Can I turn this on?

Maybe, all right.

>> Can people hear in the back?

>> Can you guys hear me?

Is the mic on?

No, ah, maybe you can ask them to turn it on.

Maybe we can get a bigger, ah, there we go.

All right.

Maybe we can get a bigger auditorium, we'll see.

So welcome to CS183B.

I'm Sam Altman.

I'm the President of Y Combinator.

Nine years ago, I was a Stanford student and

then I dropped out to start a company.

And then I've been an investor for the last few.

So, at YC, we've been teaching people how to

start startups for nine years.

Most of it's very hands on and

specific to the startups.

But, 30% of it is pretty generally applicable.

And so, we think that we

can teach that 30% in this class.

And even though that's only 30% of the way

there hopefully it'll still be really helpful.

We've taught a lot of this at YC already, but

it's all been off the record.

And this is the first time that a lot of what we

teach in YC is gonna be on the record.

So we've invited some of our best speakers to come and

give the same talks they give at YC.

We've now funded 720 companies.

And so, we're pretty sure

that a lot of this advice is pretty good.

We can't fund every startup yet, but we can

hopefully make this advice very generally available.

Guest speakers are gonna teach 17 of the 20 classes.

I'm only teaching three.

Counting YC itself,

every guest speaker has been involved in the creation of

a billion plus dollar company.

So the advice shouldn't be that theoretical.

It's all been, it's all from people who have done it.

All of the advice in

this class is geared towards people starting a business

where the goal was hyper-growth.

And eventually building a very large company.

Much of it doesn't apply in other cases and

I wanna warn people up front.

That if you try and

do these things in a lot of big companies or

non startups, it won't work.

It should still be interesting.

I, I really do think that startups are the way of

the future and it's worth trying to understand them.

But startups are very different

than normal companies.

So over the course of today and

Thursday, I'm gonna try to give an overview of the four

areas that you need to excel at in order to

maximize your chances of success at a startup.

And then throughout the course, the guest speakers

are gonna drill into all of these in more detail.

So the four areas, you need a great idea,

a great product, a great team and great execution.

These overlap somewhat, but I'm gonna have to talk about

them somewhat individually to make it make sense.

You may still fail.

The outcome is something like idea times product

times execution times team times luck,

where luck is the random number between 0 and 10,000.

Literally that much.

But if you do really well in the four areas you can

control, you have a good chance of at

least some amount of success.

One of the exciting things about startups, is

that they are surprisingly even playing field.

Young and inexperienced, you can do this.

Old and very experienced, you can do this too.

And one of the things that I particularly like about

startups is that some of the things that are bad in

other work situations, like being poor and unknown are

actually huge assets when it comes to starting a startup.

Before we jump in on the how.

I want to talk about why you should start a startup.

I'm somewhat hesitant to be doing this class at all,

because you should never start a startup just for

the sake of doing so.

There are much easier ways to get rich and

everyone who starts a startup always says,

always, that they couldn't have imagined how hard and

painful it was going to be.

You should only start a startup if you com,

feel compelled by a particular problem.

And that you think starting a company is

the best way to solve it.

The specific passion should come first and

the startup second.

In fact, all of

the big successes we have at YC followed this.

So, for the second half of today's lecture,

Dustin Moskovitz the co-founder of Facebook and

Asana, is going to take over and

talk about why to start a startup.

We're so surprised by the amount of

attention that this class got.

That we wanna make sure we

spend a lot of time on the why.

Okay. So

the first of the four areas.

A great idea.

It's become popular in

recent years to say that the idea doesn't matter.

In fact, it's almost uncool to spend a lot of time

thinking about the idea for a startup.

You're just supposed to start.

Throw stuff at the walls.

See what sticks.

And not even spend any time thinking about if

it'll be valuable if it works.

And pivots are supposed to be great.

The more pivots, the better.

So this isn't totally wrong.

Things do evolve in

ways that are difficult to predict.

