
Lecture 3: How to Start a Startup - bjenik
http://startupclass.samaltman.com/courses/lec03/
======
pptr1
PG made allot of valid points. It very useful to watch the video first.

However here is one additional counterintuitive point. Not all startups work
hard. The good ones are focused and might not have all the answers but you at
least know what your going to be doing. Some startups are just there, they
don't work consistent hours and spend allot of time doing fluff stuff and not
productive stuff. Some startups are just there because it's the cool thing now
and they come in at 12:00pm and leave at 4:00 pm.

For reference I have worked few startups, some small companies and one very
large company. I am currently working out of a co-working space. I see very
few startups here working any type of consistent hours. I don't mean 9-5 , I
mean consistently being here and working no matter what hours they prefer,
even though they are full time members of the space.

I can reference companies like Apple in which people are basically working as
much as humanly possible[1]. Their work culture is actually more intense than
allot of startups. Even at a small-medium company I worked at I would see
executives up at 3am, even after they have been at work all day long.

[1] - [http://9to5mac.com/2014/10/01/former-apple-managers-talk-
of-...](http://9to5mac.com/2014/10/01/former-apple-managers-talk-of-
the-247-work-culture-these-people-are-nuts/)

------
sbisker
Am I the only person who ever found the course list for an MBA genuinely
_interesting_? Like, intellectually so.

I get the general usefulness of advising undergraduates that MBAs are, in
general, a bad idea for them. They're certainly about as poor of a financial
investment these days as a degree in English. But the hopeless idealist in me
asks if it isn't possible to get an MBA to actually try to theorize about
customer behavior, economic structure, supply chains, what have you and build
part of ones academic foundation around it? Or is it truly impossible to walk
into today's MBA programs wanting to study business as theoretical and
societal constructs, without walking out a professional networker and middle
manager?

All I know is, I never seem to get tired of reading HBS case studies. I'm
always curious to learn how other people approached things and how the world
worked then, in addition to how it works now. If anyone has a good community
for embracing that sort of knowledge, I'm all ears.

~~~
akbar501
> But the hopeless idealist in me asks if it isn't possible to get an MBA to
> actually try to theorize about customer behavior, economic structure, supply
> chains, what have you and build part of ones academic foundation around it?

Yes, an MBA will help you understand many of our societal, economic, and
business constructs. I did not find an MBA to be particularly helpful in
understanding customer behavior, but it's definitely valuable in understanding
government and corporate behavior.

And yes, it'll help you understand supply chains/logistics, various process
and people optimizations, etc. Think of it like learning algorithms and
patterns for solving problems that are commonly found in large human
organizations.

> Or is it truly impossible to walk into today's MBA programs wanting to study
> business as theoretical and societal constructs, without walking out a
> professional networker and middle manager?

It's a degree. Nothing more. However, I would not get an MBA with a goal of
middle management as the focus of most programs is on getting you ready for
upper management decision making. For middle management in a large company
skills such as project management, people management, scheduling, delegation
and communication are more important than high level strategic thinking.

~~~
johan_larson

       However, I would not get an MBA with a goal of middle
       management as the focus of most programs is on getting
       you ready for upper management decision making. For middle
       management in a large company skills 
       such as project management, people management, scheduling,
       delegation and communication are more 
       important than high level strategic thinking.
    

Perhaps it would be better if the training were divided into different
(shorter) programs undertaken at different stages of a career. There might be
a short program of basic business skills, appropriate for people just starting
out and taking worker/analyst jobs; another for people stepping up into
leadership positions, dealing with project and people management; and a final
one for senior management, focused on strategic issues.

The military typically does it this way. What you learn in Officer Candidate
School is different from what they teach you at the War College.

------
nxh
The fact is most startups will fail[1]. If I fail and try again and again,
statistically I will probably fail eventually. Therefore, most of us will end
up working for other companies. Statistically again, there are a lot more
employees in well established companies than startups so most of us will
likely end up working for well established/large organizations.

So my question is: does the experience, the knowledge I learn from startups
helps me on my probably eventual job in an established company? Should I just
go work for a large company right away so I can be good at what I will end up
doing? It seems to be opposite to what PG said[2].

