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