
Startup Playbook - sama
http://playbook.samaltman.com
======
lemevi
I feel like this needs a "when to give up" section. Like at some point it's
obvious right. When is that point. Should you just destroy your entire life
and never give up no matter how long since it's been since you've had steady
growth? I've seen startups struggle for years with average growth or really
slow linear growth where real profitability was years away. Do they just
continue? Is that the advice? What about their employees who are being paid
less than market value?

------
webmasterraj
> _an even bigger problem is that once you have a startup you have to hurry to
> come up with an idea, and because it’s already an official company the idea
> can’t be too crazy. You end up with plausible sounding but derivative ideas.
> This is the danger of pivots._

A great point, that I haven't seen in too many places. I sometimes feel like
we're seeing too many people who "want to have a startup" for the supposed
fame and fortune, and not enough who are truly passionate about an idea.
Believing in an idea will get you through, not dreams of gold coins.

Sam, I noticed you didn't mention watching cash burn or unit economics. Is
that a later section you might add? Too many founders don't realize the
importance of that until it's too late (speaking from personal experience)

~~~
birken
As a counterpoint, the founders of Thumbtack started a startup before they had
an idea, picked a very "derivative idea" and still did (and are doing) pretty
well. If I had to quantify the motivation of the early team, it was much more
about the company being successful than everybody being super passionate about
the idea. As long as you can out-execute your competitors and people want your
product, it doesn't really matter what your motivation is.

------
jMyles
> Startups are the point in your life when tricks stop working.

Awesome thesis, hidden in the middle of the text. In some ways, this is a
great single sentence answer to the question, "What is a startup, really?"

~~~
sama
[http://www.amazon.com/Persecution-Art-Writing-Leo-
Strauss/dp...](http://www.amazon.com/Persecution-Art-Writing-Leo-
Strauss/dp/0226777111)

~~~
nbashaw
Ha, it's amazing to see a Leo Strauss reference in a HN thread! I majored in
Political Theory at Michigan State, and the department was full of
Straussians. Worlds colliding.

------
jedberg
> On the other hand, starting a startup is not in fact very risky to your
> career—if you’re really good at technology, there will be job opportunities
> if you fail. Most people are very bad at evaluating risk.

It's true that career risk is low, but opportunity cost could be high. If
you're well into your career, taking a few years off to work at a startup that
might fail could really be a million dollar tradeoff.

So you really gotta believe in your startup.

(Note: I left my comfortable high paying job earlier this year to start a
startup)

~~~
stevesearer
That is the calculation I used over the course of a few months to switch from
being a teacher to going all-in on my office design website.

At the time I was pretty burnt out from teaching, ended up moving to a new
city and was doing a few temp jobs to make some extra cash. The risk was low
enough at that point that the website was almost a no brainer. I'm pretty
confident that had I been in a good spot career-wise at the time, I would
likely have either never kept my side project going.

------
m_fayer
I wish there was a similar level and quality of resources for what I think are
called lifestyle businesses. By that, I mean product-based businesses with at
most a few million in revenue, a 5ish person team, a solid sustainable market
position, and no desire to revolutionize any unicorns.

I know a lot of people attempting this and they mostly seem to be flying under
the radar, or at least have nowhere near the cachet of a startup. They are
often bootstrapped, frequently for lack of other options.

For those of us who don't want to be in the pressure cooker or are turned off
by the hype machine, these businesses are a viable alternative route toward
independence and possibly achieving a significant impact. The fact that they
have become as attainable as they are is I think also something quite
remarkable.

~~~
davepeck
The Basecamp (née 37Signals) folks have been beating this drum for quite some
time. DHH posted "Reconsider" to their blog today, actually; it's an
entertaining read, if nothing else:
[https://signalvnoise.com/posts/3972-reconsider](https://signalvnoise.com/posts/3972-reconsider)

Here in Seattle, there's a great community of small software businesses with
meaningful profits and impact. We have ties to the broader Seattle startup and
technology community, without being a proper subset.

I don't see it as an either-or proposition. Right funding for the right
business, as it were.

