Lecture 2 - How to Start a Startup - VoiceTube: Learn English through videos!

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Uh, before I jump into today's lecture,
I wanted to answer a few questions.
People emailed me saying they had questions about
the last lecture they ran out of time for.
So if you have a question about what we
covered last time um,
I am welcome to answer it now starting with you.
>> Can you use the mic feed?
>> Uh, it should be on.
Can you not hear me?
No?
Maybe you can ask them to turn on.
Ah, hopefully it will come on.
Anybody else?
Yes?
>> Ah, so one question that was submitted online was um,
how do I identify if a market has
a fast growth rate now, and also for the next ten years.
>> All right, so the question is
how you identify markets that are growing quickly.
Um, the good news about this is is this is one of the big
advantages students have.
Um, you should just trust your instincts on this.
Um, older people have to basically guess about
the technologies that are sort of,
that young people are using, right?
Because young people get older and
they become the dominant market.
Um, but you can just watch what you're doing,
what your friends are doing.
And um,
you will almost certainly have better instincts on
fast-growing markets than anybody older than you.
And so the answer to this is just trust your instincts.
Think about what you're using more,
think about what you're using, what you're
seeing people your age begin to start using.
Um, that will almost certainly be the future.
Maybe I can do one more question on
the last lecture before we start.
>> Um, this isn't really last lecture, but
another online is, how do you deal with burnout while
still being effective and remaining effective?
>> Yeah. Sure.
Um, so the question is
how you deal with burnout as a founder.
Uh, this, the answer to this is just that it sucks and
you keep going.
Um, unlike a student, where you can sort of throw up
your hands and say, you know what, I'm really burned out.
I'm just gonna like get bad grades this quarter.
Uh, one of the hard parts about running a start up
is that it's real life.
And um, you just have to get through it.
Uh, the canonical advice is like go
on vacation or whatever.
Um, that never works for founders.
It's sort of all consuming in this way.
It's very difficult to understand.
So what you do is you just keep going.
Um, you rely on people uh, it's like really important.
And founder depression is this serious thing.
And you need to have a support network.
Um, but the way through burnout is just to address
the challenges, address the things that are going wrong,
and you'll eventually feel better.
All right, so, last week we, or last lecture we
covered the idea and the product, um, and I want to
just emphasize that if you don't get those right,
none of the rest of this going to save you.
Um, today, we're gonna talk about how to hire ah, and
how to execute.
Hopefully you don't execute the people you hire.
Um.
Sometimes.
Uh, so, first, I wanna talk about co-founder.
Um, co-founder relationships are among the most
important in the entire company.
Um, and everyone says that you need to watch out for
tension brewing among co-founders, and
address them immediately, and that's all true.
And certainly in YC's case.
The number one cause of early death for
start ups is, is co-founder blow ups.
But for some reason a lot of treat choosing their
co-founder with even less importance than
they put on hiring.
Um, don't do this.
This is one of the most important decisions you
make in the life of your start up,
and you get treated as such.
And for some reason,
students are really bad at this.
They just pick someone,
they're like I wanna start a business,
you wanna start a business, let's start it,
start it together.
Um, there are these, like, co-founder dating things
where you're like hey, I'm looking for a co-founder.
We don't really know each other,
let's start a company.
And this is like crazy.
Um, you would never hire someone like this, and yet
people are willing to
choose their business partners this way.
Um, it's really, really bad.
And choosing a random co-founder or
choosing someone you don't have a long history with.
Choosing someone that you're not friends with.
So that when things are really going wrong, you have
this sort of past history to bind you together.
Um, usually ends up in disaster.
We had one YC batch where nine of about 75 companies
added on a random co-founder between when we
interviewed the companies and when they started,
and all nine of those teams fell apart in the next year.
Uh, the track record for founders that
don't already know each other is really bad.
Um, a good way to meet a co-founder is in college.
If you're not in college and
you don't know a co-founder, the next best thing I
think is to go work in an interesting company.
If you work at Facebook or Google or
something like that, um,
it's probably almost as co-founder Rich at Stanford.
It's better to have no co-founder uh,
than have a bad co-founder, but
it's still bad to be a solo founder.
Um, I was just looking at
the stats here before we started.
For the top, and
I may have missed one cause I was counting quickly, but
I think, but for the top 20 most valuable YC
companies um, all of them have at least two founders.
Uh, and we, we probably fund at a rate of something like
one out of ten solo teams.
Uh, so best of all,
founder you know, co-founder you know.
Um, better than that or not as good as that but
still okay, solo founder.
Random founder you meet.
Uh, again students do this for some reason.
Really, really bad.
Uh, so as you're thinking about co-founders and
people that could be good,
there's a question of what you're looking for, right?
And at YC we have this public phrase.
Um, and it's relentlessly resourceful.
And everyone's heard about it.
And I think that really is a very good description for
what you're looking for with co-founders.
Um, you definitely need
relentlessly resourceful co-founders.
Um, but there's a more colorful example that we
share at the YC kickoff.
