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  • Welcome.

  • 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

  • a way to stay on strangers' couches?

  • That just sounds terrible all around.

  • These all sounded really bad,

  • but they turned out to be good.

  • If they had sounded really good,

  • there would have been too many people working on them.

  • As Peter Tills discussed in the fifth class,

  • you want an idea that turns into a monopoly, but

  • you can't get a monopoly in a big market right away.

  • Too much competition for that.

  • You have to find a small market in which you can get

  • a monopoly, and then quickly expand.

  • This is why some great startup ideas look

  • really bad at the beginning.

  • It's good if you can say something like, today only

  • the small subset of users are going to use my product.

  • But I'm gonna get all of them.

  • And in the future,

  • almost everyone will use my product.

  • >> Here's the thing that's gonna come up a lot,

  • you need conviction in your own beliefs, and

  • the willingness to ignore others nay saying.

  • The hard part is that this is a very fine line.

  • There's right on one side of it, and crazy on the other.

  • But keep in mind that if you do come up with

  • a great idea, most people are going to think it's bad.

  • You should be happy about that.

  • It means they won't compete with you.

  • This is also a reason why it's

  • not usually dangerous to tell people about your idea.

  • The truly good ideas don't sound like

  • they're worth stealing.

  • You want an idea about which you can say,

  • I know it sounds like a bad idea.

  • But hear specifically why it's actually a great one.

  • You wanna sound crazy, but you wanna actually be right.

  • And you want an idea that not many

  • other people are working on.

  • And it's okay if it doesn't sound big at first.

  • Common mistake among founders,

  • especially first time founders,

  • is they think that the first version of their product,

  • the first version of their idea,

  • needs to sound really big.

  • But it doesn't.

  • It needs to take over a small,

  • specific market and expand from there.

  • That's how most great companies have started.

  • Unpopular but right is what you're going for.

  • You want something that sounds like a bad idea, but

  • is a good idea.

  • You also really wanna take the time to

  • think about how the market's going to evolve.

  • You need a market that's going to be big in

  • ten years.

  • Most investors are obsessed with the market size today,

  • and they don't think at all about how the market is

  • going to evolve.

  • In fact, I think this is one of the biggest

  • systemic mistakes that investors make.

  • They think about the growth of the startup itself,

  • they don't think about the growth of the market.

  • I care much more about the growth rate of

  • the market than it's current size.

  • And I also care if

  • there's any reason that it's gonna top out.

  • You should think about this.

  • I'd prefer to invest in

  • a company that's going after a small but

  • rapidly growing market than a big but slow growing one.

  • One of the big advantages of these sorts of markets um,

  • these small but rapidly growing markets, is that

  • customers are usually pretty desperate for a solution.

  • And they'll put, put up with an imperfect but

  • rapidly improving product.

  • And a big advantage of being a student, one of

  • the two biggest advantages is that you probably have

  • better intuition about which markets are likely to

  • start growing rapidly than older people do.

  • Another thing that students usually don't understand, or

  • at least takes a while you cannot create a market that

  • doesn't want to exist.

  • You can basically change everything in

  • a startup but the market.

  • So you should actually do some thinking, to be sure or

  • at least as sure as you can be, that the market your

  • going after is going to grow and be there.

  • There are a lot of different ways to

  • talk about the right kind of market.

  • For example, surfing someone else's wave or

  • stepping into an up elevator or being part of a movement.

  • But all of this is just a way of saying you want

  • a market that's going to grow really quickly.

  • It may seem small today.

  • It may be small today.

  • But you know, and

  • other people don't that it's gonna grow really fast.

  • So think about where this is happening in the world.

  • You need this sort of

  • a tail wind to make a startup successful.

  • The exciting thing is there are probably more of

  • these tail winds now than ever before.

  • As Mark Andreessen says,

  • software is eating the world.

  • It's just everywhere.

  • There are like, so many great ideas out there and

  • you just have to pick one, and

  • find one that you really care about.

  • Another version of this,

  • that would, gets down to the same idea,

  • is Sequoia's famous question.

  • Why now?

  • Why is this the perfect time for this particular idea and

  • to start this particular company?

  • Why couldn't it have been done two years ago?

  • And why will two years in the future be too late?

  • For the most successful startups we've been

  • involved with, they've all had a great idea,

  • great answer to this question.

  • And if you don't, you should be at

  • least somewhat suspicious about it.

  • In general, it's best if

  • you're building something that you yourself need.

  • You'll understand it much better than if you have to

  • understand it by talking to

  • a customer to build the very first version.

  • If you don't know it yourself and

  • you're building something that someone else needs,

  • realize that you're at a big disadvantage and get very,

  • very close to your customers.

