
Lecture 2: How to Start a Startup - gatsby
http://startupclass.samaltman.com/courses/lec02/
======
malthaus
as someone geographically & logically outside of the silicon valley bubble,
working in the 'real economy' and a bit older than the y combinator target
group it hurts me to see those kind of lectures / advice on startups.

from my perspective it all seems like one big circle jerk, especially
considering the hive-mind mentality here on hackernews where working 80hours+
/ week for some fun app startup seems like good guidance for young people and
something to strive for.

the goal of a startup is to make money, not raising money. the SV scene seems
to be concentrating on the latter since its influenced & guided completely by
venture capitalists and their interests instead of market opportunities.

to be provocative: just throw thousands of teenagers at random things, give
them some pocket money and hope something sticks. motivate them by giving them
some grand illusion of being an independent entrepreuner. burnout is just
something that comes with the game. give them lectures to clone them into
perfect worker bees for VCs as traditional education would clone them into
perfect big corp employees.

my advice to young people with drive is: go travel, see the world first. solve
real problems. starting your typical SV startup is mostly an illusion and a
bad proposition for you. young age is certainly good for coming up with
disrupting ideas, but execution profits heavily from life experience - think
of survivorship bias and don't be fooled by the few success stories.

~~~
JonoBB
> AirBnB spent 5 months hiring before they hired a person. Brian Chesky:
> "Would you take the job if you had a medical diagnosis that says you only
> have a year left to live?" \- culture of extremely dedicated people

I couldn't help but feel an extreme level of utter disgust at this. Somehow
portraying that its heroic to work for a start up for the last 12 months of
your life.

Really? Utterly fucking ridiculous.

~~~
Iftheshoefits
It's not explicitly stated anywhere, but it hardly takes "reading between the
lines" to see that the kind of "business" model being pushed is one that is
_exploitative_ of youth in some cases, and of the culture that has grown up
around software engineering and computer programming in general.

A lot of the themes in this lecture related to motivation and employee
qualities are what I'd lump in the category of "dog whistles." They're meant
to send a certain signal to people. If that's not what they are, then somebody
has done a thoroughly unimpressive job of communicating various ideas.

~~~
rdlecler1
Not to make this just a conversation about money, but if working 100 hours a
week as the first hire at Airbnb (even for below market salary) is
exploitation, then please exploit me! If you can identify a growth engine, and
not have to take on the founder neonatal pre-funding risk, then that's a huge
opportunity, not exploitation. You're probably not going to make that kind of
money working at Google.

~~~
S4M
> Not to make this just a conversation about money, but if working 100 hours a
> week as the first hire at Airbnb (even for below market salary) is
> exploitation, then please exploit me!

OK. Imagine I come to you with this offer: "Hey, relecler, I am starting this
company that does X. Would you like to be its first employee? You'll be
expected to work 100 hours a week for a salary below market rate, but you will
have some equities. If we get big you will become millionaire, but you will
lose your job if we run out of money." Would you take it?

Don't forget that for one airbnb that succeeds, you have hundreds startups
that fail and whose employee have worked a lot for nothing.

~~~
rdlecler1
Maybe I'm doomed to repeat mistakes until I've learned my lesson, but I made a
similar pact when I did my PhD (Absent any promise of being a millionaire), as
I did for the next company I worked for. And now at my own startup that is
certainly the case.

~~~
S4M
Well, if you think what the startup join join does is really awesome and
you're passionate about it, by all mean go for it, passion is something I do
respect. And same for your PhD, I always respect people who have one because
they were passionate about something enough to do research instead of going
for a well paid job (I don't have a PhD but I seriously considered doing one
in maths when I finished my Msc).

------
timr
The advice about burnout isn't so helpful.

Yes, perseverance is important (particularly for undergrads, who have probably
never worked on a project with a time horizon longer than a semester), but you
can't fix burnout just by lowering your head and trudging forward like a
packhorse.

I don't know if there's a single, quick fix for burnout, but taking a vacation
is definitely a good idea -- even if it's only a few days. And if you can't
take your mind off of what you're doing for a few days, something else is
wrong.