~~~
TranquilMarmot
How can I find jobs for small software business like that (especially in
Seattle!)? I want to work in a smaller environment that's not necessarily
trying to be a "unicorn", but those seem to be the only jobs posted here on HN
for "Who's hiring?". On other job boards, I mostly just see larger
corporations hiring worker drones. I just want to write good software that
solves interesting problems and make enough money to get by!

~~~
aeden
It's really up to you to go out and find them. I suggest looking for local
meetups and talking to engineers who are working in those small businesses.
Get to know the people in your community running these small businesses.

Most of our hires were introduced through people I know. In a small business
this is often the only logical way to hire because you already have some level
of trust with the referrer and thus they've acted as the first gateway for a
candidate to get through (and they usually can vouch for the candidate's
work).

Also, many small businesses are concerned largely with staying alive and
making a profit, so that may mean they will be focused on "non-interesting"
problems of making the business operate well. Factor this into your decision
as to who you want to work for as well.

~~~
TranquilMarmot
I guess that's the issue- where I'm living right now, there is absolutely _no_
"tech scene". There are no local meetups that don't require me driving 1.5+
hours one way to get to, which I can't manage to do on a regular basis. I'd
love to move somewhere where there's more people who are like-minded, but I
can't just up and move without a job waiting for me.

The general consensus I'm hearing is that the way you get hired at a smaller
company is just through networking, but if there's no network near me to speak
of am I just simply out of luck?

And yes, I'm aware that I will have to work on some "non-interesting"
problems, but I'm okay with that as long as I feel like my work is being
valued by my coworkers and that I'm not just another drone.

------
libertymcateer
I have a really hard time buying a lot of this about how novelty and monopoly
are keys to a successful company. If you look at the really successful
startups, especially unicorns, almost none of them are actually monopolies or
new ideas. The vast, vast majority are old products done right, and almost all
of them have very substantial competition. This attitude is, in fact,
encompassed in the near footnote-like section entitled "Competition." That
section sums it all up: success is determined with obsessively improving the
company. Competition isn't what kills, it is failure to keep on improving.

[https://www.cbinsights.com/research-unicorn-
companies](https://www.cbinsights.com/research-unicorn-companies)

There is the list of current Unicorns. I can't think of one of them that
doesn't have very, very substantial competition or is a genuinely novel
product. All of them ventured into highly competitive, well-worn fields and
what set them apart was quality of service, ease of use, and responsivity.
Very few of them made conceptual leaps in the underlying product - they mostly
made leaps in lowering activity energy to use products or solving associated
logistical problems.

Sorry Sam, I have to politely disagree with you on this one. Lord knows you
are the one with the resume and authority on this, but I am a startup lawyer
and work with clients on this stuff all day, so I am not totally unqualified.
I do defer to your judgment, obviously, on companies that you want to fund,
and your track record more than speaks for itself. However, what I want to
know is if there isn't some disconnect between the companies you do fund and
the attitude that is expressed in this post. I would love to hear your
insights or opinions on whether you feel that I have this wrong, and if you
think that the next generation of unicorns are going to be novel monopolies,
or that maybe I am misreading the characteristics of current successful
startups.

~~~
jhchen
Novel does not mean no competition--there's always competition, even for
breakthrough technologies. Even the telephone had to compete with telegraphs
or snail mail. The novelty comes in the way an existing need is met. From your
list, Uber competes against taxis to transport people short distances. Airbnb
competes against hotels to provide short term housing to travelers. Dropbox
competed against flash drive to transfer data between machines. These
companies have a novel approach to enter and thrive in a competitive market.

A monopoly simply has to have significant influence on supply of a good. In
the UK that can be as low as a 30% market share. Qualify a market enough and
any company can be a monopoly (I'm sure there's some geography where Lyft or
good ol taxis represent a monopoly), so it's important to determine the size
and importance of a market (a monopoly over food in a small town is still
problematic). So while I cannot say these companies are monopolies--we have
the Department of Justice for that--many companies on your list would make a
compelling case, were they to abuse their market power.

~~~
libertymcateer
You make a fair point, and I also do appreciate the definition used by Sam in
his post, which was (the site is now down) about network effects compounding
the bigger you get, and creative a positive feedback loop. I buy that
definition, sure, and I get your comment. However, what I take issue with is
funneling tons of smart minds into a quest for green-field or blue-ocean
opportunities. There are tons of huge opportunities in existing businesses. I
guess I don't understand how we got from "disruption" to "find a business with
no competition."

~~~
jhchen
My thoughts on why is pure conjecture but I'll add that there are many such
common misunderstandings. Chasing growth is another, which is why I'm very
happy for this Startup Playbook. So many people do do not realize growth is
STEP TWO AND YOU CANNOT SKIP STEP ONE:

"Your goal as a startup is to make something users love. If you do that, then
you have to figure out how to get a lot more users. But this first part is
critical—think about the really successful companies of today. They all
started with a product that their early users loved so much they told other
people about it. If you fail to do this, you will fail. If you deceive
yourself and think your users love your product when they don’t, you will
still fail.

The startup graveyard is littered with people who thought they could skip this
step."

------
sama
(This got published a little early because it got indexed. I'm still going
through and fixing some typos and will maybe add a few other things.)

