00:00 welcome can I turn this on baby
00:04 all right good people can you guys hear
00:10 me is the mic on No maybe you can ask
00:14 them to turn it on maybe we can get a
00:19 all right maybe we can get a bigger
00:21 auditorium we'll see so welcome to CS
00:23 183 B I'm Sam Altman I'm the president
00:26 of Y Combinator nine years ago I was a
00:28 Stanford student and then I dropped out
00:30 to start a company and then I've been an
00:32 investor for the last few so YC we've
00:35 been teaching people how to start
00:36 startups for nine years most of it's
00:38 very hands-on and specific to the
00:40 startups but thirty percent of it is
00:42 pretty generally applicable and so we
00:46 think that we can teach that 30 percent
00:47 in this class and even though that's
00:49 only 30 percent of the way there
00:51 hopefully it'll still be really helpful
00:52 we've taught a lot of this at YC already
00:55 but it's all been off the record and
00:56 this is the first time that a lot of
00:58 what we teach in YC is going to be on
00:59 the record so we've invited some of our
01:01 best speakers to come and give the same
01:02 talks they give it YC we've now funded
01:05 seven hundred and twenty companies and
01:07 so we're pretty sure that a lot of this
01:08 advice is pretty good we can't find
01:11 every startup yet but we can hopefully
01:13 make this advice very generally
01:14 available guest speakers are going to
01:17 teach 17 of the 20 classes on the
01:19 teaching three-county and YC itself
01:22 every guest speaker has been involved in
01:24 the creation of a billion plus dollar
01:26 company so the advice should be that
01:28 theoretical it's all been it's all for
01:31 people who have done all the advice in
01:34 this class is geared towards people
01:36 starting a business where the goal is
01:37 hyper growth and eventually building a
01:40 very large company much of it doesn't
01:42 apply in other cases and I want to want
01:43 people up front that if you try and do
01:45 these things in a lot of big companies
01:47 or non startups it won't work it should
01:49 still be interesting I really do think
01:51 that startups or the way of the future
01:52 and it's worth trying to understand them
01:54 but startups are very different than
01:56 normal companies so over the course of
01:59 today and Thursday I'm going to try to
02:01 give an overview of the four areas that
02:02 you need to excel at in order to
02:04 maximize your chances as accessible to
02:05 startup and then throughout the course
02:07 the guest speakers are going to drill
02:08 into all of these in more detail so the
02:12 four areas you need a great idea
02:14 a great product a great team great
02:15 execution these overlaps somewhat but
02:19 I'm going to have to talk about them
02:20 somewhat individually to make it make
02:22 sense you may still fail the outcome is
02:26 something like idea x product x
02:28 execution times team x luck
02:30 we're luck is a random number between 0
02:32 and 10,000 literally that much but if
02:35 you do really well in the four years you
02:36 can control you have a good chance at it
02:39 we sell amount of success one of the
02:42 exciting things about startups is that
02:44 they are surprisingly even playing field
02:45 young an experience you can do this old
02:48 and very experienced you can do this too
02:50 and one of the things that I
02:51 particularly like about startups is that
02:54 some of the things that are bad in other
02:55 work situations like being poor and
02:57 are actually huge assets when it comes
03:00 to starting a start-up Before we jump in
03:03 on the how I want to talk about why you
03:05 should start a startup I'm somewhat
03:07 hesitant to be doing this class at all
03:08 because you should never start a
03:10 start-up just for the sake of doing so
03:11 there are much easier ways to get rich
03:13 and everyone who starts a start-up
03:15 always says always that they couldn't
03:17 have imagined how hard and painful is
03:18 going to be you should only start a
03:21 startup that you can feel compelled by a
03:22 particular problem and that you think
03:24 starting the company is the best way to
03:26 the specific passion should come first
03:28 and the start-up second in fact all of
03:30 the big successes we have at YC followed
03:32 this so for the second half of today's
03:35 lecture Dustin Moskovitz the co-founder
03:38 of Facebook and asana is going to take
03:39 over and talk about why the start a
03:41 startup we're so surprised by the amount
03:43 of attention that's class got that we're
03:45 going to make sure we spend a lot of
03:46 time on the Y ok so the first of the
03:49 four area is a great idea it's become
03:52 popular in recent years to say that the
03:54 idea doesn't matter in fact it's almost
03:56 uncool to spend a lot of time thinking
03:58 about the idea for a startup you're just
04:00 supposed to start third step at the wall
04:02 see what sticks and not even spend any
04:04 time thinking about if it'll be valuable
04:05 with it works and pivots are supposed to
04:08 be great the more pivots the better so
04:11 this isn't totally wrong things do
04:13 evolve in ways that are difficult to
04:15 predict and there's a limit to how much
04:16 you can figure out without actually
04:18 getting a product in the hands of users
04:19 and great execution is at least ten
04:22 times more important and a hundred times
04:24 harder than a good idea but the pendulum
04:27 is swung way out of
04:27 here a bad idea is still bad and the
04:31 pivot happy world that wearing today
04:32 feels really suboptimal
04:33 great execution towards a terrible idea
04:36 will get you nowhere there are
04:38 exceptions of course but most great
04:40 companies start with a great idea not a
04:43 pivot if you look at successful pivots
04:45 they almost always are a pivot into
04:47 something the founders themselves wanted
04:49 not a random made-up idea
04:51 Airbnb happened because Brian Chesky
04:53 couldn't pay his rent but he did have
04:55 some extra space in general though if
04:57 you look at the track record of pivots
04:59 they don't become big companies I myself
05:02 used to believe ideas didn't matter that
05:03 much but I'm very sure that's wrong now
05:07 the definition of the idea is we talk
05:09 about it is very broad it includes the
05:12 size and the growth of the market the
05:13 growth strategy for the company
05:15 the defensibility strategy and so on
05:16 when you're evaluating an idea you need
05:19 to think through all these things not
05:20 just the product if it works out you're
05:24 going to be working on this for 10 years
05:25 so it's worth some real upfront time to
05:28 think there's a long term value in the
05:29 defensibility of the business
05:31 even though plans themselves are
05:33 worthless the exercise of planning is
05:35 really valuable and totally missing in
