

Lecture 6: How to Start a Startup - kqr2
http://startupclass.samaltman.com/courses/lec06

======
npalli
Enjoyed the talk. Key takeaway for me was the need for explicit sequencing of
product market fit and growth hacking (i.e, don’t bother with growth hacking
if you don’t have PM fit). I suppose it is obvious intuitively, but
demonstrating PM fit via retention metrics (“make sure your retention flat
lines at the appropriate level”) was an interesting take. It can be easy to
create work and activity doing growth hacking creating an illusion of
progress. Keeping PM fit/growth separate and sequenced is a good lesson.

~~~
fookyong
This needs to be better understood/accepted by startups, but it's a bitter
pill to swallow for many entrepreneurs.

I wrote a book on growth hacking and now often get requests (sometimes casual,
sometimes formal) on how a startup can "growth hack" or accelerate their
growth. Then when I ask about the basics like target market, retention
metrics, customer feedback etc - I get a bunch of blank stares.

It's no good driving more traffic or "virality" when people aren't interested
in your startup in the first place. I'd say in 9 out of 10 cases, there's
still a ton of PM fit work to be done by startups who think they are in the
"growth hacking" stage.

The problem is, I'd say most first-time entrepreneurs just think the only
obstacle they need to overcome is getting more people seeing their website, or
downloading their app. It's hard to accept that your startup is not ready for
growth because it's not providing any clear value yet.

~~~
weavie
What is the book?

~~~
fookyong
didn't want to seem too self-promotional but since you asked!

[http://growthhackinghandbook.com/](http://growthhackinghandbook.com/)

------
oretoz
I still haven't got my head around the 'growth' thing is how is it applicable
to software/hardware startups that are NOT developing products for mass
market.

For example, if someone in telecom industry creates a product that can only be
sold to operators. The time it takes to convert an engagement can be upwards
of 6 months. In such cases, what would be a good growth metric with which to
measure your progress?

Now, we can chose not to call such companies startups but that doesn't solve
the problem.

I am sure there are many knowledgeable people on this thread who can provide
some insights here. Any pointers to read will also help.

~~~
LukaAl
I've been a manager working for telco companies so I know a bit about it.
Usually the backlog is a good metric but it works from when you have already
sold the product. Usually to assess what happens before the sales team is
asked to assess the probability of closing the deal and discount the deal size
by that probability. An increase of the scope (and of the total value) or of
the probability to close the deal represents your metric. It is not very
scientific but could be made pretty accurate. E.g: you know the price of your
product and how much you are willing to give a discount in order to close the
deal. Also, even if negotiation, especially with big companies, could be
unpredictable, it is usually done in steps and each steps closer means an
higher chance of success. A possible sequence of steps is: \- RFI received. \-
RFI answered. \- Q&A and first meeting \- Follows Up \- RFP received \- RFP
answered \- First round of Q&A/meetings \- Short Listed \- Second round of
Q&A/meetings \- Product demo \- Final negotiation (usually price and
conditions) This is the process for RFI, there's a different one (and a little
bit more complex) for "cold calls" that probably is more applicable to
startups. Obviously some steps are optional and the names could changes but
this is how it works. Just a final note, though. If you are a startup in B2B
avoid, at the beginning at least, big corporation as client if you can. They
have a huge negotiation power, they will drive down your price like crazy and
being your biggest client they will use their force to ask you a lot of extra
work than the one negotiated. You will end up loosing a lot of money on the
deal and also you will have little ability to follows other deals. Yes, they
are useful to qualify for other clients and if you lock them in they could be
quite profitable, but unless you have deep pocket they will crash your
company.

~~~
oretoz
Thanks for the detailed answer. I suppose tracking stages of sales pipeline is
a good metric as you and several others have mentioned. Much better than being
completely in dark.

Also by 'backlog', I assume you meant product backlog (e.g. features
remaining) or something in the sales funnel?

While tracking the sales funnel is great to use as an indicator of progress,
it is not great as a decision-making heuristic internally (e.g. for product
features) as pg mentions in his essay 'Startup=Growth'. I suppose product
backlog is a good metric for such cases.

Tldr; use sales funnel to track business side and feature backlog internally.

Because of the faster feedback cycles, the web/mobile app world can use the
same metric to track internal and external progress.

