The Unrelenting Ambition of Sam Altman
Loopt, Y Combinator, OpenAI, and Investing in a Bright Future
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Sam Altman is the epitome of ambition. He is the co-founder & CEO of OpenAI, the company behind ChatGPT and DALL·E 2, that’s reportedly valued at $29 billion. Previously, he was President at Y Combinator (YC), a behemoth in the venture industry and the world’s best startup accelerator, with companies that include Airbnb, Stripe, Instacart, and Dropbox among others. At 19, he dropped out of Stanford to start Loopt, selling it at age 26 for $43 million.
In 2009, Paul Graham, co-founder of YC, named Sam one of the five most interesting founders of the last 30 years, along with people like Steve Jobs and the founders of Google, writing:
Honestly, Sam is, along with Steve Jobs, the founder I refer to most when I'm advising startups. On questions of design, I ask ‘What would Steve do?’ but on questions of strategy or ambition I ask ‘What would Sam do?’
At the time, Sam was only 24 years old, and that was 3 years after he’d been compared to Bill Gates in another Paul Graham essay.
Oh, and we haven’t even mentioned Sam’s angel investments.
Sam has made sizable investments in a number of notable companies.
One that stands out?
His largest investment to date - a $375 million investment into Helion, a nuclear fusion company, as part of a $500 million funding round.
Yes, $375 million of his own money was invested into one company.
Let’s dive into how Sam Altman became Sam Altman, the scope of his ambitions, and some lessons we can take from him.
Sam Altman grew up in St. Louis and had an interest in computers from a young age.
When he was 8 years old he got his first Macintosh computer, which, according to a New Yorker profile, became his “lifeline to the world.”
It also seemed clear that, even during his youth, he was quite resourceful:
Altman’s mother, a dermatologist with four children, likes to tell people that by the time he was about 10 years old, she felt that she would have been comfortable dropping Sam off, alone, in New York City.
I’m not sure how many mothers would say that about their 10-year-old kids.
However, what stands out most from his upbringing, and perhaps foreshadows later bold bets he’d make, is a story from his days at prep school:
After a Christian group boycotted an assembly about sexuality at his prep school, John Burroughs, Altman addressed the whole community, announcing that he was gay and asking whether the school wanted to be a repressive place or one open to different ideas. Madelyn Gray, Altman’s college counsellor, said, “What Sam did changed the school. It felt like someone had opened up a great big box full of all kinds of kids and let them out into the world.”
Sam would eventually attend Stanford, where he studied computer science.
In 2005, after his sophomore year, he dropped out to work on his first startup, Loopt.
Sam was just 19 years old when he started Loopt, a social networking mobile app utilizing location-based data to help connect people to their community.
As I write this in 2023, Loopt seems like a footnote in Sam’s career, a topic Sam himself mentioned in one of his most popular essays:
“It’s useful to focus on adding another zero to whatever you define as your success metric—money, status, impact on the world, or whatever. I am willing to take as much time as needed between projects to find my next thing. But I always want it to be a project that, if successful, will make the rest of my career look like a footnote.”
While Loopt would eventually become a mere footnote in Sam’s career, it was far from a failure and served as the jumping-off point for everything else he’d do in his career.
Loopt was one of the companies in the first batch of Y Combinator, which at the time had a program called the Summer Founders Program, and was announced with this post on Paul Graham’s blog.
But Sam getting into YC in 2005 almost didn’t happen:
In 2005, they had scheduled Altman for his in-person Y Combinator interview, for which he would fly to Boston (where the program was originally located) from the San Francisco Bay Area.
Altman was having trouble getting his potential co-founders to commit to coming with him, and he also tried to push the interview back so he could participate in a pitch event the day before.
As Livingston recalled it, “Paul wrote back, kind of trying to blow him off, saying, ‘You’re only a freshman. Just apply next year.'“
Altman replied, “I’m a sophomore. And I’m coming.”
Maybe he would’ve gone the next year… but maybe not?
Regardless, Loopt ended up getting accepted into YC’s first batch.
However, despite Sam’s crazy work ethic, they struggled:
Altman worked so incessantly that summer that he got scurvy. He excelled at wrangling meetings with mobile carriers, and at closing deals with them to feature the app, whose valuation eventually soared to a hundred and seventy-five million dollars. Consumers, though, never bought in. “We had the optimistic view that location would be all-important,” Altman said. “The pessimistic view was that people would lie on their couches and just consume content—and that is what happened. I learned you can’t make humans do something they don’t want to do.
