Yeah? All right. god eftermiddag och välkomna till den sista klassen i hur man startar en startup So this is a little bit different than
every other class. Every other class has been
things that you should be thinking about in general at
the beginning of a Startup. And today, we're going to talk
about things that you don't have to think about for
a while. In fact, you shouldn't. But since, I'm not going to
get to talk to most of you, again before you get to sort of post-product market
fit stage. I wanted to just give you the
list of things that you need to think about as
your Startup scales, and the list of the things that
usually. Founder failed to make the
transition on. So these are the topics we're
going to talk about but again all of these things are things
that are not writing code or talking to users. Which means, with a few exceptions that
I'll try to note, you can ignore them until after you
have product market fit. Most of these things, for most
companies, become important between
months 12 and 24. But it's really more about
stage than anything else. These are things that usually
hit around 25 people and definitely post product-market
fit. So just write these down
somewhere and look back at them when you get
there. So the first area we're going to talk about is
Management. At the beginning of a company
there is no management, and this actually works really
well. Before 20 or 25 employees most
companies are structured with everyone reporting to the
founder, it's totally flat. And that's really good, and
that's what you want, and at that stage that is the
optimal way, for product, that's the optimal structure
for productivity. But the thing that tricks
people is that when, when lack of structure fails,
it fails all at once. And so what works totally fine
at 20 employees, is from zero to 20 employees? Is disastrous at 30. And so you want to be aware that this
transition will happen. And you don't actually need to make the structure
complicated. In fact, you shouldn't. All you need is for every
employee to know, who their manager is? And every, and there should be
exactly one. And, and every manager should
know, who their direct reports are? You want to ideally cluster
people in teams that make sense of
course. But the most important thing is that there's just clear
reporting structure. And that everyone knows, what
it is. And if you want to make
changes to it people sort of understand how to make changes
or to hire someone. Clarity and simplicity are the
most important things here. But failing to do it is really
bad. So, because it works in the
early days to have no structure at all, and, because it sort of feels
cool to have no structure. Many companies are like, we're going to try this crazy
new management theory and have no structure. What you want to do is
innovate on your product and your your business model? Management structure is not, where I would recommend trying
to innovate. So, don't make the mistake of
having- >>
>> Nothing but don't make the other mistake of having
something super complicated. A lot of people fall into this
trap, where they think it's like you
know, people feel cool if they're
someones manager. And if they're just an
employee they don't feel cool. So people come up with these
convoluted circular matrices management structures, where
you report to this person for this thing, and this person
for that thing, and this person for that thing. But you know, actually this person reports
to you for this thing. That's a mistake too. So don't, don't try to
innovate here. This is the first instance of
an important shift, in companies, or in, in, in
the founders job. Before product market fit your
only job that matters is to build a great product, right, you're number one job is to
build a great product. As the company grows and at about this, you know, 25 or
so employee size, your main job shifts from
building a great product. To building a great company,
and it stays there for the rest of your time. And this is probably the
biggest shift in being a founder that ever happens. There are four failure cases
we see all the time, as founders become managers. So I want to talk about the
four most common ones. The first one is being afraid
to hire senior people. In the early days of a
Startup, hiring senior people is
usually a mistake. You just want people that get
stuff done. and, and the willingness to
work hard and aptitude matters more than
experience. As the company starts to
scale, and about this time when you have to put in place
a basic management structure. It is actually valuable to
have senior people on the team. You know, executives that have
built companies before. And almost all founders after
the first time they hire a really great
executive and that executive takes over big
pieces of the business and just makes them happen the
founder says, wow, I wish I had done that
earlier. But everybody makes this
mistake and waits to long to do this, so don't, don't be afraid to hire
senior executives. The second mistake is hero
mode. So, I will use the example of
say someone that runs the customer service
team. Someone runs the customer
service team, they want to lead by example,
this starts from a good place, it's, it's the extreme of
leading by example. It's saying, you know what, I want my team to work really
hard. Rather than tell them to work
hard I'm going to set an example and I'm
going to work 18 hours a day. And I'm going to show people
how to get a lot of tickets done. But then the company starts
growing. Also they have the normal
discomfort of assigning a lot of work to other people. So the company starts growing
and the ticket volume, keeps going
up, and now they have to do like 19
hours a day, and then 20 hours a day, and it's
just obviously, not working. But they won't stop and hire
people, because they're like, if I stop, even for one day, we're going to get behind on
tickets. The only way to get out of
hero mode in this case is to say, you know, what? we're going to get behind on
tickets for two or three weeks, because I'm
going to go off. And I'm going to hire three
more support team members and I've calculated based off our
growth rate that this is going to last this long. And next time, I'm not going to make the same
mistake. I'll get ahead of it and hire
