
Advice for First Time Founders - craigcannon
https://blog.ycombinator.com/advice-for-first-time-founders/
======
danieltillett
The one thing I have learnt is it is never too early to fire. The only
exception is if you haven’t been clear with your expectations.

The one counterintuitive piece of advice is don’t overpay (I made this mistake
in version 1 of my company). Pay above the average the employee could earn
elsewhere, but not too much over.

You want to pay enough that no one leaves to get a pay rise, but not so much
that they can’t get a similar salary elsewhere. A smart unhappy employee that
feels they can’t leave can cause a lot of damage in ways that are hard to
identify and fix.

Edit. I think I was unclear about what I meant by average pay - it is not the
average for the job title, but the average the employee could earn in the
industry. These two numbers are close most of the time, but with high
performers they will be significantly different.

~~~
dman
I hope that your philosophy of compensation is well understood by your
employees. I would hate to be an employee who goes over and above work wise in
such a setup.

~~~
nostrademons
Pay in bonuses rather than salary, then. It's fairly common for top performers
in both finance and big-tech for performance bonuses to equal or surpass one's
base salary. That connects compensation to results, and makes it clear that
you're being paid _because_ you went over and above rather than because your
employer doesn't know what market rate is.

~~~
danieltillett
The problem with bonuses is people just concentrate on whatever earns the
bonus, not on what is best for the business. Bonuses work well when the
metrics are able to be measured accurately, but if not they can create a lot
of unproductive behaviour (like sucking up to the boss).

~~~
natecavanaugh
But isn't that a symptom of not being able to correctly identify what those
metrics should be?

I imagine that even actions that are somewhat indirectly associated with
benefitting the entire business should be enumerable in some way and
prioritized.

I'm not saying it's easy (how do you prioritize community engagement vs new
product development vs how those impact the business short and long term).

But at the end of the day, you'll know best how you value those for your org,
and how you want to rank them (along with the employee's actual execution of
said goal), but sorting by a percentage of income instead of fixed amounts is
probably the best course.

Of course, my armchair quarterbacking is a lot easier than actually doing it
:)

~~~
jacques_chester
I recommend _Measuring and Managing Performance in Organizations_ [0] to
anyone who decides to start tinkering with bonus schemes.

It's a short, sharp, quite readable explanation of why tying reward &
punishment to metrics of difficult-to-observe work tends to quickly become
destructive.

[0]
[http://www.dorsethouse.com/books/mmpo.html](http://www.dorsethouse.com/books/mmpo.html)

------
TheFullStack
A good way to gauge a founder's (first-time founder) likelihood of success is
to see how receptive they are to this list of advice. As a contract developer,
I find that many many founders consider themselves the exception to the points
listed in the original article which is a huge red flag. The biggest exception
is probably listening to customers - I find a lot of founders insist they have
to 'educate' customers which basically never works. I wrote about it at length
here: [https://www.turbo360.co/blog/startup-red-flags-
syzdan](https://www.turbo360.co/blog/startup-red-flags-syzdan)

~~~
spraak
Is the link supposed to be to a specific post? I just see a list of posts so
I'm not sure where to read more about what you mean to share.

~~~
mediascreen
On mobile you only see the menu, the responsive layout hides the actual
article.

------
rpedela
I want to echo the advice about interns from David Wind. I have hired a few
interns. While relatively cheap, which is attractive at an early stage, they
took up a lot of my time and most of their work couldn't be used in the end.
The latter was probably my fault, but the reality is that I didn't have the
time to properly train/mentor them. It is better to go without interns at
least in the early stages in my experience.