It’s a bit harsh though to say consumers never bought in.
Loopt did grow to at least 3 million users in 2010 and by some accounts had 5 million users at one point.
Loopt also showcased Sam’s ability, even at a young age, to close deals:
I remember about 15 to 20 minutes into the meeting, we stepped outside of the room and were like, “Okay. Shit. We need to go tell our VP that at the 11th hour, we’re changing direction and we want to bet on a pre-launch startup with a 19-year-old CEO.”
And the experience of trying to sell to carriers taught Sam an important lesson as well:
I learned this great lesson of my life. The way to get things done is to just be really fucking persistent… I had this philosophy of going to every door and every window.
Loopt would go on to raise $30M+ from investors, including a $5M Series A that included Sequoia and NEA, two of the world’s best venture firms.
Eventually, Loopt was acquired for $43.4 million, with Sam personally making $5 million.
While he was building Loopt, Sam also got his start with angel investing, as mentioned in his essay on black swan seed rounds:
I started seed investing in 2010 (and much more actively in 2012) before becoming a full-time YC partner. In this period, I invested in about 40 companies. So far, five of them are in the “really good” category—a current value of ~100x or more, based on the valuation of the last round or last offer.
Let me just highlight something you might have missed.
5 of the first 40 companies he invested in, 12.5%, were valued at 100x - ONE HUNDRED TIMES THE VALUATION AT WHICH HE INVESTED IN THEM!
Yes, these are just valuations, but that’s quite the track record that early on.
One of his first angel investments?
Stripe, a company currently valued somewhere around $60 billion.
But more on that in a bit.
Sam’s angel investing experience and time building Loopt didn’t only turn out to be highly lucrative for him, but it set him up for his role as YC’s President.
Sam became a part-time partner at YC in 2011, advising founders while still building Loopt.
In February 2014, he became the first president of YC after Paul Graham, the co-founder.
Who else was in the running for the role? Nobody:
There wasn’t a list of who should run YC and Sam at the top. It was just: Sam.
YC presented an opportunity for Sam to leave his mark, with his unrelenting ambition leading the way.
As Marc Andreessen, co-founder of the VC firm Andreessen Horowitz put it:
Under Sam, the level of YC’s ambition has gone up 10x.
But what does this mean?
Well, YC in 2014, prior to Sam taking over, was certainly established.
At the time, YC already had 17 batches of companies come through the program, the likes of which included Airbnb (W09), Dropbox (S07), and Stripe (S09). In total, more than 500 companies had gone through the accelerator by the time Sam become president.
One story, from a time before Sam became YC president, told by Brian Chesky, the co-founder of Airbnb, illustrates his ambitions well:
“We had limited our projected revenue to thirty million dollars,” Chesky said. “Sam said, ‘Take all the “M”s and make them “B”s.’ ” Altman recalls telling them, “Either you don’t believe everything you said in the rest of the deck, or you’re ashamed, or I can’t do math.”
Sam’s level of ambition, and what he expects of others, are clear.
And, shortly after becoming president, he made some major moves.
A profile in The New Yorker outlines a couple of them from 2014:
Altman wanted to create a trillion-dollar conglomerate and to move the world forward. And, he realized, ‘you couldn’t have a trillion-dollar enterprise without major scientific advances.’ So he opened the batches to hard tech, studied the science and engineering problems such companies faced, and recruited the most promising ones. Altman helped to persuade Kyle Vogt, the C.E.O. of the self-driving-car company Cruise, to do YC in 2014; afterward, when Cruise had trouble finding funding, he invested three million dollars in the company. In March, General Motors bought Cruise for $1.25 billion.
And then, in 2015, by which time the valuation of all YC companies was a staggering $65 billion, he announced a few more initiatives.
The first was YC Research, announced on October 7th of 2015, and personally funded by Sam with a $10M donation:
“Our mission at YC is to enable as much innovation as we can. Mostly this means funding startups. But startups aren’t ideal for some kinds of innovation—for example, work that requires a very long time horizon, seeks to answer very open-ended questions, or develops technology that shouldn’t be owned by any one company.
We think research institutions can be better than they are today. So we’re starting a new research lab, which we’re calling YC Research, to work on some of these areas.”
The second, announced a week later, was YC Continuity, a $700M growth-stage fund, led by the former COO of Twitter, Ali Rowghani.
A couple of months after those announcements, Sam co-founded OpenAI as a non-profit with Elon Musk, Peter Thiel, Reid Hoffman, Jessica Livingston, Greg Brockman, and a number of others.