~~~
LukaAl
What do you mean by backlog depends a lot on what you are selling: \- If it is
software, usually you sells it in stage or you have to deliver
customization/integration at a later stage: \- If it is SaaS is like before
but you have also the following months of license (they usually ask for a
minimum guaranteed lifetime for the SaaS); \- If it is hardware for internal
use usually it is installed in stage, so you could have your sales spread over
few months/years. \- If it is something they resell, you will have the
projection of sales. _ If it is a service, you have the service not yet
delivered as backlog. Obviously they can cancel when they want, but it is
still your backlog until you deliver it or it is cancelled.

------
rajensanghvi
A very very well delivered lecture. I love that YC is taking a stance against
buzzwords like growth hacking, and getting startups to look maniacally at
building a solid product that gets to product/market fit quickly. Seems pretty
consistent across lectures from PG, Peter Thiel and now Alex as well.

And much like the other lectures, here are 24 quotes from Alex's lecture worth
remembering: [https://medium.com/how-to-start-a-startup/24-quotes-from-
ale...](https://medium.com/how-to-start-a-startup/24-quotes-from-alex-schultz-
on-startup-growth-d3a846544937)

------
drinkzima
This is a great talk, but I can't help but think this is tailored to bigger
companies than YC-application stage start-ups. Alex spends lots of time
talking about the distinction between power users and marginal users, which is
incredibly valuable advice for the AirBnBs, Dropboxes, Facebooks, etc but a
different problem set than the 'normal' start-up.

For emerging product-market fit companies, your power users are your
lifeblood. Cultivation super-users early is the make or break for seed
companies. These super users are testers, referrals, product-definers,
everything. 50M+ user problems are just so limited.

In any case, great talk, but definitely targets growth marketers more than
start-up folks. Especially liked the idea of tying 'magic numbers' to logical
reasoning, not done enough in the growth world.

Edit: Much better in the tactical section going through marketing tactics.

~~~
dirtyaura
Great talk, but I agree that like a lot of startup advice out there, it is for
companies that have a product-market fit.

I've been thinking why the startup community has so few talks about product
design. We have a lot of advice about tech stacks, growth hacking, rising
funding, building a team, even some about customer research, but surprisingly
little about design.

Yet, product design is one of the key activities to achieve product market
fit: you can understand the problem, but if your product isn't easy enough to
use, PM fit is hard to achieve.

For example, you can find a deep analysis of a different SaaS models, but it
is surprisingly rare that someone does a deep analysis of e.g. Facebook's UI
and writes a blog post about it.

~~~
alexorig
you are spot on. I was directly focused on the point in Sam's list (idea,
product, team, execution) where you decide when to really focus on the
execution phase of scaling and then what to do when you hit it. I think it's
easy to over-focus on product design though, big companies are really bad at
this, they produce polished products with great user flows and so on but miss
the big win. Products like craigslist/eBay/Google weren't really great
designed products to start with, they just solved a real need. As such I think
Peter T's talk is really good on getting to product market fit.

------
headgasket
From my perspective what this series of very good lectures has triggered is a
common introspective conversation, here in the comments section, that far
outweighs the content of the lectures in value.

There is some very smart, intuitive and perceptive people hanging out here; I
wish there was an even better algorithm to make these stand out.

Noise is the curse of a community (such as HN, slashdot, reddit -- any social
circle come to think of it) as it get more popular; everyone has a different
view of what is hacking, startups and noise, as the community broadens the
focus dissolves.