again. But you actually have to make
a tradeoff. You actually, have to say, you
know, what? I need to hire more people and we're going to get behind on
other stuff. That is the right answer. The wrong answer is to stay in
hero mode until you burnout, which is what most people do. Third mistake bad delegation. Most founders have not managed
people before and they certainly haven't managed
managers. And so the way that the bad
way you delegate is you say hey, employee, we need to
do this big thing. You go off and research it. Come back to me with all the
data and the trade-offs, I'll make a
decision and tell it to you, and then you'll go off and
implement it. That's how most founders
delegate, and that does not make people feel good and it
certainly doesn't scale. A subtle difference but really
important is to say, hey, you're really smart,
that's why I hired you. You go off, here are the
things to think about, here's what I think, but you
make this decision. I totally trust you, and let
me know what you decide. That's the delegation that
actually works. because, I think, because
Steve Jobs was able to get away with the former and make
every decision himself, and people just put up with it. And every founder thinks
they're the next Steve Jobs. A lot of people try this. But I, for 99.9% of people. The second method here works a
lot better. And then the fourth area is
just a personal organization one. When you are working on
product, you don't actually need to be
that organized in terms of how you run a company, and how you talk to people about
what they're working on. But if you fail to get your
own personal organization system
right. where you can keep track in
some way of what you need to do, and what everybody else is
doing, and what you need to follow up
with them on. That will come back to bite
you, so developing this early as
the company begins to scale is really important. Two other things that we hear
again and again from our founders, they
wished they had done earlier. And that is simply writing
down, how you do things? And why you do things? These two things, the how and
the why, are really important. I mean early there is you just
tell everyone, employee, when you're, like, sitting around, having lunch
or dinner, you know? This is how we think about
building products, this is how we push
production, you know, this is how we handle customer
support, whatever. As you get bigger, you can't
keep doing that. And if you don't do it, someone else is just going to
say it. But if you write it down, and
put it up on a Wiki or whatever, that every employee
reads. You as the founder get to
basically, write the law. And, and if you write this
down it will become law in the
company. And if you make everyone read
this as the company hires 100 and then 1,000 employees
people will read this and say, all right, that's how we
do things. If you don't do it it will be
like random oral tradition of whatever the hiring manager or
their best friend that they make at their first week
in the company tells them. So writing down how you do
things? And the why? The why is the culture of
values, Brian Chesky talked about this
really well. Every founder I know wishes
that they'd written down both of these, the how and the
why, earlier. To just establish it as the
company grows, and then this becomes what
happens. I think it's one of the
highest leverage things that you can do that,
that people don't. All right.
Next area, HR. HR is another thing that most
people correctly ignore in the first phase of a
Startup because again, it's not writing code. It's not talking to users. But it's a huge mistake to
continue to ignore it. And the reason that I think
most founders ignore it, is they have in their mind
this idea of, like TV sitcom HR, you know,
awfulness. But it doesn't have to slow
you down. Actually, it speeds you up. Most founders will say, out of
one side of their mouth, people are our most important
asset. And, the other side, we don't
want any HR. So, what they mean is, we
don't want HR. We don't want, like, the bad
kind of TV HR. What good HR means is, a few
things. A clearer structure, which
Charlie talked about. You know, a path for people about, how they can
evolve their careers? Most important, one of the most important things
is Performance Feedback. again, this happens
organically early on, people know how they're doing. As the company gets to 25, 30, 45 people, that gets lost and
it doesn't have to be complex. It can be super simple but
there should be a way that it happens and it shoulder be
frequent. You know, people need to hear
pretty quickly, how they're doing? And it should tie you know, if
they're doing badly to a way you get them out of the
company or if they, they doing well it should
there should be a clear path to how this ties
to compensation. And that's the next thing. In the early days of a
Startup. People's compensation is
whatever they negotiate with the founder,
and it's all over the place. As you grow. It feels hopelessly corporate,
but it really is worth putting in place these
compensation bands. So a midlevel engineer is in
this range. A senior engineer's in this
range. Here's how you move from this
to this. And it keeps things really
fair. Someday everyone will find
that everyone else is comp. If it's all over the place it will be a complete meltdown
disaster. If you put these bands in
place early. It will at least be fair. It will also save you a lot of
crazy negotiation. One thing that I think is
really important when it comes to HR is equity. Most people get this right now
for the early employees, they give
them a lot of equity. But I think you should
continue to give a lot of equity all the way through. And, this is one place that your investors will always
give you bad advice. I think, not YC, but all other investors give bad
advice here, most do. You should be giving out a lot
of equity to your employees. now, this dilutes everyone,
right, this dilutes you as the
founder and the investors equally. For some reason, founders usually understand
this is good, investors are very
shortsighted and don't want to dilute
themselves. So they'll like fight you over
every equity grant. But we've seen a lot of data
at YC now, and the most successful
companies, and the ones where the investors