Um, Paul Gram started using this, and
I've kept it going.
Um, so you're looking for
co-founders that need to be unflappable, tough.
They know what to do in every situation.
They act quickly.
They're decisive.
They're creative.
They're ready for anything.
Um, and it turns out that there's a model for
this in, in pop culture.
And it sounds really dumb, but
it's at least very memorable.
And we've told every class of YC this for
a long time, and I think it helps them.
Um, and that model is James Bond.
Um, and again it sounds crazy but it, it, uh,
it will at least stick in your memory and, and
you need someone that behaves like James Bond
more than you need someone that is you
know an expert in some particular domain.
As I mentioned earlier,
you really want to know your co-founders for
a while, ideally years.
This is true for early hires as well.
But incidentally, more people get this right for
early hires, than they do for co-founders.
Uh, so again, take advantage of school.
Um, in addition to relentlessly resourceful,
you want a tough and a calm co-founder.
Uh, there are all the obvious things like smart.
But everyone knows that you want a smart co-founder.
Uh, most people don't prioritize tough and
calm well enough.
Especially if you feel like you yourself aren't,
you need a co-founder who is.
Um, if you're not technical, and
hopefully most people in this room are,
you really want a technical co-founder.
There's this weird thing going on in
start ups right now where it's become popular to say,
like you know what?
We don't need technical founders,
we're gonna hire people,
We're just gonna be great managers.
Um, that doesn't work too well, in our experience.
In a software,
people really should be starting software companies.
Media people should be starting media companies.
Um, so and in the YC experience, two or
three co-founders seems to be about perfect.
Um, one obviously not great,
five really bad, four works sometimes, but uh, two or
three I think is what to target.
Okay, the second part of how to hire.
Um, try not to.
So one of the weird things that you'll notice if
you start a company is that everyone asks you
how many employees you have.
And this is the metric people use to sort of
judge how real your start up is and how cool you are.
Um, and if you say you have a high number of employees,
they're really impressed.
And if you say you have a low number of employees
then, then you sound like sort of this little joke.
Um, but actually it sucks to have a lot of employees and
you should be proud of how few employees you can have.
Lots of employees ends up with things like a high burn
rate, meaning that you're losing a lot of money every
month, complexity, tension, slow decision making.
The list goes on but it's nothing good.
So you want to, you want to be proud of how much you can
get done with a small number of employees.
Um, many of the best YC companies have had
phenomenally small number of employees for
the first year, sometimes none besides the founders.
Um, they really try to
stay small as long as they possibly can.
At the beginning, you should only hire when you
have the desperate need to.
Later you need to learn how to hire fast to scale up
the company.
But in the early days uh,
the goal should be not to hire, not too higher.
And one of the reasons this is so bad is that
the cost of getting a early hire wrong is really high.
Um, in fact a lot of the companies that I have been
very involved with that have had a very bad first hire
in the first three or
so employees never recover from it.
It just kills the company.
Um, Airbnb spent five months interviewing their first
employee before they hired someone.
And in their first year they only hired two people.
Um, before they hired a single person they,
they wrote down a list of the cultural values that
they wanted any Airbnb employee to have.
One of those was that you had to bleed Airbnb.
And if you didn't sort of agree to
that they just wouldn't hire you.
Um, as an example of how intense Brian Chesky is,
he's there being CEO.
Um, he use to ask people before he hired them at
Airbnb, if they would take the job if they got a
medical diagnosis that they got one year left to live.
Um, he wanted them to be that committed.
Later he decided that, that was like a little too crazy.
>> Um, and I think he relaxed it to ten years.
But last I heard, he still asks that question.
Um, but like, you know, these hires really matter.
These people are what go on to define your company.
And so you need people that believe in it almost as
much as you do.
And it sounds like a crazy thing to ask, but
he's gotten this culture of extremely dedicated people.
Um, that come together when the company faces a crisis.
Uh, and when the company faced a big crisis early on,
everyone in the company lived in the office, and
they shipped product everyday until
the crisis was over.
One of the remarkable observations about Airbnb is
if you talk to any of the first,
say 40 or 50 employees, they all
feel like they're apart of the founding of the company.
Uh, and this is really hard to get right and
this is really rare.
Um, but by having an extremely high bar and
hiring slowly and
making sure everyone believes in the mission,
you can get that.
Okay, so let's say, you know,
you've listened to the warning about not hiring and
now you absolutely have to.
When you're in this hiring mode, your job is, it should
be your number one priority to get the best people.
Just like when you are in product mode that is
your number one priority.
And when you are in fundraising mode,
fundraising's your number one priority.
Um, one thing that founders always estimate is how
hard it is to re recruit.
You know, you think you have this great idea and
everyone's going to come and
join, but that's not how it works.
To get the very best people they have a lot of
great options, right?
And so it can easily take a year to recruit someone.
It's this long process and you have to convince them
that your mission is the most important of
anything that they're looking at.
This is another case of why it's really important to
get the product right, before anything else.
The best people know that
they should join a rocket ship.
Um, by the way, that's my number one piece of advice.
