Mar 8, 2018 · 1h 5m · y-combinator
Elad Gil and Pejman Nozad - Startup Investor School Day 3 · Y Combinator
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On Day 3 of Y Combinator's Startup Investor School, veteran investors Elad Gil and Pejman Nozad share actionable frameworks for evaluating early-stage startups, identifying exceptional founders, and avoiding common angel investment pitfalls. Hosted by Geoff Ralston, the event covers market versus team dynamics, real-world investment lessons, and audience Q&A.
How this conversation actually went
Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. How this is scored →
The partners as informed peer 0.5 Guest teaching 0.3 Guest disagreement 0.9 The partners pushing back 0.1
speaking balance: gold is the partners, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 18:50 Gil rejects conventional angel wisdom on valuation
Gil directly contradicts widespread early-stage angel advice, arguing that ignoring valuation math is demonstrably false and financially perilous.
Hardest push from the partners ▶ 55:50 Ralston steps in to reframe complex audience dilemmaRalston intervenes to qualify an audience member's detailed portfolio question, pointing out that deciding whether to back struggling companies requires extended direct evaluation.
Biggest teaching moment ▶ 1:01:05 Nozad explains trusting founder vision over market sizingNozad educates the audience and panel on early-stage TAM assessment, explaining that great founders see the future first and investors must let founders educate them.
The partners hold their own ▶ 1:04:29 Ralston synthesizes founder conflict resolutionRalston contributes his own distinct framework to the panelists' answers, asserting that almost all co-founder conflict traces directly to communication breakdowns.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | The partners as informed peer | Guest teaching | Guest disagreement | The partners pushing back | Why |
|---|---|---|---|---|---|---|
| Elad Gil on Market Evaluation and High-Growth Indicators | 0 | 0 | 1 | 0 | This is a solo presentation by Elad Gil discussing market dynamics and growth metrics. Because it is an uninterrupted lecture with no host involvement, host-side scores are zero. | |
| Elad Gil on Key Team Attributes and Founder Execution | 0 | 0 | 1 | 0 | Gil continues his presentation outlining key founder and team traits. There is no host interaction during this solo talk. | |
| Elad Gil on Investor Mistakes, Valuation, and False Signals | 0 | 0 | 2 | 0 | Gil breaks down common angel investing traps and pushes back against conventional advice stating valuation doesn't matter. As a solo presentation, host metrics remain zero. | |
| Elad Gil on Startup Support Strategies and Bad Behaviors | 0 | 0 | 1 | 0 | Gil concludes his talk detailing practical ways angels can help companies and highlights bad founder/investor behaviors. The segment is a monologue without host intervention. | |
| Geoff Ralston Introduces Pejman Nozad | 0 | 0 | 0 | 0 | Jeff Ralston delivers a transition monologue introducing Pejman Nozad to the stage. There is no guest dialogue or friction. | |
| Pejman Nozad's Journey: From Homelessness to Top Angel Investor | 0 | 0 | 0 | 0 | Pejman Nozad delivers a personal keynote chronicling his journey from being an immigrant rug salesman to a top angel investor. The section is entirely a solo talk. | |
| Pejman Nozad on Key Founder Traits and Investment Lessons | 0 | 0 | 1 | 0 | Nozad discusses founder evaluation, lessons from missing Facebook, and persistence. The segment is a monologue without interaction from the host. | |
| Audience Q&A with Elad Gil, Pejman Nozad, and Geoff Ralston | 4 | 2 | 1 | 1 | Jeff Ralston moderates audience Q&A with Gil and Nozad. Ralston summarizes questions cleanly and provides his own concluding framework on communication during co-founder disputes. |
Statements from this episode (19)
Ralston: Investors make a mistake by not evaluating if founders attract talent
“If you're not evaluating that when you talk to founders, you're making a mistake, because if you think about it, every giant company is built with an incredible team. And if you don't believe that the founder you're talking to can recruit and build this team o…”
Gil: Competing on lower price is usually a bad startup strategy
“The typical thing that founder will do especially if they're a more technical founder, is they'll say, the way I'm gonna win is by making this cheaper than anybody else, which actually tends to be a really bad strategy, unless you're truly just going for scale…”
Gil: Data moats do not exist in most industries
“There are very, very few companies that actually have data moats, and so I think that's often a red herring. I think maybe in genomics right now there may be interesting data moats to be formed, but in most industries data moats don't really exist.”