  • Try to work in their office if you can.

  • And if not, talk to them multiple times a day.

  • Another somewhat counter-intuitive thing

  • about good start up ideas,

  • is that they're almost always very easy to explain,

  • and very easy to understand.

  • If it takes more than a sentence to

  • explain what you're doing um,

  • it's almost always a sign that it's too complicated.

  • It should be a clearly articulate,

  • articulated vision with a small number of words.

  • And the best ideas are usually either,

  • very different from existing companies in one

  • important way.

  • Like Google being a search engine that worked

  • just really well and none of the other stuff of

  • the portals or totally new, like Space X.

  • Any company that's a clone of

  • something else that already exists with some small or

  • made up differentiator,

  • like we're gonna be x beautiful design or

  • we're gonna be y for people that like red wine instead.

  • That usually fails.

  • So as I mentioned one of the great things about being

  • a student is you

  • have a very good perspective on new technology.

  • And learning to get good at having new

  • ideas takes a while.

  • So start working on that right now.

  • That's one thing we hear from people all the time,

  • that they wish they had

  • done more when they were a student.

  • The other is meeting potential co-founders.

  • You have no idea how good of an environment you are in

  • right now for meeting people that you

  • can start a company with down the road.

  • And the one thing that we

  • always tell college students, is more

  • important than starting any particular startup

  • is getting to know a lot of potential co-founders.

  • So I want to finish this section of my talk

  • with a quote from 50 Cent.

  • This is from when he was asked about vitamin water.

  • I won't read it, its up there.

  • But it's about the importance of

  • thinking about what customers want, and

  • thinking about the demands of the market.

  • Most people don't do this,

  • most students especially don't do this.

  • If you can just do this one thing, if you can just

  • learn to think about the market first, you will have

  • a big leg up on most people starting startups.

  • All right, and this is something.

  • This is probably the thing that we

  • see wrong with Y Combinator apps most frequently, is

  • that people have not thought about the market first.

  • And what people want first.

  • So for the next section,

  • I'm gonna talk about building a great product.

  • And here again,

  • I'm gonna use a very broad definition of product.

  • It includes customer support and

  • copyright explaining the product.

  • Anything involved in your customer's interaction with

  • what you built for them.

  • To build a really great company, you first have to

  • turn a great idea into a great product.

  • This is really hard, but it's crucially important,

  • and fortunately it's pretty fun.

  • Although great products are always new to the world and

  • it's hard to give you advice about what to build,

  • there are enough commonalities that we

  • can give you a lot of advice about how to build it.

  • One of the most important tasks for a founder is to

  • make sure that the company builds a great product.

  • Until you've built a great product,

  • almost nothing else matters.

  • When really successful startup founders tell

  • the story of their early days.

  • It's almost always sitting in front of the computer,

  • working on their product or talking to their customers.

  • That's pretty much all the time.

  • They do very little else, and

  • you should be very skeptical if your time allocation is

  • much different.

  • Most other problems that founders are trying to

  • solve, raising money, getting more press,

  • hiring, business development, et cetera.

  • These are significantly easier when you

  • have a great product.

  • It's really important to take care of that first.

  • Step 1, is to build something that users love.

  • At YC, we tell founders to work on their product,

  • talk to users, exercise eat and

  • sleep and very little else.

  • All the other stuff I just mentioned, PR conferences,

  • recruiting advisers, doing partnerships,

  • you should ignore all of that and

  • just build a product.

  • And get it as good as possible by

  • talking to your users.

  • Your job is to build something that users love.

  • Very few companies that go on to be

  • super successful get there without first doing this.

  • A lot of good on paper startups fail because they

  • merely make something that people like.

  • Making something that people want,

  • but only a medium amount is a great way to fail and

  • not understand why you're failing.

  • So these are the two jobs.

  • Something that we say at

  • YC a lot is that it's better to build a small number,

  • it's better to build something that a small

  • number of users love than a large number of users like.

  • Of course, it'd be best to

  • build something that a small number of users love.

  • But opportunities to do that for V1 are rare, and

  • they're usually not available to startups.

  • So in practice,

  • you end up choosing either the grey or the orange.

  • You make something that a lot of users like a little

  • bit, or something that a small number of users,

  • like, love a lot.

  • And this is a very important piece of advice.

  • Build something that a small number of users love.

  • It's much easier to expand from something that

  • a small number of

  • people love to something that a lot of people love.

  • Than from something that a lot of

  • people like to a lot of people love.

  • If you get this right,

  • you can get a lot of other things wrong.

  • If you don't get this right,

  • you can get everything else right,

  • and you'll probably still fail.

