
YC’s Essential Startup Advice - craigcannon
https://blog.ycombinator.com/ycs-essential-startup-advice/
======
thinbeige
> launching a mediocre product as soon as possible, and then talking to
> customers and iterating, is much better than waiting to build the “perfect”
> product.

Yes, yes and yes. But this is so easy said but still a struggle and need to be
put into perspective. Let's say we do a super simple business, eg a resume
writing service on scale (just for the sake of having a simple example). To be
ready to reach out to first customers we need to...

\- Setup a landing page, takes ten minutes with Squarespace but to get all the
copy and visuals right or least good enough for some first testing, min one
day, rather three to five

\- Setup and prefill all social media channels, should take half a day incl
getting the first 25 likes in order to save the name

\- Create the first ads and iterate to some ads which actually convert at good
CTRs/CPCs take multiple days because you need to let a campaign run at least
for one day; so lets assume another five days

So just to test this stupid-simple agency business properly we need already
two weeks.

Now imagine, you do something a bit more sophisticated, an actual
app/SaaS/game/bot/whatever, you still need minimum two weeks for the
'Marketing' stuff before plus the time for the actual app. And being mediocre
doesn't work in highly competitive markets.

So, if you are able to (1) build a first testable thing in 2-4 weeks you are
very good. And you are even better if (2) you have the power and positivity to
do 12 tests per year because you need more than one shot.

~~~
adamqureshi
[https://onlyusedtesla.com/](https://onlyusedtesla.com/) I set up a landing
page using WP with form and a basic email capture. I got 3 listings from tesla
forums. I got a BUNCH of emails. I started using ambush tactics to get
customers to list their for sale used tesla with me for free while in beta.
Saying stuff like " we have a concentrated buyer exposure , notice buyers not
shoppers. I used FB messenger for communications and email. I started running
ads on FB for each listing. I started charging customers $150 for each sold
vehicle, manually. Now 6 months later, i am building a new web app using VueJS
hosted on DO. I tested charging from the get go and made a sale today. $50 to
sign up list $50 to boost on FB. Boost on FB cost me like $5/$10. You can
target location , interest , behaviors. I am working on new features . I made
$150/avg just following up with customers , i was ranking first page organic
for "buy a used tesla" kinda got lucky , who knows. I just wanna grab a
"slice" from cars,autotrader they can keep the pie. customers started
comparing my rinky/dink Wp site to cars, auto trader , they liked the
simplicity and speed. I adopted the mentality NOBODY IS GONNA FUND YOU. Its
everyman for himself. Good LUCKY!

~~~
tomerbd
how many .com sites did you register before this one? i mean is this your
first shot or how many previous shots did you have if i may ask? how did they
go? did people show interest? how did you get the interest of people to find
your web site?

~~~
adamqureshi
how many .com sites did you register before this one?

I made a list of like say 20 then tested with a bunch of people here in union
square NYC.

i mean is this your first shot or how many previous shots did you have if i
may ask?

Whenever i have an idea i put up a landing page and start testing, this is
another i am testing: [http://tryoldster.com/](http://tryoldster.com/) I got a
BUNCH of emails already. I don’t know what todo since i have ADHD and need to
narrow my focus to the one thats making money.

how did they go?

So i just asked them i’d list for free, it was unusual if I’m honest and
people started asking how I’m different then carsdotcom, whats the benefit if
they list with me and what is the fee, whats the traffic amt. Most of the
times i had to scramble and think on my fee because i actually didn’t know
what i was doing , it kinda just unfolded and i kept it adaptive (“wait and
see” i guess a lot of luck, you never know what the heck the customer is gonna
want or say or ask. But you better give them an answer which satisfies them.

how did you get the interest of people to find your web site?

I don’t know. I was on all the tesal forums / listening to what customers are
saying and what kinda problems they are having then i messaged a few and kept
going. Goal was to make $150/day.

~~~
tomerbd
thanks alot for the details, for me it looks like the most important thing is
that while launching you need to find potential customers and you do that via
forums/social/... otherwise they will not locate your website just because I
put a web site in the internet, how much do you think that is correct please?

~~~
adamqureshi
Most important thing is launch THEN find out what is going on / working ,
converge on what's working "double down" on that. Keep at it. The fact of the
matter is you can't predict the future. Luck + persistence. Be relentless.

------
jacquesm
This article looks a little rushed.

> By the way, it is vital to remember that the money you raise IS NOT your
> money.

But it isn't the investors money either. It is yours to allocate as you see
fit but keep in mind that you should always do it to benefit the company and
the shareholders.

Beware of backseat driving shareholders or suppliers of convertible notes and
other instruments of lending that then want to tell you how to spend their
investment/loan (or even with whom), and never agree to spend all or part of
an investment with a company allied with one of your investors. You are in
charge, you decide.

And beyond that, keep a good eye on your shareholders agreement which could
very well place limits on the kind of things you can do with the money you
raise, many of those have clauses which can severely constrain your ability to
run your business such as being forbidden to move the company (even just to
larger offices), hiring of C-level execs and other bits like that. So make
sure you fully realize the consequences of entering into a shareholders
agreement and do not fold too easily on 'standard clauses' that you feel will
cramp your ability to run the company as you see fit.

~~~
mceoin
There have been enough failed startups with hot tubs that this advice may seem
heavy-handed, but necessary in hindsight.

~~~
mattmanser
Whatever happened to caveat emptor? Does it only apply to the plebs and not
investors?

Investors claiming that founders have some sort of _moral_ obligation to spend
money wisely is laughable.

Otherwise a good article, but no idea how that bit of strange perspective
ended up in there.

~~~
jaggederest
Actually, they literally do have a moral and fiduciary duty to their investors
to spend money wisely. The article describes it well.