Then, in January of 2016, YC announced they’d fund a study on basic income, for the first time putting out a request for research.
By the end of that same year, they launched the MOOC Startup School, an evolution of the YC Fellowship.
Starting this winter, YC Fellowship is becoming Startup School, a free, online, ten-week course for as many companies as want to take part. They won’t get funded, but they can learn the same lessons as batch companies do. Altman, who will personally oversee this initiative, believes it is the fastest, easiest way to bring ten thousand new founders a year into the network. He said, “If we create more scale for the world and 10x the number of great startups, even though we don’t have any ownership in them, it will benefit YC in some way I can’t exactly predict now.”
I know, that was a lot.
And it was all within the first few years of Sam’s reign at YC.
But it only continued.
In 2018 YC launched Work at a Startup for engineers to easily apply to YC startup jobs and announced their Series A Program to help founders know what it takes to raise their Series A round of funding as well as their plan for YC China, though they ended up having to pull back.
Of course, Sam has his limitations and acknowledged just that:
I absolutely could do a better job at managing the organization—it was my chief weakness at Loopt, and I still have some learned helplessness about it. I don’t want to do weekly one-on-ones and let’s-talk-about-your-career-paths. But I think it’s O.K. to have a little mess at the organizational level if we’re making the big decisions right, since those are the ones that bring us all our returns.
That last part stood out to me though, making the big decisions right.
If you can do that, most else doesn’t seem to matter.
There has been pushback though, specifically on the size of the batches at YC.
When Sam became President, batches were around 60 companies but had ballooned to 205 in the last batch by the time he left.
In my opinion, this seemed inevitable, especially with Sam at the helm.
All told, Sam accomplished a lot as YC President, certainly seeming to live up to the idea that YC’s ambition would increase 10x with him leading the way.
In 2019, Sam transitioned to Chairman to allow him to focus on OpenAI full-time, starting the next chapter of his career.
OpenAI is Sam’s most ambitious undertaking yet.
They’re trying to build artificial general intelligence (AGI) and ensure that it benefits all of humanity.
Their most recent product, ChatGPT, has achieved remarkable growth right out of the gate:
ChatGPT launched on wednesday. today it crossed 1 million users!
— Sam Altman (@sama)
Dec 5, 2022
1 million users within five days.
Compare that with past OpenAI products and it’s clear their growth only seems to be accelerating:
little openai update:
gpt-3, github copilot, and dall-e each have more than 1 million signups!
took gpt-3 ~24 months to get there, copilot i think around 6 months, and dall-e only 2.5 months.
— Sam Altman (@sama)
Jun 22, 2022
My first real taste of their products was DALL·E 2, which creates realistic-looking images from a text description.
Seeing it in action for the first time was surreal and hinted at their abilities.
These game-changing products, while incredibly expensive to run because of the compute costs, certainly give OpenAI a path to monetizing in a big way.
According to Reuters, OpenAI is projected to do $200 million in revenue this year and $1 billion in 2024.
If the adoption of their products continues to accelerate, these numbers could be much higher.
But let’s take a step back.
OpenAi is trying to build artificial general intelligence, something incredibly challenging yet important to do:
Creating AGI is, I think, most interesting, challenging, and important technical problem in the world.
The engineering challenges are now as hard and impactful as the research challenges.
If you’re an engineer, OpenAI would love to hear from you!
— Sam Altman (@sama)
Mar 18, 2022
While every expert seems to have a different opinion on when we’ll have AGI, few question if we’ll have AGI.
It’s going to happen.
The team likely to do it?
It’s not that he alone will do it, that’s crazy, and yes he probably gets too much credit for OpenAI’s success, but the fact that he is who he is certainly plays a role. Not only in attracting some of the smartest people in the world to work at OpenAI, but for their level of ambition to ever increase.
That became apparent as soon as he came on board full-time in 2019, with a rapid succession of releases and announcements in the few years since:
In 2019, OpenAI changed from a non-profit to a for-profit, with Microsoft investing $1 billion
On June 11, 2020, OpenAI launched its first product commercial product, the OpenAI API, and 9 months later, 300 applications were using their API
On June 17, 2020, image GPT was announced
In May of 2021, the $100 million OpenAI Startup Fund launched
November 2, 2022, OpenAI launched Converge, a five-week program where participants get a $1 million investment
December 1, 2022, OpenAI Startup Fund announces its first 4 investments
February 1, 2023, ChatGPT Plus is announced, starting at $20/month
While AGI seems like a ways off at best, Sam Altman is certainly leading the charge to make sure we get there.