do the best, end up giving a lot of stock
out to employees, year after year after year. So I tell founders like, you
should think about, you know, for the next ten
years, you're going to be giving out 3 to 5% of the
company every year, because you just get bigger
and bigger. So the individual grants get
smaller, but in aggregate, it's a lot of stock. And I think this is really
important to do, if you value your people, you
should be doing this. specifically, you need to do
this with refresher grants and you should get a, a plan in
place for this early. You know, I think, you never
want an employee in a place where they vested three out of
their four years of stock and they start thinking about
leaving. So you should always stay in
front of people's vesting schedules. And you know, how they plan
early where you have refresher grants in place. There are a lot of new
structures that people have been using here. I personally like six year,
big grants, but six years investing. because I think these
companies just take a while to build. There's Pyramid Vesting where
you back weight someone's grant, so in year
four they get a lot more of the vesting than year one. There's a concept, different
names for it, but something like continuous
forward vesting, where people's grants are
automatically reupped every year, at the same number
of shares. Whatever you decide, get an
option management system in place at about this point. The normal way people do this is just someone keeps an
Excel spreadsheet. I have seen mistakes that have
cost employees or companies tens of millions of dollars because
they didn't get this right. So there's really good option
management systems or software and you should get those in place
around this point. The other sort of HR stuff to
touch on, there are a bunch of rules that change around 50
employees. Common examples are that you
have to start sexual harassment
training and diversity training there's a
bunch of others as well. But just put a little pin in
your mind that when you cross 50 employees there's a
new set of HR rules that you have to comply with. Monitor your team for burnout. Again, it's up to product
market fit it's just to Sprint, now it becomes a
marathon. At this point, you actually
don't want people to work a hundred hours a week
forever. You want them to go on
vacation. You want them to have new
challenges and do new things. And if you let the whole
company get burned out all at once, that, that is often a
company-ending thing. This is also a good time to
put in place a, a hiring process. Another thing that most
founders regret is they don't hire as soon as
everything is working, I think you should hire a
full-time recruiter. If you do this too early, that's bad because you'll hire
too fast, and that usually implodes. But, most founders get behind
the ball on this. The other, there are a lot of
other, sort of just hiring process
tips. For example, I think most
companies, even until they get up to say
3 or 400 employees should announce every offer on
some internal mailing list or something before they make it, because like half the time you
do that, someone in the company will
know something good or bad about that employee. And the companies that I know that have instituted this
have been really happy. Also a good time to have a
program in place to ramp up employees, so when someone
starts, you know, what does their first week
look like? How do they get, how do they
get spun up? How do they learn everything
they need to learn? Are they going to have a buddy that's going to think
through them? That's going to help them
think through kind of everything about the company. Here's one that you actually
do need to think about before the 12 to 24 month mark, which
is diversity on the team ,. The most common place this
comes up honestly is people that hire, you know, all guys
on their engineering team for the first 15 or 20 people. And in that point you get a
culture in place that sort of takes on a life of it's own,
and most founders that I've spoken to that have made this
mistake regret it and they wished they had hired
some diversity of perspective on the team early
on. Engineering teams are not the
only place where it comes up, but that's where you see it
the most often, and if you get this right early
you'll be able to grow the team much more quickly
over, over the long-term. The other thing to think about is what happens to
your early employees. So, a common situation that
happens is, the company evolves fast the
early employees you know, the company, so like
you hire an engineer who is a really great engineer, but
then as the engineering team grows you need a VP of
Engineering. The early engineer wants to be
the VP of Engineering, you can't do that, and but you
don't the early employee to leave, they're an important,
important part of the culture, they know a lot, people love
them, and so I think you want to be very
proactive about this. You know, you want to like
think about what's the path for my first 10 or 15
employees going to be as the company grows, and
then just talk to them about it very directly, be up front,
you know,. I want, like sit them down and say, I want to talk about,
sort of where you want to see your career go inside of this
company. All right, so company productivity, this is
something you don't need to think about in the early days
because small teams are just sort of naturally productive
most of the time. But as you grow, it the productivity I think
goes down with the square of the number of employees if you
don't make an effort because it sort of one of these like
connections between nodes, every pair of people adds
communication overhead. And so if you don't start
thinking about the systems that you're going to put in
place, when the company is 25 to 50 people, to stay
productive as you grow things will grind to a halt
faster than you can imagine. The single word that matters
most, I think, to keep the company productive
as it grows is alignment ,. The reason companies become
unproductive is people are either not on the
same page and you know, don't know what the same priorities
are, or they're actively working against each other
which is obviously worse. But if you can keep the entire
company aligned in the same direction, you'll
have one well over half of the battle, and, and the way