I'm not a lawyer, but that's what I've been advised. You must adhere to good
judgement when spending the company's money or people can and will come after
you on a civil or criminal level.

That's a pretty broad scope, and corporate hot tubs are probably not beyond
the pale, but you can't take investor's money and put it into your bank
account and say "Sorry the company has folded". Embezzlement and fraud are
real crimes that you can get real convictions for, and investors can file
civil suit for much less than full on embezzlement - witness Benchmark's suit
against Kalanick/Uber.

~~~
Aeolun
You don't have to spend it wisely, just not deliberately unwisely (e.g. put it
in your own account), and I believe the 'deliberate' is much more important
there than 'unwisely'.

As long as you can make it sound kind of reasonable that your corporate hot-
tub would have attracted the right talent, it doesn't sound nearly
unreasonable.

~~~
jjeaff
Exactly. The things I've seen as far as blowing investor money is cringe
worthy. But almost never have I seen a successful lawsuit by investors except
I. The case of outright theft or fraud.

------
CalChris
My brother and I were talking last night. We talked about mechanics,
operations, for a VC fundable startup:

    
    
      Delaware C vs LLC
      IP assignment
      83b election
      Xero
      Opening a Silicon Valley Bank account
      Capital One credit card vs SVB
    

I don’t understand why YC or freaking Haas never walks people through startup
best practices, especially in an ‘Essential’ guide.

~~~
geoff
YC's Kirsty Nathoo gave a great summary of startup mechanics here:
[https://www.startupschool.org/previous](https://www.startupschool.org/previous)

~~~
kirsty
Thanks Geoff. I'm happy to answer questions on this topic. However some things
are company and situation specific so can't be generalized. Also IANAL!

~~~
CalChris
Please, please beat 83b into every founder’s head and make sure they’ve
internalized it so they get this boring form right for their employees.

You’ve got 30 days or you’re paying income rather than capital gains. If WSGR
incorporates the startup they will get this right for the founders. Sign this,
sign this, this and this. But will the founders get this right for their
employees?

~~~
nostrademons
Clerky beats 83(b) into the heads of founders who use its service. It's
included in the package, with pre-filled forms and detailed instructions for
where to mail them, and it sends you nag mail every week until you've uploaded
the completed IRS form. It works for employees, too, but they don't get the
nag-mail.

The folks who I think really need to teach their employees about 83(b)s are
fast-growing big companies. I didn't know about them when I joined Google, for
example, and learned about it too late to take advantage of it. That mistake
cost me literally hundreds of thousands of dollars.

~~~
CalChris
Yeah, and Google's HR is supposed to rock. They got my business cards on my
desk on day one, but really.

I will look Clerky over. I admit I was just thinking of them as a formation
forms generator.

I'm more worried about operations after formation. I'm surprised that Xero
doesn't get much discussion. Founders are going to be everything early on.
They're going to be accountants too.

------
fragsworth
I take major issue with this:

> By the way, it is vital to remember that the money you raise IS NOT your
> money. You have a fiduciary and ethical/moral duty to spend the money only
> to improve the prospects of your company.

I think this is unethical. YCombinator is taking advantage of a lot of
founders by discouraging them from paying themselves a reasonable salary with
the money they raise. There is a lot of confusion about this issue, mostly
because YCombinator founders are young and naive, and they think because they
own most of their company that they should be working for free the entire
time, and can spend years trying to make their company work while eating
through what little savings they have.

That's not the case. Founders should be doing one of the following:

 _1) You should pay yourself a reasonable salary with the money you raise._

 _2) Otherwise you should be diluting the investors over time by the amount
you are getting underpaid._

~~~
mceoin
Couldn't disagree more. You should pay yourself the absolute minimum you need
to reduce burn and extend your runway. This doesn't mean free, it means living
expenses but no more. Keep the burn low and extend your runway.

If those terms are undesirable, that's fine. Better not to raise money then,
or to raise from a different profile of investor who is looking for different
kinds of returns (i.e. not 'death or unicorn').

~~~
fragsworth
If you're not paying yourself your actual value in salary, then you should be
diluting the investors because you are investing your missing salary into your
company.

~~~
icebraining
Aren't the shares you already have supposed to be payment for that? The other
investors had to put a lot of money to get them, often/usually(?) way more
than the founders.

------
jtmarmon
This is a bit of a meta question but I've found that I've almost never learned
anything from reading posts like this. I've scanned them over and nodded in
agreement, only to make the mistakes I've been warned against and then I
finally understand what people were telling me all these years.

Does YC have an approach on how to actually get founders to take advice to
heart instead of just understanding at a surface level?

~~~
adventured
> Does YC have an approach on how to actually get founders to take advice to
> heart instead of just understanding at a surface level?

I've been building Internet companies non-stop since the mid 1990s. The only
means I've seen or personally experienced to accomplish that, is personal
suffering (only half joking). That is to say, going through it for yourself.
The difference between book knowledge and hands on experience. Taking a punch
to the gut (so to speak) provides an intimate, emotional, personal lesson in a
way that reading about taking a punch to the gut simply never can. Your brain
subconsciously makes a special effort to take note (forms of pain learning
mechanisms) and ingrain lessons that it will not (and I would argue, can't)
from reading about it alone. It's almost like something getting etched into
your DNA, versus just having a surface tattoo. When you actually go through
it, you acquire a kind of automated discipline (courtesy of said pain) that
you can't have just from reading or being told; children and pets learn the
same way from touching hot things.

~~~
dyarosla
I imagine that the best thing to extrapolate from this is to learn from your
own failures, but make those punches hurt only a little. So that if you mess
up, you can still move on.