  • So when you start on a startup, this is the only

  • thing you need to care about until it's working.

  • >> Excuse me, can you explain that again?

  • >> Sure. So you have

  • a choice in a startup.

  • The best thing of all worlds would be to

  • build a product that a lot of people will really love.

  • In practice you

  • can't usually do that because of big company.

  • If there's an opportunity like that, Google or

  • Facebook will do it.

  • So there's like a limit to the area under the curve

  • of what you can build and you can either build

  • something that lot of users like a little bit or you can

  • build something that a small number of users love a lot.

  • And, like, the total amount of love is the same,

  • it's just a question of how it's distributed.

  • And there's like this law of conversation of

  • how much happiness you can put into the world

  • with the first product of a startup.

  • And so startups always struggle with which of

  • those two they should go.

  • And they seem equal,

  • right, cuz the area under the curve is the same.

  • But we've seen this time and again that they're not.

  • And that it's so much easier to expand.

  • Once you've got something that some people love,

  • you can expand that

  • something that a lot of other people love.

  • But if you only get ambivalence or

  • sort of like weak enthusiasm.

  • And then try to expand that,

  • you'll never get up to a lot of people loving it.

  • So the advice is, uh, find a small group of users and

  • make them really love what you're doing.

  • Does that make sense?

  • All right.

  • I'm, I'm, one way that you know when this is

  • working is that you'll get growth by word of mouth.

  • If you make something people love

  • people will tell their friends about it.

  • This works for consumer products and

  • enterprise products, as well.

  • When people really love something,

  • they tell their friends about it and

  • you'll see organic growth.

  • If you find yourself talking about how it's okay that

  • you're not growing because there's a big partnership

  • that's gonna come save you or something like that,

  • it's almost always a sign of real trouble.

  • Sales and marketing are really important, and

  • we're gonna have two classes on them later.

  • But if you don't have some early organic growth,

  • then your product probably isn't good enough yet.

  • A great product is the secret to

  • long term growth hacking.

  • You should get

  • that right before you worry about anything else.

  • It doesn't get easier to put off making a great product.

  • If you try to build a growth machine before you

  • have a product that some people really love,

  • you're almost certainly gonna waste your time.

  • Breakout companies almost always have a product

  • that's so good that it grows by word of mouth.

  • Over the long run great products win.

  • Don't worry about your competitors raising a lot of

  • money and what they may do in the future.

  • They probably aren't very good anyway.

  • Very few startups die from competition.

  • Most die because they themselves fail to

  • make something users love.

  • They spend their time on other things.

  • So worry about this above all else.

  • Another piece of advice to make something that

  • users love is to start with something simple.

  • It's much, much easier to make a great product if

  • you have something simple.

  • Even if your eventual plans are super complex, and

  • hopefully they are,

  • you can almost always start with a smaller subset of

  • the problem than whatever you think is the smallest.

  • And it's hard to build a great product.

  • So you wanna start with as

  • little surface area as possible.

  • Think about the really successful companies and

  • what they started with.

  • Think about products that you really love.

  • They're generally incredibly simple to use and

  • especially to get started using.

  • The first version of

  • Facebook was almost comically simple.

  • The first version of Google was just an ugly

  • webpage with a textbox and two buttons but it returned

  • the best results, and that's why users loved it.

  • The iPhone is far simpler to

  • use than any smartphone that ever came before it and

  • it was the first one that people really loved.

  • Another reason that simple is good,

  • is because it forces you to do one thing extremely well.

  • And you have to do that to make

  • something that people love.

  • The word fanatical comes up again and

  • again when you listen to successful founders talk

  • about how they think about their product.

  • Founders talk about being fanatical in the way

  • they care about the quality of the small details.

  • Fanatical in getting the copy that they use to

  • explain the product just right and fanatical in

  • the way they think about customer support.

  • In fact, one thing that correlates into

  • success among the YC companies is the founders

  • that hook up pager duty to their ticketing system, so

  • that even if the user emails in the middle of

  • the night when the founders are asleep.

  • They still get a response within an hour.

  • Companies actually do this in the early days.

  • These founders feel physical pain when the product sucks.

  • And they wanna wake up and fix it.

  • They don't ship crap.

  • And if they do they fix it very, very quickly.

  • And it definitely takes some level of

  • fanaticism to build a great product.

  • You need some users to help with the feedback cycle.

  • But the way to get those users is manually.

  • You should go recruit them by hand.

  • Don't do things like buy Google ads in

  • the early days to get initial users.

  • You don't need very many.

  • You just needs ones that will give you feedback every

  • day and eventually love your product.

