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Michael Seibel’s Startup Playbook: Underdog Strategies That Win
- Startup Bell
- Apr 20
- 7 min read
In the high-stakes world of startups, where nine out of ten new ventures fail, finding guidance from someone who has repeatedly succeeded can be invaluable. Michael Seibel, Managing Director at Y Combinator and co-founder of successful startups like Twitch and Socialcam, has become one of the most respected voices in Silicon Valley.
At the heart of his philosophy are three deceptively simple—but profoundly effective—tenets:
Make something people want.
Do things that don’t scale.
Talk to your users.
In this article, we’ll dive deep into each of these principles, sprinkle in real-world examples, and weave in stories about how founders turned underdog status into victory. Get ready for an enthusiastic, practical guide to going from zero to one, courtesy of Michael Seibel.
1. Make Something People Want: The North Star of Startups
“Three key pieces of advice are to make something that people want…” — Michael Seibel
At first glance, this sounds obvious. Of course, you want to build something people want—why else launch a startup? Yet, countless companies crash and burn because their product solves a problem nobody feels strong enough pain to fix.
Before Spotify became a streaming giant, founder Daniel Ek observed how people were increasingly consuming music through illegal downloads. Rather than building another iTunes store, he identified what people truly wanted: unlimited access to music without the hassle of ownership. The insight wasn't just about music—it was about understanding a shifting consumer behavior that larger companies were too slow to recognize.
Seibel consistently urges founders to fall in love with the problem, not their solution. When Dropbox founder Drew Houston couldn't find a reliable way to access his files across devices, he didn't just build better USB storage—he reimagined how we think about file access entirely. By solving his own pain point, Houston created something millions of others desperately wanted but didn't know to ask for.
The mistake many founders make is assuming they know what people want without verification. They build elaborate products in isolation, only to launch to crickets. Seibel's advice flips this approach on its head:
Identify a real problem
Create the simplest possible solution
Get it in front of real users immediately
Iterate based on actual feedback
Slack exemplifies this approach. What began as an internal communication tool for a gaming company became one of the fastest-growing B2B applications in history—precisely because it was built by people who were living with the problem of inefficient workplace communication every day.
2. Do Things That Don’t Scale: The Underdog Advantage
"You've got to do something different than them. And so 'do things that don't scale' is kind of part of that philosophy. You need to do things that your competitor can't do."
In a world where growth hacking and automation dominate headlines, doing manual, one-off tasks feels counterintuitive. Yet Seibel argues it’s precisely these unscalable actions that help early-stage startups break through.
Consider DoorDash founders Tony Xu, Stanley Tang, and Andy Fang. Before building their food delivery empire, they personally delivered food orders from local restaurants. This hands-on approach gave them insights no algorithm could provide. They discovered that restaurants struggled most with the logistics of delivery, not just finding customers. This insight shaped their entire business model.
Brian Chesky and Joe Gebbia, Airbnb's founders, famously traveled to New York to meet their earliest hosts in person. They brought professional photographers to take high-quality photos of listings—a completely unscalable practice that nonetheless dramatically improved booking rates and helped them understand what made hosts and guests comfortable with their revolutionary concept.
Here's another thing you might find interesting. Back in 2009, Airbnb was still AirBed & Breakfast and struggling to find traction beyond their initial launch. Then the founders had a flash of brilliance: post listings manually on Craigslist, the internet’s busiest classified site.
Here’s how it worked: they wrote scripts to post their own listings on Craigslist under people’s names, responding personally to each inquiry. It was laborious, error-prone, and definitely didn’t scale as the company grew—but it worked.
Bookings jumped, new hosts joined, and the Airbnb community swelled. Through that unscalable hack, they tapped into a massive audience without spending a dime on traditional marketing.
These labor-intensive, personal approaches would cripple a large company trying to implement them across millions of users. But for startups, these "inefficient" practices create:
Deeper user relationships
Richer product insights
Passionate early adopters
Competitive advantages that can't be easily copied
Seibel encourages founders to embrace this paradox: sometimes the path to massive scale begins with actions that deliberately ignore scalability.
3. Talk to Your Users: Empathy as a Growth Engine
“…and talk to your users.” — Michael Seibel
It’s one thing to guess what users want; it’s another to hear it directly. User conversations are a goldmine of insights, pain points, and feature ideas.
Patrick Collison of Stripe understood this deeply. Despite building a highly technical payment infrastructure company, Stripe's early team spent countless hours in direct conversations with developers. These conversations revealed that developers didn't just want better payment processing—they wanted it to disappear entirely as a concern. This insight led to Stripe's now-famous seven lines of code implementation that revolutionized online payments.
Zappos: Shoe Store Built on Phone Calls
Long before e-commerce was the norm, Nick Swinmurn wanted to sell shoes online—a risky idea when most people preferred trying on footwear in person. So he launched Zappos with one unscalable tactic: he went to local shoe stores, took photos of inventory, then posted them online. When orders came in, he’d buy the shoes and ship them himself.