Advisors could say what things to avoid, but then offer a path of- but if you
don't want to listen to me, try this (small) experiment to see what happens.

~~~
adventured
The kind of advice that you pick up from articles like those routinely linked
here on HN, in my opinion, can help you limit mistakes slightly and can help
you learn slightly faster; basically, improve the outcomes _somewhat_. It
probably also compounds nicely with actual experience, as reinforcement.

I don't think there's any good substitute for doing, as a means to learn how
to do start-ups, and more broadly understanding how companies should operate.
That naturally includes working for other successful companies first for a
couple of years, which is a tremendous way to learn as much as possible about
the fundamentals of how companies run before striking out on your own.

------
shamino
For people just coming out of college, the advice given by YC might seem very
"groundbreaking". But honestly, these are not new ideas. I listened to Sam's
lectures at Stanford, and listened to Brian Tracy's business books, and they
are the same advice. Not to hate on YC, but I just wanted to keep it 100.

~~~
mwseibel
Let’s be clear the goal wasn’t to break new ground in fact it’s the opposite.
To condense all the accumulated pieces of advice that we give in one place and
provide links to dive deeper if needed.

~~~
shamino
I agree you are trying to do that with this post. But YC startup information
sometimes markets itself as knowing what others don't know when it comes to
growing a business, and say they know best since they've seen so many startups
in their cohorts. It comes across as revolutionary ideas, even if those words
aren't exactly used.

~~~
shamino
For instance, all your reference links are to yourselves. Are there no data
points outside your own findings that could be useful ?

------
CM30
This is especially relevant if you're trying to setup a social networking
site:

> Many startup advisors persuade startups to scale way too early. This will
> require the building of technology and processes to support that scaling,
> which, if premature, will be a waste of time and effort.

I see all these social media services started up by folks who've spent weeks
coding fancy platforms hosted on cloud services with a whole team of engineers
on standby with all the best graphics design work money can buy...

While no one's actually using the service. Best to focus on the community and
getting people using it than the tech stack. No point trying to make a super
complicated site that scale to Facebook levels when you've got about a hundred
people actually posting on it.

~~~
ajeet_dhaliwal
I have leaned towards scaling too early in the past too and I think there’s a
tendency to do that for professional software developers turned founders
because that’s the expectation we have when interviewing for a corporate role.
It’s hard to unlearn.

------
moron4hire
I am always disappointed at the lack of effort put into discussing what
"launch early" really means. For example, let's say you're making a Word
Processor[0]. Surely, putting up nothing more than a download page where
people can Stripe their $10 for a copy is not sufficient. There must be a lot
more to the story, because there are a lot of projects that have done just
that and have gone nowhere.

It's always made to sound like you can "just launch now". But there must be
some sort of apparatus in place to promote the product and take advantage of
the attention given to the product. Constructing this apparatus must be a
significant undertaking, or else more people would do it. So one can't "just"
launch. There is still significant work to do up front, it just might not
necessarily be programming of your product.

[0] Just for example. Call it, "consumer-oriented software", rather than any
sort of SaaS or open-source library or any other sort of software offering.

~~~
nathan_f77
I agree that it's certainly possible to launch too early, especially if your
product doesn't exist, or it's full of bugs and unusable.

But this is still good advice for me. I'm just about to launch a service, and
I think I've already gone way beyond "MVP" status. I was even planning on
doing a big redesign of the whole product, but now I've decided not to do
that, because it works fine as it is.

I could easily keep working on this product for another 6 months before I was
comfortable launching it, but now I think I'm going to set a deadline for
early next week, and only work on the most important things.

~~~
staticelf
What is the product? You should always link to your product if possible when
you're talking about it.

It got me interested even if I just want to take a look.

------
mwseibel
Geoff and I are happy to answer questions in the comment thread. Our goal was
to condense the advice we most often give to early stage founders. (Much of
this advice was also given to me when I went through YC)

~~~
jacquesm
The first two links are both 'do things that don't scale', is that correct or
did you mean to link to something else in the first link?

Also, unexplained reference to 'PB', Phineas Barnum or Paul Buchheit?

------
urs2102
The term "launch early" can often get blurred. Dropbox famously had a landing
page, and then a video, and then iterated to a product.

Is Dropbox considered a product that "launched early", despite them waiting to
receive feedback on a video before building software?

Additionally, what tracks better: a good screencast or a bad useable demo (I
imagine a good demo is obviously better than a good screencast)?

Otherwise, great list, and thank you for putting it together.

~~~
nathan_f77
This is really scary to think about when you're days or weeks away from
launching an MVP.

I'm building a service for developers. I really want to polish the design and
get the UX perfect, and have really good documentation and client libraries
for various languages. But I think I can launch without those.

I really just need to record a screencast and get a demo online. But wow, the
struggle is real. I really don't want to launch it yet.

~~~
urs2102
I was just curious on how other people think this through.

It's a question I love hearing feedback on from other hackers who are building
things to solve problems. A useful way I like to think about the MVP is : "if
I removed everything, what's the last thing I could possibly remove without
the solution no longer addressing the problem?"

I try to stop just before that line. That being said, it's always easier said
than done.

DM me on Twitter/I just followed you! I'd love to try out your product when
you're ready!

------
neerkumar
I never find advice on how to grow when your customers are heavily competing
with each other and, therefore, they are very unlikely to recommend your
product no matter how much they love you. I feel this is a very common
situation and I never heard YC talk about how to deal with it.

~~~
danieltillett
We have a similar situation where our customers actively prevent us even
mentioning that they use our products. It is a grind.

------
venantius
What is your position on attacking regulated industries that require
significant up-front capital (e.g. banking)? Domains like these face
significant chicken-or-egg problems - you need financing in order to legally
attack the problem, but without actually being in the market it's difficult to
raise financing. YC seems invested in encouraging companies like these, but
their domain necessitates a different approach than a traditional technology
company.

------
jefferson123
Does YC have enough time perspective to be truly convinced these principles
actually hold?

The only example in article is Airbnb, which is obviously an outlier.

How well has this doctrine been working?