~~~
revorad
Can you please get the designer of this playbook and ycombinator.com to
redesign HN too?

~~~
IanMikutel
And Craigslist. And ReadMe.io.

~~~
sharemywin
facebook just redeisgned craigslist for them...lol.

------
davidu
A resource like this is terrific. Would be great to see it in github so you
can solicit the occasional outside contribution.

I've always found that even the best teams still need to constantly explore
and add new tools in the toolbox in order to execute effectively and achieve
success.

(In fact, it's not that even the best teams need to still do this, the best
teams actively go out and do this, which likely contributes to them being a
high-performing team.)

------
taylorwc
> _Thanks to Paul Buchheit, Erica Carpenter, Brian Chesky, Adam D’Angelo, Drew
> Houston, Justin Kan, Matt Krisiloff, Aaron Levie, Gabriel Leydon, Jessica
> Livingston, Dustin Moskovitz, David Rusenko and Colleen Taylor for
> contributing thoughts to this._

^ this group + @sama... wow. Terrific advice from an amazing list of credible
people.

~~~
jMyles
To be honest, I don't think I know a single one of them. Who are they and how
can I learn more about what they do and how they formulate such great content?

~~~
gkoberger

      * Sam Altman – Y Combinator President
      * Paul Buchheit - YC Partner, Gmail founder
      * Erica Carpenter - Y Combinator
      * Brian Chesky - AirBnb
      * Adam D’Angelo – Quora, ex-CTO of FB
      * Drew Houston – Dropbox founder
      * Justin Kan – YC Partner, Twitch, Justin.tv, Socialcam
      * Matt Krisiloff – Y Combinator
      * Aaron Levie – Box founder
      * Gabriel Leydon – Machine Zone founder
      * Jessica Livingston – YC Founder
      * Dustin Moskovitz – Facebook cofounder
      * David Rusenko – Weebly founder
      * Colleen Taylor – Y Combinator

~~~
sethd
"Gmail founder" sounds a little funny to me.

If I am employed as a developer in a company on a new product, am I then a
founder of that product? It just seems like the word founder just keeps being
used more liberally as time goes on.

~~~
joshmlewis
I think it's appropriate in this case. Paul started Gmail inside of Google as
a side project. At first most people were not a supporter, including Marissa
Mayer and other peers. He was scratching an itch though and eventually got
Larry and Sergey on board which helped the cause and eventually grew into what
it is today.

So with that, there are a lot of similarities into what we'd call a founder
today. While financially there wasn't a big risk, it was still a product he
was passionate about and created from nothing.

~~~
mattmanser
Not really, he did it inside a big company with a nice cushy salary and lots
of hardware supporting him. Absolutely ZERO risk.

That's not a founder.

It's a great product, he did a brilliant thing, but he's not the gmail
'founder'.

~~~
sethd
Exactly. 'Creator' or 'original developer' would be far more accurate language
and prestigious enough on it's own.

------
djhn
This is a welcome synthesis of a lot of great info.

It's also a more attractive and credible way to introduce fast-growing
technology startups* to the uninitiated than just saying, "oh, just read this
bunch of blog posts by this guy called 'pg' who you've never heard of, no, no,
trust me, it's reaaally good, he founded YC, which you've also never heard of,
but trust me, they're like, the real deal".

*YC-style/SV-type, even if some of the advice is more general, and the definition of 'YC-style' is quickly expanding and loosing meaning.

------
billmalarky
"We once tried an experiment where we funded a bunch of promising founding
teams with no ideas in the hopes they would land on a promising idea after we
funded them.

All of them failed."

I was under the impression Reddit fell within this category. I recall a PG
quote that went something like "we [Y combinator] hate your idea, but we like
you [Alexis and Steve]" in reference to reddit's initial YC funding.

I know Reddit isn't considered a smashing success by VC standards (originally
sold for roughly 15-20 MM), but I certainly wouldn't call it a failure.

~~~
tptacek
He's referring to a YC batch in which founders were specifically offered the
option of applying with no idea (that's not what Reddit's founders did).