  • So instead of trying to get them on Google AdWords,

  • just find a few people in the world that will be

  • good users.

  • Recruit them by hand.

  • Ben Silverman when everyone though Pinterest was a joke,

  • recruited the initial Pinterest users by

  • tagging up strangers in coffee shops.

  • He really did. He just walked around

  • Palo Alto and said will you please use my product.

  • He also used to run around the Apple store in

  • Palo Alto.

  • And he would like set all the browsers to

  • the Pinterest home page real quick before they caught him

  • and kicked him out.

  • So then when people walked in there, they were like oh,

  • what is this?

  • This is an important example of doing things

  • that don't scale.

  • If you haven't read Paul Graham's essay on

  • that topic you definitely should.

  • So get users manually and remember that the goal is to

  • get a small group of them to love you.

  • Understand that group extremely well,

  • get extremely close into them, close to them,

  • listen to them and you'll almost always find out

  • that they're very willing to give you feedback.

  • Even if you're building the product for

  • yourself, listen to outside users and

  • they'll tell you how to make a product they'll pay for.

  • Do whatever you need to make them love you,

  • make you're doing, cuz they're also gonna be

  • the advocates that help you get your next users.

  • You wanna build an engine in the company that transforms

  • feedback from users into product decisions then get

  • it back in front of the users and then repeat.

  • Ask them what they like and

  • what they don't like, and watch them use it.

  • Ask them what they pay for.

  • Ask them if they'd be really bummed if

  • your company went away.

  • Ask them what would make them recommend the product

  • to their friends.

  • And ask them if they've recommended it to any yet.

  • You should make this feedback loop as

  • tight as possible.

  • If your product gets 10% better every week,

  • that compounds really, really quickly.

  • One of the great advantages of start,

  • of software startups is just how short you

  • can make the feedback loop.

  • It can go circle in hours, and the best

  • companies usually have the tightest feedback loops.

  • You should try to keep this going for

  • all of your company's life.

  • But it's really important in the early days.

  • The good news is that all of this is doable.

  • It's hard, it takes a lot of effort, but

  • there's no magic.

  • The plan is at least straight forward and

  • you will eventually get to a great product.

  • Great founders don't put

  • anyone between themselves and their users.

  • The founders of

  • these companies do things like sales and

  • customer support themselves in the early days.

  • It's critical to

  • get this loop embedded in the culture.

  • In fact, the specific problem that we

  • always see with Stanford startups for

  • some reason is that the students try and

  • hire sales and customer support people right away.

  • And you've gotta do this yourself.

  • It's the only way.

  • You really need to use metrics to

  • keep yourself honest on this.

  • It really is true that the company will

  • build whatever the CEO decides to measure.

  • If you're building an internet service,

  • ignore things like total registrations.

  • Don't talk about them.

  • Don't let anyone in the company talk about them.

  • And look at growth in active users, activity levels,

  • cohort retention, revenue, net promoter scores.

  • These things that matter.

  • And then be brutally honest if they aren't going in

  • the right direction.

  • Startups live on growth.

  • It's the indicator of a great product.

  • So this about wraps up

  • the overview on building a great product.

  • I wanna emphasize again,

  • that if you don't get this right,

  • nothing else we talk about in the class will matter.

  • You can basically ignore everything else that we

  • talked about until this is working well.

  • On the positive side,

  • this is one of the most fun parts of building a startup.

  • So I'm gonna pause here,

  • I'll pick back up with the rest of this on Thursday and

  • now we're gonna have Dustin talk about why you should

  • start a startup.

  • Thank you for coming Dustin.

  • >> Sure.

  • But yeah. So Sam asked me

  • to talk about why you should start a startup.

  • There's a bunch of reasons you might have.

  • And there's a bunch of common reasons that

  • people have that I hear all the time for, for

  • why you might start a startup.

  • It's important to know, like, what reason is yours.

  • Because some of them only make sense in,

  • in certain contexts.

  • Some of them will actually like lead you astray.

  • You may have been misled by the way that Hollywood or

  • the press likes to

  • romanticize entrepreneurship.

  • So I wanna try and like illuminate you know,

  • some of those potential fallacies, so

  • you guys can, can make the decision in a clear way.

  • And then I'll talk about the,

  • the reason I like best for actually starting a startup.

  • It's very related to a lot of what Sam just talked

  • about but surprisingly I don't think it's the most

  • common reason usually people have one of these other

  • reasons or they just wanna start up, you know,

  • start a company for the sake of starting a company.

  • So the, the four common reasons just to

  • numerate them are it's glamorous.

  • You know, you'll be, you'll get to be the boss.

  • You'll have flexibility,

  • especially over your schedule.