And what does that future potentially look like?
The best case, according to Sam in an interview with Connie Loizos of StrictlyVC:
I think the best case is so unbelievably good that it’s hard for me to even imagine.
I can sort of think about what it’s like when we make more progress of discovering new knowledge with these systems than humanity has done so far, but in a year instead of 70,000.
I can sort of imagine what it’s like when we launch probes out to the whole universe and find out everything going on out there.
I can sort of imagine what it’s like when we have unbelievable abundance and systems that can sort of help us resolve deadlocks and improve all aspects of reality and let us live our best lives… the good case is just so ubelievably good.
The bad case according to sam?
Lights out for all of us.
Sleep well, my friends.
Let’s not forget though, Sam’s ambition extends beyond building companies, he’s also investing in world-changing companies.
Earlier, I hinted at Sam’s ambition as an angel investor.
The scale is way beyond what most angels are capable of.
He’s done around 400 investments personally, with his largest being that $375 million investment in Helion I mentioned previously.
The Helion investment, in particular, is significant for what it may allow:
If something like fusion does work, it will so change the dynamics of what’s possible in terms of our ability to create things like aviation fuel easily or capture carbon out of the atmosphere.
With those 400 investments, he’s funded just about everything.
Through his experience as an angel investor and also with investing in thousands of companies at YC, he’s learned a thing or two about startup investing.
A few of these stood out to me.
First, is in understanding the power law in angel investing:
Everyone claims that they understand the power law in angel investing, but very few people practice it. I think this is because it’s hard to conceptualize the difference between a 3x and a 300x (or 3000x) return.
It’s common to make more money from your single best angel investment than all the rest put together. The consequence of this is that the real risk is missing out on that outstanding investment, and not failing to get your money back (or, as some people ask for, a guaranteed 2x) on all of your other companies.
The second is in regards to “hot rounds” that investors fight to get into:
I’ve been thinking a lot about what these investments have in common, and what about them was different from other investments. The most striking observation is that, in my experience, the “hot seed rounds” that everyone is fighting to get in are anti-correlated with very successful investments. (It’s probably different for A and B rounds because the best companies often have exponential growth at that point.) The hotly-competed seed investments I’ve made have underperformed.
And finally, how to do well as an investor:
That said, to do well as an investor, you need to do three things: get access to good investment opportunities, make good decisions about what to invest in, and get the companies you want to invest in to choose you as an investor. That’s it! You can often help the companies you invest in become bigger than they otherwise would have been, but the sad reality is that your best investments will do quite well without you.
Aside from YC and investing as an angel, he also launched a $21 million fund backed by Peter Thiel, Hydrazine Capital, in 2012 after exiting Loopt.
According to a New York Times profile, “Hydrazine had grown tenfold in value in just four years.”
And if that wasn’t enough, Sam launched a fund called Apollo with his brothers, Max and Jack, in 2020, to invest in “moonshot” projects.
Following in the footsteps of Paul Graham, Sam Altman makes time to write and has a number of fantastic essays. I’ve included quotes from a few of them already.
Below are two more of my favorites, with one quote from each.
Minimize your own cognitive load from distracting things that don’t really matter. It’s hard to overstate how important this is, and how bad most people are at it. Get rid of distractions in your life. Develop very strong ways to avoid letting crap you don’t like doing pile up and take your mental cycles, especially in your work life.
Focus is a force multiplier on work.
Almost everyone I’ve ever met would be well-served by spending more time thinking about what to focus on. It is much more important to work on the right thing than it is to work many hours. Most people waste most of their time on stuff that doesn’t matter.
Once you have figured out what to do, be unstoppable about getting your small handful of priorities accomplished quickly. I have yet to meet a slow-moving person who is very successful.
It was difficult to pick just two.
Even harder to choose only one quote from each.
I’d highly suggest reading them in their entirety and checking out Sam’s blog with more of his essays from his archive.
Here’s the future Sam is hoping for:
The future I would like to see is where access to AI is super democratized. Where there are several AGIs in the world that can help allow for multiple viewpoints and not have any one get too powerful. And the cost of intelligence and energy, because it gets commoditized, trends down and down and down, and the massive surplus there, access to the systems, eventually governance of the systems, benefits all of us.
I think we’ll get there.
Sam’s unrelenting ambition will make certain of that.
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