05:38 most startups today long-term thinking
05:40 is so where anywhere but especially in
05:42 startups that is a huge advantage if you
05:44 do it remember that the idea will expand
05:47 and become more ambitious as you go you
05:50 certainly don't need to have everything
05:51 figured out in a path from here to world
05:53 domination but you really want a nice
05:55 kernel to start with he wants me they
05:58 can develop in interesting ways as
05:59 you're thinking through ideas another
06:02 thing that we see young founders get
06:03 wrong all the time is that someday you
06:06 need to build a business that's
06:07 difficult to replicate this is an
06:09 important part of a good idea I want to
06:14 make this point again because it's so
06:15 important the idea should come first and
06:18 the startup should come second wait to
06:20 start a startup until you come up with
06:21 an idea you feel compelled to explore
06:23 this is also the way to choose between
06:25 multiple ideas if you have several ideas
06:27 that all seem pretty good work on the
06:29 one that you think about most often when
06:31 you're not trying to think about work
06:32 but we hear again and again from
06:34 founders that they wish they have waited
06:36 start a startup until they came up with
06:38 an idea they really loved
06:41 another way of looking at this is that
06:42 the best companies are almost always
06:43 mission oriented it's difficult to get
06:46 large groups of people to the extreme
06:47 levels of focus and productivity that
06:49 you need first started to be successful
06:51 unless the company feels like an
06:53 important mission and it's usually
06:55 really hard to get that without a great
06:57 family an idea a related advantage of
07:02 mission oriented ideas is that you
07:04 yourself will be dedicated to them it
07:06 takes years and years usually a decade
07:08 to create a great startup if you don't
07:10 love and believe in what you're building
07:11 you'll likely to give up at some point
07:13 along the way there's no way I know of
07:16 to get through the pain of the startup
07:17 without belief that the mission really
07:19 matters a lot of founders especially
07:21 students believe that their startups
07:23 only going to take two or three years
07:24 and then after that they'll work on what
07:25 they're really passionate about that
07:26 almost never works good startups usually
07:29 take 10 years a third advantage of
07:32 mission oriented companies is the people
07:33 outside the company are more willing to
07:36 you'll get more support on a hard
07:37 important project than a derivative one
07:39 when it comes to starting startups in
07:41 many ways it's easier to start a hard
07:44 startup and easy startup this is one of
07:46 those counterintuitive things it takes
07:47 people one time to understand it's
07:51 difficult to overstate how important
07:53 being mission driven is so I want
07:54 emphasize it one last time derivative
07:56 companies companies that copy an
07:58 existing idea with very few new insights
08:00 don't excite people and they don't
08:02 compel the teams to work hard enough to
08:04 be successful Paul Graham is going to
08:07 talk about how to get started ideas next
08:08 week it's something that a lot of
08:10 founders struggle with but it's
08:11 something I believe you can get better
08:12 with it better out with practice and
08:14 it's definitely worth trying to get
08:16 better at the hardest part about coming
08:19 up with great ideas is that the best
08:21 ideas often look terrible at the
08:22 beginning the 13th search engine and
08:24 without all the features of a web portal
08:26 most people thought that was pointless
08:28 search was done and anyway it didn't
08:30 matter that much portals where the value
08:32 was at the tenth social network and
08:34 limited only to college students with no
08:36 money also terrible myspace did one and
08:38 who wants college students as customers
08:39 or away to stay on strangers couches
08:41 that just sounds terrible all around
08:43 these all sounded really bad but they
08:46 turned out to be good if they'd sounded
08:48 really good there would have been too
08:49 many people working on them as Peter
08:53 Thiel is going to discuss them
08:54 class you want an idea that turns into a
08:56 monopoly but you can't get a monopoly in
08:59 a big market right away
09:00 too much competition for that you have
09:02 to find a small market in which you can
09:04 get a monopoly and then quickly expand
09:06 this is why some great startup ideas
09:09 look really bad at the beginning it's
09:11 good if you can say something like today
09:13 only the small subset of users you're
09:14 going to use my product but I'm going to
09:16 get all of them and in the future almost
09:18 everyone will use my product here's the
09:21 theme that's going to come up a lot
09:22 you need conviction in your own beliefs
09:24 and a willingness to ignore others
09:27 naysaying the hard part is that this is
09:29 a very fine line there's right on one
09:32 side of it and crazy on the other but
09:34 keep in mind that if you do come up with
09:36 a great idea most people are going to
09:37 think it's bad you should be happy about
09:39 that means they won't compete with you
09:41 this is also a reason why it's not
09:43 usually dangerous to tell people about
09:45 your idea the truly good ideas don't
09:48 sound like they're worth stealing you
09:51 want an idea about what you can say I
09:52 know it sounds like a bad idea but
09:54 here's specifically why it's actually a
09:56 great one you want to sound crazy but
09:58 you want to actually be right and you
10:00 want an idea that not many other people
10:01 are working on and it's okay if it
10:03 doesn't sound big at first common
10:05 mistake among founders especially
10:07 first-time founders is they think that
10:09 the first version of their product the
10:10 first version of their idea needs to
10:12 sound really big but it doesn't means to
10:14 take over a small specific market and
10:18 that's almost great companies have
10:19 started unpopular but right is what
10:22 you're going for you want something that
10:23 sounds like a bad idea that is a good
10:25 idea you also really want to take the
10:29 time to think about how the market is
10:30 going to evolve you need a market that's
10:32 going to be big in ten years
10:34 most investors are obsessed with the
10:36 market size today and they don't think
10:38 at all about how the market is going to
10:40 evolve in fact I think this is one of
10:42 the biggest systemic mistakes that
10:43 investors make they think about the
10:44 growth of the startup itself they don't
10:46 think about the growth of the market I
10:48 care much more about the growth rate of
10:50 the market than its current size and I
10:52 also care if there's any reason that's