[1]
[http://online.wsj.com/news/articles/SB1000087239639044372020...](http://online.wsj.com/news/articles/SB10000872396390443720204578004980476429190)

[2] [http://www.paulgraham.com/boss.html](http://www.paulgraham.com/boss.html)

~~~
prostoalex
Strictly speaking, a corporate recruitment process will peg and interview you
based on your experience level. 3 years at a failed startup are likely to be
equivalent to 3 years at a large established company, you'll go through the
same interview process, be asked the same questions, and presented with the
same offer.

From a rational standpoint, having even a mild level of success that ends up
in an acqui-hire instead of an outright failure will yield you a better offer
from a large corp than an applicant who just sent his resume in.

Given two choices - equivalent compensation at failure, and higher
compensation at anything but failure, you should do a startup.

That does not take into account stress levels and opportunity cost of your
spare time.

~~~
sbisker
I have to disagree here. Folks with failed startups are as diverse as the
startups they built (or just as often, struggled to build).

The simple reason why is because while a startup is the best place to learn
how to start a startup, it _isn 't_ always the best place to learn how to be
an engineer.

At least, not the sort of robust engineering (hopefully) done at established
companies, where you have to understand existing best practices like code
style, continuous deployment and testing, and non-technical conventions like
proper code reviews and pager schedules. That sort of rigor isn't found in all
startups, but some amount of it is a necessity when your primary job is
shipping code, lots of it, and not just searching for product market fit.

I think it is far more likely that you'll get a strong offer for a large corp
coming out of another large corp - where you'll speak the language and have
found at least _someone_ talented to mentor you - than as a typical acqui-hire
or founder of an also-ran startup. In fact, many acqui-hire employees
themselves have to go through interviews at the acquiring company, finding
themselves on the bottom of the pecking order at their new companies - if they
even have jobs at all.

That's not to say you shouldn't do a startup...just, don't do it expecting
your Plan B to be a cushy job at Facebook. :)

~~~
prostoalex
That is true, I almost put a caveat there that small startups (or schools)
teach programming, while large companies teach software engineering, but
nowadays most large technology companies have onboarding/mentoring process
designed around that, as a lot of the processes tend to be company-specific.

> many acqui-hire employees themselves have to go through interviews at the
> acquiring company, finding themselves on the bottom of the pecking order at
> their new companies

Employees yes, from OP's wording I understood the question was in regards to
the founder. An acqui-hirer is likely to sweeten the offer for the founding
team, otherwise why even pursue an acqui-hire.

~~~
nxh
With the word startup I actually mean founders and early employees. Sorry for
the unclear wording and thank you for your opinion.

------
subdane
I like this little corner of the universe with YC funding redditcoin and
giving free lectures from Stanford to the world.

~~~
guystorygami
agreed, man. Fantastic.

------
rfrey
"I have in my head more data [about starting a startup] than anybody else
does... and you're asking me questions a reporter would ask because they can't
think of anything interesting?"

I was blushing down to my beltline for that guy.

~~~
thearn4
Still more on-topic than the question asking about Snapchat.

------
rileyjshaw
Loved this quote:

 _...this is exacerbated by the existence of this term "growth hacks"...
whenever you hear anybody talk about "growth hacks", just mentally translate
it... to "bullshit"._

~~~
sbisker
A counterpoint: [https://medium.com/designing-for-results/if-by-growth-
hackin...](https://medium.com/designing-for-results/if-by-growth-
hacking-b3d057fcc0a3)

~~~
recentdarkness
TLDR; but you can simply see "growth hacking" as a manner of tinkering with
changes to your product/workflow/communication until it shows a positive
effect on userbase growth.

------
mhartl
I share pg's distaste for the mouthful that is "entrepreneurship"
([http://youtu.be/ii1jcLg-eIQ?t=30m35s](http://youtu.be/ii1jcLg-
eIQ?t=30m35s)). How about resurrecting the root, and using "enterprise"
instead? Moving a language as big as English is a Brobdingnagian task, but few
people are as well-positioned as pg to (re)introduce "enterprise" as a more
economical alternative to "entrepreneurship".

~~~
clairity
but then what would you call the people doing the enterprise? enterprisers?

i'm not necessarily defending "entrepreneur" but one would hope that the
alternative would be shorter.