~~~
Schwolop
I had assumed they'd all failed, but don't remember seeing any discussion of
it from sama. Was there ever a public post (other than this playbook) that
announced the failure of that experiment, and any take-aways beyond the
obvious?

------
dsugarman
>It’s important that you distort reality for others but not yourself.

I would love to see more content and discussion around this. I understand
clearly why it is important to pitch who you will be not who you are when
recruiting and raising money but when it comes to day to day, doesn't this
contradict what you had said earlier about sharing all of the good and bad
with your employees? Replacing your water jugs with Kool-Aid at the office
just seems evil to me. I'm not sure if that is really what you are saying or
not but it seems synonymous with unicorn culture. I see a lot of positives to
creating a culture masked with illusion, but in my head, all of the value
seems short-term.

~~~
seiji
_Replacing your water jugs with Kool-Aid at the office just seems evil to me._

Founder/VC/moneyhat friendly isn't always employee friendly. Employees exist
to be exploited so the founders and VCs become extremely wealthy.

The best way to drive productivity is to convince your employees there's a
vague "external enemy" they've gotta beat. Turn it into mental cult
gymnastics. Bind their self worth to the success of the company. Grow at all
costs.

There are circles of belief though. You should always know the truth yourself
(founder), then you decide which lies to tell the board, then which lies to
tell your management, then which lies to tell your employees, then which lies
to tell the media/public/world. (where "lies" also equals "putting a spin on
the truth" or selectively withholding information (hiding faults in the hopes
of improving them before failing completely, etc).)

------
petecooper
I am very much liking the CSS animations.

------
sharjeel
""" Bandwidth Limit Exceeded

The server is temporarily unable to service your request due to the site owner
reaching his/her bandwidth limit. Please try again later. """

Any mirrors?

~~~
alexmuro
here is a link to the google cache.

[http://webcache.googleusercontent.com/search?q=cache:d0Df-
gF...](http://webcache.googleusercontent.com/search?q=cache:d0Df-
gFG1KoJ:playbook.samaltman.com/+&cd=17&hl=en&ct=clnk&gl=us)

------
6stringmerc
Okay, I've been researching and reaching out to various entities for, well,
going on a couple years now regarding my "start-up" concept of a company that
creates some inventions, brings to market, and licenses technology as another
revenue stream. Yes, it's not a software-oriented business, but it's a viable
entity with multiple prospects. Thus, the following line doesn't really ring
true to me:

> _One important counterintuitive reason for this is that it’s easier to do
> something new and hard than something derivative and easy. People will want
> to help you and join you if it’s the former; they will not if it’s the
> latter._

In every single instance where I actually get a response, there's a consistent
chorus of "this doesn't fit the model of what we support" and, basically, I
chalk it up to an investment environment that actually, truly targets the
derivative and easy moreso than the unique and difficult.

That's why I'm still slogging along in the self-directed patent process.
Nobody is interested in helping (beyond some constructive comments I've
received here from community members - thank you!), and certainly not in
contributing financial backing. It is what it is...but that claim? I don't
really buy it.

~~~
ThomPete
I think the point is that if the problem is interesting you can get people
onboard helping you as ex. tech founders.

But if your problem is trivial (build a en ecommerce website) then they want
you to pay them hard cash.

I agree though that some problems might be hard to articulate and so you end
up with having a problem getting people to believe in your project.

I personally was trying to convince developers to join me on a venture I
wanted to do and had no luck. Then I decided to just pay someone to do a small
fraction of what I wanted to do and which I knew I could pay for and now that
developer I paid to do my first project is now partnering with me in my next
project.

Sometimes you have to look at your idea and see if you can create a much
smaller product from what you want so you can get started on someting at
least. Then if it's successful you will have people wanting to join you.

~~~
6stringmerc
Thanks for your response and reasoning as to the circumstance, I follow what
you're pointing out. Your last line, about getting started, is the reality
I've decided to deal with - enough with dreaming of getting a jump start from
anybody else. A co-worker of mine obtained a device patent and has been very
encouraging that I pursue the same route - if the idea is to be as successful
as intuition and market review indicate, then might as well reap all the
rewards first and foremost.