If you're gonna join a start up, pick a rocket ship.
Um, pick a company that's already working.
Uh, and that the,
you know, not everyone yet realizes that.
But it's, you know,
you know cuz you're paying attention and
it's going to be huge.
And, and again you can usually identify these.
Um, but good people know this, right?
And so good people will wait and they want to see that
you're on this break out trajectory before they join.
One question that people asked online this morning
is, how much time you should be spending hiring.
The answer is either like 0 or 25%.
You're either not hiring at all, or
it's probably your single biggest block of time.
Um, in practice, like all these books on management or
whatever say that you
should spend 50% of your time hiring.
But the people that give that advice, it's rare for
them to even spend 10% themselves.
25% is still a huge amount of time.
Um, but that's really how much you should be doing
once you're in hiring mode.
Um, okay, so if you compromise and
hire someone mediocre, you will always regret it.
We always like to warn founders of this.
No one really feels it until they miss,
make the mistake the first time.
Um, but it can poison the culture.
Mediocre people at a big company cause some problems.
They don't usually kill the company.
A single mediocre hire in the first five will often,
in fact, kill a start up.
Uh, a friend of mine has a sign up
in the conference unit, he uses for interviews.
And he like positions the sign, so
the candidate is looking at it,
while they're interviewing.
And it says that mediocre engineers do not
build great companies.
Um, yeah.
That's true.
Um, it's really true.
You can get away with it, in a big company, right?
Cuz people just sort of like,
fall through the cracks.
But, but every person in a startup sets the tone.
Um, so if you compromise in the first, you know,
say five, ten hires, um, it might kill the company and
you should think about that for
everyone you hire like will I bet the future of this
company on the single hire um, and that's a tough bar.
At some point in life at the company when you're bigger,
you will compromise on a hire um,
there'll be some pressing deadline uh, or
something like that.
You will still regret it, um, but
this is the difference between theory and
practice, and we're gonna have later speakers talk
about what this, what to do when this happens.
But in the early days you just can't screw it up.
Um, sources of candidates,
this is another thing that students get wrong a lot.
Um, the best source by far for
hiring, is people that you already know, and
people that other employees in the company already know.
Most great companies, in tech have been built
by personal referrals, for the first at least 100
employees and often many more.
Um, most founders feel
awkward calling everyone good that they ever met.
And asking their employees to do the same.
But you'll notice that if you go work at Facebook or
Google, one of the things they do in your first few
weeks, is an HR person sits you down, and like beats out
of you every smart person you've ever met.
No matter how likely you
think you are to be able to recruit them.
Um, and these personal referrals really
are the trick to hiring.
So you have to
like go way beyond your comfort zone here.
Um, another tip is to look outside the valley.
It is brutally competitive to hire engineers here.
Um, but you probably know very good people living
elsewhere in the world that would love to work with you.
Another question that founders ask us
a lot about Is experience and how much that matters.
Um, the short version here,
is that it experience matters for some roles and
not others.
Um, when you're hiring sort of like you know,
someone that is gonna run a large organization of
your company, experience probably matters a lot.
Um, for most of the early hires you make in
a start up, experience doesn't matter very much uh,
and you should go for
aptitude and believe in what you're doing.
Most of the best hires that I ever made in my
entire life have never done that thing before.
Um, so it's really like is this a role where I
care about experience or not.
Most of the time you don't in the, in the early days.
Um, there are three things that I look for
when I hire people.
Um, are they smart?
Do they get things done?
Do I want to spend a lot of time around them?
And if I get an answer, if get, ended up with a yes for
all thee of these,
um I almost never regretted a hire.
It's almost always worked out.
You can learn a lot about all three of
these things from an interview.
But the very best way is by working together.
So ideally,
it's someone you've worked with in the past.
And in which case,
you probably don't even need an interview.
Um, if you haven't, then I think it's way
better to work with someone on a quick project for
a day or two before hiring them.
Um, you'll both learn a lot, they will too.
And most uh,
first time founders are very bad interviewers.
But very good at evaluating someone after
they've worked together.
So one of the pieces that we give advice,
one of the pieces of advice that we give at YC is,
try to work together on
a project rather than just doing an interview.
Um, if you are gonna interview, which
you'll probably do as well, you should ask specifically
about projects that someone has done in the past.
Um, you'll learn a lot more than you will with
brain teasers.
For some reason,
young technical founders love to ask brain teaser
questions rather than just ask what someone's done.
Really dig into projects people have worked on and
call references.
Ah, that is another thing that first time
founders like to skip.
Um, you want to call some people uh,
that these people have worked with in the past.
And then when you do,
you don't just want to ask like how was so and so.
Like you really want to dig in, like is this person in
the top 5% of people you've ever worked with?
What specifically did they do?
Would you hire them again?
Like why,
why, why aren't you trying to hire them again?
Um, you really have to press on,
on these reference calls.
Um, another thing that I've noticed from talking to
a lot of YC companies,
is that good communication skills tend to
correlate really well with hires that work out.