  • And you'll have the change to have, you know,

  • bigger impact.

  • And make more money than you'd,

  • than you might by joining a later stage company.

  • So, okay, so uh, you know, you,

  • you guys are probably pretty familiar with this concept.

  • When I wrote the Medium post,

  • which a lot of you guys read a year ago uh, I felt like

  • the story in the press was a, a little more unbalanced.

  • You know, entrepreneurship just

  • got romanticized quite a bit.

  • You know, the movie, The Social Network,

  • came out, had a lot of sort of like bad aspects of,

  • of, you know, what it's like to be an entrepreneur.

  • But mainly pa,

  • sort of painted this picture of like.

  • There's a lot of partying and you just

  • kinda move from like one brilliant insight to another

  • brilliant insight um, and really made it, you know,

  • seem like this, like really cool thing to do.

  • And I think the reality is just, you know,

  • not quite so glamorous.

  • There's sort of a, there's an ugly side to being

  • an entrepreneur and also just more importantly what,

  • what you're actually spending your time on is,

  • is just a lot of hard work.

  • Sam mentioned this, but you're

  • basically just sitting at your desk heads down,

  • focused answering customers, customer support, emails,

  • doing sales, figuring out hard engineering problems.

  • So it's really important that you kind of like,

  • go in with, with eyes wide open.

  • And then also it's, it's really quite stressful.

  • This has been a popular topic in the press lately.

  • The Economist actually ran a story just last week

  • called like entrepreneurs anonymous, and

  • shows like a founder kinda like hiding under

  • his desk And talking about like founder depression.

  • This is like a very real thing, like, you know,

  • let's be real.

  • This, if you start a company,

  • it's gonna be extremely hard.

  • Why is it so stressful?

  • So, a couple reasons.

  • One is you've got a lot of responsibility.

  • So people in any kind of of career have fear of failure.

  • It's kind of just like a dominant part of

  • the psychology.

  • But when you're an entrepreneur your fear of

  • failure on the behalf of yourself and

  • all of the people who decided to follow you ah, so

  • that's really stressful.

  • In some cases these people are depending on

  • you for their livelihood.

  • Even when that's not true,

  • they have decided to devote the,

  • the best of your, years of their life to following you.

  • And so you're responsible for

  • the opportunity cost of their time.

  • So that's a big deal.

  • And you're always on call.

  • If something comes up maybe not always at 3 in

  • the morning, but for some startups that's true.

  • But if something important comes up,

  • you're gonna deal with it.

  • That's kinda the end of the story.

  • Doesn't matter if you're on vacation.

  • Doesn't matter if it's the weekend.

  • You kinda always got to be on the ball and

  • always be in a, in a place, mentally,

  • where you're prepared to deal with those things.

  • And then a sorta special example of that is,

  • is or of this kind of stress is fundraising.

  • So a scene from The Social Network.

  • This is us partying and working at the same time.

  • And somebody's spraying champagne everywhere.

  • You know, so The Social Network spends a lot of

  • time kind of painting these scenes.

  • Mark's not in the scene.

  • The other thing they spend all their time on is

  • kind of like painting how, him out to be a huge jerk.

  • This computer?

  • >> Yes. Oh.

  • >> Okay. So.

  • This is an, an actual scene from um, See it.

  • I'm gonna move this just a little.

  • >> Oh, no.

  • >> This, this will work.

  • >> This will work. Okay.

  • On the PDF as well?

  • >> Yep >> Okay.

  • Okay, cool. This is

  • an actual scene from Palo Alto.

  • Spent a lot of time, his desk,

  • just kinda heads down and focused.

  • Mark was still kind or a jerk sometimes, but

  • in this more like fun loveable way,

  • not a like sociopathic scorned lover way.

  • So this is him like, signaling his intention to,

  • you know, just be focused and keep working.

  • Not be social.

  • >> So then there's also the scene sort of

  • demonstrating the like brilliant insight moment.

  • It's kind of like straight out of A Beautiful Mind.

  • >> They literally stole that scene.

  • So they like to paint it as you just kinda jump from one

  • of these moments to,

  • to the other moment with like partying in between,

  • but really we were just at that table the whole time.

  • So interestingly if you compare this to

  • the other photo, Mark is in the exact same position, but

  • he's wearing different clothes.

  • This is definitely a different day.

  • So cool.

  • So that's what it,

  • that's what it's actually like in person.

  • And I just covered this bullet up here.

  • This is the Economist article I

  • was talking about a second ago.

  • So another form of, of, stress is just,

  • like, unwanted media a, attention.

  • So part of it being glamorous is

  • you get some positive media attention sometimes.