~~~
jacquesm
It works well enough if the numbers are large enough from an investors point
of view. It may very well be sub-optimal when looked at from the position of
an individual company.

This is un-avoidable, any kind of start-up advice will always be a distillate
from experience across a portfolio and hence will maximize the chances for the
holders of portfolios, not for the holders of stock in a single company.

~~~
geoff
This might be true if this were the sort of advice that argued that startups
should always swing for the fences, or always take unreasonable risks, in the
hopes that a portfolio of such startups will result in one or more big
winners. In fact, this is not the case. Our advice is intended to increase the
chances that every startup that follows it will be successful. Like any
advice, you can surely find counterexamples where the advice will not be a
good fit, but we would argue those cases are rare.

~~~
jacquesm
I think your YC bias is blinding you to the vast arena of companies different
than those that would normally apply to YC. So it is more along the lines of
'YC essential start-up advices for the kind of companies that would apply to
YC'. Not for start-ups in general.

• Launch now

This works, if your product is something that is trivial or extremely easy to
manufacture. Many products are not at all like that.

• Build something people want

Which you may only find out during the iterating process.

• Do things that don’t scale

That depends. Almost all of the examples in the article are from companies
that eventually scaled very well, and the 'do things that don't scale' advice
is only applicable to some specific examples that held true in extremely
narrow domains. For the most part start-ups are trying to find each and every
kink in the machine to automate it as soon as they can so they can stay lean
while growing. I'd change it to 'do things that don't scale and then find a
way to scale them anyway'. The first part is just to get a feel for the
problem space, the next is where you will end up making or breaking the
company.

• Find the 90 / 10 solution

The Pareto Principle at work, can't disagree with that in any way, it is good
advice no matter what the context. Perfection can wait.

• Find 10-100 customers who love your product

Some very successful companies have only 3 or 4 customers, you'd never hear of
them because they are not sexy in any way but they are critical and usually
have a lock in on their customers that most start-ups can only dream of.

• All startups are badly broken at some point

I'd change that to 'Almost all companies are badly broken in some way'. This
is after looking at many of them over the years. That doesn't mean they can
not function, merely that almost every company that I've ever looked at had
one or more pretty serious defects.

• Write code – talk to users

Not all start-ups revolve around writing code, in fact the best of them when
it comes to 'changing the world' probably do not.

• “It’s not your money”

See comment elsewhere, it's not yours either, it is the company's money.

• Growth is the result of a great product not the precursor

Growth by itself should not be a goal, and in many cases growth would be a
problem. I've written this before, if growth was good then cancer would be
good. So if you grow fine but be in control and aware of what parameters drive
that growth and don't be afraid to step on the brake if it looks as if your
growth is going to outstrip your capacity to deal with it.

• Don’t scale your team/product until you have built something people want

Sensible advice, regardless of what kind of company you run. Could be
generalized to: "do not fall for the premature optimization trap".

• Valuation is not equal to success or even probability of success

I can't make much sense of company valuations in general and start-ups in
particular, but I do know that even if the relationship does not hold in one
direction, there does seem to be strong correlation between success in numbers
and valuation.

• Avoid long negotiated deals with big customers if you can

That 'if you can' is instrumental, anything involving enterprise sales is
going to have that element.

• Avoid big company corporate development queries – they will only waste time

True, _but_ they are sometimes also ways to bankroll the company without
dilution. I've seen a couple of successes happen this way and it seems like an
elegant way to grow a company.

• Avoid conferences unless they are the best way to get customers

Agreed. Never went to a conference that I liked or that felt like time spent
well.

• Pre-product market fit – do things that don’t scale: remain small/nimble

Remaining small and nimble is good advice at any stage. VCs that push you to
increase your headcount should be avoided at all cost.

• Startups can only solve one problem well at any given time

Strong agreement there, this goes for almost all the businesses I've looked
at. I'd even consider a start-up that tries to solve more than one thing at
the time as being more at risk than any of their competitors solving only one
of those. You'd have to be _very good_ at everything in order to change along
more than one axis in more than an incremental fashion.

• Founder relationships matter more than you think

Again, strong agree. I've seen more start-ups tank or lose momentum because of
founder issues than for any other reason or set of reasons combined.

• Sometimes you need to fire your customers (they might be killing you)

But don't do it too early, make sure you drop them when you can afford to.

• Ignore your competitors, you will more likely die of suicide than murder

That depends, there is one situation where being unaware of your competitors
can be costly: If one of your competitors has picked up funding and they enter
your market with a price war or giveaway when you are still selling your
product. This makes keeping a cursory eye on your competitors a good
investment as long as it does not occupy you or one of your colleagues more
than an hour or so in a month. It can also help to keep you 'feature complete'
in the eyes of potential customers if you are going head-to-head in the same
market, as well as to stay informed about their pricing and models.

• Most companies don’t die because they run out of money

I disagree with this one, not sure what your reason behind writing that so
definitively was, but in fact the majority of companies dying are due to
bankruptcy.

• Be nice! Or at least don’t be a jerk

Agreed. In the same line: don't burn your bridges.

• Get sleep and exercise – take care of yourself

That's good advice for _everybody_ including those people that do not work on
start-ups.

Thanks for posting all this by the way.

------
abalone
_> 007 – formidable (need this)_

What does this mean?

~~~
jacquesm
Quite a few loose ends in that piece.

~~~
beat
Launch early and iterate!

------
jorgemf
> Get sleep and exercise – take care of yourself

This should be the first advice, how are you going to take care of something
if you don't take care of yourself first?