Um, I used to not pay attention to this.
We're gonna talk more about why communication is so
important in an early startup.
If someone is difficult to talk to, if
someone cannot communicate clearly uh, it's a real
problem in terms of their likelihood to work out.
Also for early employees you want people that have
somewhat of a risk taking attitude.
Uh, you, you generally get this or
they wouldn't be interested in a startup.
But now that startups are sort of more in fashion um,
you, you want people that actually sort of
like a little bit of risk.
If someone's choosing between like Mackenzie and
joining your startup, very unlikely that,
that person's going to work out at the startup.
Uh, you also want people who are maniacally determined.
And that is slightly different than
having a risk tolerant attitude, so
you really should be looking for both.
By the way, people are welcome to
interrupt me with questions, as stuff comes up.
There's a famous test from
Paul Graham called the Animal Test.
Um, and, and the idea here is that you should be able
to describe any employee as an animal at what they do.
Um, and I don't think that probably translates out of
English very well, but
um, you know, you need unstoppable people.
Uh, you want,
you want people that are just going to get it done.
Um, founders that end up
being really happy with their early hires.
Usually end up describing these people as the very
best in the world, at whatever they do.
Mark Zuckerberg once said uh,
that he tries to hire people, that A,
that he would spend time with socially and B,
that he'd be comfortable reporting to,
if the roles were reversed.
Um, this strikes me as a very good framework.
You don't have to be friends with everybody,
but you should at least enjoy working with them.
And if you can't have that,
you need to at least deeply respect them.
Um, but again, the,
if you don't wanna spend a lot of time around people,
uh, you should sort of trust your instincts on that.
While I'm on this topic of hiring uh,
I want to talk about employee equity.
Founders screw this up all the time.
Um, I think that as a rough guideline you should aim to
give 10% of the company to the first ten employees.
Um, they have to earn it over four years anyway.
And if they're successful,
they're gonna contribute way more than that.
Uh, they're gonna increase the value of
the company by way more than that.
Um, and if not, then they won't be around anyway.
So for whatever reason founders are usually
very stingy with equity to employees and
very generous with equity to investors.
And I think this is totally backwards, um,
I think this is one of the things founders screw up
the most often.
You know, employees will only add more
value over time.
Investors sort of like write the check, and
then despite a lot of big promises,
don't usually do that much.
Sometimes they do.
Um, but, but your employees are really the ones that
build the company over years and years.
So I believe in like fighting with investors to
reduce the amount of equity they get.
Um, and then being as gen,
generous as you possibly can with employees.
Um, the YC companies that have done this well,
the YC companies that have been super generous with
equity to early employees in general are the most
succesful ones that we've funded.
Um, all right.
So one thing that founders forget is that after they
ah, after that they hire employees,
they have to retain them.
I'm not gonna go into a huge amount of detail here,
cuz we're gonna have a full lecture on this later.
Um, but I do wanna talk about it a little bit.
Because founders get this wrong so often.
Um, you have to make
sure that your employees are happy and feel valued.
This is one of
the reasons that big equity grants are important.
Um, people in the excitement of
joining a startup don't think about it much.
But if they come in day after day, year after year,
um if they feel like they've been treated unfairly,
that will really start to grate on them,
uh, and resentment will build.
But more than that,
learning just a little bit of management skill,
which first time CEOs are usually terrible at,
uh, goes a long way.
Um, one of the speakers at YC this summer, uh, who,
who is not extremely successful.
But struggled early on and
had his team turn over a few times.
Someone asked him what his biggest learning was.
And he said that it turns out you shouldn't tell your
employees they're fucking up every day
unless you'd like them all to leave because they will.
>> Laugh.
>> Um, but as a founder this is
this like very natural instinct, right?
You think you can do everything the best?
And, it's easy to
tell people when they're not doing it well.
So, learning just a little bit here will
prevent this like massive team churn.
It also doesn't come naturally to
most founders to really praise their team.
Um, it took me a while to learn this too.
You have to let your team get all the credit for
everything good that happens, and
you take responsibility for the bad stuff.
You have to not micromanage.
You have to like continually give people new areas of
responsibility.
These are not the things that
most founders think about.
Um, I think the best thing you can do is be aware that
as a first time founder, you are likely to be a very bad
manager and try to overcompensate for that.
Uh, Dan Pink talks about these three things that
motivate people to do great work, autonomy, autonomy,
mastery and purpose.
Um, I never thought about that when I was running my
company, but I've thought about it since.
And I think that's actually right, and
I think it's worth trying to think about that.
Um, it also took me a while to learn to do
things like one and ones and give clear feedback.
All of these things that first time CEOs just don't
do, uh, until they get burned a few times.
But maybe, maybe I can save you from doing that.
All right.
And the last part on the team section uh,
is about firing people when it's not working.
Um, no matter what I say here,
this is not gonna prevent anyone from doing it wrong.
And the reason is that firing people is one of
the worst parts of running a company.
Um, actually in my own experience I
think it is the worst.
Uh, every first time founder waits too long.
