I mean by platform specifically is I just mean like underlying infrastructure. Yeah, right. So I'm talking about chipsets and databases and that works. In the closing minutes, what were the greatest mistakes you made?
What would you do again, redo? I'm happy where I'm at, so it's not like I would fundamentally redo something. But if I could, I would probably spend I would try to do everything faster. So I would instead of doing three years at Google, I would do maybe two.
Or I don't know if I do less than two. If doing three years at Weiss, maybe do two. Because I think, like, you know, the thing that I'm doing now, I hope, is a large cash generating company. You know, that that that's the goal.
I think in my heart of hearts, I really am a founder. And I think the best best test of that was, yeah, I could I could work at YC or or as a venture capitalist the rest of my life. And that's a great life.
If you ever want a want career advice, you can get a VC job, get it. It's fantastic. Huge outcome. You don't have to work that hard. And nobody ******* knows what they're doing, so you can sound pretty smart. Like, it's not that hard. Fantastic.
You know you know, and then and then you're like Everybody gets up and walks out of the room and does it. Yeah. You hope that you catch like one of the companies, you know, you put in fifteen thousand dollars into Snapchat and it kicks out a couple hundred million bucks.
Like you hope you get that check-in the right company. Quite useful. Yeah. And it's like, it's it's a great lifestyle. But for me, I think I I think in my heart of hearts, my own identity, I didn't see myself as a VC. And I think I saw my dream is and maybe this is like, you know, the the sec you know, maybe maybe you should I should have stopped while I'm ahead, know, leave leave the chips.
The last company was acquired by Google, leave it there and just stay an investor, and maybe Buy a nice house. Yeah. Whatever. But this third one might prove that I was an idiot all along, but, you know, I it's I I can't I'm like a gambler who's addicted.
I just wanna take one more shot, And if I can build a great company, it'll all be worth it. And if I can't, then I'll be a VC. I'll call up YC, like, hey, remember me? Can I get a job again? Help. It didn't work.
Yeah, it didn't work, yeah. Well, I think that was fascinating to talk to you properly and get some of your views on what's going on at the moment. But, Cassie Younis, thank you very much. Yeah, thank you. Cheers.