------
gnicholas
> _We often say that a small group of customers who love you is better than a
> large group who kind of like you. In other words, recruiting 10 customers
> who have a burning problem is much better than 1000 customers who have a
> passing annoyance._

How does the possibility of being pigeon-holed affect this calculus,
especially where stigmas are at play? My startup's technology is life-changing
for many people with dyslexia or ADHD, but is also well-used by skilled
readers (for whom it is augmentive, but not life-changing).

If I focus exclusively on the accessibility community, many people who come
across our website will be turned off by words like "dyslexia", and will
assume that our technology isn't for them because they read well already.

How do you suggest startups navigate these waters when there is a chance of
being pigeon-holed in a way that evokes stigma?

~~~
quaunaut
I'm not an expert, grain of salt, etc.

But to me, this is the responsibility of different funnels. Have your most
generic marketing info- your landing page, etc- apply to just about anyone,
but make your resources that reach out to the accessibility community target
them exclusively. They won't be offended/disturbed when they see that you can
be used more generically, and if it's truly solving a need for them they'll
sign up generally based on your targeted outreach anyway.

~~~
gnicholas
We are actually in the process of redesigning our website (currently a single
page) to have a generic landing page and three silos. This allows us to refer
to educational/accessibility benefits when speaking to one audience and speed-
reading benefits when talking to other audiences. Thanks for reaffirming this
change, which we've poured a lot of time into!

------
npgatech
I am looking for startup advice for founders that _don 't_ want to build a
billion-dollar company or need VC funding. How to efficiently target a local
market? Or perhaps start a niche business that appeals to a small market.

Every time I see a startup advice book, article, Stanford lectures, whatever
it may be - it is always shooting for becoming the next Uber or Airbnb -
including this article.

~~~
hyperpallium
That's a "lifestyle" business, and it's very appealing. I don't want billions,
I just want to work for someone else.

One curious thing is it's more selfish than a startup - after all, you're
doing it for you, not for the business. You want it to be sustainable, so the
ugliness of competition is relevant sooner. One pg essay likens a startup to a
charity, and some, like Craigslist retain some of that quality, helping a lot
of people without making as much money as they could.

Note: I'm not criticizing you for wanting this. I'd like it too, I just
haven't found a way of doing it that doesn't become nasty. YMMV.

~~~
GCA10
Could we stop using the term "lifestyle" to describe young companies that
aren't chasing the unicorn dream? A lot of them are run by very driven
founders who work long hours to build world-class products for smallish
niches. They don't have vacation homes in Tahoe; they don't shut down for a
week to go to Burning Man.

Instead, they are obsessed with a definition of business success that doesn't
involve ten-digit numbers.

There is one "lifestyle" business that's rampant throughout Silicon Valley, in
spite of its efforts to deny it. This would be the bottom quartile of the
venture business. It's all about picking up management fees, taking long
weekends, and living large.

~~~
rgrieselhuber
See my other comment. Cashflow business is a much better and more accurate
term for this.

~~~
wolco
What about the term small business?

~~~
rgrieselhuber
Just doesn't have the same ring to it. ;)

It's largely semantics as any small business should ideally be cashflow
positive but I think the nuance here is one that you can build these
businesses to scale, just without VC funding. The time horizon for growth is
much longer as a result but definitely there.

------
pbiggar
I think this advice is great, but the wording they use causes people to miss
the point. Specifically the word "launch". You don't need to have a big
marketing launch, you don't need to do ads, you just need to get it in front
of customers and validate your business by whatever means you can (whether
checking whether consumers come back or asking people to pay, or whatever).

The struggle is that people think "oh, this needs Slack-level design" or 'just
another feature', but if they thought of it not as "launch" but instead "put
this in front of customers now and get feedback", it would be more obvious
that this was a good thing.

------
mbesto
Here's my Essential Startup Advice:

Whenever someone gives you free advice (i.e. you don't directly pay them cash)
try to understand the motivation to give you free advice. That should give you
an idea of whether the advice is valuable or not.

~~~
geoff
This is actually reasonable advice. For clarity: our motivation is because we
want to see more successful startups in the world. We also believe and hope
that some of those startups will be funded by YC.

~~~
Macsenour
Would you agree or disagree that YC looks for high value potential more than
just a successful start up? I'm thinking of the top post here and that's
prompting my question.

------
alvis
"Do things that don’t scale" \-- The essential of the essential IMHO.
Intuitively, it sounds nonsense. After all, who what to build an unscalable
business. But having been working on my super early stage startup for a while,
I realise this is the biggest wisdom I gain during the process.

Sometimes I feel stressed on spending too much time on things like manually
solving problems for my potential customers and even helping my once potential
co-founder, who now formed another startup of his own, with his problems. But
now looking back, the time I spend is not in vain. I gained lots of hand-on
experience on what things do and don't work. Not to mention, valuable
feedbacks and friendship are something I think I won't get it if I focus on
something otherwise.

------
uncle_d
Any advice for people who would like to found their own company, but aren't
sure what it should do?

~~~
ladybro
Solve a problem that you or people around you have.

I know It's frustrating to hear that over and over again, but you have to
actively keep your eyes open to the inefficiencies around you ("live in the
future") and eventually you'll discover a problem that needs solving.

PG's essay on this is a good one that helped me choose what to work on:
[http://www.paulgraham.com/startupideas.html](http://www.paulgraham.com/startupideas.html)

~~~
icebraining
My problem is that the people around me have no money to pay for the solution.
How do you get around that?

~~~
Mz
That probably isn't literally true. If you come up with a solution that is
worth more to them than the cost to them, people will find the money.