  • It's nice to be on, like,

  • the cover of Time and, like, be the person of the year.

  • It's maybe a little less nice to be on the cover of

  • People with, like, one of your wedding photos.

  • It depends who you are.

  • Some people would like that.

  • I'd really hate it.

  • But when Valleywag like, you know,

  • analyses your lecture and just tears you apart, like,

  • you definitely don't want that.

  • Nobody wants that.

  • And then, one thing I almost never hear people talk

  • about is, you're just a of more committed.

  • So if you're an employee of a startup.

  • and, you know, things are stressful,

  • it's not going well, you're unhappy, you can just leave.

  • For a founder you can leave but it's, it's very uncool.

  • It's pretty much a black eye on the rest of your career.

  • And so you really are committed you know, for

  • ten years if it's going well probably more

  • like five years if it's not going well.

  • So three years to figure out that it's not going well and

  • then if you find, like,

  • a nice landing for your company,

  • another two years at the acquiring company.

  • And if you leave before that,

  • again, it's not only gonna harm yourself financially,

  • it's gonna harm all your employees.

  • So you pretty much don't um, so if you're lucky, and

  • you have a bad startup idea you fail quickly um, but

  • most of the time, it's not like that.

  • All right, moving right along um, so.

  • And I should say,

  • I have had a lot of this stress in my own life,

  • especially in the early years of Facebook.

  • You know, I just got really unhealthy.

  • I wasn't exercising.

  • I had a lot of anxiety.

  • Actually, I threw out my back, like,

  • almost every six months, like,

  • when I was like, 21, 22.

  • Which was, like, pretty crazy.

  • And so, if you do start a company.

  • make, you know,

  • be aware that you're gonna have to deal with this and

  • you have to actually manage it.

  • It's actually, like, one of your core responsibilities.

  • Ben Horowitz likes to say, like, the number one rule of

  • a CEO is managing your own psychology.

  • It's absolutely true, make sure you do it.

  • so, another reason so people especially if

  • they've already had a job at another company.

  • You tend to develop this narrative of like,

  • okay like,

  • the people running this company are idiots,

  • they're making all these stupid decisions,

  • they're spending their time in, in these stupid ways.

  • I'm gonna start a company and I'm gonna do it better.

  • I'm gonna like, set all the rules.

  • It's a pretty attractive idea.

  • Makes a lot of sense.

  • If you've read my

  • Medium posts you know what's coming.

  • I'll give you guys a second to read this quote.

  • Cool. So this,

  • this really resonates with me.

  • And one thing I'd point out is you know, the reality of

  • these decisions is pretty nu, nuanced.

  • The people you thought were

  • idiots probably weren't idiots.

  • They probably just had like

  • a really difficult decision in front of them.

  • And people pulling them in multiple directions.

  • So the most common thing I have to spend my time on.

  • And, and focus my energy on as a CEO is like.

  • The, the problems that

  • like other people are bringing to me.

  • The, the other priorities that people create.

  • And it's usually in the form of a conflict.

  • People wanna go in different directions.

  • Or like customers want different things.

  • And like I might have my own opinion about that.

  • But really the, the game I'm

  • playing is like who do I disappoint the least?

  • And like just trying to like navigate all,

  • all these difficult situations.

  • And even on a day to day basis I might come in

  • on Monday and like have all these, you know,

  • grand plans for like how I'm gonna improve

  • the company and what I'm gonna spend my time on, but

  • then if like an important employee is threatening to

  • quit, that's what I'm spending my time on.

  • That's my number one priority.

  • So a subset of you're

  • the boss is you have flexibility.

  • You have control over your own schedule.

  • This really attractive idea.

  • So here's the reality.

  • And their Phil Libin quote.

  • So this, this truly reson, resonates with me as well.

  • And some of the reasons for

  • this, again, you're always on call.

  • So maybe you don't intend to work all parts of

  • the day but you might not get to control which ones.

  • You're a role model, this is super important.

  • So if you're an employee of a company um, you might have

  • some good weeks, you might have some bad weeks,

  • some weeks when you're, you're low energy, maybe you

  • wanna take a couple extra days off um, that's really

  • bad if you're, you're an entrepreneur like your team

  • will really signal off what your bringing to the table.

  • And so if you take your foot off the gas, so will they.

  • And you're always working anyway.

  • So, if you're really passionate about an idea,

  • it's just gonna like pull you to,

  • to keep working on it.

  • If you're working with great investors,

  • you're working with great partners,

  • they're gonna wanna be working really hard,

  • they're gonna want you to be working really hard uh, and

  • again, you're gonna wanna work really hard.