to start with this is just a very
clear roadmap and goals. Everyone in the company should
know what the roadmap for the next three or six months,
or a year, depending on where the company is in its
life cycle, looks like. You know, a classic test that
I love to give is if I walk into a company getting,
beginning to struggle with these scaling issues, I'll ask
the founders, like, if I walked around and polled
ten random employees and asked them what the top three
goals for the company are, right now, would they all say
the same thing? And a 100% of the time, the
founder says, yes, of course they would, and I'd
go do it, and 100% of the time, no two employees
even say the same three, top three goals, in order. And founders can never believe
it, because they're like well I announced that in all hands
like three months ago what our goals were going to be, and
how can they not remember? But it's really important to
keep reiterating the, the message about the roadmap
and the goals, and almost no
founder does this enough. And if you do it, you know the
company will say, you know, all right, these are our
goals, we understand them, we're going to get them done, I know self-organize around
that. But if people don't know what
the roadmap of their goals are it won't
happen. We already talked about
figuring out your values early, but I want to reiterate that
because that also really help the company make the right
decisions. If everyone knows what the
framework to decide is. They'll make hopeful the same
decisions if they're smart people. You want to continue to be run
by great products and not process for its own sake,
this is a fine, fine line. Because you do need to put
some process in place, but you never want to put process
in place that rewards the
process. The focus has to always be on
great product. One easy way to do this that a
lot of companies try is they just say, we're going to ship
something every day, and if you do that you know, there's at least a continued
focus on delivery. And then transparency and
rhythm in how you communicate are really important, most
founders wait way too long on these, but having a management
meeting every week, of just the people that report
directly to the founder or the CEO, critical ,. All hands meetings not quite
sure how often is optimal for those, at least once a month
where you go through the results and the real map with the entire
company really important. And then, you know, doing a
plan every quarter of what we're going to get down
over the next three months and how that fits into our goals
for the year, also becomes really
important. I put offsites up there, because I don't think people
do these nearly enough. A surprising number of the
successful companies we've been involved with do a lot of
offsites. Where they'll take their best
people for a weekend to a cabin in the woods or
somewhere and just talk about. What do we want to be when we
grow up? What are our most important
things to be doing? What are we not doing that we
should be doing? But get people out of the
office and out of the day-to-day,
everyone I know that does those thinks
they're well worth the time. So the goal in all of this
productivity planning is that you're trying to build a
company that creates a lot of value over a long period of
time, and the long period of time is
what's important here. You can avoid all of this and just like with the authority
of the founder make sure the company ships a great
next version. But that won't work for
version ten, it won't work for version 11. I, I really believe that this
single hardest thing in business is building a company
that does repeatable innovation and just has this ongoing culture
of excellence as it grows. If you look at the examples of
this most companies fail here. Most companies do one great
thing where the founder just pushes to get it done and then don't innovate that well
on follow on products. And it really takes founders
that think about how I'm going to do this second thing. This really hard thing. To get something like an Apple
that can churn out great products for 30 or 40 years,
or longer. All right, these are super
tactical mechanics. This is, this is definitely to
just put on a list and remember these things for
later. All right in the early days, people basically ignore all
accounting and they have, like, maybe if they're lucky,
a shoebox full of receipts. They certainly don't have
anything that looks like a financial report. This is a good time to get it
in place. You know, when things are
working, say, month 18 or whatever. You can do this with an
outsourced person. Just say, you know what? We want, like to get our books
in order. We want to start getting
audits every year. We want to start a relationship with an
accounting firm. Easy to do. Definitely worth it. This is also a good time to
collect your legal documents. Because it's easy to fix
things now. So, if you actually assign
someone to go through and collect every agreement the
company has ever signed. Then when your landlord tries
to **** you out of your lease and no-one can find the
lease which happens like, half the time somehow someone
will be able to find it. Also, you're almost certainly
missing something. Some employee didn't sign
their PIIA or whatever and you'll find it
now. It's easy to fix now. It gets really hard to fix,
like, in the middle of your next
round of financing. So, again, this is time to
bring, like, a little bit of the order to,
to chaos. FF stock is a special class of
stock for founders that the founders can
sell in a later round, without messing up the
common-stock valuation. It used to be that most people
set this up right when they started the
company. Founders fund sort of
popularizes. Which is why it's called FF
stock. But it became a really bad
signal, right? Founders that were obsessed
with their own personal liquidity when the
company had nothing turned out to like fail most of the time. And so investors learn that if
founders pushed on this in the seed round it was a very,
very bad sign. Most founders don't actually
want to sell stock until the company is worth, like a
billion dollars or something like that. So, I think you can actually
safely set this up after things start working, in the