~~~
mhartl
You can still use "entrepreneur", which comes from same root as "enterprise"
(ultimately from Middle French _entreprendre_ , "to undertake").

    
    
        entrepreneur
        noun, plural entrepreneurs
    
        1. a person who organizes and manages any enterprise, especially a business, 
        usually with considerable initiative and risk.
    

[http://dictionary.reference.com/browse/entrepreneur](http://dictionary.reference.com/browse/entrepreneur)

~~~
clairity
ah, ok. i had assumed the distaste was for all forms of the word. =)

------
ssqmm
Interesting take on not starting a startup while in college. I've watched a
lot of his lectures and didn't see him state this before. Good point in
thinking about the ideas and cultivating them before jumping the gun too early
in life.

------
etrautmann
Perhaps PG's position on getting an MBA was previously well known to many. I
found his comments regarding the orthogonality of business school and the
process of _starting_ a business to be refreshingly clear and straightforward.

------
oskarth
I thought this answer was interesting:

 _" I don't think I'm very efficient. I have two ways of getting work done.
One is like during YC, the way I worked at YC is I was forced to. I had to set
the application deadline, and then people would apply, and then there were all
these applications that I had to respond to by a certain time, so I had to
read them, and I knew if I read them badly we would get bad startups, so I
tried really hard to read them well. So I set up this situation that forced me
to work.

The other kind of work I do is like writing essays, and I do that
involuntarily. I'm like walking down the street and the essay starts writing
itself in my head. And so really I either force myself to work on less
exciting things, or I can't help working on exciting things. I don't have any
useful techniques for making myself efficient. If you work on things you like,
you don't have to force yourself to be efficient."_

------
blergh123
As someone who lives outside the US, what did PG mean when he was talking
about Facebook starting as a Florida LLC and that "even you guys know not to
do that" ?

~~~
Oculus
Most corporations in the US are incorporated in Delaware. Whenever the
question of incorporation arises, the answers is always in Delaware as a
C-corp. PG's comment was a nod to that.

[http://blakemasters.com/post/21742864570/peter-thiels-
cs183-...](http://blakemasters.com/post/21742864570/peter-thiels-
cs183-startup-class-6-notes-essay) (Look at point #2 - "You Should Be a
Delaware C-corp")

~~~
7Figures2Commas
> Whenever the question of incorporation arises, the answers is always in
> Delaware as a C corp.

Yes, if you raise venture money, you will need a Delaware C-corp. But the
percentage of companies that are _successful_ in raising venture capital is
extremely low. How low? Probably lower than Y Combinator's acceptance rate.

For entrepreneurs serious about building a real business, entity selection
should be based on what's best for the business and the founders, not what's
going to be required by investors they don't yet have and may never have.
Generally speaking, young companies have no legitimate incentive to pay
Delaware for the privilege of being incorporated in Delaware.

So what about companies that are successful in raising money? For early stage
startups with little to no revenue and assets (read: most startups), it is
quite straightforward to revisit entity selection if necessary with minimal
complexity and cost, and with few if any tax consequences. Delaware has a
statutory conversion that makes it super simple and inexpensive to convert a
Delaware LLC to a Delaware corporation. Even conversion of a non-Delaware
entity to a Delaware C corporation is a simple task and will not come close to
being the most expensive item when you pay your law firm for its work
associated with your financing.

Of course, if your company has no assets, you could just dissolve if need be.
Which, ironically, is what happens to a lot of those Delaware corporations.

------
howradical
Timestamped and summarized notes: [https://timelined.com/how-to-start-a-
startup/lecture-3-how-t...](https://timelined.com/how-to-start-a-
startup/lecture-3-how-to-start-a-startup)

------
LukeWalsh
My favorite quote:

"Snapchat? What do I know about snapchat, we didn't fund them. How about
another question."

------
williamstein
I found pg's comments about "podcasting businesses" interesting, in light of
this exciting podcast about creating a startup around podcasting:
[http://hearstartup.com/](http://hearstartup.com/) \--"...supposed to be in
the podcasting business, and you like podcasting business, do those words even
grammatically go together? The answer turned out to be no as Evan discovered."

------
bramgg
This talk is surprisingly entertaining.