~~~
dyarosla
Interns are great for practicing how to manage, but I agree, as anything
beyond that, don’t expect much.

~~~
Lich
I think internships should be about both giving and taking. Not just simply
objects to practice on. If a startup doesn't have the time and money to invest
in interns no matter what the payoff is, they probably shouldn't as it is
wasting time on both sides.

------
shrumm
_Aesthetics really matter in the early stage. Spend time and /or money early
on nailing a cool logo and beautiful slide template. It really matters. Even
copying other beautiful stuff is fine. For getting our first 3/10/100 clients,
the fact that we looked and sounded totally pro meant a lot. We seemed like a
larger more innovative company because of it._

Great advice all round but the above really spoke to me. Most advice talks
about failing fast, getting to market asap etc. It's just as important to make
sure what you DO ship / put out there is polished.

------
ScottBurson
_Venture investors want to hear crazy ideas, not pragmatic plans. When I first
pitched investors, I was talking about how we would add customers slowly at
first, because that’s how enterprise SaaS works. Honesty is always a good
policy. But those pitches did not go well._

I'd love to hear investors' thoughts on this one. lpolovets, are you around?

~~~
lpolovets
Each investor is different, but I personally think the ideal pitch is a big
vision combined with a pragmatic plan for the first couple of years. If the
vision is not that big, then that won't excite most (Silicon Valley)
investors.

However, "big vision" is not the same as "crazy vision." A big vision could be
"we're going to replace an old incumbent in a $5b industry." A crazy vision
could be "we're going to build an amazing piece of technology that very few
people think is possible." The crazy vision only works if you have _a lot_ of
credibility. One of the only personal examples I have of backing a crazy
vision is with Rigetti Quantum Computing (a YC company). The founder, Chad
Rigetti, set out to build a quantum computer from the ground up. This is an
extremely ambitious goal, but when I spoke to a few Caltech quantum
physicists, they said that Chad was one of the 2-3 best people in the world
for building a QC. That was a very strong testimonial.

On the planning side, I prefer pragmatic plans and start rolling my eyes if
someone's plans sound completely unrealistic. I've seen so many pitch decks
with a predicted revenue ramp up that looks like: "$500k sales this year, $4m
next year, and $50m in year 3." I've been investing for five years and I've
never personally seen a company ramp up that quickly.

What I do want to see though is that if customer acquisition is
slow/deliberate, then there's a good reason for that.

Example of a good reason: "I'm working with 3 pilot customers for the next 6
months and focusing on learning and iteration and understanding exactly where
their biggest pain points are. I'm intentionally not focused on getting new
customers."

Example of a poor reason: "I'm not good at sales but don't want to hire anyone
because I think salespeople are overrated. I expect to get 3 pilot customers
by myself in the next 6 months, and I think that should be enough to make
investors happy."

On an unrelated note, I'm happy to answer any other questions folks have. My
background is that I was a sw engineer for 10 years, then moved to seed stage
investing about 5 years ago.

~~~
RHSman2
Hi lpolovets,

In the world of massive, multi 100 million exits where does a more 'humble'
single digit Million exit's it with you and investors?

~~~
lpolovets
TLDR: if you aim for 100x and achieve a 3x, that won't affect my fund much
financially but I'll be very happy for you and your team. But if you initially
aim for a 3x then I can't invest in the first place based on my portfolio
model.

For a good VC fund, a typical portfolio might look something like 30
investments -> 11 fail, 10 return 1x, 6 return 5x, 2 return 15x, and 1 returns
50x. That's a 4x return overall, but most of that return is concentrated in
the top 10% of companies. So the investing model only works if a VC fund keeps
swinging for the 50x return and occasionally succeeds.