next financial round, and then you can sell it two, three,
four years down the road. But it's a good thing to remember by about the time you
get to the B round. IP, trademarks and patents. actually, just IP and
trademarks. So, you have 12 months, after you announce something,
if you want to patent it. And, if you miss that window,
it's very hard to do. so, 11 months after you
launch, or first publicly talk about what
you're doing. Is a good time to file
provisional patents. We recommend people just file
provisional patents. All that does is just hold
your place in line at the patent office and it gives
you another year to decide if you want to patent something
or not. It only costs about $1000. It takes way less effort than
a full patent. And most of the time you'll
know whether or not you need full patent a
year later. But if you just do this one
step, you'll at least have the
option. It's also a good time to file
trademarks for the U.S. and major international markets. again, if you don't do this at
this stage, most people end up regretting
it. And while you're at it, a good
time to grab all the domains. FP&A, good time also I think
to think about someone to start
doing FP&A. I think most companies don't
end up realizing where the knobs on their financial
model are until far too late. And I think it turns out that
if you have someone build a really great
model of the business. And by really great,
apparently Roelof Botha, who was the PayPal CFO and
built their FP&A model. The top, the, like, the top sheet of his
spreadsheet was 1,500 lines, just as a level of the detail
people build these to. But you can really optimize
the business and understand it at a level that I think most
people totally miss. Most people don't hire someone
like this until they're many
hundreds of employees. I think it's worth hiring
earlier. Another thing that I think is
worth hiring earlier that almost no one does is a
full time fundraiser. Let's say you hire someone
like really, really great and their full time job is to
raise money for the company. You hire them after your b
round. And you say, you know what, by the time we raise our c
round we want the evaluation to be double what it would
have been otherwise. You almost certainly get
better results than if you hire an investive banker or
someone else if it's just someone internal to the
company and you end up paying way less money, and take like
literally half the dilution. So, I think this is one of
these like, slightly none obvious optimizations that
people just failed to make. Tax structuring, so, this is
another thing. most, once things are working. It would be worth you spending
a little bit of time thinking about how you set up the tax
structure for the company. I confess, I don't know a lot
about the details here because I just find it
personally really boring. But like somehow if you assign
all the IP to like some corporation in Ireland that
licenses it back to the U.S. corporation, you end up paying
like no tax, no corporate tax. But I know you can only do
that like relatively early on. And this ends up being a huge
issue for companies that don't do it that compete with
companies that do do it. You know once they're big,
public companies. So that's worth doing. A lot of people throughout the
class have talked about your own psychology as a
founder. Here's what they haven't said. It gets worse, not better. As the company grows, you
continue to oscillate. The highs are better but the
lows keep getting worse. And, you, you really want to
think about this early on and just be aware this is going to
happen. And try to try to manage your
own psychology through the expanding swings that it's
going to go through. Another thing that happens as
you begin to be successful. As you go from being someone
that most people rooted for, kind of the underdog, to someone that a lot of
people start hating on. And you know, you see this first in internet
commenters who will be, like, I can't believe this
**** company raised money. It **** sucks, like, awful. And it only bothers you a
little bit, but then, like, journalists that you kind of
care about start writing this, and it just goes on and on. This also will go on and on as
you get more and more successful, and you just have to make peace
with this early. But if you don't, it will bother you all the way
through. This is also a good time to
start thinking about how long of a journey this is
going to be. Very few founders think long
term. Most founders think kind of a
year in advance. And they think that you know
what in three years I'm going to
sell my company and either I'm going to become a VC or sit on
the beach or something. Because so few people make an actual long
term commitment to what they're building, the ones
that do have a huge advantage. They're, they're in a very
rarefied class, and so this is a good time to like sit around
with your cofounders and decide, you know what, we're
going to work on this for a very long time. And we're going to build a
strategy that assumes that we're going to be doing this
for the next ten years. Just thinking that way alone,
I think is probably, a very high leverage thing you
can do for success. Take vacation. Another common thing that we
see is founders will run their business for three or four
years, without ever taking, you know, more than a day of
vacation. And that works for like a
year, or two years, or something like that. It really leads to nasty
burnout if you don't do it. Losing focus is another way
that founders get off track. I actually think this is a
symptom of burnout. When you get really burned out
on running the business, you want to do easier things,
or sort of more gratifying
things. You want to go to conferences,
and have people tell you how great
you are. You know, you want to do all
these things that are not actually building the
business. And the most common post-YC
failure case for the companies we fund is that
they're incredibly focused, during YC, on their company,
and then after, they start doing a lot of
other things. You know, they, they advise
companies. They go to conferences,
whatever. Focus is what made you
successful in the first place. There are a lot of reasons
people lose focus, but fight against that really,
really hard. This is a special case of