~~~
dxbydt
He's very funny! I've never heard him talk before. I listened to this whole
thing & laughed so many times. "screw this whole entrepreneurship thing" at 34
mins.

~~~
bramgg
I've only heard one. Either the other talk of his I listened to was abnormally
dry, or he's just more comfortable joking around with a younger audience
(which kind of makes sense).

~~~
staunch
I imagine abdicating the YC throne had something to do with it.

------
jonalmeida
I really enjoyed this lecture and I found it hard to take down notes. Mainly
because there's more experience involved in this lecture, than "note worthy"
information.

I'm not saying there's something wrong with Sam's lectures, but there's a
stark contrast between the two formats which makes me even more interested in
seeing what the other speakers will bring.

------
bira
Here you have some notes on the lecture.

By the way, we are a couple of italian friends building FlashUp, a platform
for sharing notes on lectures, videos, books, panels so other people can enjoy
the nitty-gritty without having to spend hours and hours glued to their
screens.

Any feedback is appreciated.

\---

NOTES:

\--> Startups are very counter-intuitive – if you trust and never question
your intuition you will make mistakes

\--> LIST OF COUNTERINTUIVE STUFF TO REMEMBER WHEN BUILDING A STARTUP:

\--> Startups are so weird that you will make mistakes if you follow your
instincts. That’s why at YC partners give advices to founders, to warn them
about these counter-intuitive mistakes.

\--> Trust your instincts about people. A mistake founders often make is not
trusting their instincts about people. In business pick people like you would
pick friends.

\--> You don’t need expertise in startups to succeed in startups. What you
need is expertise in your users.

Zuckemberg wasn’t an expert on startups but he knew his users and what they
wanted.

\--> Another mistake founders is not making something people want first but
“playing house”: they come up with a plausible idea, raise money, rent an nice
office in SOMA and hire their friends to later figure they have no product.
Why? Cause they have been trained to believe this is how you do it. They
measure success by how much money they have raised.

\--> They are always looking for a trick: What’s the trick to raise capital?
Start a startup that’s growing fast and let investors know about it What’s the
trick to grow? Make something people want.

\--> Tricks and gaming the system doesn’t work in startups. There are no
bosses to trick, only users to build good software for and make happy.

\--> Startups are time consuming: they will take over your life time in a way
you can’t imagine now. If it’s successful it will take over your life time for
several years. There is a cost opportunity here. It’s like having kids, it
will change your life (kids are awesome – pg)

\--> What you really need to learn are your users’ needs. University can’t
teach that.

\--> You can’t start a startup in college. If you do, you won’t be a student
for long.

\--> DON’T START A STARTUP IN COLLEGE. There are things you can only do when
you are 20, like backpacking around Thailand that people like Zuckemberg won’t
ever be able to do. So wait.

\--> While you are in college, come up with an idea and meet your future
founders, friends you love to spend time and work with.

\--> The way to get startup ideas is not to think about having good startups
ideas: you’ll get bad and plausible ideas that will end up wasting your time.

\--> To have a good idea, take a step back and don’t even try.

\--> You can have them unconsciously if: \- You learn a lot of things that
matter \- Work on problems that interest you with people you respect

\--> Be on the edge of some technology, live in the future: you will be able
to spot good ideas where other won’t. They won’t look like startup ideas but
they will look good, like a search engine for example.

\--> If you want to start a startup later in life, learn important things and
be genuinely interested in them. You need domain expertise.

\--> Bottom line: IN COLLEGE JUST LEARN.

The question time part is missing. I'm sorry, it's almost 2 o'clock in my
zone. I just wanted to share some notes!

...