And if it is literally true, then you look at uncoupling monetization from the
end point user. There are a number of ways to do that. Historically, TV was
supported by ads. Viewers bought TVs, but broadcast stations did not directly
charge viewers for watching TV. Instead, they broadcast for free, but included
ads.

It is another layer of complication, but it isn't outright a charity model.
Plenty of for profit businesses have a less direct monetization strategy than
simply charging the end user for their use of it.

~~~
icebraining
_If you come up with a solution that is worth more to them than the cost to
them, people will find the money._

Yes, that is true. Unfortunately, that essentially means competing with the
things that cost them currently, and that's mostly rent and basic utilities,
which are heavily regulated markets dominated by state-supported companies.
You could sell to _them_ , but then it's no longer "solve the problems of
people around you" but solve the problems of huge corporations, which is quite
different.

You're still right, it's just a discouraging prospect.

 _Plenty of for profit businesses have a less direct monetization strategy
than simply charging the end user for their use of it._

That's also very true. I have a bit of a love-hate relationship with ads,
since I dislike the concept, but recognize that I and many others who couldn't
afford online services have greatly benefited from the redistributive effects
of ads. Still, I wouldn't use them as my revenue source.

Unfortunately, except for ads and a fremium model, I don't see many ways to do
this decoupling.

~~~
Mz
It is a problem space I am abundantly familiar with. I certainly feel your
pain. The fact that I want to offer solutions for people with serious problems
that keep them trapped in poverty helps contribute to my own lack of funds.

I do have ads on my websites. I also have a tip jar and Patreon. I don't make
much money, but I make more than I used to.

So, I get that you probably feel like your problem is being dismissed. It
isn't. I am right there in the trenches with you and telling you what I know
from long, hard firsthand experience.

You haven't given any details, so I can't try to give specifics. I can only
speak in generalities, because you are only speaking in generalities.

I may not be the best person to talk to about how to make money. I don't seem
especially talented at that. But I may know a lot more than most people on HN
about trying to solve problems that seem impossible to monetize, and I am
making headway on monetizing them anyway, against long odds.

~~~
icebraining
No, no, I don't think you're being dismissive! I appreciate that you've taken
the time to reply seriously to my whiny rant.

I haven't given details because I don't really have any, it's just a general
feeling of foreignness I've had since I started reading HN and about startups.
Even now that I technically could, I'd frankly feel ashamed of spending money
on most of the tech trinkets that get advertised here, let alone dedicated my
life to building them. And yet, I also know this is just relative - my $250
laptop is an extravagant expense for actually poor people - so I don't judge
those founders. I just wish there were more startups for working-class people
from where to draw inspiration.

Anyway, thanks for your patience and support :)

~~~
Mz
What you are describing is an error in your internal mental models, not
objective reality. It is a thing I also wrestled with.

Until earlier this month, I was homeless. I spent nearly six years on the
street. I still am quite poor.

Like a lot of homeless people, I had income, just not enough to purchase a
middle class lifestyle. I made choices about how to spend my money. I bought
cheap tablets because I make my money online. I don't make much, but a cheap
tablet could readily pay for itself in short order.

I also blog. Among other things, I try to provide health information for
people with CF. There is a drug for CF that costs around $300k annually, so
there are people providing high priced solutions for this same problem space.
My difficulties in making money aren't actually the fact that people with CF
have no money. This is not stopping drug companies from putting out very
expensive medications for the condition.

So, there are reasons why I, personally, cannot up and charge people with CF
big bucks for my help. But those reasons are not actually because they simply
don't have the money, even though it is true that people with CF tend to be
dirt poor.

While homeless, I shopped sometimes at second hand stores that had a lot of
homeless clientele and I got payday loans. That was an eye opening growth
experience for me.

If you provide real value and the right price point, even poor people can buy
your product. If you think this is not true, you are dealing with some kind of
emotional baggage, not actual market reality.

Best.

~~~
icebraining
You've given me some food for thought. Thank you.

------
asah
great advice! esp "a small group of customers who love you is better than a
large group who kind of like you"

I'd add some additional qualification: "Valuation is not equal to success or
even probability of success" ==> capital-intensive businesses require suitable
valuation

Ignore your competitors, you will more likely die of suicide than murder ==>
yes, and!!! competitors are good: they help build awareness among customers,
investors, etc.

"Write code – talk to users" ==> for enterprise products, also talk to a few
customers / decision-makers. If nothing else, make sure your fans have access
to budget.

~~~
alvis
Out of curiosity, I am wondering if entrepreneurs really worry too much on
their competitors. Often I find articles saying the opposite -- they urge
people not having a blind eye on their competition so that they can at least
differentiate themselves from competition, lest that they're making another
me-too product.

------
ballenf
When is it ok to outsource/offshore some/all of the software development?

~~~
mwseibel
It’s often not good to do this

~~~
ballenf
Thanks. Any recommended reading on this?

------
ajeet_dhaliwal
One area I’d love to be discussed/expanded further in another post is about
techniques around taking to users. Even getting people who have signed up or
are existing customers to talk to you is surprisingly difficult. There are
probably pearls of wisdom to share in this area. Taking and listening to
customers is so important but with the noise nowadays I find it’s harder to
get them taking, even as I say they’re already using the product.

------
pasharayan
Thanks for this write-up mwseibel & Geoff!

A question: What's the best way to keep ourselves accountable to the tasks of
"talking to users", "do things that don't scale" and "writing code" every
week?