10:53 going to top out you should think about
10:55 this I prefer to invest in a company
10:57 that's going after a small but rapidly
10:59 growing market then a big but slow
11:00 growing one one of the big advantages of
11:03 these sorts of markets these small but
11:06 rapidly growing markets
11:07 is that customers are usually pretty
11:08 desperate for a solution and they'll put
11:11 up with an imperfect but rapidly
11:12 improving product and a big advantage of
11:15 being the student one of the two biggest
11:17 advantages is that you probably have
11:19 better intuition about which markets are
11:21 likely to start growing rapidly than
11:22 older people do another thing that
11:27 students usually don't understand or at
11:28 least takes a while you cannot create a
11:31 market that doesn't want to exist
11:32 you can basically change everything in a
11:34 startup but the market so you should
11:36 actually do some thinking to be sure
11:38 or at least assures you can be that the
11:40 market you're going after is going to
11:41 grow and be there there are a lot of
11:44 different ways to talk about the right
11:45 kind of market for example surfing
11:48 someone else's wave or stepping into an
11:49 up elevator or being part of a movement
11:50 but all of this is just a way of saying
11:52 you want to market that's going to grow
11:53 really quickly it may seem small today
11:55 it may be small today but you know and
11:57 other people don't that it's going to
11:59 grow really fast so think about where
12:02 this is happening in the world you need
12:03 this sort of a tail end to make a
12:04 startup successful the exciting thing is
12:07 there are probably more of these talons
12:09 now than ever before as Marc Andreessen
12:11 says software's eating the world it's
12:14 there like so many great ideas out there
12:16 you have to pick one and find one that
12:18 you really care about another version of
12:21 this that with it's not the same idea is
12:23 sequoia the famous question why now why
12:26 is this the perfect time for this
12:28 particular idea and to start this
12:29 particular company why couldn't it have
12:32 been done two years ago and why will two
12:34 years in the future be too late for the
12:36 most successful startups we've been
12:38 involved with they've all had a great
12:39 idea great answer to this question and
12:41 if you don't you should be at least
12:43 somewhat suspicious about it in general
12:46 it's best if you're building something
12:48 that you yourself need you'll understand
12:50 it much better than if you have to
12:51 understand it by talking to a customer
12:53 to build a very first version if you
12:56 don't eat it yourself and you're
12:57 building something that someone else
12:58 needs realize that you're at a big
13:00 disadvantage and get very very close to
13:02 your customers try to work in their
13:03 office if you can and if not talk to
13:05 them multiple times a day another
13:08 somewhat counterintuitive thing about
13:09 good startup ideas is that they're
13:11 almost always very easy to explain and
13:13 very easy to understand if it takes more
13:15 than a sentence to explain what you're
13:17 doing it's almost always a sign that
13:19 it's too complicated
13:20 it should be a clearly articulate
13:22 articulated vision with a small number
13:24 of words and the best ideas are usually
13:27 either very different from existing
13:29 companies in one important way like
13:32 Google being a search engine that worked
13:34 just really well and none of the other
13:36 stuff of the portals or totally new like
13:38 SpaceX any company that's a clone of
13:41 something else that already exists
13:42 with some small or made-up
13:44 differentiator like we're going to be X
13:45 beautiful design or we're going to be Y
13:47 for people that like red wine instead
13:49 that usually fails so as I mentioned one
13:54 of the great things about being the
13:55 student is that you have a very good
13:57 perspective on new technology and
13:59 learning to get good at having new ideas
14:01 takes a while so start working on that
14:03 right now that's one thing we hear from
14:05 people all the time that they wish they
14:07 had done more when they were student the
14:09 other is meeting potential co-founders
14:13 you have no idea how good of an
14:15 environment you're right now for meeting
14:16 people that you can start a company with
14:17 down the road and the one thing that we
14:19 always tell college students is more
14:21 important than starting any particular
14:22 startup is getting to know a lot of
14:24 potential co-founders so I want to
14:28 finish this section of my talk with a
14:30 quote from 50 cent this is this is from
14:33 when he was asked about vitamin water I
14:35 won't read it it's up there but it's
14:38 about the importance of thinking about
14:39 what customers want and thinking about
14:41 the demands of the market most people
14:44 don't do this most students especially
14:46 don't do this if you can just do this
14:48 one thing if you can just learn to think
14:50 about the market first you will have a
14:52 big leg up on most people starting
14:54 startups and this is something this is
14:58 probably the thing that we see wrong
14:59 with Y Combinator apps most frequently
15:01 is that people have not thought about
15:03 the market first and what people want
15:05 first so for the next section I'm going
15:08 to talk about building a great product
15:09 and here again I'm going to use a very
15:15 broad definition of product it includes
15:18 customer support and copyright
15:19 explaining the product anything involved
15:21 in your customers interaction with what
15:23 you built from them to build a really
15:26 great company you first have to turn a
15:28 great idea into a great product this is
15:30 really hard but it's crucially important
15:31 and fortunately it's pretty fun
15:33 all the great products are always new to
15:35 the world and it's hard to give you
15:37 advice about what to build there are
15:39 enough commonalities that we can give
15:40 you a lot of advice about how to build
15:41 it one of the most important tasks for a
15:45 founder is to make sure that the company
15:46 builds a great product until you built a
15:48 great product almost nothing else
15:50 matters when really successful startup
15:52 owners tell the story of their early
15:53 days it's almost always sitting in front
15:56 of the computer working on our product
15:58 or talking to their customers that's
16:00 pretty much all the time they do very
16:01 little else and you should be very
16:03 skeptical if your time allocation is
16:05 much different most other problems that
16:08 founders are trying to solve raising
16:09 money getting more press hiring business
16:11 development etc these are significantly
16:13 easier when you have a great product