I guess I'm just rather frustrated at the "start up culture" of claiming to
invest in new things, in risk-to-reward principles, while in practice it's a
lot more akin to the RIAA big-label approach of "we'll give you money only
because we know you'll make us more money in this proven areana of
pop/country/rap/etc" in a lot of respects.

~~~
ThomPete
You are welcome.

I have written a little about it here [https://medium.com/black-n-white/the-
problem-with-problems-4...](https://medium.com/black-n-white/the-problem-with-
problems-47ee63bb3511)

Perhaps that can provide you with a perspective to think about it.

------
SocksCanClose
@sama have you thought about running a kickstarter to publish a hard copy
version?

------
michmeagher
Seems like a lot of the pushback on this is about whether in releasing this
playbook @sama and YC are (i) making a value judgment on unicorn startups vs
other businesses, and (ii) serving their own agenda. Personally I don't
understand either of these positions.

On (i) it's like attacking someone for releasing a book of muffin recipes by
saying "you think muffins are the best food in the world! I only bake cookies
-- do you think you're better than me?!". In fact they just like muffins, they
have a lot of experience in baking muffins, and instead of keeping their
recipes secret they want to help other people bake the best muffins in the
world.

On (ii), again my personal reaction, I don't care if it's self-serving. It
also happens to be very helpful to me.

Small businesses, large businesses, "lifestyle" businesses, unicorns -- they
all take a lot of effort, not to speak of other life commitments. In fact
there is a maximum amount of time they can take (24 hours minus a few hours
for sleep per day) and depending on your personality you will likely dedicate
more or less of this time regardless of the scale of the venture.

I don't think whether it's a $10m business or $100m business or more is a
choice based on personal preference, it's based on the nature of the idea you
find yourself compelled to pursue.

For example, I used to be an antitrust lawyer. I was often in the office until
5am, and that was as an employee. I worked HARD. I thought I wanted to work
less so I quit my job to start a small business. But it turns out that the
idea that I have been excited about for the last few years is not a small
business, it could never be one even if I wanted it to be. It's the kind of
idea that will either be huge or it will be nothing. When you are standing on
the brink of that kind of endeavour a few helpful words, a playbook if you
will, from someone who knows how it's done can be very helpful indeed.

------
ryporter
Entrepreneurs need to be very careful when developing self-belief in their
idea. As Sam points out, the people telling you that you are crazy "may be
right." I've started angel investing, and it really pains me to see people who
have quit their job and devoted years of their life to a business that (in my
opinion) has no chance of succeeding. Yes, I may well be wrong about some of
them, but the entrepreneur needs to be able to articulate why they think
everyone else is wrong.

Self-belief in a crazy idea is not enough. Obviously Sam wouldn't disagree
with this sentiment, but many entrepreneurs seem to omit the step of proving
to themselves that their idea is not crazy, or they suffer from confirmation
bias.

------
Bouncingsoul1
"One important counterintuitive reason for this is that it’s easier to do
something new and hard than something derivative and easy. People will want to
help you and join you if it’s the former; they will not if it’s the latter."
So Google didn't invent the Internet Search it was a derivative but not easy.
Facebook didn't invent the SocialNetwork and actually made it easier than e.g.
MySpace. Amazon was not the first online retailer but made it better, more
reliable. WhatsApp? we knew how to send textmessages for a while but well they
made it more convient. So a good idea must not be something unique new but
something which makes the product better than the rest.

------
sebak
Basically they're saying: "To succeed you need to have an awesome idea that
hasn't been done before. You need a great team and build a great product your
users will love".

Wow, thanks for the advice, why didn't I think of that.

------
vrnayini
I really like the illustrations. Any idea what tools were used for the
animations?

Thanks!

~~~
gkoberger
I did them by hand with CSS.

------
cmstoken
Wow, this is fantastic! The little animations give it a playful vibe too.

------
jpwagner
From the section on competition: "But 99% of startups die from suicide, not
murder."

and more precisely, from David Packard: "More organizations die of indigestion
than starvation."

~~~
senderista
Like Packard's own company.

------
squidlogic
> _You want to start with something very simple—as little surface area as
> possible—and launch it sooner than you’d think_

Honest question: does this model apply when your product can't at any point
be, for lack of a better word, half-baked?

Say you're making a security product or working on control code for rocket
thrusters.

~~~
tonyarkles
Sure!

Small and simple doesn't have to mean janky and shitty. You reduce scope, not
reduce quality.

To carry on with your two examples, I'll make up a security product and a
product related to control code for rocket thrusters.