Everyone hopes that an employee will turn around.
But the right answer is to
fire fast when it's not working out.
Um, It's better for the company.
It's also better for the employee.
But it's so painful and so
awful that everyone gets it wrong the first few times.
Um, in addition to firing people who
are doing bad at their job.
You also wanna fire people who A, create an office
politics, and B, who were persistently negative.
Um, the rest of the company is always aware
of employees doing things like this.
And it's just this huge drag,
it's completely toxic to the company.
Ah, again, this is an example of something that
might work okay in a big company,
although I'm still skeptical.
But will kill a startup.
So I think you need to watch out for
people that are, yes?
>> How do you balance firing people fast, and
making your other employees feel like
they're secure even if they screw up sometimes?
Cuz you don't want them to
feel like they're out the door on the first mistake.
>> Yeah, sure.
So the question is how do you fi,
balance firing people fast and
making the early employees feel secure?
Um, the answer is the, when an employee is not working,
it's not like they screw up once or twice.
Um, anyone will screw up once or
twice, or more times than that.
Ah, and, you know, you should be like very loving,
not take it out on them.
Like, be a teamwork together.
Ah, if someone is getting every decision wrong,
that's when you need to act.
And at that point,
it'll, it'll be painfully aware to everyone.
It's not a case of the few screw ups.
It's a case where every time someone does something you
would've done the opposite yourself.
You don't get to make their decisions, but
you do get to choose the decision makers.
And if someone's doing everything wrong uh,
just like a consistent thing over like a period of
many weeks or a month.
You'll be aware of it.
This is one of those cases where in theory it sounds
complicated to be sure what you're talking about.
And in practice there's almost never any doubt.
It's the difference between someone making one or two
mistakes and just constantly screwing everything up, or
causing problems, or making everyone unhappy is,
is painfully obvious the first time you see it.
Yes?
>> When should cofounders decide on the equity split?
>> Great question, when should cofounders decide on
the equity split?
Uh, for some reason, I've never really been sure why
this is, a lot of founders, a lot of cofounders like to
ah, leave this off for a very long time.
You know, they'll even
sign the incorporation documents in some crazy way,
so that they can wait to have this discussion.
This is not a discussion that gets easier with time.
Um, you want to set this uh, ideally you
know very soon after you start working together.
Um, and it should be near equal.
Um, if you're not willing to give someone,
your cofounder, you know,
like an equal share of the equity.
Uh, I think that should make you think hard
about whether or not you want them as a cofounder.
Um, but in any case,
you should try to have the ink dry on this before
the company gets too far along.
Like certainly in the first number of weeks.
Yes? >> Inexperience can be
okay uh, but then how do you know if it's gonna be
crippling and you fire them?
That way >> Um,
so the question is I said that inexperience is okay.
Um, how do you know if that's going to,
you know, I someone is going to scale pass, not scale up
to a roll as things go on and later become crippling.
Um, people that are really smart, and
they can learn new things can almost always find
a role in the company as time goes on.
You may can move them into something else,
something other than where they started.
Um, you know, it may be that you hire someone to
lead the engineering team that, over time,
can't scale as you get up to 50 people.
And you give him a different role.
Um, really good people, though,
can almost always find some great place in the company.
I have not seen that be a problem too often.
>> What if your relationship with your founder or
founders breaks down over time and
you're ready to split equity and everything?
What's the best way to >> All
right, so the question is, what happens when your
relationship with your co-founder falls apart.
Um, we're gonna have a session on mechanics.
At, near the end of the course.
But here's the most important thing that
founders screw up.
Which is every foun, every cofounder of,
you yourself, of course, has to have vesting.
Um, basically what you're doing with
cofounder vesting is you're
pre-negotiating what happens if one of you leaves.
And so the normal stance on this in Silicon Valley
is that it takes four years.
Let's say you split the equity 50 50?
It takes four years to earn all of that.
Um, and the clock doesn't start until one year in.
So if you leave after one year,
you keep 25% of the equity.
If you leave after two years, 50 and
on and on like that.
Um, if you don't do that and if you have a huge fallout
and one founder leaves early on with half the company uh,
you have uh, like this dead weight uh, of the uh,
on your equity table.
And it's very hard to get investors to fund you or
to do anything else.
So number one piece of advice to prevent that
is to have vesting on the equity.
Uh, we pretty much won't fund a company now,
where the founders don't have vested equity
vesting equity, cuz it's just that bad.
The other thing to do is as soon as problems come up
in the relationship between the cofounders,
which happens to some degree in every company.
Um, talk about it early,
don't let it just sit off there and fester.
If you have to choose between hiring an employee
that's not ideal and losing your customer, you lose one
of the particular working >> If you have to choose
between hiring a suboptimal employee and losing
your customers to your competitor what do you do?
Um, if it would be one of the first five,
say employees of the company.
Uh, I would lose those customers.
Um, I just,
I think the damage that it does to the company.
Um, you, you know, you don't wanna, it's better to lose
some customers than kill the company.
Um, later on I might have a slightly different opinion,
but it's really hard to say in the general case.