16:14 it's really important to take care of
16:16 that first step one is to build
16:18 something that users love at YC we tell
16:22 founders to work on their product talk
16:24 to users exercise eat and sleep and very
16:27 little else all the other stuff I just
16:28 mentioned PR conferences recruiting
16:31 advisers doing partnerships you should
16:33 ignore all of that and just build a
16:35 product and then get it as good as
16:36 possible by talking to your users your
16:40 job is to build something that users
16:41 love there are a few companies that go
16:44 on to be super successful get there
16:46 without first doing this a lot of good
16:48 on paper startups fail because they
16:50 merely make something that people like
16:52 making something that people want but
16:54 only a medium amount is a great way to
16:56 fail and not understand why you're
16:58 failing so these are the two jobs
17:01 something that we say oh I see a lot is
17:04 that it's better to build a small number
17:05 it's better to build something that a
17:07 small number of users love then a large
17:09 number of users like of course it'd be
17:12 best to build something that a small
17:13 number of users love but opportunities
17:15 to do that for v1 are rare and they're
17:18 usually not available to startups so in
17:20 practice you end up choosing either the
17:21 gray or the orange you make something
17:23 that a lot of users like a little bit or
17:25 something that a small number of users
17:26 like love a lot and this is a very
17:30 important piece of advice build
17:32 something that a small number of users
17:33 love it's much easier to expand from
17:35 something that a small number of people
17:37 love doesn't mean it a lot of people
17:38 love then from something that a lot of
17:40 people like to a lot of people love if
17:43 you get this right you can get a lot of
17:47 if you don't get this right you can get
17:49 everything else right and you'll
17:51 probably still fail so when you start on
17:53 the startup this is the only thing you
17:54 need to care about until it's working
17:59 sure so you have a choice in a startup
18:02 the best thing of all worlds would be to
18:04 build a product that a lot of people
18:05 really love in practice you can't
18:08 usually do that because a big company if
18:10 there's an opportunity like that Google
18:11 or Facebook will do it so there's like a
18:14 limit to the area under the curve of
18:15 what you can build and you can either
18:17 build something that a lot of users like
18:19 a little bit or you can bill to me that
18:21 a small number of users love a lot and
18:23 like the total amount of love is the
18:25 same it's just a question of how its
18:27 distributed and there's like this law of
18:30 conservation of how much happiness you
18:32 can put into the world with the first
18:34 product of a start-up and so startups
18:37 always struggle with which of those two
18:38 they should go and they seem equal right
18:40 because the area under the curve is the
18:41 same but we've seen this time and again
18:44 that they're not and that it's so much
18:46 easier to expand once you've got
18:48 something that some people love you can
18:49 expand that something that a lot of
18:50 other people love but if you only get
18:52 ambivalence or sort of like weak
18:54 enthusiasm and then try to expand that
18:56 you'll never get up to a lot of people
18:58 so the advice is find a small group of
19:03 users and make them really love what
19:05 you're doing that make sense all right
19:11 one way that you know when this is
19:13 working is that you'll get growth by
19:14 word of mouth if you make something
19:16 people love people will tell their
19:19 this works for consumer products and
19:21 enterprise products as well when people
19:23 really love something they tell their
19:25 friends about it and you'll see you
19:26 organic growth if you find yourself
19:29 talking about how it's okay that you're
19:30 not growing because there's a big
19:32 partnership that's going to come save
19:34 you or something like that it's almost
19:35 always a sign of real trouble sales and
19:38 marketing are really important and we're
19:40 gonna have two classes on them later but
19:42 if you don't have some early organic
19:43 growth then your product probably isn't
19:45 good enough yet a great product is the
19:48 secret to long-term growth hacking you
19:49 should get that right before you worry
19:51 about anything else
19:51 it doesn't get easier to put off making
19:53 a product if you try to build a growth
19:56 machine before you have a product that
19:57 some people really love you're almost
19:59 certainly going to waste your time
20:00 breakout companies almost always have a
20:02 product that's so good that it grows by
20:04 word of mouth over the long run great
20:07 products win don't worry about your
20:09 competitors raising a lot of money and
20:11 what they may do in the future they
20:13 probably aren't very good anyway
20:14 very few startups die from competition
20:17 most died because they themselves fail
20:19 to make something users love they spend
20:21 their time with other things so worried
20:23 about this above all else another piece
20:27 of advice to make something the users
20:28 love start with something simple it's
20:30 much much easier to make a great product
20:32 if you have something simple even if
20:34 your eventual plans are super complex
20:36 and hopefully they are you can almost
20:38 always start with a smaller subset of
20:40 the problem than whatever you think is
20:41 the smallest and it's hard to build a
20:43 great product so you want to start with
20:44 as little surface area as possible think
20:46 about the really successful companies
20:47 and what they started with
20:49 think about products that you really
20:50 love they're generally incredibly simple
20:52 to use and especially a get started
20:54 using the first version of Facebook was
20:57 almost comically simple the first
20:59 version of Google was just an ugly web
21:00 page with the text box and two buttons
21:02 that have returned the best results and
21:03 that's why users loved it the iPhone is
21:05 far simpler to use in any smartphone
21:07 that ever came before it and it was the
21:08 first one that people really loved
21:10 another reason that simple is good is
21:12 because it forces you to do one thing
21:14 extremely well and you have to do that
21:16 to make something that people love the
21:23 word fanatical comes up again and again
21:24 when you listen to successful founders
21:26 talk about how they think about their
21:27 product founders talk about being
21:29 fanatical in the way they care about the
21:31 quality of the small details fanatical
21:33 and getting the copy that they use to
21:34 explain the product just right and
21:36 fanatical in the way they think about
21:37 customer support in fact one thing that