  • So some some companies like to tell the story about you

  • can have your cake and eat it too, you can have, like,

  • four day week, work weeks maybe if you're, if you're,

  • Tim Ferris maybe you can have a 12-hour work week.

  • It's a really attractive idea and

  • it does work in a particular instance.

  • Which is if you wanna like actually have a small

  • business or go after a niche market.

  • Then you're a small business entrepreneur.

  • That makes total sense.

  • But as soon as you get past like two or

  • three people uh, you really need to step it up and, and

  • be full time committed.

  • cool.

  • So, this is the big one this is the, the one I

  • hear the most especially like candidates applying to

  • a Asana they tell me, you know, I,

  • I'd really like to work for, for

  • a much smaller company, or start my own because.

  • Then I have a much bigger slice of the pie,

  • I'll have much more impact on how that company does and

  • I'll have more equity so

  • I'll make more money as well.

  • So let's examine when this might be true.

  • So I'll explain these tables they're a little complex but

  • let's focus on the left first so these is,

  • this is just explaining.

  • Dropbox and Facebook.

  • These are their current valuations.

  • And this is how much money you might

  • make as employee number 100 coming into these companies.

  • Especially if you're like, an experience,

  • a relatively experienced engineer, like,

  • you have five years of, of industry experience.

  • You're pretty likely to

  • have an offer that's around 10 basis points.

  • So if you joined DropBox a couple years ago,

  • the upside you'd have already locked in.

  • As about ten million,

  • there's plenty more growth from there.

  • If you leave the company if you joined Facebook a couple

  • years into its,

  • its existence you made $200 million.

  • This is a huge number.

  • And if you.

  • Even if you joined Facebook as employee number 1,000.

  • So you joined it in like 2009 you still

  • made $20 million.

  • That's a giant number.

  • And that's how you should be benchmarking when you're

  • thinking about what might I make as an entrepreneur.

  • So moving over to the table on the right uh,

  • these are two theoretical companies you might start.

  • So Uber for Pet Sitting, pretty good idea.

  • If you're, if you're really well suited to this,

  • you might have, uh, a really good shot at

  • building a $100 million company.

  • And then your share of that company is pretty likely to

  • be about 10%.

  • That certainly fluctuates.

  • Some founders have a lot more than this,

  • some have a lot less.

  • But after multiple rounds of dilution multiple rounds of

  • option table, option pool creation,

  • you're pretty likely to end up about here.

  • If you have more than this,

  • I recommend Sam's post on like the equity split

  • between founders and employees.

  • You probably should be giving out more.

  • And then but so basically, if you're extremely

  • confident about building this $100 million business,

  • which is a big ask it should go without saying that

  • you should have a lot more confidence than Facebook in

  • 2009 or Dropbox in 2014 and

  • you might, for a start up that doesn't even exist yet.

  • Then this is worth hearing.

  • So if you have a $100 million idea and

  • you're pretty confident you can execute it,

  • I would consider that.

  • If you think you're the right entrepreneur to build

  • Uber, Uber for space travel, that's really huge idea.

  • $2 billion idea.

  • You're actually gonna have a pretty good return for that.

  • You should definitely do that.

  • This is also only the value after four years.

  • And this idea probably has legs.

  • So definitely go after that.

  • If, if you're thinking of building that,

  • you probably shouldn't even be in this class right now.

  • You should go and, go and build that company.

  • So why is this, financial reward and, and impact, I

  • really think that financial reward is very strongly

  • correlated with the impact you have on the world.

  • If you don't believe that let's talk

  • through some specific examples and

  • not think about the equity at all.

  • So why might joining a, a late-stage company actually

  • provide you a lot of impact?

  • You get this multiplier They have an existing massive

  • user base.

  • If it's Facebook, it's a billion users.

  • Or if it's Google it's a billion users.

  • They have existing infrastructure you

  • get to build on.

  • That's also increasingly true for new startups.

  • Things like AWS.

  • Like awesome independent service providers.

  • But you usually get some, like,

  • proprietary technology and it's all maintained for you.

  • It's a pretty great place to start uh, and

  • you get to work with a team and they'll help you

  • just leverage your idea into something great.

  • So, a couple of specific examples Bret Taylor came

  • into employee around or

  • came into Google as around employee number 1,500.

  • And he invented Google Maps.

  • This is a product you guys probably use every day.

  • I used it to get here.

  • And it's used by hundreds of millions of

  • people all around the world.

  • Didn't need to start a company to do that,

  • did happen to get a big financial reward.

  • But the, the point is he had massive impact.

  • My co-founder Justin Rosenstein.

  • Joined go, Google a little later after Brad he was

  • a PM there.