If you want to receive future lectures notes (more polished than these quick
ones) in your inbox, sign up to
[http://joinflashup.com](http://joinflashup.com) \- the first platform for
sharing summaries and notes for startuppers, learning more saving time to
actually get things done.

~~~
jonalmeida
You're notes in Markdown:
[http://markdownshare.com/view/c97aed92-513d-46f0-b097-0fb12e...](http://markdownshare.com/view/c97aed92-513d-46f0-b097-0fb12e4b5840)

~~~
arcatek
Strangely, I find it easier to read as an HN comment. Maybe related to the
font ?

~~~
jonalmeida
Markdown Share isn't the best rendered, but the idea was to transpose the
notes into a format that any can copy-paste to their own markdown editor.

Personally, I use stackedit.io

------
giulianob
I live outside of a town with a large tech culture. I often wonder if a large
part of success is just being around the right community. So you are getting a
lot of feedback and have real connections to gain information from. I wonder
what the best way to find/make a community like that in my area would be or if
I am just out of luck and should be somewhere that already has a large tech
culture. I am in South FL btw.

~~~
squeaky-clean
Hey, another SFL hacker! I definitely think community helps you. The feedback
and connections must be great, but for me the biggest benefit is just the
motivation it provides. Having a community, large or small, that shares my
interests keeps me driven, and I don't feel like I have that here.

It feels very lonely and discouraging to spend 12 hours on a Saturday banging
out a personal project, and then not know anyone who would care to see it.

I hardly know any other techies/programmers. And of the ones I do know, 90% of
them are 9-5 programmers, who are done talking about it once they clock out,
and don't have their own personal projects. That's good for them! But that's
not me, nor who I want to surround myself with.

I know there's that space in Wynwood, I think it's called The Lab. It seems
like a good place to meet people, but all the events they do are usually while
I'm working or something else occurs where I just can't attend.

~~~
giulianob
Hey lets get in touch. Contact me at gbarberiATaotaonlineDOTcom

------
rajensanghvi
50 PG Quotes from the lecture all, 140 characters or less to make it easy for
people to share.

[https://medium.com/how-to-start-a-startup/50-quotes-from-
pau...](https://medium.com/how-to-start-a-startup/50-quotes-from-paul-graham-
on-counterintuitive-parts-of-startups-and-how-to-have-ideas-4209154ff319)

You can find more from Sam Altman and the rest of the lectures there as well.

------
jbhatab
I don't know if I'm alone on this one, but I thought his presentation was a
bit scattered. Not taking away from him in any way, but his examples were not
effectively backing up the points he was making.

You could even see him hesitating and questioning his own statements in his
head a few times.

~~~
meowface
I don't really agree, I just think it was a bit of an informal presentation. I
actually really liked that he questioned his own statements, because he knows
it can be very difficult to give solid advice in an ill-defined field like
this. I think I learned a lot more from his hesitance in giving anything
definitive than I would have if he tried to provide solid guidelines.

Also, given the limited time I don't think he had a lot of opportunities to go
into detail with examples. This was just a broad overview of advice he thinks
you should take.

------
ml10114
Anywhere to get these lectures audio only?

~~~
carlesfe
What I usually do is to use this website
[http://www.vidtomp3.com](http://www.vidtomp3.com) to convert the youtube
video to audio. Works flawlessly.

~~~
ml10114
Thanks!

------
graycat
Maybe I'm the only one here, but I was hoping for more in details,
information, examples, and insight into how to find a good _idea_ for a
startup.

I really can see that from his experience in Silicon Valley PG gave a view of
what he has actually seen in how startup _ideas_ are or have been found. I
have to respect most of what he said.

Still, from some of what he said, I have a tough time taking him literally:
E.g., as I recall from the lecture, he indicated that early on Google was just
a little thing, just a small interest, or some such.

However, also, as is well-known, even in the early days of Google even as just
an _idea_ , Internet search was already widely regarded as an important need
and problem. Without checking dates, there was, what, Lycos and Yahoo!, maybe
more?

Without means of search, the Internet was like being in the world's biggest
library with all the books, etc. just in a big pile. For libraries, the
solution has long been the library card catalog, especially the subject index.
So I have to suspect that, even in the beginnings of the idea for Google, the
founders did understand that what they were working on was possibly important
as a business.

Next, the lecture did mention that Ron Conway wrote Google an early check: I
have to believe that Conway took the future of Google fully seriously.

From all I know, Facebook, Microsoft, Cisco, Intel, etc. all knew early on, at
the beginning of the _idea_ or not long after, that they were trying to make a
successful business.