21:40 correlates with success among the YC
21:42 companies is the founders that hook up
21:44 pager duty to their ticketing system so
21:46 that even if they use your emails in the
21:47 middle of night when the founders are
21:48 asleep they still get a response within
21:49 an hour companies actually do this in
21:52 the early days these founders feel
21:53 physical pain when the product sucks and
21:55 they want to wake up and fix it they
21:57 don't ship crap and if they do they fix
21:58 it very very quickly and they definitely
22:01 take some level of fanaticism to build a
22:03 great product you need some users to
22:07 help with the feedback cycle but the way
22:09 to get these users is manually you
22:10 should go recruit them by hand don't do
22:13 things like buy Google
22:14 in the early days to get initial users
22:16 you don't need very many you just need
22:18 ones that will give you feedback
22:19 everyday and eventually love your
22:21 product so instead of trying to get them
22:23 on Google AdWords just find a few people
22:25 in the world that will be good users
22:26 recruiting them by hand Ben Silbermann
22:30 when everyone thought Pinterest was a
22:31 joke recruited the initial Pinterest
22:33 users by chatting up strangers and
22:35 coffee shops he really did he just
22:37 walked around Palo Alto and said will
22:38 you please use my product he also used
22:40 to run around the Apple store in Palo
22:41 Alto and he would like settle the
22:43 browsers to the Pinterest homepage real
22:44 quick before they caught it and kicked
22:46 him out so then when people walked in
22:48 they're like oh what is this this is an
22:51 important example of doing things that
22:53 don't scale if you haven't read Paul
22:55 Graham's essay on that topic you
22:57 definitely should so get users manually
22:59 and remember that the goal is to give a
23:01 small group of them to love you
23:02 understand that group extremely well get
23:05 extremely close in to them close to them
23:07 listen to them and you'll almost always
23:09 find out that they're very willing to
23:10 give you feedback even if you're
23:12 building the product for yourself listen
23:14 to outside users and they'll tell you
23:16 how to make a product they'll pay for do
23:18 whatever you need to make them love you
23:19 make know you're doing because they're
23:22 also going to give you advocates that
23:23 help you get your next users you want to
23:27 build an engine in the company that
23:28 transforms feedback from users into
23:30 product decisions then get it back in
23:32 front of the users and repeat ask them
23:34 what they like and what they don't like
23:35 and watch them use it ask them what they
23:37 pay for asking that they'd be really
23:40 bummed if your company went away ask
23:42 them what would make them recommend the
23:43 product to their friends and ask them if
23:45 they recommended it to any yet you
23:47 should make this feedback loop as tight
23:49 as possible if your product gets 10%
23:51 better every week that compounds really
23:53 really quickly one of the great
23:55 advantages of start of software startups
23:57 is just how short you can make the
23:59 feedback loop it can be assured in hours
24:01 and the best companies usually have the
24:03 tightest feedback loops you should try
24:05 to keep this going for all of your
24:06 company's life but it's really important
24:08 in the early days the good news is that
24:11 all this is doable it's hard it takes a
24:13 lot of effort but there's no magic the
24:15 plan is at least straightforward and you
24:16 will eventually get to a great product
24:17 great founders don't put anyone between
24:21 themselves and their users the founders
24:23 of these companies do things like sales
24:24 and customer support themselves in the
24:25 early days it's critical to get this
24:28 culture in fact the specific problem
24:30 that we always see with Stanford
24:31 startups for some reason is that the
24:33 students try and hire sales and customer
24:34 support people right away and you've got
24:36 to do this yourself it's the only way
24:39 you really need to use metrics to keep
24:41 yourself honest on this it really is
24:44 true that the company will build
24:45 whatever the CEO decides to measure if
24:47 you're building an Internet service
24:48 ignore things like total registrations
24:51 don't talk about them don't let anyone
24:52 the company talk about them and look at
24:54 growth and active users activity levels
24:56 cohort retention revenue and Net
24:58 Promoter scores these things that matter
24:59 and then be brutally honest if I'm going
25:01 the right direction
25:01 startups live on growth it's the
25:03 indicator of a great product so this
25:06 about wraps up the overview on building
25:07 a great product I want to emphasize
25:09 again that if you don't get this right
25:10 nothing else we talked about in the
25:12 class will matter you can basically
25:14 ignore everything else that we talked
25:15 about until this is working well on the
25:18 positive side this is one of the most
25:19 fun parts of building a start-up so I'm
25:22 going to pause here
25:23 I'll pick back up with the rest of this
25:24 on Thursday and now we're gonna have
25:26 Dustin talk about why you should start a
25:29 thank you for coming Dustin sure but
25:34 yeah so Sam asked me to talk about why
25:37 you should start a startup there's a
25:38 bunch of reasons you might have and
25:41 there's a bunch of common reasons that
25:43 people have that I hear all the time for
25:45 for why you might start a startup it's
25:47 important to know like what reason is
25:49 yours because some of them only make
25:51 sense and in certain contexts some of
25:53 them will actually like lead you astray
25:54 you may have been misled by the way that
25:56 Hollywood or the press likes to
25:58 romanticize entrepreneurship so I want
26:00 to try and like illuminate you know some
26:02 of those potential fallacies so you guys
26:04 can make the decision in a clear way and
26:06 then I'll talk about the the reason I
26:09 like best for actually starting a
26:10 startup it's very related to a lot of
26:12 what Sam just talked about but
26:15 surprisingly I don't think it's the most
26:16 common reason usually people have one of
26:18 these other reasons or they just want to
26:21 start up you know start a company for
26:23 the sake of starting a company so the
26:25 four common reasons just to enumerate
26:28 them are it's glamorous you know you'll
26:31 be you'll get to be the boss you'll have
26:33 flexibility especially over your
26:35 schedule and you'll have the chance to
26:37 have you know bigger impact and
26:39 make more money than you might by
26:42 joining a waiter stage company so okay
26:45 so you know you guys are probably pretty
26:48 familiar with this concept when I wrote