Usually when people say "I can't take a break" they're engaging in
catastrophic thinking. If for some reason they _really can 't_ take a break,
it's time to take a good, hard look at how you're doing things, and see what
it is that's causing that situation. In my experience, the root to your
burnout will often lie in an honest exploration of that question, alone.

It's incredibly helpful to get an outside perspective on your situation when
you feel this way -- this is what counseling is for. If you can't afford that,
talk honestly with a friend you can trust -- a _friend who has no personal
interest in the outcome_. That's critical. If you ask your co-founder what you
should do, you have to realize that s/he'll be biased.

~~~
DenisM
Marissa Mayer on burnout:

"Burnout is about resentment," she said. "It's about knowing what matters to
you so much that if you don't get it that you're resentful."

[http://www.cnbc.com/id/49060108#](http://www.cnbc.com/id/49060108#).

~~~
dlss
There's a literature on burnout. Burnout is the qualitative word for stress
induced sterility -- ie "Things are so bad that having a child right now would
be disastrous"

(ie people reporting burnout are usually temporarily sterile, people who are
"stressed but happy" are usually not sterile)

This is why burnout correlates so strongly with being overworked. Your body is
rightly concluding it can't reproduce in your current situation, and gives you
a strong prod toward fixing the problem.

Apparently Marissa's "resentful meter" correlates strongly with her body's "I
can't reproduce in this situation meter". I don't think this is true for most
people.

~~~
DarkIye
That's a very interesting theory, but quick googling doesn't bring up anything
relating to this correlation you suggest. Do you have any evidence to back up
your claim?

~~~
dlss
[http://scholar.google.com/scholar?q=burnout+infertility](http://scholar.google.com/scholar?q=burnout+infertility)
and
[http://scholar.google.com/scholar?q=stress+infertility](http://scholar.google.com/scholar?q=stress+infertility)

Both have very good data in the top 10 results. If you're looking for a pop
sci writeup, I'm not sure if there's a good source.

------
reduce
Burnout:

Whatever you do, constantly be looking for ways to actively mitigate it. Just
working less is NOT the only way to prevent it. Everyone has had times when
they've worked long hours on something, and still felt great. Think about what
was special in those situations. Ideas:

1) Play a sport.

2) Party hard, roughly 1 night per week, maybe Friday. This works well for
many extremely hard working professionals in NYC. Not sure how well it would
work in SV...

3) When coding, try to break up tasks into self-contained chunks that you can
start and finish within one day. Accomplishing a new tangible goal each day
can have a great mental effect. Catching up on big half-finished tasks from
the previous day can be stressful and mentally draining.

4) Be around people you love being around. You'll feel less stressed about
escaping the office if the people you're looking forward to being around are
inside instead of outside the office.

5) Notice how it's so hard to focus late into the evening at the office, but
once you're home you feel awake again and can work? For the earliest stage
startup, consider making your work environment more like a home, or literally
work out of your home with your cofounder. Your girlfriend/boyfriend may look
down at you for doing this, get used to it. Partners hate startups.

6) Go for walks twice per day, preferably outdoors, in a place where you're
surrounded by lots of people - or alone in nature, whatever you feel like
you're missing.