And there's a limit to how much you can figure out,

without actually getting a product in

the hands of users.

And great execution is at

least ten times more important and

a hundred times harder than a good idea.

But the pendulum has swung way out of whack here.

A bad idea is still bad.

In the pivot happy world that we're in today,

it feels really sub optimal.

Great execution towards a terrible idea

will get you nowhere.

There are exceptions, of course.

But most great companies start with

a great idea, not a pivot.

If you look at successful pivots, they almost always

are a pivot into something the founders

themselves wanted, not a random made up idea.

Airbnb happened because Brian Chesky couldn't pay

his rent, but he did have some extra space.

In general, though,

if you look at the track record of pivots,

they don't become big companies.

I myself used to believe ideas didn't matter that

much, but I'm very sure that's wrong now.

The definition of the idea,

as we talk about it, is very broad.

It includes the size and the growth of the market,

the growth strategy for the company,

the defensibility strategy and so on.

When you're evaluating an idea,

you need to think through all these things,

not just the product.

If it works out, you're gonna be working on this for

ten years.

So it's worth some real upfront time

to think we've a long term value in

the defensibility of the business.

Even though plans themselves are worthless,

to exercise a planning is really valuable and

totally missing in most startups today.

Long term thinking is so where,

anywhere, but especially in startups.

That it's a huge advantage if you do it.

Remember that the idea will expand and

become more ambitious as you go.

You certainly don't need to have everything figured out,

in a path from here to world domination.

But you really want a nice kernel to start with.

>> You want something that can develop in

interesting ways.

As you're thinking through ideas,

another thing that we see young founders get

wrong all the time, is that someday you need to

build a business that's difficult to replicate.

This is an important part of a good idea.

I wanna make this point again because it's

so important.

The idea should come first, and

the startup should come second.

Wait to start a startup, until you come up

with an idea you feel compelled to explore.

This is also the way to

chose between multiple ideas.

If you have several ideas that all seem pretty good,

work on the one that you think about most often when

you're not trying to think about work.

But we hear again and again from founders that they

wish they had waited to start a startup until they

came up with an idea that they really loved.

Another way of looking at this is that the best

companies are almost always mission oriented.

It's difficult to get large groups of people to

the extreme levels of focus and productivity that you

need for a startup to be successful,

unless the company feels like an important mission.

And it's usually really hard to get that without a great

founding idea.

A related advantage of mission oriented

ideas is that you yourself will be dedicated to them.

It takes years and

years, usually a decade to create a great startup.

If you don't love and

believe in what you're building,

you're likely to give up at some point along the way.

There's no way I know of to get through the pain of a

startup without belief that the mission really matters.

A lot of founders, especially students,

believe that their startup's only gonna take two or

three years and then after that they'll work on

what they're really passionate about.

That almost never works.

Good startups usually take ten years.

A third advantage of mission-oriented

companies is that people outside the company,

are more willing to help you.

You'll get more support on

a hard important project than a derivative one.

When it comes to starting startups,

in many ways it's easier to

start a hard startup than an easy startup.

This is one of those counter-intuitive things.

It takes people a long time to understand.

It's difficult to overstate how

important being mission-driven is, so

I wanna emphasize it one last time.

Derivative companies, companies that

copy an existing idea with very few new insights,

don't excite people and they don't compel the teams to

work hard enough to be successful.

Paul Graham is gonna talk about how to

get startup ideas next week.

It's something that a lot of founders struggle with but

it's something I believe you can get better with it,

better at with practice.

And it's definitely worth trying to get better at.

The hardest part about coming up

with great ideas is that

the best ideas often look terrible at the beginning.

The 13th search engine and

without all the features of web portal.

Most people thought that was pointless, search was done,

and anyway, it didn't matter that much,

Portal's where the value is at.

The tenth social network, and

limited only to college students with no money?

Also terrible.

MySpace had won, and

who wants college students as customers, or