26:50 the medium post which a lot of you guys
26:51 read a year ago I felt like the story in
26:54 the press was a little more unbalanced
26:56 you know entrepreneurship just got
26:57 romanticized quite a bit you know movie
27:00 The Social Network came out had a lot of
27:02 sort of like bad aspects of you know
27:04 what it's like to be an entrepreneur but
27:05 mainly sort of painted this picture of
27:07 like there's a lot of partying and you
27:09 kind of move from like one brilliant
27:10 insight to another brilliant insight and
27:13 really made it you know seem like this
27:15 like really cool thing to do and I think
27:18 the reality is just you know not quite
27:20 so glamorous there's sort of there's no
27:22 glee side to being an entrepreneur and
27:24 also just more importantly with what
27:26 you're actually spending your time on is
27:28 just a lot of hard work say I mentioned
27:30 this but you're basically just sitting
27:31 at your desk heads down focused
27:33 answering customers customer support
27:36 emails doing sales figuring out hard
27:38 engineering problems so it's really
27:40 important that you kind of like go in
27:41 with with eyes wide open and then also
27:43 it's really quite stressful this has
27:46 been a popular topic in the press lately
27:47 The Economist actually ran a story just
27:50 last week called like entrepreneurs
27:51 anonymous and shows like a founder kind
27:53 of like hiding under his desk and
27:55 talking about like founder depression
27:57 this is like a very real thing like you
28:00 know let's be real this if you start a
28:02 company it's going to be extremely hard
28:03 why is it so stressful so a couple
28:06 reasons one is you've got a lot of
28:09 responsibility so people in any kind of
28:12 career have fear of failure it's kind of
28:14 just like a dominant part of the
28:15 psychology but when you're an
28:16 entrepreneur your fear of failure on
28:19 and all of the people who decided to
28:20 follow you that's really stressful in
28:23 some cases these people are depending on
28:24 you for their livelihood even when
28:26 that's not true they've decided to
28:28 devote the the best of your years of
28:29 their life to following you and so
28:31 you're responsible for the opportunity
28:33 cost of their time so that's a big deal
28:35 and you're always on call if something
28:39 comes up maybe not always at 3:00 in the
28:41 morning but for some startups that's
28:43 true but if something important comes up
28:44 you're going to deal with it that's kind
28:46 of into the story doesn't matter if
28:47 you're on vacation doesn't matter if
28:49 you kind of always got to be on the ball
28:51 and always be in a in a place mentally
28:53 where you're prepared to deal with those
28:54 things and then a sort of special
28:58 example of that is uh or this kind of
29:00 stress is fundraising so seen from the
29:03 social network this is us partying and
29:05 working at the same time somebody's
29:08 spraying champagne everywhere you know
29:11 so the social network spends a lot of
29:13 time kind of painting these scenes
29:14 Mark's not in the scene the other thing
29:17 they spend all their time on is kind of
29:18 like painting him out to be a huge jerk
29:22 yeah okay so this is an actual scene
29:27 from so yeah I'm gonna move this just a
29:33 little office it works this will work
29:35 okay on the PDF as well okay okay cool
29:40 this is an actual scene from Palo Alto
29:43 spent a lot of time this desk just kind
29:45 of heads down in focus
29:46 mark was still kind of a jerk sometimes
29:48 but in this more like fun loveable way
29:50 not a like sociopathic scorned lover way
29:53 so this is him like signaling his
29:55 intention to you know just be focused
29:57 and keep working copy social so then
30:01 there's also the scene sort of
30:02 demonstrating the like brilliant insight
30:04 moment it's kind of like straight out of
30:07 they literally stole that scene so
30:11 they'd like to paint it is you just kind
30:13 of like jump from one of these moments
30:14 so to the other moment with like parting
30:16 in between but really we're just at that
30:18 table the whole time oh so interestingly
30:21 if you compare this the other photo mark
30:23 is in the exact same position but he's
30:24 wearing different clothes this is
30:26 definitely a different day so cool
30:30 so that's what that's what it's actually
30:32 like in person and I just covered this
30:35 bullet up here this is the Economist
30:37 article was talking about a second ago
30:38 so another form of stress is just like
30:41 unwanted media attention so part of it
30:44 being glamorous you get some positive
30:45 media attention sometimes it's nice to
30:47 be on like the cover of time and like be
30:49 the person of the year it's maybe a
30:51 little less nice to be on the cover of
30:53 people with like one your wedding photos
30:55 depends who you are some people would
30:56 like that I'd really hate it but when
30:59 Valleywag like you know analyzes your
31:01 lecture and just tears you apart like
31:02 we don't want that nobody wants that and
31:05 then one thing I almost never hear
31:06 people talk about is you're just a lot
31:08 more committed so if you're an employee
31:10 of a start-up and you know things are
31:13 stressful it's not going well you're
31:14 unhappy you can just leave for a founder
31:17 you can leave but it's it's very uncool
31:20 pretty much a black eye on the rest of
31:22 your career and so you really are
31:24 committed you know for 10 years if it's
31:27 probably more like five years if it's
31:29 not going well so three years to figure
31:31 out that it's not going well and then if
31:33 you find like a nice landing for your
31:34 company another two years at the
31:36 acquiring company and if you leave
31:38 before that again it's not only going to
31:39 harm yourself financially it's going to
31:41 harm all your employees you pretty much
31:42 don't so if you're lucky and you have a
31:44 bad startup idea you fail quickly but
31:47 most of the time it's not like that all
31:50 moving right along so and I should say
31:55 I've had a lot of this stress in my own
31:56 life especially in the early years of
31:58 Facebook um you know I just got really
32:01 unhealthy I wasn't exercising had a lot
32:03 of anxiety actually like threw out my
32:05 back like almost every six months like
32:07 when I was like 21 22 which is like
32:09 pretty crazy and so if you do start a
32:12 company make you know be aware that
32:15 you're going to have to deal with this
32:16 and you have to actually manage it it's
32:17 actually like one of your core
32:19 responsibilities ben horowitz likes to
32:21 say like the number-one role of a CEO is
32:23 managing your own psychology it's
32:24 absolutely true make sure you do it so
32:29 so people especially if they've already