focus. As you start to do well. You will start to get a bunch
of potential acquires sniffing around. And it's very gratifying. And you're like wow, I can be
so rich and that'd be so cool. And negotiations feel really
fun. This is one the biggest
killers of, of companies is that they entertain
acquisition conversations. You, you distract yourself. You get demoralized if it
doesn't happen. If an offer does come in and
it's really low, you've already like mentally
thought that you're done, and so you take the offer. As a general rule, don't start
any acquisition conversation unless you're willing to sell
for a pretty low number. Don't ever just check it
hoping that you're going to have the one
miracle high offer. If that's going to happen
you'll know. Because they'll just make you a big offer before you can
meet them. But this, this is a big
company killer. And then just as a reminder to
everybody the thing that kills startups at some level
is the founders giving up. So sometimes you should quit. But, if you mismanage your own
psychology and you quit when, when you shouldn't, that, that
is what kills companies. I mean that is, that is the
sort of final closet death in most of these start ups. And so if you can manage your
own psychology in a way that you don't quit. Dont go to place a where you
need to quit, or give up on the startup. You'll be in a far, far better
place. So, marketing and PR is
something that we tell companies to ignore
for a long time. Everyone thinks in the early
days that the press is going to be what saves them. We tell them all the time it
doesn't work that way. It's definitely true. You know, press is not what's
going to save your startup. But as you start to be
successful, this is something that the
founders themselves need to spend time on. So, once your product is
working, switch from not caring about
this, to caring about it a little
bit. And, the two most important
things for the founder to do, the
founders to do. Figure out the key messaging
yourselves. Never outsource this to your
head of marketing or PR firm. You, founders have to figure
out what the message of the compay is going to be. And once you set that, it
kind of sticks. It's very hard to change this
once the press decides how they're going to talk about
you. The other thing is getting to
know key journalists yourself. PR firms will always try to
prevent you from doing this, because they need to have a
reason to exist. And so they're like, well,
we're going to handle the relationship with
the journalist. We'll just bring you in for
interviews. No journalist wants to talk to
a PR flack, ever. They're so much more happy to
just hear from a founder. I think the biggest PR hack
you can do, is to not hire a PR firm. Just pick three or four
journalists that you develop really close
relationships with, that like you, that understand
you, that you get. And then you contact them
yourself. They will cover every story
you ever give them, and they'll actually pay
attention, get to know you and care about the company. This is so much better than
the normal strategy of having a PR firm blast 200 contacts
that never read their e-mails, with every piece of news. so, this is something that I think is important to start
doing. This is also the time in a company when business
development starts to matter. And so, in the early days you
can basically ignore anything that
would be like doing deals, except maybe fund raising and
sales. You know, this is the time
when they're important. And everything, or many things
that you do, like even fundraising, falls
under the, the category of doing deals. So there are, here's my one-minute crash
course on this. There are five points that I think are important to
understand here. We've talked about this a lot. Nothing will serve, nothing will matter if you
don't build a great product. So assume that you've done
this before you go try and get anyone to do anything with
you. Developing a personal
connection with anyone you're trying to do any sort
of big deal with, is really important. For whatever reason, most
founders fail to do this, or many founders fail to do this. But no one wants to feel like
they're this transactional thing, that you're using them
to get distribution for your product, or to raise
money, or whatever. And, so figuring out some way
to actually care about this person and care about
what you're doing with them. And not view them, you have to
in your own mind not just view them as a one off
transaction. You have to actually care
about them and what they're going to get out
of this. Competitive dynamics, so this is like basic
principle of negotiation. Most funders learn this the
first time in fundraising but it actually matters for
everything. The way you get deals done,
and the way you get good terms, is to have a competitive
situation. You know, if you don't do this
deal with party A, you're going to do it with
party B. It's not always an option, but
it usually is, and this is, like, the single thing that
makes deals happen and makes deals move. Tyler talked about persistence
the last lecture so I won't hit on that again too
much, other than to say, you have to go beyond your
comfort point here, most of the time as a founder. And then, the fifth point is
you have to ask for what you want. This is another thing, I still
have trouble with this, and certainly most of the founders
we do. Have, you know, if you want something to deal,
just ask for it. Most of the time, you know, you won't get laughed out of
the room and you might get it. But you have to be like, at some point you actually
have to say, you know this is what I'd like
you to do. Even if it feels aggressive or
an overreach, or whatever. So I'm going to close, this part of the talk with an
image. One of the Airbnb founders
drew this on like a business card or something for another founder
that was starting a company. And then I saw it once and
took a picture of it. Because I thought it was such
a good summary. And what he had tried to draw
here was the Ycombinator process as he remembered it. And I love it because it's
like so simple, and it looks so do-able when it's
written on a business card. But you're trying to find
product market fit. You know, you're trying to
build a product, and you're trying to close the gap
between those two gears. The only way to do that is to