But the lecture seemed to be suggesting that at the start an _idea_ is hardly
more than a toy or curiosity.

Next there was,

> The way to get startup ideas is not to think about having good startups
> ideas: you’ll get bad and plausible ideas that will end up wasting your
> time.

> To have a good idea, take a step back and don’t even try.

While I can believe that PG has plenty of examples where startups followed
this advice and were successful, still I'm shocked and have a tough time
swallowing that this advice is the only way to be successful or that, in
particular, always any effort to find a good _idea_

> will end up wasting your time.

Instead, I'd like to build on PG's

> What you really need to learn are your users’ needs.

Now I'm on board!

But then I want to go farther: Okay, not everyone has to go along with my next
thinking, and here is some of why: First, there's not just one way to "skin a
cat" or be successful. Second, and something I regard as very important for
successful startups, as we know too well, a really successful startup is rare,
so rare that we have to suspect that, not all, but some of the most successful
startups will be taking approaches that are new and with few or no examples
from the past, say, 30 years in Silicon Valley venture funded startups.

Moreover, if a startup looks close to what has been tried, and even worked,
before, then we have to be suspicions and question if that "what" should be
tried again instead of something new.

But, broad strokes, aside, let's try to be more definite:

Step (1) Need.

Assume we've seen some users' need. Suppose we use some judgment here and
accept only a genuine need. Such a need might be, say, a safe, effective,
cheap one pill taken once to cure any cancer. Yup, that's definitely a need --
no question. We want a need so serious that we can be quite sure, e.g., the
pill, that the first good or a much better solution will be a _must have_ and
not just a _nice to have_. So, we pick a need.

Now I narrow the scope: We want to exploit Moore's law and the Internet and do
have a need that, at least for its solution, is in _information technology_.
One reason: Can send to the users just bits, and those sent just over the
Internet.

Step (2) Solution.

With the need, we try to find the first good or a much better solution. If we
fail, as we likely would for years on a cure for cancer, or, in information
technology, a project were we needed an algorithm that shows that P = NP, we
return to Step (1) and find another genuine need.

Step (3) How to

So, how can we find a solution?

Well, here's my suggestion: Right, even with PG's broad experience, the
suggestion may so far never have been seen even by PG in Silicon Valley. So,
in this sense we're talking something new, and we keep in mind that we should
not be reluctant to pursue something new since being new and different is from
maybe good up to crucial for the rare, big successes in the future.

But for something new, we very much want some evidence of, say, _efficacy_ ,
or will that dog hunt?

So, we have a problem, and we want a solution, in information technology, and
a solution we have high confidence in, even before we start writing software.
So, where can we find examples of doing that? Sure: The US DoD. They've been
doing that with, comparatively, a great batting average for 70+ years, that
is, finding solutions that well informed people can have high confidence in
before starting implementation.

So, we have

Lesson 1: By example, it's actually possible, and in the US DoD quite common,
nearly standard, to find solutions that well informed people can have high
confidence in before starting implementation.

Now, this lesson, and the fairly obvious DoD examples, e.g., the SR-71, were
often quite expensive to implement. But, there is also

Lesson 2: The implementation work commonly was routine, that is, low risk,
maybe expensive but, still, low risk.

More of my suggestion: It can be good, when we can, to convert the work of
finding the solution to a mathematical problem where, if the math is correct,
then we are quite sure the solution is correct and, quite likely, effective as
a solution for the need.

Advantages here include: (A) The math has a good chance of being done just on
paper by just one person, with very low "burn rate". (B) The math is
comparatively easy to check for correctness. (C) Since we have assumed that
our startup is in information technology, a solution based on math has a big
_natural_ advantage; e.g., maybe the implementation is just software with no
metal bending, team of thousands, big buildings, etc.

So (1)-(3) is my suggestion for insight into how to find a good _idea_ for a
startup.

So, where is this suggestion for finding a startup _idea_ unclear, wrong?

------
kategleason
this is amazing

------
guystorygami
Made an interactive version of this lecture - with @paulg's essay, reading
material and recommended Job's video embedded: [http://storygami.co/htsas-
lec-1/](http://storygami.co/htsas-lec-1/)