On top of that, Zappos’ customer support reps took phone calls—not chatbots or email—and spent as much time as needed ensuring perfect fits. Customers felt valued, return rates plummeted, and word-of-mouth marketing exploded.
This hands-on user engagement, born from conversations and empathy, built Zappos into a billion-dollar brand acquired by Amazon in 2009.
Seibel recommends specific practices around user conversations:
Speak directly with users at least weekly
Ask open-ended questions rather than seeking validation
Look for emotional responses, not just logical feedback
Pay special attention to users who stop using your product
The Underdog Advantage
"What's so fun about being a startup is that you're an underdog. Almost always you have a big competitor and almost always you need to fight asymmetrically."-Michael Seibel
When you lack the resources of incumbents, you have to get creative. Asymmetric warfare in business means using mismatched tactics that big players can’t—or won’t—replicate.
Spotify vs. Apple: Free Trials that Stung
In 2008, Spotify launched in Europe, where piracy was rampant and iTunes dominated. With deep pockets and legal muscle, Apple could’ve crushed Spotify in a heartbeat. Instead, Spotify offered free, ad-supported streaming—legal, convenient, and limitless.
Apple’s pay-per-song model couldn’t match. Apple’s executives reportedly dismissed streaming as a fad. By the time Apple Music launched in 2015, Spotify had tens of millions of users hooked on free tiers.
Spotify didn’t outspend Apple; it offered something big players wouldn’t—free, on-demand music. That asymmetric move redefined how the world consumes music.
When Netflix began, they didn't try to build more Blockbuster stores. Instead, they created a DVD-by-mail service that leveraged Blockbuster's weaknesses: late fees and limited selection. By the time Blockbuster recognized the threat, Netflix had established a beachhead that eventually allowed them to pioneer streaming video.
Seibel encourages founders to identify what unique advantages they have as small, nimble startups:
Speed: Can you make decisions in minutes that would take your competitors months?
Personal touch: Can you provide concierge-level service that would be impossible at scale?
Focus: Can you obsess over a niche that's too small for incumbents to care about?
Risk tolerance: Can you try approaches that would be too unconventional for established players?
Shopify's early success came from deeply understanding small merchants' needs in a way that eCommerce giants couldn't be bothered with. Rather than competing directly with Amazon, they empowered thousands of businesses to collectively compete. This asymmetric approach turned what looked like a disadvantage—their small size—into their greatest strength.
The Paradox of Scale
Perhaps the most profound insight in Seibel's advice is the paradox that to eventually reach massive scale, you must first embrace approaches that deliberately ignore scalability.
"The things that don't scale are often the most important things you can do."
WhatsApp grew to billions of users by initially focusing on a simple, reliable messaging experience when competitors were adding endless features. By deliberately constraining their product and focusing fanatically on quality and reliability, they created something that could eventually scale beyond most social platforms. You can learn why WhatsApp slowed its own growth with this article.
This paradox explains why so many startups with dreams of disrupting industries fail. They try to act like big companies from day one—building complex products, implementing elaborate processes, and avoiding "inefficient" personal interactions with users. In doing so, they sacrifice their greatest competitive advantages.
Putting It All Together: A Tactical Blueprint
Here’s how you can adopt Michael Seibel’s underdog strategies in your startup:
Validate demand before you build
Conduct landing page tests or demo videos. If people sign up at 20–40%, you’re on the right track.
Embrace unscalable tactics early
Do manual outreach, personal onboarding, or in-person demos. These build insights and advocates.
Listen like your business depends on it
Conduct user interviews, surveys, or even guerrilla research in coffee shops.
Identify your asymmetric edge
What can you do that a Fortune 500 can’t or won’t? Free trials, home kits, hyper-personalized service—get creative.
Iterate ruthlessly
Use feedback from manual efforts to improve your product. Then automate what matters most.
By weaving these tactics together, you transform underdog energy into unstoppable momentum.
Conclusion: The Wisdom in Simplicity
Michael Seibel's advice—make something people want, do things that don't scale, and talk to your users—might not seem revolutionary at first glance. But its power lies in its simplicity and how it cuts against the conventional wisdom that often leads startups astray.
In many ways, these principles bring startup building back to its most human elements: solving real problems, connecting personally with users, and embracing creative approaches that larger competitors cannot match.
The next time you find yourself feeling disadvantaged as a small player in a big industry, remember Seibel's perspective—being the underdog isn't just a challenge to overcome; it's potentially your greatest strategic advantage. The key is embracing approaches that leverage your smallness rather than trying to compete on the same terms as established giants.
And in the high-stakes world of startups, this perspective might make all the difference between becoming the next success story or just another statistic.
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