For the security product, let's do a "secure storage on Dropbox" product.
Version 1, you do as much as you can with with existing libraries and pieces.
Use OpenSSL to handle the crypto bits. The UI has two options: the passphrase
for the encrypted storage, and the path to the encrypted directory (and a
system tray icon).

Right away, I can think of all kinds of features that would be cool to add to
this product, but DON'T build them out for V1. Eventually, you can add PKI so
that you can have different keys on different devices and selectively revoke
them. And build out the mobile app so that you can access your encrypted stuff
on the go. And bake in crypto libraries so that you're not just calling out to
openssl.exe. Etc etc. That's V2, V3, V4...

For rocket thruster control code... You're going to need a way to test it.
Start with a thruster simulator. You're going to probably need a FEA model and
a numeric solver. It's not going to be "simple" as in "I banged it out in a
week", but it's way less scope than building and testing thruster control
code. Once you've got the simulator built out and working reliably, start
selling the simulator while you build out your own control code.

Hell, if you want to keep it super simple, start out by only simulating solid
fuel model rocket engines. You can use that to bootstrap the verification
process (compare simulation results against measured results for a couple
bucks/launch)

~~~
squidlogic
Thanks, good thoughts!

------
vuyani
"If the idea does not really excite at least some people the first time they
hear it, that’s bad."

Reconsider([https://medium.com/@dhh/reconsider-41adf356857f](https://medium.com/@dhh/reconsider-41adf356857f))

------
LordRaven69
This has been the single most useful article Ive read all year. There is much
to be said about setting up an unknowing amount of companies with the lessons
needed to essentially, NOT MESS THIS UP. Thanks for this

StepUp, Stand Out _E L E V /A\ T E D_

------
dawie
"There may be a part II on how to scale a startup later" \- I would love a
part II

------
kilimchoi
Has anyone been able to get a letter of intent with just an idea? Is that even
possible?

~~~
mbesto
Yes.

~~~
kilimchoi
would you like to share your story of how you did it?

~~~
mbesto
There's no real "how you do it" other than having friends with money. I've
seen LOIs with an idea range anywhere from $10k to $1M.

------
jjoe
Word Occurrences Frequency Rank

you 196 4.2% 1

your 74 1.6% 2

company 60 1.3% 3

it's 59 1.3% 3

great 56 1.2% 4

product 52 1.1% 5

people 51 1.1% 5

get 44 0.9% 6

founders 42 0.9% 6

good 40 0.9% 6

------
colund
My impression is that anything related to YCombinator gets huge upvote bias.

------
orliesaurus
@Greg I can see the Rick and Morty influence on some of the art ;) ;)

------
_s
I don't suppose I could make a small request - could we have a print
stylesheet that does page breaks on the headers? I'd love to be able to print
it out and go through it :)

------
thadd
Well this looks quite nice. Bookmarked for later. Thank you!

------
pavornyoh
Very detailed and good information to have. Thank you Sama.

------
dools
"Most really big companies start with something fundamentally new" urr that's
not even remotely true. Stopped reading at this point.

------
vijayr
Anyone knows what software Sam is using for his blog?

~~~
gkoberger
For the startup playbook, I just built it with static HTML (glued together
with gulp).

(For his actual blog, he uses Posthaven:
[https://posthaven.com/](https://posthaven.com/))

------
t23
Great stuff. Also love the UI. Thank you, Sama!

------
shardinator
Not sure if it's right to post this. Small typo in Making Money section:

... if your product if your product is easy to sell.

Should be

... if your product is easy to sell.

------
sobinator
Peter Thiel's 'Zero to One' should be what anyone looking for more of this
kind of reading should look into.

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pbreit
Wow. Sounds grandiose but this is an epic piece of writing by one of the
smartest guys in the field.

Required reading.

------
SarahofGaia
So is this like an online "textbook" for how to do startups or something?

------
gozo
If this is something that is expected to be around for awhile I recommend
talking to an editor. Friends are good to check for overall content and typos,
but they are too familiar with the subject to check how well you convey
something and too nice to really tear through the text objectively.