This series has drawn out very good reflexion, IMHO.

~~~
k-mcgrady
I find HackerNews pretty good at highlighting the best content in non-flamewar
articles. What I mean is that if the article isn't anything to do with the big
tech companies we will get good discussions and people will up/downvote
rationally. Whenever Apple/Google/Facebook etc. are mentioned the fanbois come
out.

------
noeyedear
One of the best so far. From speech delivery to content.

------
diminish
Right after minute 32:00 Alex Schultz says "Facebook was viral via word of
mouth because of the awesome product". Is this really true? I think "Use your
email login and password and invite your contacts" namely contact import was
the viral technique. The payload and frequency was high and the CR was ok.

I remember Facebook growth days somewhat well. People logged in with their
emails and passwords were asked to provide their email provider passwords (to
be fair, somewhat deceivingly) to invite everyone in their addressbook to come
to Facebook. And I remember quite well _some people_ didn't event notice the
difference between whether they were asked for a Facebook password or their
email provider password, and didn't really understand what was asked by
inviting their friends.

~~~
sobriquet
FWIW Facebook tore through my college in a couple weeks way before they had
any type of inviting mechanisms. So PM fit was definitely there and virality
was all word of mouth.

~~~
diminish
Yes but right after school expansion, it was not only WOM.

~~~
alexorig
you guys are totally right (in the growth tactics I definitely tell you lots
of the non-organic stuff). That being said the idea here is "how to start a
startup" and so I was trying to focus on what got Facebook the first 50million
users not the next 1.3Billion and how we think about growth for products at
Facebook and how I think about it when advising companies. It's always cool to
see the different comment threads (one saying I'm too optimized for big
company growth, one saying I'm talking about too early, I am hoping that means
I pitched it about right :) )

------
petermackowiak
Timestamped notes: [https://timelined.com/how-to-start-a-
startup/lecture-6-how-t...](https://timelined.com/how-to-start-a-
startup/lecture-6-how-to-start-a-startup)

------
diltonm
Brilliant guy, speaker. I now get why something that's relatively easy for me
to make might actually be worth more than a few bucks per hour to a lot of
people.

------
jonathanehrlich
Amazing talks. Alex is the best in the world at this.

------
adotjdotr
This talk is quality. Honestly, the others seem to just be rehashed lectures
about pg's essays or YC related essays from other partners.

------
fidotron
This one is absolutely phenomenal. There is a clarity and precision of
thinking about things that too often are very vague and ambiguous.

------
coingig
being in the digital marketing / growth space I really enjoyed his talk and
consider it one of my favorites next to paul grahams.

------
redtrackker
absolutely amazing talk. This needs to be watched several times. My favorite
takeaway: Get your users to their 'magical' moment with your product as fast
as possible.

------
albakes
Awesome talk, just like all the other lectures. Appreciate YC putting this out
to the world for free.

------
bcoyle73
Did you notice the similarities between his talk and the 1999 piece on google
that was on HN [http://www.zdnet.com/news/can-googles-search-engine-find-
pro...](http://www.zdnet.com/news/can-googles-search-engine-find-
profits/102541)

------
alexorig
thanks everyone who said really nice things. Totally appreciate it :)

------
jxm262
Apologies for the randomly off topic, but what's the logo on his shirt?

~~~
DarMontou
[http://en.wikipedia.org/wiki/Palantir_Technologies](http://en.wikipedia.org/wiki/Palantir_Technologies)

~~~
rahij
That is wrong. It is internet.org's logo.

~~~
soneca
Peter Thiel was using Palantir

~~~
rahij
This person is Alex Schultz who works at Facebook.

~~~
soneca
I know. May I offer a possible explanation about why the GP made his mistake?

~~~
rahij
Oops, sorry about that, I did not understand the context in your comment :)

------
wahsd
OOph.... I can't listen to him longer than ten minutes. Someone please tell
him to stop talking that way. What is it??? the upturn at the end of every
other sentence.

~~~
deefour
It's called a High Rising Terminal.
[http://en.wikipedia.org/wiki/High_rising_terminal](http://en.wikipedia.org/wiki/High_rising_terminal)

~~~
testrun
Very common in Australia. Seems some Brits do it as well.

------
annasaru
Common sense rules, jargon stuff like 'growth hacking' is just that - jargon.