We write a weekly report, and set milestones to go for each week - but it
doesn't feel like these things focus us our attention as well as they could
be.

~~~
quaunaut
It's the hardest part. Discipline. It requires creating your own system and
constant reevaluation- every milestone/meeting should begin and end with how
this is related to figuring out product/market fit.

If possible, this is the general way milestones should be structured:

1\. Who is this for? Be as specific as possible. At first this might even be
someone's name. As you start solving their problems, they'll ask for more and
you'll naturally start targeting others through those features.

2\. What's the easiest way to solve this problem today? Do it that way. You
shouldn't be saving them 30 seconds a day, and actually doing what they're
doing now will help you realize the difference between an annoying thing and a
real need.

3\. From here, what your proposed solution really is. Make sure you really
figure out what they want- don't just do what they say, try to get to the root
of what they're asking for.

4\. How you're going to go back, show it to them, and see how much they clamor
for it. See how it changes their plans, schedules, etc.

While going through this multiple times you'll probably even get mistaken
customers. In this case, make sure you meet with them to just figure out what
the hell is going on. They might be using it in a way you didn't realize and
should maybe pivot toward- Segment is a good example of how there might be a
big business right next to the problem you're solving today.

------
alyhuss
On YouTube, "How To Start A Startup" has a list of videos that talks about
various stages a startup will encounter. Here is the link:
[https://www.youtube.com/channel/UCxIJaCMEptJjxmmQgGFsnCg](https://www.youtube.com/channel/UCxIJaCMEptJjxmmQgGFsnCg)

------
Bretts89
If anyone is interested I'm building an edtech startup which streams college
classes. We have a a few courses from Stanford done in partnership with Y
Combinator on building startups:
[https://www.podiumedu.com](https://www.podiumedu.com)

------
pascalxus
Great post: I especially like the description he gave: "find customers who
have their hair on fire".

If anyone wants to solve the Satiety problem, I'd be willing to bet there's
millions if not billions of people with their hair on fire with that problem!

------
Naushad
Matches with a lot of practical thoughts shared by dhh and jason in "Re-work"

~~~
staticelf
I really, really loved that book. It resonates so well with how I think and
view the world.

------
johnrob
I found a typo: "copy written" should be "copyrighted".

------
graycat
That seems like a lot of excellent advice except in cases where "it depends"
and the advice is not good or some other advice would be better.

> If we invest in you, your group is expected to move to the Bay Area for
> January--March 2018. You can of course leave afterward if you want, but it's
> a good place for a startup to be.

IMHO it's a horrible place to be, way too expensive, and anyone not really
wealthy should get the heck out ASAP.

It's the state of Governor Moonbeam and the district of Nasty Nancy, "The San
Francisco Treat".

> we expect you to work out of wherever you find to live.

I agree with that.

IIRC, some places there can be zoning and insurance issues operating a
business out of residential housing.

> At each dinner we'll invite an expert in some aspect of startups to speak.

Biggie problem: For the startups that are really wanted, eventually worth $10+
billion, there are not many experts from the past and many fewer for the next
dozen such in the future.

Indeed, for the next $10+ billion startups, a guess is that they will be
different from last $10+ billion startups, mostly need to be something quite
new in some of problems solved, technology used, market, and customers served.
Then the new stuff might be from _field crossing_ and not from what is in
Silicon Valley or computer science now.

> Most successful startups change their idea substantially.

Not very good news.

> The ideal company would have two or three founders. We'll consider those
> with four or five. We're reluctant to accept one-person companies, though we
> have funded many of them now.

But notice the advice

> It turns out most companies fail fast because founders fall out.

Right. And the obvious solution is to be a sole, solo founder where

> We're reluctant to accept one-person companies,

For

> Make something people want.

Yes, but at first, nearly no one knew they wanted a telephone, a Ford Model-T,
a PC, Google, or Facebook.

> the guidance below will help most startups find their path to success

But "most startups" will be at most a minor success. So far we get another
Google only about once each ten years. So, the advice that works for "most
startups" doesn't have to work for the next Google or even the next 10
startups worth $10+ billion.

> The first thing we always tell founders is to launch their product right
> away;

That is good advice for some startups, but for other startups there is the
issue of "You only get one chance to make a good first impression."

> ... for the simple reason that this is the only way to fully understand
> customers’ problems and whether the product meets their needs.

Again, that's good advice for some startups, but we would hope that the
situation was:

(A) The startup has picked a problem currently solved at best poorly where it
is totally, 100%, completely utterly clear that the first good, a much better,
or an excellent solution will just thrill enough users/customers with enough
revenue per each to make a really successful business. The great example would
be a cheap, safe, effective one pill taken once to cure any cancer.

Believe me, once someone has such a cancer pill, no way will they then be out
talking to customers for feedback about, say, the color (white or yellow) or
shape (round, oval) of the pill. Instead, as soon as that pill is known to
exist, desperate customers will literally be banging on the doors to get one.

(B) The challenge is not at all having the first good solution thrill the
users/customers but just being able actually to construct that solution. That
is, as for that cancer pill, the reason there is no solution now is that so
far no one has been able to find one. So, the solution will need something
new, some _secret sauce_ in some important respects too difficult for others
to discover. Then hide the secret sauce, say, in a server farm, with good
security.

> Surprisingly, launching a mediocre product as soon as possible, and then
> talking to customers and iterating, is much better than waiting to build the
> “perfect” product.

Sure. And "The perfect can be the enemy of the very good."

But the

> talking to customers and iterating

is not very good for all startups.

> Once launched, we suggest founders do things that don’t scale (Do Things
> That Don’t Scale by Paul Graham1).

Okay, but how did that little photography experiment lead to "a vibrant
marketplace"?

Maybe you are saying that the photography experiment said that pictures are
important. Then the scalable, production version was to tell the AirBnB
associates that they needed to hire an okay or better photographer to take
pictures, e.g., much as in the experiment.

> Talking to users usually yields a long, complicated list of features to
> build.

Maybe. But Google has hardly changed their home page in years.

> a 100% solution that takes ages to build.