Gil: IoT startups are bad investments due to lack of revenue recurrence
“So internet of things, for example traditionally have been bad investments for startups, great investments for big companies, because you know, if you have a smart light bulb company, ah, you buy a light bulb once, and especially if it lasts 20 years as an LED…”
Gil says pitch decks without a working product rarely lead to success
“Some of the worst investments I've made
We're two really smart people with a PowerPoint deck, and I was like,
oh my gosh, their vision, and they're so articulate, and they're so smart, and it never tends to work.”
Brian Chesky and Ben Silbermann scaled rapidly by internalizing new domains
“Ben, the CEO of Pinterest is a great example of this, where every time you talk to him, ah, six months, ah, ah, later he'll have, ah, internalized everything and have learned way more than you ever knew about a topic. And so that's an example of somebody who's…”
Gil says passing on Lyft's $90M Series C was a major mistake
“One of the biggest mistakes I made from a passing perspective is I passed on Lyft for their Series C, which was a ninety million dollar valuation, and I think they're now in the, like, nine billion dollar raise range, so I missed a hundred X, or maybe post-dil…”
Gil: Most angel investors care too little about valuation
“I think most angels actually care too little about valuation. And so often if you actually look at the return, say you do 10 investments, and I'm making up a number just to make it a round number, a 100,000 each, and nine of them go under and one works and tha…”
Gil argues a founder's poor prior performance can be a neutral signal
“I think a great team is a very positive signal. I think a bad team, depending on context, may actually be a neutral signal.”
Gil: An investor tried to block Mixer Labs' 2009 Twitter acquisition
“When my first company Mixer Labs exited to Twitter, so Twitter bought it back in 2009, we actually had an investor who tried to block the exit as a way to negotiate more of the outcome for themselves.”
Gil: Startup founder structured Jawbone exit leaving investors with severe losses
“So one company that I invested in That exited a jawbone, which then of course went bankrupt, ah, so it should have been a sign. They had, ah, five million dollars that was invested in the company collectively. They received, I think, fifteen million or so back…”
Nozad was the first investor in Andy Rubin's Danger
“I actually was the first investor in Danger in that room. Andy Rubin started Danger, and as you know, he went on and created Android.”
Nozad made the introduction to SoftBank for DoorDash's $500 million round
“DoorDash, another amazing Y Combinator company, which actually I met the founder at Y Combinator Demo Day just raised five hundred million dollars, and I made that intro to SoftBank.”
Nozad passed on Facebook's Series B investment over office lease terms
“So part of the investment was, ah, they wanted to lease one of our offices on University Avenue, ah, for five years. So we went back and forth, and we didn't agree on the lease terms, and we didn't invest in Facebook.”
Investors should not lose outlier founders by overanalyzing minor deal terms
“When you see an exceptional founder, those outliers who, Are actually from Mars. Do, do not overanalyze the situation. Just get on the rocket ship and go. And two never let those extra four cents distract you. You have to see the forest through the trees.”
Nozad warns waiting for seed funding before quitting is a bad sign
“Typically, if they're waiting to the seed round to be raised before they drop their job, I think it's not a good sign for me, and that, I think this is very obvious among the best founders.”
Gil: Needing to help a portfolio company daily signals fundamental flaws
“I think in general, when you help companies, it comes, it goes, and spikes, versus it's sustained throughout. If you're sustainably having to interfere or help with a company every day, then there's either something wrong with that company or with the founders…”
Nozad sourced early deals by cold-emailing Persian Stanford CS students
“I remember in, when I started in late nineties and I didn't know how to find founders I was going on Stanford computer science actually school looking at every name that looked Iranian or Persian and sending an email and inviting them for tea. And I ended up i…”
Gil: Very early co-founder conflict is usually unresolvable
“Well, there, there's two types of, ah, co-founder conflicts, resolvable and unresolvable. Ah, I'd say, If it starts very early, usually it's unresolvable and somebody's gonna have to leave. If it starts late, usually there's a reason and you can fix it.”