~~~
sharemywin
he commented that it was released early.

~~~
gozo
He said that he would fix typos and add some stuff, not anything that will
make the text itself necessarily better. His writing just isn't that good for
something that will be handed out to a lot of people and were there a very
real purpose of them understanding it. But as most thing coming out of YC I
guess it's more marketing material for the people who buy into a lot of the SV
stuff. Maybe he should talk less about "things" and more about ethics, seems
like that is something YC companies have become known to fail at recently.

------
graycat
Nice essay. IMHO the contents are (1) Common, good advice. (2) Good data from
Sam's excellent experience. (3) Some not so good advice and attitudes.

Scope:

The essay seems aimed mostly at current Silicon Valley (SV) _style_ , mostly
consumer, information technology startups. Okay, but that's not all of
business or even all of startups. Yes, YC is pursuing much more, e.g., some
shoe company in Pakistan, still, the essay is _SV style_ and there, mostly Web
and mobile. Fine with me, because that's what I'm doing, be we should
understand this point about _scope_. And, as below, we should understand this
scope and style because IMHO it's time for SV style of consumer Internet to
borrow from some of the rest of technology and business.

Broad Point:

As we all can see, all heard from Mark Andreessen, etc., and see from Sam,

" ... investors’ returns are dominated by the big successes, ... "

The Exceptional:

So, from this Broad Point, the goal is something _exceptional_. From that, we
have to suspect that we won't always be following the common and ordinary,
some extensive experience and observations from the past, or even "big
successes" from the past, and, instead, should be willing to consider some
_exceptions_ in order to be _exceptional_.

Users' Love:

> "Your goal as a startup is to make something users love."

Yup.

Now, can we, please, have some more guidance on just how the heck to do that?
And, please, don't ask me to draw from Snapchat or Homejoy. And I'm concerned
about

[http://koltai.co/notebook/the-risky-business-of-
entrepreneur...](http://koltai.co/notebook/the-risky-business-of-
entrepreneurship-y-combinators-stellar-success-rate-shows-1-in-200-win)

with:

"However, these statistics also reveal a grimmer reality: 93 percent of the
511 companies accepted by Y-Combinator have failed. Even more alarming, only 3
to 5 percent of the companies that apply to Y-Combinator are even accepted,
meaning that only one in every 200 companies that applies to Y.C. eventually
succeeds."

And, I'm concerned about the low ROI of venture capital as in

[http://www.avc.com/a_vc/2013/02/venture-capital-
returns.html...](http://www.avc.com/a_vc/2013/02/venture-capital-
returns.html#disqus_thread)

and

[http://www.kauffman.org/newsroom/2012/07/institutional-
limit...](http://www.kauffman.org/newsroom/2012/07/institutional-limited-
partners-must-accept-blame-for-poor-longterm-returns-from-venture-capital-
says-new-kauffman-report)

Instead, for history with some good examples, there have been many amazing
projects, some astoundingly innovative, that worked the first time with high
probability, e.g., for a picture:

[http://iliketowastemytime.com/sites/default/files/sr71_black...](http://iliketowastemytime.com/sites/default/files/sr71_blackbird_leaking_fuel_cell19.jpg)

IMHO, here is a better approach:

(1) Find a problem that huge number of potential users/customers believe or
can come to believe is really important to have solved. E.g., want, say, 1+
billion people with Internet access, if only from a smartphone.

(2) Find a solution that is much better than anything else and difficult to
duplicate or equal.

(3) Make sure that for the target customers right away or soon the solution
will be seen as a _must have_ and not just a _nice to have_. Want no doubts
here; do not want to have to depend on gossip and fads from notoriously
flighty teenage girls. One of the best examples would be a single pill, safe,
effective, cheap, to cure any cancer.

(4) Deliver the product, easy to use at a very attractive price.

(5) Make sure the revenue covers all expenses and yields a fantastic margin,
e.g., pre-tax margin 90%.

(6) For that solution, do some good original research with powerful, valuable
results in the STEM fields.

(7) Offer the solution as a Web site, i.e., exploit software, Moore's law, and
the Internet.

(8) Be a solo founder until at least $10 million a year in after tax earnings.

Difficulty:

> "A word of warning about choosing to start a startup: It sucks! One of the
> most consistent pieces of feedback we get from YC founders is it’s harder
> than they could have ever imagined, because they didn’t have a framework for
> the sort of work and intensity a startup entails."

There's something wrong here: All across the US, east to west, north to south,
cross roads to the largest cities, millions of sole proprietors do startups
and are successful enough to buy houses, support families, and get the
children through college.

All the larger bodies of water in and around the US have boats and yachts, and
nearly all the owners are just such entrepreneurs. Maybe they own 10 fast food