Creating unique, powerful, valuable, crucial core "secret sauce" is, say, some
applied math research, and that by the right person commonly can be done in
hours, days, or weeks. Then write the darned code, dirt simple code, and go
for it.

E.g., I worked out the main parts of my Ph.D. dissertation research in my head
in an airplane ride. The resulting dissertation had some nice improvements but
was always well within what I first worked out.

This "ages to build" stuff suggests finding another problem to solve.

> As companies begin to grow there are often tons of potential distractions.

By far the worst I found was contacting VCs. I'll never do that again. It'd be
better to start a grass mowing service than trying to get equity funding.

Besides, now, for an information technology startup based on software, the
computing hardware, software infrastructure, and Internet data rates are so
cheap that a solo founder, with a good startup selection, can bring his work
to the _traction_ equity funders want that will put him into nice
profitability and ability to grow just from retained earnings. The equity
funders are asking for too much: By the time a solo founder has what the
equity funders want, that founder will no longer need, want, or accept an
equity check.

> chasing after press coverage

That can be one of the most important sources of publicity and
users/customers. Remember: You want your story told, and the press desperately
wants a story to tell.

> the most important tasks for an early stage company are to write code and
> talk to users.

That's true for some startups, but such a startup is usually going to be in a
sad situation.

Instead, the founders should already have a good problem to solve. By the time
the customers see the good alpha test, the company should be in quite good
shape with very little more code to write until, say, much bigger scale is
needed.

> For any company, software or otherwise, this means that in order to make
> something people want: You must launch something, talk to your users to see
> if it serves their needs, and then take their feedback and iterate.

This advice can hold for some companies, but not all. Instead, some startups
have already selected a good problem and found a good solution.

> These tasks should occupy almost all of your time/focus. For great companies
> this cycle never ends.

Again, Google has hardly changed their home page in years.

> Similarly, as your company evolves there will be many times where founders
> are forced to choose between multiple directions for their company.

Again, Google has hardly changed their home page in years.

> When it comes to customers most founders don’t realize that they get to
> choose customers as much as customers get to choose them. We often say that
> a small group of customers who love you is better than a large group who
> kind of like you.

Sometimes, yes. E.g., does an auto company go for the Rolls Royce, Mercedes,
BMW, Chevy SUV, Ford F-150, etc. market?

> YC is sometimes criticized for pushing companies to grow at all costs, but
> in fact we push companies to talk to their users, build what they want, and
> iterate quickly.

That talking and iterating stuff only works for some startups.

> It is very difficult as a new startup founder not to obsess about
> competition, actual and potential. It turns out that spending any time
> worrying about your competitors is nearly always a very bad idea. We like to
> say that startup companies always die of suicide not murder. There will come
> a time when competitive dynamics are intensely important to the success or
> failure of your company, but it is highly unlikely to be true in the first
> year or two.

Again, that doesn't apply to all startups, but it's good news, and I can
believe it often applies.

> A few words on fund raising (A Guide to Seed Fund raising by Geoff
> Ralston9). The first, best bit of advice is to raise money as quickly as
> possible and then get back to work.

Better advice: (A) Pick a problem and solution so that you, as a solo founder,
won't need equity funding. (B) If you contact 20 VC firms and don't get a
check, then give up on VC at least for a while. (C) Do "get back to work".

> It turns out most companies fail fast because founders fall out.

So, as above, be a solo founder. So, pick a pair of a problem and good
solution that you as a solo founder can bring to nice profitability alone
without equity funding.

------
ilaksh
All great advice, but realize that you cannot just do one or two of them, or
incorrectly execute some of them, and expect to be successful.

For example, you cannot take the 'imperfect MVP' and 'iterate quickly' advice
as an excuse for poor testing and ignore the part about a narrow focus or
listening to customers. I will admit that I have worked on several projects
where something like this was the case.

It may just be that some of the projects I have worked on have not been so
great (because it is much easier to get those contracts), or maybe this is
common -- but what I have seen is startups or dev teams that are iterating
quickly on programs that fundamentally do not work or cause their users great
frustration. Part of the problem is that people often underestimate the
technical difficulty (or perhaps almost infeasibility in some cases) of
certain features or impracticality of some UX, etc.

The user frustration one was a government contract so the users couldn't
switch to another program. What happened was we built a program for utility
workers that required a ton of data entry in the field. Due to slow loading
screens or just a ton of extraneous fields or an issue of keeping laptops
clean or something else, it was impractical, so they switched to doing data
entry in the office on based on paper forms. And then someone decided to give
all of those forms to one poor lady in the office. One day I was permitted to
visit, and found that due to some bugs we had not been told about and the
sheer volume of work, the lady was literally going insane. They were still
iterating quickly and adding tons of features on that project when I left.

Here is an example where a project manager may have been using something like
the idea of an imperfect MVP as an incorrect rationale for perhaps not
evaluating core functionality carefully enough. The product was a home server
device. A core feature that was supposedly complete when I came onto the
project was a relay/proxy system that would allow multiple connections to come
into this device through one port while it was behind NAT. Or something close
to that -- it was a few years ago so I don't remember perfectly. But I was
initially given the task of working on some lighting animation and only
coincidentally discovered that this proxying system and other core networking
was not even close to working. I did eventually get a multiplexing thing
working for it but they never delivered the system to the initial customer so
it was never fully tested.

On another project, it started out as another case of an 'MVP' that actually
didn't do the thing it was supposed to do. It mostly did it most of the time,
but due to the nature of the project, without an automatic way to detect and
correct the 5% of cases where it didn't work, it could not possibly make any
significant amount of money. So when I came on, I wasted quite a bit of time
trying to make this supposedly already working MVP work, but it had been
'iterated on quickly' and had unmaintainable code and no tests, so I ended up
rewriting it.