go off and meet the people. You cannot do this without
getting really, really close to your users. And then he drew this graph
that, sort of on a whiteboard at YC
and got in kind of, like, one of the YC he writes
a passage, but that's the graph of how adoption goes
for a new company. So you launch in the press,
you get a huge spike. It falls off to nothing. At some point, at least one
point, things look like they're
going to completely die and kind of dip below the x-axis. They recover a little bit. You have this long, long, long trough of sorrow before
things work. In Airbnb's case, it was 1,000 days before the
graph started ticking upward. You have these wiggles of
false hope, and then finally, finally, finally, things start
to grow. Three years later. So starting a startup ends up
being this very long process. It is, you know, it can be
really rewarding. It's definitely long, but it
is do-able. And that's what I love about
that drawing. So, with that, I think I have
about ten minutes left. I can answer questions on
this, or anything else in the course
that we've covered. If anyone has some. Yes. >> You have that diversity
being important, but an earlier speaker said
diversity wasn't important and you should just hire people
that are very much like you, and then you can cross. >> So, here is the the
question is, how do you you square the device of diversity
being important with earlier speakers saying you want
people that are very similar. the, the difference what you
want is you want diversity of backgrounds, but you don't
want diversity of vision. Like where companies get in
trouble is when they have people think
very differently about what the company should be doing,
or don't work well together. You don't want that. You do want to hire people
that you know, and that you trust and that you
can work with. But if everyone on the team
comes from exactly the same background you end, you do end
up developing somewhat of a mono-culture which often
causes problems down the road. Not always. Some companies have been
successful with that. So what, what we tell people
is, hire people that you know and that you've worked with
before. But try to hi, try to hire people that are
complementary and align towards the same goal, not people that are exactly
the same. because you just get a, a
better skill set. Yeah. >> What are some examples of
ways to make a transition back to a more personal level,
especially when you're really. >>
>> How to keep track, productivity systems. So, the one I use, which
actually I think works really well, is I keep one piece of
paper with my goals for sort of a three to 12 month
time frame. And I look at that every day. And then separately I keep
one, one page for every day of my short term
goals for that day. And so if I need to do
something in like a week, I just flip forward seven
pages and write it down, and then I also keep a list of
every person and what they're working on, and
what I need to tell them, and what I need to talk to them
about, what we talked about last
time. So every time I sit down with
someone, I kind of have the full
statement, a list of things for that
person that works really well. Yes. >> So we talked about that
startup growing. But most startups fail. >> Yeah.
>> Any advice for kind of fail gracefully. >> Yeah. >>
>> How to fail gracefully. So, most startups fail,and
Silicon Valley almost goes too far in how much it loves
failure. Failure still sucks. You should still try not to
fail. And this whole, like, thing, of like, failure's great, I, I
don't agree with. But it will happen to most
people most of the time, and it's a very forgiving
environment. As long as you are upfront
about it, and ethical, and don't let anyone
get into a bad situation. So, if you're failing, first
of all, you should tell your
investors. And, second of all, you should
not totally run out of money. What you don't want is a
blow-up with a bunch of, you know, debts that the company
owe, and everyone, you know, showing up to work, one day,
and the door being locked. You'll know when you're
failing, you'll know when the company
is, things just aren't going to
work, and you should just tell your
investors. Like, hey, sorry, this isn't
going to work. No one will be surprised. Like, I expect to lose my, or
I'm willing to lose my money on every investment I ever
make. I know that happens most of
the time, and the winners pay for it, you know, still with a factor
of 100, so it's okay. No one, people will be very
understanding and supportive. But you want to tell people
early. You don't want to surprise
them. And you want, you don't
want to like let your employees gets
shocked when they learn they don't have a job. you know, you, you, you want to shut the company
down in a graceful way. Help them find jobs. Make sure you give them two or
four weeks of severance payment, so that they're not
suffering a cash flow problem. All that stuff is pretty
important. Yes. >> How many immigrant founders
have you seen in Y Combinator? >> How many immigrant founders
have we seen in Y Combinator? In the last batch, I think it
probably went up for this next batch, in the last
batch 41% of the founders we funded were born outside the
US. From 30 different countries. So it's. Yeah a pretty big percentage. >> What do you think are other
good places to start a start up? >> Apart from the Valley where
do I think are other good places to
start a start up? Well I still think the Valley
is the best by a very significant
margin. But I think it's finally, maybe beginning to weaken a
little bit. Because the costs have just
gotten so out of control. To be clear, if I was going to start a company I
still wouldn't think about. I would still pick Silicon
Valley. And I think if you look at the
data of companies over the last few years, Valley
still wins by a lot. But Seattle, LA, lots of places outside the U.S., I
think all of these make sense. >> Like what places outside? I hesitate to make
recommendations there because I haven't spent enough
time in this cities to really have an
intuitive feel. but, like, I mean, you, you
know as well as I do the common ones people
talk about, startup hubs, and I just, I can't make a
personal recommendation there. >> Hire a professional CEO or
like a senior. >> When should the founders