The way I would frame exits from my perspective is that I need to keep
investing in companies with 50x potential so that hopefully at least one will
reach that level during a fund's lifecycle. But along that path, a lot of
companies will predictably exit for 5x or 1x or 0x. Those exits don't have a
huge impact on my fund's financial returns, but the companies are still run by
people who I like and believe in, and the ideas those people worked on are
ones that we (and their employees) believed in. So if a company exits for 0x
everyone is bummed on behalf of the founders and their team who went all-in.
But if the founders aimed at 50x and came out with 2x I am very happy for them
personally. I don't get upset at all that not every exit is a 50x because that
would be like always betting on 17 in roulette and being upset every time a
different number pops up. That's not how the statistical distribution works.
What would bum me out is if someone is clearly on track for a 10x or 50x
outcome, but then sells at 2x or 4x because that's good enough for them.

~~~
RHSman2
Thanks for the detailed reply. Really clear.

------
JohnHammersley
There is a lot of really good advice in there... perhaps almost too much in
the sense that it's easy to skip the ones you should pay attention to, and nod
along to the ones that reinforce your existing idea of what advice you need.
Putting myself in my wife's shoes for a moment, I'm pretty sure she'd say I
need to listen to the advice on getting more sleep (I'm typing this at 1am in
the UK). In fact, thinking about it, I am going to call it a night now!

I'm a first-time founder, and lucky enough that our company (Overleaf [1]) has
been going for five years now. If you haven't had enough of the advice for one
evening, you can read my take on it here:
[https://clutter.errantscience.com/2017/07/31/reflecting-
on-t...](https://clutter.errantscience.com/2017/07/31/reflecting-on-the-
founding-growth-and-maturing-of-overleaf/)

[1] [https://www.overleaf.com](https://www.overleaf.com)

~~~
spraak
My wife also added to the list the need to make love with her more often ;)

------
wellboy
> I thought I should be like Elon Musk and tried working 100h a week and
> sleeping under my desk. I learned that in fact I’m not Elon Musk and found
> myself on the brink of a burnout a couple times.

Not even Elon Musk is Elon Musk. He is doing a lot of things right, very few
entrepreneurs in the world are as good as him.

However, checking and writing emails at all times while playing with your kids
and doing things in parallel isn't smart.

As a great entepreneur you also need to be excellent in mindfulness, not being
that manifests in poor private life quality (women, kids, friends), not to
mention exercise. Musk mentioned himself that he doesn't know much about these
things.

I wonder what he came up with if became an expert in these things.

> Learning how to create FOMO is the most important negotiating dynamic you
> can learn. FOMO = fear of missing out.

Needs to be added that you need traction or big social proof to create fomo,
otherwise you'll see founders running around trying to create fomo with a few
hundred users, no term sheets, no revenue.

~~~
goldenchrome
> As a great entepreneur you also need to be excellent in mindfulness, not
> being that manifests in poor private life quality (women, kids, friends)

Women can be great entrepreneurs as well.

~~~
lozenge
Women can also be great friends.

------
sillysaurus3
_A. The importance of good communication with potential and existing
investors. Done effectively it significantly increases your chances of keeping
the company funded, and therefore of success. Done terribly it makes you
borderline un-fundable.

I learned it through being lashed by PG.

It helped by creating an open dialogue between our investors and us, and drove
our focus and prioritization on the right things at the right time._

What does good communication look like? How about bad communication?

~~~
fredsters_s
(I wrote that answer)

A few principles that may be useful:

\- have a regular cadence of communicating, usually monthly, usually he last
day of the month

\- have a standard format and stick to it

\- numbers are better than words

\- preview the updates where you uncover scary stuff over the phone / in
person before sending an update

\- always include an ask

~~~
anitil
What do you mean by 'always include an ask'? Is that to keep them engaged by
having some information out of them?

~~~
mhluongo
You should always think about how your investors can help you, and ask them
for it.

It's about engagement, sure. But it's also about realizing that you need to
better leverage your network and supporters. Investors can't help you if they
don't know what you need.

------
postit
My only advice to anyone founding a company

Learn from the mistakes of others. Your startup won't live long enough to make
them all.

------
pwaai
While reading the article on the back of my mind I'm thinking that 99% of
founders that read & follow those advices will still fail. But why? Why is the
failure rate for startups so high?

and why is the failure rate for starting a bootstrapped revenue generating
business much lower?

~~~
jacquesm
> Why is the failure rate for startups so high?