How about one more question, and I'll keep going, yes?
>> Uh, what's your experience with cofounders
who aren't working uh, in the same location?
>> I'm gonna get to that later.
The question is what about cofounders that are not
working in the same location.
>> Um, don't do it.
I am skeptical of remote teams in general.
But in the early days of a startup where
communication and speed outweigh everything else.
Um, for whatever reason, video conferencing or
calls just don't work that well.
The data on this is look at the say, like,
30 most successful software startups of all time.
And try to point to a single example
where the cofounders were in different locations.
It's really, really tough.
Um, all right.
We'll skip a little bit of this.
All right.
So, now we're gonna talk about execution.
Um, execution for most founders is
not the more fun part of starting a company.
But it is often the most critical.
Um, most people that start a company think that they
are signing up to have this brilliant idea.
And, you know, then they're just going to be,
like, be on magazine covers and go to parties.
>> But really what it's about more than
anything else, what, what being a founder means is, is
signing up for this year's long grind on execution, and
you can't outsource this.
Um, the way to have a company that executes well
is to execute well yourself.
Everything in startup gets modeled after the founders.
Whatever the founders do becomes the culture.
So if you want a culture where people work hard and
pay attention to detail and focus on the customer and
are frugal um,
you have to do it yourself there is no other way.
You cannot hire a COO and have them, you know,
do this while you go off to conferences.
The company just needs to see you as
like this maniacal execution machine.
As I said in the first lecture,
there's like a hundred times at least more people with
great ideas.
Than people that are willing to put in the effort,
um, to execute them well.
Ideas by themselves are not worth anything.
Only executing well is what, what adds value,
or what creates value.
A big part of execution is just putting in the effort.
Um, but there is a lot you can learn about how to
be good at it and so we're gonna have I
think three classes that just talk about this.
Uh, so the CEO, people have asked me a bunch of
times like the jobs of the start up CEO.
And there are probably more than five but, you know,
here are five that come up a lot in the early days.
Um, the first four,
I think everyone thinks of as CEO jobs.
Set the vision.
Raise money.
Evangelize the company to people you're trying to
recruit.
Existing employees, partners, press,
customers, everybody.
Hire and manage the team.
Um, but the fifth one is setting the execution bar,
and this is not something that
most founders get excited about.
Probably think about themselves doing that I
think is actually one of the critical CEO roles.
And no one but the CEO can do this.
Um execution gets divided into two, two key questions.
One can you figure out what to do?
And two can you get it done?
Um so I wanna talk about two parts of getting it done.
Assuming that you've already figured out what to do.
Um, and those are focus and intensity.
Ah, so, so focus is critical.
Um, one of my favorite questions to ask founders
is what they're spending their time and money on.
Um, this reveals almost everything,
about what founders think is important.
One of the hardest parts about being a founder.
Is it there are 100 important
things competing for your attention every day.
Um, and you have to identify the right two or three, work
on those and then ignore or delegate or defer the rest.
And a lot of these things that,
that founders think are really important, you know.
Interviewing a lot of different law firms,
going to conferences, recruiting advisors,
whatever, they just don't matter, right?
And what really does matter, varies with time but
it's an important piece of May Day advice.
You need to figure out what the two or
three most important things are and then just do those.
And you can only have two or three things every day,
because everything else will just come at you.
You know fires of the day, and
if you don't get really good at setting what these two or
three priorities are every day.
Um, you'll never be great at actually getting stuff done.
This is really hard for founders right.
Founders are people that get
excited by starting new things.
Unfortunately, the trick to great execution is to
say no a lot.
You know, you're saying no 97 times out of 100,
um, and most founders find that they have to
make a very conscious effort to do this.
Most startups are not nearly focused enough.
They work really hard, maybe, but
they don't work hard on the right things.
And you'll still fail.
Um, one of the great and
terrible things about starting a startup is that
you get no credit for trying.
You only get points when you
make something that the market wants.
So if you work really hard on the wrong things.
Uh, no one will care.
So then there's this question of how do
you figure out what to focus on each day?
And this is where it's really important to
have goals.
Most good founders that I know uh,
at any given time have a small number of
overarching goals for the company.
Everybody in the company knows.
Could be things like ship a product by this date.
You know, maintain this growth rate,
get this certain engagement rate, hire for
these key roles, get this deal done.
But anybody could tell you in the company every week
what are our, what are our key goals?
And then everybody executes based off of that.
The founder really does set the focus.
Um, whatever the founder cares about,
whatever the founders think are the key goals.
Um, that's going to
be what the whole company focuses on.
And, and the best founders repeat these goals over and
over far more often than they
think they should need to.
They put em up on the walls,
they talk about them in one on one's,
all hands meeting every week.
Um, but it keeps the company focused.
One of the keys to focus on why I said I think.
Co-founders in different places struggle is that
you can't be focused without really great communication.
Um, even if you only have say four or
five people in a company.
A small communication breakdown is enough for
everybody to be working on slightly different things.
