How to Start a Startup

Sam H. Altman (an American entrepreneur, investor, programmer, blogger, CEO of OpenAI and former president of Y Combinator) gives a great lecture at Stanford University on the topic of “How to start a startup“. Altman covers the first 2 of the 4 key areas: Ideas, Products, Teams and Execution. Altman also brings in Dustin Moskovitz (co-founder of facebook, Asana, and Good Ventures) as guest speaker to cover “Why start a startup“.

Kindly disregard the presenting skills themselves, and focus only on the valuable content. Then you will quickly realize that this is a highly valuable lecture filled with good advice and stories that exemplifies the lessons Altman and Moskovitz is trying to get across. They both draw on their vast experiences from their own startups, startups they have invested in as well as the numerous startups that Altman has interacted with through Y Combinator. Strongly recommend spending the time to watch the below videos all the way through, and possibly watching it several times over every so often moving forwards.

Key Points

• When starting a startup, there are four areas you need to maximize your chance of success:
  1. Idea
  2. Product
  3. Team
  4. Execution
     
     
• Idea
  • Why start a startup? It all starts with the idea. The idea should come First and the startup should come second.
  • Develop a mission-oriented (potentially even purpose-driven) organization, have an important mission.
  • You need something that sounds like a bad idea, but is a good idea.
  • Be able to have a good answer to “Why start now?”. This speaks to the viability of the startup, and will also be asked by most investors.
  • While you’re a student: think of new ideas, meet potential founders.
  • What do customers want? What are the demands of your market?
    
    
• Product
  • Build something that people love. It is always easier to scale something that a few people love, rather than something that a lot of people only like and then later on make them love it.
  • Build easy-to-use, simple products.
  • Fanatical products and user feedback.
  • Transform user feedback into decisions.
  • Create metrics that focus on growth.
    
    
• Guest speaker Dustin Moskovitz’s on “Why you should start a startup”
  • Entrepreneurship is glamorized. In truth it is stressful, tedious, hard work, etc.
  • The ugly side of being a founder: stress, always on call, fundraising, unwanted media attention, you can not just leave your own startup, people are dependent on you.
  • Addressing the “Being your own boss” notion. In reality, everyone is your boss. Your employees, customers, partners, etc.
  • Addressing “You’ll make more money” and “have more impact” notions.
  • So what’s the best reason to start a startup?: You can’t not do it.
  • Passion: You NEED to do it.
  • Aptitude: The world needs it.
  • Recommended reading list.

Key Points from Lecture #2

• Team: How to hire?
  • Co-founder relationships is among the most important factors. #1 cause for YC (Y Combinator) blowups (startups not working out).
  • Characteristics to look for in a co-founder. “Relentlessly resourceful.”
  • Second part of how to hire: Try not to. Try to keep the number of employees as low as possible. Fewer employees leads to lower burn rate and it is easier to manage the company. Anyone with a bad employee among their first few employees destroyed the company.
  • When hiring #1 goal: Get the best people. If you are a rocket ship, then good people will notice and join. A single mediocre engineer can kill a startup.
  • Where to hire? The best source is from people you know. Choose aptitude over experience in the early days.
  • Things to look for when hiring.
  • Employee equity. Aim to give 10% to first 10 employees.
  • Fire bad employees fast. e.g. Negative or politicking people.
  • When to have equity talks. Vested equity among the co-founders.
    
    
• Execution: How to execute?
  • The company culture models the founders.
  • The 5 jobs of a CEO.
  • 100’s of things competing for your attention, is one of the hardest things as a founder. You need focus.
  • The best founders talk about their goals over and over. You need good communication.
  • Growth and momentum are extremely important. Have the right metrics and focus on growing them.
  • Best predictor of success for founders: They continually get new things done. Every time you talk to them, they have accomplished new things.
  • Disagreements between founders are settled by asking the users.
  • The best thing a board can do for you: review metrics & milestones.

Key Points from Lecture #3 “Before the Startup”

Paul Graham is a computer scientist, essayist, entrepreneur, venture capitalist, and author. He is best known for his work on the programming language Lisp, his former startup Viaweb (later renamed Yahoo! Store), cofounding the influential startup accelerator and seed capital firm Y Combinator, his essays, and Hacker News.

Graham gives an entertaining lecture at Stanford University on six counter-intuitive lessons you need to remember to survive as a startup. This is lecture 3 of the “How to Start a Startup” course at Stanford. When watching the video, kindly advice you to try to ignore his “uhm/hum” brainfarts, and rather focus on the content.

1. (04:18) One of the biggest mistakes founders make is ignoring their intuition.
2. (05:32) What you need to succeed in a startup is NOT expertise in how to do a startup. You will learn that as you go along instead. What is important is that you obsess over your users, and to build a great product/service to make your users happy. Focus on growing your user base. You will know that you are onto something when you start seeing a strong growth curve, which is also what investors will look for.
3. (11:24) Founding a startup is where gaming the system stops working. There is no tricks for making a successful business.
4. (14:30) Startups are all consuming. It will take over your life. It never gets easier. If you succeed you will likely work on the startup for the next 10 years, or in some cases the rest of your life.
5. (19:54) You can not tell if you have got what it takes to start a startup.
6. (24:37) The way to get startup ideas is NOT to think of startup ideas. Instead, take a step back and turn your mind into one that generates startup ideas unconsciously. Try to solve problems that you are annoyed by yourself. Scratch your own itch.
   
   

Q&A

• 31:42 “How can a non-technical founder most contribute to a startup?“
• 33:00 “Is there value in business school if you are interested in entrepreneurship?“
• 34:48 “How do you manage just a few people?” – The first employees should be strongly self-motivated like the founders, thus no management should be required.
• 36:24 “Are we currently in a bubble?“
• 39:23 “What advice do you have for female founders?” – Focus even more on building a great company with a strong growth curve.
• 40:37 “What would you learn in college right now?“
• 43:34 “When do you know to turn a side project into a startup?” – when it starts taking over your life and everything you are doing.
• 44:52 “What kind of startup should not go through an incubator?” – can’t think of any.
• 47:32 “How do you deal with hiring a homogenous culture?” – Hiring your friends or people you know very well at first is the best advice, and there is more upside to doing this than the potential downside of creating a mono-culture when you are starting out.