\- product market fit

\- timing

\- founder conflicts

\- better funded competition

\- bad management

~~~
sah2ed
You forgot a very important factor many people fail to account for: a major
inflection point or what Bill Gates characterizes as "eventually, the market
will turn left".

------
staunch
Fire quickly but take responsibility!

Don't spend months torturing an employee that you know is very unlikely to
work out. Fire them quickly and compensate them for the situation you find
yourselves in.

New hires should be be given 3 months of severance. Old hires should be given
6-18 months, depending on how long they've worked at the company.

Take all that time, energy, and money you were going to spend on the
Performance Improvement Plan and hand it to the employee on their way out.
They will thank you for it.

It's not just a gentler and kinder way to behave, it's also saves money and
improves productivity.

~~~
ldd
How is that supposed to help team morale?

Perhaps it's just me talking, but I _like_ my work. I _like_ my co-workers. I
have no kids nor debt, and I would be pretty sad working at a place that
_says_ that they want to fire quickly.

The hiring process sucks, and employees are _human beings_. Perhaps you mean
to say that you should be fully transparent when someone underperforms? If
that's the case, I would agree with you. No need to beat around the bushes,
just be honest.

~~~
thwarted
Not firing quickly means you fire slow. Which means the person who should be
let go continues to stick around and potentially cause problems for the rest
of the people. This can be just as sad, if not more so, for the other
employees who are impacted by what the person who should be fired continues to
do.

Firing quickly doesn't mean not to offer regular feedback, or not letting
people improve, or not setting expectations well, or not being transparent. It
means that it's better to rip the bandaid off instead of picking at it weeks
or month ignoring the employee with the hope that things will turn around.

~~~
ldd
Oh well, in that case it kinds of makes sense, as long as you are also
transparent during the hiring process that this is the state of affairs in
your company.

I guess I jumped to conclusions too quickly, but I can see how firing fast
could _maybe_ work paired with regular feedback to avoid surprises. I don't
think it could work for everyone (particularly parents with young children),
but under certain circumstances what you say probably makes sense.

~~~
thwarted
If you are concerned about the impact of firing an employee with other
financial responsibilities (not sure why specifically having young children
factors into it anymore than any other responsibility), that is solved with a
severance package, which is often still cheaper than keeping an
underperforming or toxic employee around.

------
charris0
I liked the advice by Garros Li – Edusight (IK12)

> 1\. If you plan on having cofounders, you need to determine how decisions
> will be made before starting a company together. Titles and vague
> “roles/responsibilities” won’t be enough. Play out scenarios to hash out
> decisions and set the right expectations, ask tough questions, and don’t let
> ego get in the way.

It got me thinking of something like the 'Co-founder compatibility test'

I wonder if anyone already has a good set of example scenarios and questions
to reveal this compatibility/incompatibility between people in decision making
/ expectations / virtues. Many questions could come from challenging moments
with co-founders and teammates in one's own experience. I can think of a few
already.

If we compiled a list of these types of questions and scenarios, could they be
used as a good test of compatibility, useful to at least some initial degree
to assess potential partnerships in real life and over the internet.

------
dmitrygr
> [...] we thought paying more to get experienced people wasn’t worth it.

> we thought because we knew how to code that we didn’t need senior

> engineers [...] Shouldn’t we just be able to teach ourselves?

> The answer was maybe, but with a lot of wasted time along the way.

A lot of startups make this mistake from what I can see

------
ganeshkrishnan
>A cofounder who compliments you was a saving grace for me.

I am sure he meant "complements you"

~~~
zodiac
It's also nice when the compliment you :)

~~~
ganeshkrishnan
I am sure you meant when "they" compliment you ;)

------
milansuk
Many founders talking about hiring or firing employees. I'm not from US, so I
wanna ask How long trial period do startups offer? Do they pay severance
package during/after trial and how much?

~~~
dmitrygr
It is very uncommon in US to have trial periods. Alternate interpretation:
since in most states employment is at-will and the company can fire you
anytime for any or no reason, basically your entire employment can be
considered a trial period.

------
simonswords82
From the article: "The biggest responsibility of a founder is making the right
decisions."

No shit?

------
tjholowaychuk
Wonder when we'll stop hyping the stupid startup culture

~~~
MsMowz
That will never happen on hacker news, certainly.

------
bhhaskin
Thanks! Some great advice in there. Bookface, very clever ;)