Um, and then you lose focus and
the company just scrambles.
I'm going to talk about this a little bit more later.
Um, but growth and
momentum are something you can never lose focus on.
Uh, growth and momentum are what a start up lives on.
Uh, and you always have to focus on maintaining these.
You should always know how you
are doing against your metrics.
You should have a weekly review meeting every
week and you should be
extremely suspicious if you're ever talking about.
We're not focused on growth right now,
we're not growing that well right now, but
we're doing this other thing, you know.
We don't have, we don't have a timeline for when we're
gonna ship this cuz were focused on this other thing.
We're doing a rebrand,
whatever, almost always a disaster.
So you wanna have the right metrics and
you want to be focused on growing those metrics and
having momentum.
Um, don't, don't let the company get distracted or
excited by other things.
Um, a common mistake is that company's gets excited by
their own PR.
It's really easy to get PR with no results and
it feels like your actually really cool.
But in a year, you'll still have nothing, and
at that point you won't be cool anymore.
And you'll just be
talking about these articles from a year ago.
That oh, you know, like these Standford students
start this new startup, it's gonna be the next big thing.
And now you have nothing, and that sucks.
Um, and then,
as I mentioned already, be in the same space.
Ah, this is like,
I think this is pretty much a non starter.
Remote co-founding teams is just really really hard.
It slows down the cycle time more
than anybody ever thinks it's going to.
The other piece, besides focus for
execution is intensity.
Um, startups only work at a fairly intense level.
Um, a friend of mine says that the secret to startups
is extreme focus and extreme dedication.
You know you can like a have a startup in one
other thing, you can have a startup in a family but
you probably can't have many other hobbies.
Startups are not the best choice for
work life balance.
And that's sort of just, the sad reality.
Um, there's a lot of great things about a startup, but
this is not one of them.
Um, they are all consuming in
a way that is difficult to explain.
You, you generally need to
be willing to outwork your competitors.
The good news here, uh, why that's hard to see um, is
that a small amount of extra work on the right thing.
Makes a huge difference.
One example that I like to give is thinking about
the viral coefficient for a consumer web product.
Um, how many users how many new users each
existing user brings in.
If it's .99 the company will
eventually flatline and then die.
Uh, and if it's 1.01 you'll be in this happy place of
exponential growth forever.
Um, so this is just one concrete example of where
a tiny bit of extra work is the difference between
success and failure.
And, when we talk to successful founders they
tell stories like this all the time.
You know, just outworking their competitors by
a little bit, was what made them successful.
Um, so you have to be really intense, you know,
this only comes from the CEO,
this only comes from the founders.
Uh, one of the biggest advantages that
startups have is execution speed and
you have to have this relentless operating rhythm.
Um, Facebook has this famous that says, move fast and
break things.
Um, but at the same time,
they manage to be obsessed with quality.
And this is why it's hard.
It's easy to move fast or be obsessed with quality.
Um, the trick is
that you have to do both at a start up.
Um, you need to have a culture where
people have very high quality standards for
everything the company does but still move quickly.
Ah, Apple Facebook and
Google have all done this extremely well.
It's not just about the product um,
it's about everything they do.
They move fast and they break things and
they're frugal in the right places.
But they care about quality everywhere.
Um, you know you don't buy people shitty computers if
you don't want them to write shitty code.
You really have to you do have to
set a quality bar that runs through the entire company.
Related to this is that you have to be decisive.
Um, indecisiveness is a start up killer.
Mediocre founders spend a lot of time talking about
grand plans but they never quite make this decision.
You know, they're, they're talking about well I
could do this thing that sounds great or
I could do this other thing.
And they keep going back and forth and they don't act.
Now what you actually need is this bias towards action.
Um, the best founders work on things that seem small,
but they move really quickly, uh,
they get things done really quickly.
Every time you talk to the best founders, they,
they've got new things done.
In fact, this is the one thing that we learned
best predicts success of founders in YC.
If every time we talk to a team they've gotten new
things done that's the best predictor we have of
the company will go on to be successful.
Part of this is that you can do huge things by,
in incremental pieces.
If you just keep knocking down
small chunks one at a time.
In an year you look back you've done
this amazing thing.
On the other hand if you disappear for an year.
And you expect to come back with something amazing all
at once it usually never happens.
You have to pick these right sized projects.
You know even if you're building this
crazy synthetic biology company.
Um, most people would say well I have to go away for
an year, I can't do this incrementally.
There is almost always a way to break it down,
into smaller projects.
Um, so speed is this huge premium, right?
The, the best founders usually respond to email,
the most quickly.
Um, they make decisions the most quickly.
They're generally quick in all these different ways.
Um, and they just have this do
whatever it takes attitude.
They also show up a lot.
Um, they come to you know, they come to
meetings they come in they meet us in person.
Um, one piece of advice uh, that I have.
It's always worked for me is that they get on planes in
marginal situations.
Um, how we doing on time?
I'll tell a quick story here.
Uh, when I was running my own company um,
we found out that we were about to lose a deal.