restaurants, are big in asphalt paving, are a manufacturer's representative
for some great lines, run five new car dealerships, own and manage 2000 units
of rental property, have a private label line of industrial floor cleaning
supplies in a mid-size Midwestern state, did a rollup of dry cleaning stores,
are the main beer distributor for half of a state, are a leader in design and
construction of custom tanks on truck frames for hauling liquids, etc.

But, a startup that exploits information technology, software, Moore's law,
and the Internet should have some advantages and generally be less difficult.

Idea:

> "Remember that at least a thousand people have every great idea."

Maybe true with SV style, but more generally, no, and a thousand times no.

Instead, since so many startups fail, we want some advantages and definitely
can get a lot of advantage from having a genuinely new idea. People who wrote
a Ph.D. dissertation that was supposed to be "an original contribution to
knowledge worthy of publication" and "new, correct, and significant" will
quickly appreciate the importance of a unique idea and a lot about how to
construct such. Here SV style is seriously lacking and, as above, needs to
borrow from outside.

As in Sam's

> "Remember that at least a thousand people have every great idea."

I believe that SV style nearly trivializes the _idea_ and, to raise the
success rate, very much needs to go much deeper into the idea and associated
considerations of user need, market size, meeting the user need, and new,
proprietary technology to meet the user need especially well with a product
difficult to duplicate or equal, and protected intellectual property that
supplies a barrier to entry. In some places such unique intellectual property
is taken very seriously, with laws, contracts, national security
classification, etc. For higher success rates, SV style needs to do better
with such intellectual property.

Several good examples of a such intellectual property and its power are in the
picture

[http://iliketowastemytime.com/sites/default/files/sr71_black...](http://iliketowastemytime.com/sites/default/files/sr71_blackbird_leaking_fuel_cell19.jpg)

This is another case of where SV style needs to borrow from outside.

Team:

Once again, over again, one more time, yet again, we come to the issue of
_team_. Again we learn that it's tough to get a good co-founder; co-founder
disputes are a major cause of startup failure; it's tough to hire good staff;
it's difficult to keep the staff well involved; being a good leader and
manager and learning to do so is a lot of work, and BoD members rarely know
much about the details of the business, likely much less if some new, unique,
powerful, valuable crucial, core technology is key to the business.

So, with all those clear dangers to the startup, we begin to conclude: Be a
solo founder, get to earnings ASAP, grow organically, well into very good
profitability hire no one, and from the start carefully plan never but never
to accept equity funding or report to a BoD. Or, follow the example of Markus
Frind and his romantic match making Web site Plenty of Fish, initially, just
one guy, two old Dell servers, ads just from Google, $10 million a year in
revenue, and recently sold for $575 million in cash.

Understand the Users:

> "... it’s critical you understand your users ..."

Right. And for making, say, really nice seat cushions for the driver's seats
of Rolls Dropheads with owners in the Chablis and Brie set in the Hamptons,
sure.

But in consumer Internet, for a big success, there will millions, maybe
billions of users, and about all that can be said about those users is that
they are a not very special cross section of humanity. So, really just have to
understand the pair of the product and the _ordinary man on the street_.

------
scriptstar
The website is looking cool. Anyone know which CMS Sam used? Guess?

------
tradeupofficial
Awesome article. Great clear and concise points!!!

------
lukasm
Love it. What is missing is some information about technicalities e.g. Want to
rise money in US? You probably need a Delaware S-corp (Github repo maybe
better for it)

~~~
2arrs2ells
(C-corp, not S-corp! [https://www.quora.com/Should-a-tech-startup-incorporate-
as-a...](https://www.quora.com/Should-a-tech-startup-incorporate-as-an-LLC-a-
C-Corp-or-an-S-Corp-If-so-why))

------
mrdrozdov
This is great! Why no anchor tags? :(

~~~
gkoberger
There are; they just aren't linked.

[http://playbook.samaltman.com/#money](http://playbook.samaltman.com/#money)

------
atatus
Invaluable advise..

------
latenightcoding
Great stuff, thanks

------
Animats
That's not a startup playbook. That's an app playbook.

------
horsingaround
A lot of nonsense fluff in this article.

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0xCMP
Oh darn... Bandwidth exceeded.

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glxc
what about YC Research?

------
Sevzinn
Why is the title in orange? Color does not convey logical information when
used in text.

------
kefka
Maybe you all can help me, but I've just agreed to do a Startup Weekend. I did
an "Ask HN" (
[https://news.ycombinator.com/item?id=10515984](https://news.ycombinator.com/item?id=10515984)).

Any ideas, including what I've asked?