32:32 had a job at another company you tend to
32:34 develop this narrative of like okay like
32:36 the people running this company are
32:37 idiots they're making all these stupid
32:39 decisions they're spending their time
32:40 and in these stupid ways I'm going to
32:43 start a company and I'm going to do it
32:44 better I'm going to like set all the
32:45 rules it's a pretty attractive idea
32:47 makes a lot of sense if you've read my
32:50 medium post you know it's coming you
32:52 guys a second read this quote
33:04 cool so this this really resonates with
33:06 me and one thing I'd point out is you
33:09 know reality of these decision decisions
33:11 is pretty new and nuanced the people you
33:13 thought were idiots probably weren't
33:15 idiots they probably just had like
33:16 really difficult decision in front of
33:17 them and people pulling them in multiple
33:19 directions so the most common thing I
33:23 have to spend my time on and focus my
33:25 energy on as a CEO is like the problems
33:28 that like other people are bringing to
33:29 me the other priorities that people
33:31 create and it's usually in the form of a
33:33 conflict people want to go in different
33:35 directions or like customers want
33:37 different things and like I might have
33:39 my own opinion about that but really the
33:41 game I'm playing is like who do i
33:43 disappoint the least and like just
33:45 trying to like navigate all these
33:47 difficult situations and even on a day
33:50 to day basis I might comment on Monday
33:51 and like have all these you know grand
33:53 plans for like how I'm going to improve
33:54 the company what I'm going to spend my
33:55 time on but then if like an important
33:57 employee is threatening to quit that's
33:59 what I'm spending my time on that's my
34:00 number one priority so a subset of your
34:05 the boss is you have flexibility you
34:07 have control over your own schedule this
34:10 is really attractive idea so here's the
34:13 reality under fill alive in quote so
34:18 this really resonates with me as well
34:21 some of the reasons for this again
34:23 you're always on call so maybe you don't
34:25 intend to work all parts of the day but
34:27 you might not get to control which one's
34:30 your role model this is super important
34:32 so if you're an employee of a company
34:34 you might have some good weeks you might
34:36 have some bad weeks some weeks when
34:38 you're low energy maybe you want to take
34:39 a couple extra days off that's really
34:41 bad if you're an entrepreneur like your
34:43 team will really signal off what you're
34:45 bringing to the table and so if you take
34:47 your foot off the gas so will they
34:50 and you're always working anyway so if
34:53 you're really passionate about an idea
34:55 it's just going to like pull you to keep
34:57 working on it if you're working with
34:58 great investors you're working with
35:00 great partners they're going to want to
35:01 be working really hard they're going to
35:02 want you to be working really hard and
35:04 again you're going to want to work
35:05 really hard so some some companies like
35:09 to tell the story about you can have
35:10 your cake and eat it too you can have
35:12 like four-day work weeks maybe if you're
35:14 if you're Tim Ferriss and
35:15 you can have a 12 hour workweek it's
35:17 really attractive idea and it does work
35:20 in a particular instance which is if you
35:22 want to like actually have a small
35:23 business or go after in each market then
35:25 your small business entrepreneur that
35:27 makes total sense but as soon as you get
35:29 past like two or three people you really
35:31 need to step it up and be full-time
35:32 committed goal so this is the big one
35:39 this is the one I hear the most
35:41 especially like candidates applying to
35:43 asana they tell me you know I'd really
35:45 like to work for for a much smaller
35:47 company or start my own because then I
35:50 have a much bigger slice of the pie I'll
35:52 have much more impact on how that
35:53 company does and I'll have more equity
35:56 so I'll make more money as well
35:57 so let's examine when this might be true
36:01 so I'll explain these tables they're a
36:04 little complex but let's focus on the
36:06 left first so these this is just
36:09 explaining Dropbox and Facebook these
36:11 are their current valuations and this is
36:13 how much money you might make as
36:15 employee number 100 coming into these
36:17 companies especially if you're like an
36:21 experienced engineer like you have like
36:23 five years of industry experience you're
36:25 pretty likely to have an offer that's
36:27 around ten basis points so if you join
36:29 Dropbox a couple years ago the upside
36:31 you'd have already walked in is about 10
36:33 there's plenty more growth from there if
36:35 you leave in the company if you joined
36:37 Facebook a couple years into its
36:39 existence you made 200 million dollars
36:40 this is a huge number and if you even if
36:45 you joined Facebook is employee number
36:47 1000 so you joined it in like 2009 you
36:50 still made 20 million dollars that's a
36:52 giant number and that's how you should
36:53 be benchmarking when you're thinking
36:55 about what might I make as an
36:56 entrepreneur so moving over to the table
36:59 on the right these are too theoretical
37:01 companies you might start so uber for
37:05 Pet Sitting pretty good idea if you're
37:08 if you're really well suited to this you
37:10 might have a really good shot at
37:11 building a hundred million dollar
37:12 company and then your share of that
37:14 company is pretty likely to be about ten
37:16 percent this certainly fluctuates some
37:18 founders have a lot more than this some
37:20 have a lot less but after multiple
37:21 rounds of dilution multiple rounds of
37:24 option table option pool creation you're
37:27 pretty likely to end up about here
37:29 if you have more than this I'd recommend
37:31 Sam's post on like the equity split
37:33 between founders and employees you
37:35 probably should be giving out more and
37:37 then but so basically if you're
37:41 extremely confident about building this
37:43 hundred million dollar business which is
37:44 a big ask it should go without saying
37:47 that you should have a lot more
37:48 confidence in Facebook in 2009 or
37:50 Dropbox in 2014 than you might for a
37:54 startup that doesn't even exist yet
37:56 then this is worth doing so if you have
37:58 100 million dollar idea and you're
38:00 pretty confident you can execute it I
38:01 would consider that if you think you're
38:04 the right entrepreneur to build over
38:05 over for space travel that's a really
38:07 huge idea 2 billion dollar idea you're
38:10 actually gonna have a pretty good return
38:11 for that you should definitely do that
38:12 this is also only the value after four
38:14 years and this idea probably has legs