And it was sort of this, this critical deal from
the first big customer in the space.
Uh, and it was gonna go to this company that had
been around for years before we were.
Um, and they had us, like, all locked up.
So we called. We said,
hey we have this better product.
You gotta meet with us.
They said, you know what.
We're signing this deal tomorrow.
Sorry.
Um, we drove to the airport.
We got on a plane.
Um, we were at their office at 6AM the next morning.
We just sat there.
They told us to go away.
We just kept sitting there.
Um, finally one of the junior guys decided to
meet with us.
Um, finally after that,
one of the senior guys decided to meet with us.
They ended up ripping up the contract and
sell their company.
Um, and we closed the deal
with them about a week later.
Uh, and I'm sure that had we not gotten on a plane,
had we not shown up in person,
that would not have worked out.
Um, and so you just sort of like, you show up,
you do these things, you know.
Uh, it's, when people say get on planes in marginal
situations they usually mean it.
Uh, well they don't usually mean it literally but
I think it's actually good literal advice.
Um, all right.
>> Six minutes, so.
>> I'll skip that part then.
So, I mentioned this momentum and growth earlier.
Uh, once more, that momentum and
growth are the lifeblood of startups.
Um, this is the,
probably in the top three secrets to executing well.
You want a company to be winning all the time.
If you ever take your foot off the gas pedal,
things will spiral out of control, snowball downwards.
Um, a winning team feels good and keeps winning.
A team that hasn't won in a while gets demotivated and
keeps losing.
So always keep momentum is this prime directive for
managing a start up.
Um, if I can only tell founders one thing
about how to, how to run a company, it would be this.
For most start,
software startups, this translates to keep growing.
For hardware startups it translates to don't let
your ship date slip.
Um, this is what we tell people during YC,
and they usually listen, everything is good.
Um, what happens after the end of YC is
that they get distracted on other things.
And then growth slows down.
And somehow after that happens,
people start getting unhappy and quitting and
then everything falls apart.
It's hard to figure out
a growth engine because most companies grow in new ways.
Um, but there is this thing about if you
built a good product, it will grow.
And so getting this good, this product right at the
beginning is the best way to not lose momentum later.
If you do lose momentum,
most founders try to get it back in the wrong way.
They give these long speeches about vision for
the company and
they try to rally the troops with, with speeches.
Um, but employees in a company where momentum has
sagged don't wanna hear that.
Um, you have to save the vision speeches for
when the company's winning.
When you're not winning,
you just have to get momentum back in small wins.
Um, a board member of mine used to say that sales fix
everything in a startup, and that is really true.
So you figure out where you can get these small wins,
and you get that done.
And then you'll be amazed how
all the other problems in a startup disappear.
Uh, another thing that you'll notice if you
have momentum sag is that
everyone starts disagreeing about what to do.
Fights come out when a company loses momentum.
Uh, and so a framework for that that I think works is.
That when there's disagreement among the team
about what to do, then you ask your users and
you do whatever your users tell you.
And you have to remind people like, hey, stuffs not
working right now we don't actually hate each other.
Um, we just need to get back on track and
everything will work.
And if you just call it out, if you just acknowledge that
um, you'll find that things will get way better.
To use a Facebook example again,
when Facebook's growth slowed in 2008
Mark instituted a growth group.
They worked on very small things to
make Facebook real faster.
Uh, all of these things by themselves seemed really
small, but they got the, the curve of Facebook back up.
Um, it quickly became the most
prestigious group there.
Um, Marcus said that it's been one of
Facebook's best innovations.
Um, according to friends of mine that worked at
Facebook at the time.
It really turned around the dynamic of the company.
And went from this thing where everyone was
feeling bad and
the momentum was gone, back to a place that was winning.
So a good way to to keep momentum is to
establish an operating rhythm in the company early.
Where you ship product and
lauch new features on this regular basis.
Uh, where you're reviewing metrics you know,
every week with the entire company.
Uh, this is actually one of
the best things your board can do for you.
Um, boards add value to
business strategy only rarely.
Um, but
very frequently, you can use them as a forcing function,
to get the company to care about metrics,
and milestones.
Um, one thing that often disrupts momentum and
really shouldn't is competitors.
Competitors making noise in the press, I think,
probably crushes a company's momentum more often than
any other external factor.
Um, so here's a good rule of thumb.
Don't worry about a competitor at all.
Um, until they're actually leaving you with a real,
shipped product.
Uh, press releases are easier to write than code,
um, and that is still easier than making a great product.
So remind your company of this, and don't, this is
sort of a founders rule, is not to let the company get
down because of the competitors and the press.
Um, this great quote from Henry Ford that I love.
The competitor to be feared is
one who never bothers about you at all.
But goes on making his own
business better all the time.
These are almost never the companies that put out
a lot of press releases, and they bum people out.
Should we move on to this section...
You know what, we'll cover this in a later lecture.
I will talk about, uh,
finance dealmaking and distribution.
Are there any questions?
Okay, so on Tuesday, Paul Graham is going to speak.
See you then.
Thank you.