  • And just as a side project he

  • ended up prototyping a chat which, which used to be

  • a standalone app as integrated into Gmail,

  • like you see it on the upper right there.

  • And before he did that, like people didn't even think you

  • could do chat over AJAX, or chat in the browser at all,

  • and he just kind of like demonstrated it, and

  • showed it to his team, and made it happen.

  • Again, this is probably a product most of

  • you use maybe every day.

  • And then, perhaps even more impressively,

  • shortly after that,.

  • JR left,

  • he became employee around number 250 at Facebook.

  • And he led a hack-a-thon project along with

  • people like Andrew Bosworth and

  • Leah Pearlman uh, to create the like button.

  • So, this is one of the most popular elements anywhere

  • on the web.

  • Totally changes how people use it.

  • And again didn't need to start a company to do it and

  • almost certainly would have failed if he had tried.

  • Because he really needed the distribution of

  • Facebook to make it work.

  • So important to, to keep in mind the context for uh,

  • what kind of company you're trying to start and like,

  • where will you actually be able to make it happen.

  • So what's the best reason?

  • So, Sam already talked about this a little bit but

  • basically, you can't not do it.

  • You're super passionate about this idea.

  • You're the right person to do it.

  • You've gotta make it happen.

  • So how does this break down?

  • >> Cuz we're getting close to end here.

  • How am I doing on time?

  • >> Cool.

  • Sweet. Perfect.

  • So this, this is sort of like a word play.

  • You can't not do it in two ways.

  • One is, you're so

  • passionate about it that you're just like,

  • you have to do it.

  • You're gonna do it anyway.

  • And this is really important.

  • Cuz you'll need that passion to get through all of

  • those like hard parts of

  • being an entrepreneur that we talked about earlier.

  • You'll also need it to effectively recruit.

  • Candidates can smell when you don't have passion.

  • And there are enough entrepreneurs out there who

  • do have passion.

  • That they may as well work for one of those.

  • So this is sort of like table stakes for

  • being an entrepreneur.

  • Your subconscious can also tell when you

  • don't have passion and that'll be a huge problem.

  • And then so the other way to interpret this is the world

  • needs you to do it.

  • So this is sort of

  • validation that the idea is important.

  • It's gonna make the world better, so

  • the world needs it.

  • If it's not em, if it's not something the world needs,

  • go do something the world needs.

  • Your time's really valuable. Um,

  • there are plenty good ideas out there.

  • Maybe it's not one of your own.

  • Maybe it's an existing company.

  • But you may as well work on

  • something that's gonna be good.

  • And then the second way to

  • interpret this is the world needs you to do it.

  • You're actually well suited to this problem in some way.

  • If this isn't true it may be a sign that

  • your time is better spent somewhere else.

  • But also just best case scenario if this isn't true,

  • you out compete the team for which it is true.

  • And you just end

  • up with like a sub-optimal outcome for the world.

  • That doesn't feel very good.

  • So drawing this back to my own experience at Asana,

  • you know, Justin and

  • I were kind of like reluctant entrepreneurs.

  • We, before we founded Asana so

  • we're working at Facebook.

  • We were already working on a great problem.

  • And we would basically work all day

  • long on our normal projects and

  • then at night we would keep working on this internal

  • task manager that was used internally at the company.

  • And it was just cuz we were like so

  • passionate about the idea that was so

  • clearly valuable, that we couldn't do anything else.

  • And at some point we had to have the hard

  • conversation of like, okay well what does it

  • mean if we don't actually start this company.

  • We were pretty, we were able to

  • see the impact it was having on Facebook.

  • We were pretty convinced it

  • could be really valuable for the world.

  • We were also pretty

  • convinced nobody else was gonna build it.

  • The problem had been around a long time and

  • we just kept seeing sort of incremental solutions to it.

  • So if we didn't go out with the one that we

  • thought was best,

  • we thought there'd be a lot of value left on the table.

  • And yeah.

  • So we just couldn't, couldn't stop working on it.

  • And literally the idea was like beating itself out of

  • our chest, like forcing itself into the world.

  • And I think that's the feeling you should really be

  • looking for when you start a company.

  • That's how you know you have the right idea.

  • So I'll go ahead and stop there.

  • I'll put some recommended books up here,

  • but won't narrate them.

  • And maybe, that's the end of the class.

  • >> Yeah, thank you.

  • Maybe you guys could stick around for

  • a few minutes if you have questions for him.

  • And uh, see you Thursday.

  • Thank you.

Welcome.

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A2 初級

講義1 - スタートアップの始め方 (Lecture 1 - How to Start a Startup)

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    Steven Wu に公開 2021 年 01 月 14 日
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