38:17 so definitely go after that if you're
38:19 thinking of building that you probably
38:21 shouldn't even be in this class right
38:22 now just going go and build that company
38:23 um so why is this financial reward in
38:28 and impact I really think that financial
38:30 rewards very strongly correlated with
38:32 the impact you have on the world if you
38:34 don't believe that let's talk through
38:35 some specific examples and not think
38:39 about the equity at all so why my
38:42 joining a late-stage company actually
38:44 provide you a lot of impact you get this
38:46 force multiplier they have an existing
38:48 massive user base it's Facebook it's a
38:50 billion users or if it's Google it's a
38:51 billion users they have existing
38:53 infrastructure you get to build on
38:55 that's also increasingly true for new
38:57 startups thanks to like AWS and all
39:00 independent service providers but you
39:03 usually get some micro proprietary
39:05 technology and it's all maintained for
39:06 you it's a pretty great place to start
39:08 and you get to work with the team and
39:10 they'll help you just leverage your idea
39:11 into something great
39:12 so a couple specific examples Brett
39:16 Taylor came in to employee around or
39:18 came in to Google as around employee
39:20 number 1500 and he invented Google Maps
39:23 this is a product you guys probably use
39:24 every day I used it to get here and it's
39:27 used by hundreds of millions of people
39:29 all around the world didn't he start a
39:31 company to do that did happen to get a
39:32 big financial reward but the point is
39:35 you had massive impact my co-founder
39:37 Justin Rosenstein joined Google a little
39:41 he was a p.m. there and just as a side
39:44 project he ended up prototyping chat
39:46 with you which used to be a standalone
39:48 app as integrated into Gmail like you
39:51 see it an upper right there and before
39:54 he did that like people didn't even
39:55 think you could do chat over Ajax or
39:57 chat in the browser at all and he just
39:59 kind of like demonstrated it and showed
40:00 it to his team and they made it happen
40:02 again this is this is probably a product
40:04 most of you use maybe everyday and then
40:07 perhaps even more impressively shortly
40:09 after that er left he became employee
40:11 around number 250 at Facebook and he led
40:14 a hackathon project along with people
40:17 like Andrew Bosworth and Lea Perlman to
40:19 create the like button so this is one of
40:21 the most popular elements anywhere on
40:24 the web totally changes how people use
40:26 it and again didn't need to start a
40:28 company to do it and almost certainly
40:29 would have failed if he had tried
40:30 because he really needed the
40:31 distribution of Facebook to make it work
40:33 so important to keep in mind the context
40:36 for what kind of company you're trying
40:38 to start and like where will you
40:40 actually be able to make it happen
40:44 so what's the best reason so Sam already
40:47 talked about this a little bit but
40:49 basically you can't not do it you're
40:51 super passionate about this idea you're
40:54 the right person to do it you've got to
40:55 make it happen so how does this break
40:58 down so we're getting closely in here i
41:03 am i doing on time oh cool sweet perfect
41:05 so this this is sort of like a wordplay
41:09 you can't not do it
41:10 in two ways one is you're so passionate
41:12 about it that you just like you have to
41:13 do it you're going to do it anyway and
41:15 this is really important because you'll
41:17 need that passion to get through all of
41:19 those like hard parts of being an
41:20 entrepreneur that we talked about
41:21 earlier you'll also need it to
41:23 effectively recruit candidates can smell
41:25 when you don't have passion and they're
41:27 enough entrepreneurs out there who do
41:28 have passion but they may as well work
41:29 for one of those so this is sort of like
41:31 table stakes for being an entrepreneur
41:33 your subconscious can also tell when you
41:35 don't have passion and that'll be a huge
41:37 problem and then so the other way to
41:39 interpret this is the world needs you to
41:42 do it so this is sort of validation that
41:44 the idea is important it's going to make
41:46 the world better so the world needs it
41:47 if it's not if it's not something the
41:50 world needs go do something the world
41:51 needs becomes really valuable there
41:53 any good ideas out there maybe it's not
41:55 one of your own maybe it's an existing
41:56 company but you may as well work on
41:58 something that's going to be good and
42:01 then the second way to interpret this is
42:02 the world needs you to do it you're
42:04 actually well suited to this problem in
42:05 some way if this isn't true it may be a
42:09 sign that your time is better spent
42:11 somewhere else but also just best-case
42:14 scenario if this isn't true you
42:16 out-compete the team for which it is
42:17 true and you just end up with like a sub
42:19 optimal outcome for the world that
42:20 doesn't feel very good so drawing this
42:22 back to my own experience at asana you
42:26 know Justin and I were kind of like
42:27 reluctant entrepreneurs before we
42:32 so we were working at Facebook we're
42:33 already working on a great problem and
42:35 we would basically work all day long on
42:37 our normal projects and then at night we
42:39 would keep working on this internal task
42:41 manager that was used internally at the
42:43 company and it was just because we were
42:45 like so passionate about the idea it was
42:46 so clearly valuable that we couldn't do
42:48 anything else and at some point we had
42:51 to have the hard conversation of like
42:53 okay well what does it mean if we don't
42:55 actually start this company we were
42:57 pretty we were able to see the impact it
42:58 was having on Facebook we were pretty
43:00 convinced it could be really valuable
43:01 for the world we were also pretty
43:02 convinced nobody else was going to build
43:04 it the problem had been around a long
43:05 time and we just kept seeing sort of
43:07 incremental solutions to it so if we
43:09 didn't go out with the one that we
43:10 thought was best we thought there'd be a
43:11 lot of value left on the table and yeah
43:15 so we just couldn't couldn't stop
43:16 working on it and literally the idea was
43:18 like beating itself out of our chest
43:20 like forcing itself into the world and I
43:22 think that's the feeling you should
43:23 really be looking for when you start a
43:25 company that's how you know you have the
43:26 right idea so I'll go ahead and stop
43:29 there I'll put some recommended books up
43:31 here but we'll narrate them and maybe
43:33 that's seem to across yeah thank you
43:43 she doesn't have questions for him and
43:47 see you Thursday thank you
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