think about hiring a professional CEO? Never. you, if you look at the most
successful. Companies in tech, they are
run by their founders for a very long time, sometimes
forever. And sometimes they even hire a
professional CEO and then realize that that is not going
to like build a great company. And so, like Larry Page came
back to CEO again. I think, if you don't want to
be the long-term CEO of a company, you probably
shouldn't start one. I'm not totally sure about
that. I think there are exceptions. But generally, that, the transition I talked about
today, if you go from building a great product
to building a great company. Being a founder, you know, for
nine of the ten years is going to be about building that
great company. And if you're, if you're not
excited about doing that I think you should think hard
about, about it. Yes? >> What are some of the most
common and most alarming warning signs
you should be looking for. When you're trying to make
this shift from building great products to
building great companies. What are the, the most common
mistakes to make when you're shifting towards
building your own company? I think I went through most of
them here. I tried to put everything in
here that I see people mess up most of the
time. Yes? >> Is there a way to get
involved in the Y com, community before getting
accepted? Is there a way to get involved
with YC before getting funded? No, and intentionally not. Actually I'll say the one
thing you can do is if you work at a YC company. And then later apply I think
that probably like, well not probably. That definitely if you get a
good recommendation from those founders will help with
YC. So you know, working at a YC
company helps. But there's not much you can
do to help and that's intentional. Like there is no pre start up
in a way that there's pre-med. You should just focus on
whatever you're doing. And when you start a start up,
there's things like YC and others that are structured to
help you. Most of the founders we fund, we don't know at all before we
do it. You know, you don't, you really don't need to get
to know us or get involved. We're, we're all good that
way. Yes? >> There's a statistic of
saying, now harder to get into Y
company then getting, getting into Harvard. So I'm curious, the criteria
that are used, think of start-up, does it
change over time, or? >> The question is what, what criteria do we use to
pick start-ups and has it gotten harder? Has it changed? You know, we, the two things
that we need to see are, are good founders and a good
idea. And without both of those, we,
we won't fund a company. But that hasn't changed. That has, that has always been
the case. The applicant pool to YC has
grown quite a bit. But most of, or a lot of the
growth is, you know, people that shouldn't be
starting start-ups anyway. Probably, that are just doing
it because it's sort of the cool
thing now. So you know, if you're really
passionate about an idea. And the idea is good. And you're you know, smart and get things done that you're
executing. I still think you have a, a
very reasonable shot at YC, even though the headline
number is bigger. Yes. >> The certain, certain market
that you're really excited about but don't necessarily
know a lot about yet. Is there a certain or ways to
,. >> Sure.
If there's a market that you're excited
about but don't know a lot about yet,
what should you do? Two schools of thought on
this. One is to just jump right in. Learn it as you go. That's worked a lot of times. The other is to go work at a
company in the space or do something in, in the market
for, you know, a year or two years. I lean slightly towards the
second. But as long as you're willing
to really learn and really study and really get
uncomfortably close to your users, either case will work. And I don't think it's that
much of a disadvantage. I, I think, all things being
equal, I would go spend a couple
years learning about it in detail, but I don't think
you have to. Yes? >> I have question related to
YC to. >> Sure.
>> Yeah so, I think that YC does fantastic
job in promoting partnership, instead of combating. In fact, as an institutional
investor I actually I messed with a suite up at YC. In past periods, the hardware
has things like you know, you guys has 180 companies every
year jumping into the market. And it looks like it's hard to
follow each of the YC companies any more. Do you think that this will
create some you know, if some people will walk away
from YC. Because they cannot follow
such a companies. The company has to be very
polished and the founder has to be thinking
over and over about ideas. Easy to access the capital- >> All right, so I think the
question is do I think investors are going to fund
less YC companies as we grow? no. Definitely not. Like certainly the trend in
this is the other way. We have more and more
investors saying that, you know, half their
portfolio's now YC companies. And they're looking forward to the day where it's
three-quarters. No I don't think that's a
problem at all. I think that is like so not on
my top 100 problem list. The opposite of that maybe. All right, one more question. Yes. >> When should a group of
founders raise a seed fund or the first fund? >> When should a group of founders raise some seed
money? This is a great question. I think that, I think that in
general. It's nice to wait until you
have the idea figured out and initial signs of promise
before you raise money. Raising money puts some
pressure on the company. Some time pressure. And once you've raised money
you can't be in this exploratory phase
indefinitely. you, and you end up having to
rush. And so, like, if you haven't
raised money, and your idea's not working, you can, you
know, like flail around and pivot until you really hit on
the thing that's working. But if you raise money and
your idea doesn't work, you're in this like oh ****
moment, and you have to pivot. And you pivot to whatever the first vaguely
plausible idea is. And that's bad. So I think. If you can wait to raise any
outside capital more than say, like $100 or $200,000 if you're necessary,
but ideally not even that. Until things are working or,
or at least pointing in the direction of working
you're way better off. All right, thank you all very
much, this was fun.