7) Kick out whining people, immediately.

~~~
Ologn
> 2) Party hard, roughly 1 night per week, maybe Friday. This works well for
> many extremely hard working professionals in NYC. Not sure how well it would
> work in SV...

Probably one of the best comments I've seen on HN on some of the benefits of
NYC over SV.

Back in 1999 my company needed servers set up at a colo in Sunnyvale, so I
flew out to the Bay Area. Saturday evening I head over to Fry's Electronics,
and unexpectedly run into a friend of mine who had moved out to the Bay Area.
We agree to meet later for dinner, then he says let's head back to his office.

We walk in to his office at 9 PM and Saturday. The entire office is there,
sitting at their desks. 90% male, if not more. This was their life.

The thing though was - this was not Facebook, this was not Google. I can see
doing that amount of work in some years in order to get a payoff. This was a
company which it was obvious to me at the time, was going nowhere. It raised
about $60 million from Kleiner Perkins in 2000, and has hobbled along since
then, with another $30 million of Kleiner money in subsequent years. Last year
the New York Times said the company and business "remains something of a work
in progress", was "lagging many earlier expectations" and was still a small
business. I could easily foresee this at the time.

It's one of the problems. People at Facebook, Google etc. worked all hours in
the early years, so every company feels they have to emulate that. But
Google's don't come around every day - I was sending e-mail's to Google asking
them to employ me back when they were still hosted at Stanford. It's obvious
that many people would trade a few years of very hard work for the spigot of
money early Facebook and Google employees got. But between such black swans,
you want to have the ability to make a decent living working 40 hours a week,
and live in a community where you can have a life beyond your tech job.

It's not working hard versus having a life, it's not wanting to work 60+ hours
a week when you're just spinning wheels. I've worked at companies where people
started staying until 6, 7, 8 PM for no real reason. Then I learn there is
trouble at home with their marriage, they often get a divorce. They stay at
work because they don't want to go home and spend time with their spouse. It's
what bothers me about SV, work for works sake, everything beyond focused on
tech. If you catch a ride on a black swan it's a great thing, but if you
don't, there's not much good about it.

~~~
jlaurend
Those years don't make sense. Do you mean you were there in 2009 and they
raised in 2000?

It's hard to know when you're at a company that will make it big. Ok, so you
can probably tell if you're at a FB or Google and you're on your way up.
Likewise, you should be able to tell when you're at a really BAD company. Most
companies are somewhere in between, though.

That said, I'm not disagreeing with you. People shouldn't be working that hard
unless there's a reason to. The goal should be to get to a point where the
path to success is reasonable clear and makes those long nights useful.
Otherwise it's better to fail fast (much easier said than done).

------
lowglow
I'm sorry, everyone in this god damn thread is stupid if you think there is a
recipe for this shit. This is all part of the propaganda machine to make YC
relevant.

This is just a warning. Down-vote me to heaven.

~~~
robg
YC has exactly shown there is a recipe. And that goes back before they were
popular - the very first class in fact.

After all this time of YC doing things, why don't you have have actual
criticism, instead of ad hominem. So why troll?

~~~
bdcravens
Read my response: I think the point is that a recipe implies perfect
ingredients + perfect preparation = predictable results, which is far from
true. You can follow the recipe to the letter and still fail. You can't judge
a recipe by successes, but by its repeatability (I don't care about someone
else's feast when I'm trying to make MY meal based on the recipe they
followed)

~~~
dlss
Lecture one starts with Sam saying ``idea * execution * luck == results and
the luck term is a random number between 0 and 10,000``

Deterministic recipes don't exist anywhere outside the hard sciences (and even
there it's not _really_ deterministic -- chemical synthesis and experimental
physics have an art to them)

Stochastic recipes on the other hand _do_ exist. I think YC's recipe is quite
good.

Thiel's is cooler though :p

------
7Figures2Commas
In response to a question about identifying fast-growing markets:

"The good news about this is that this is one of the big advantages students
have. You should just trust your instincts on this. Older people have to
basically guess about the technologies...that young people are using. Because
young people get older and become the dominant market. But you can just watch
what you're doing and what your friends are doing and you will almost
certainly have better instincts on fast-growing markets than anybody older
than you."

Vivek Wadhwa conducted a fairly large study[1] on successful technology
company founders and discovered that the median age when they started their
companies was close to 40. This seems to be in direct conflict with Altman's
statements, so I wonder what statistics he has to back them up.

Also, for all the talk about fast-growing markets and building huge companies,
it's somewhat useful to look at who is actually making money and how much. In
2009, just 3% of all taxpayers who earned $1 million or more were under the
age of 35 and of those reporting more than $10 million in adjusted gross
income, only 409 were under 35[2]. Since a significant percentage of million
dollar-plus earners are self-employed business owners, a lot of old farts
running businesses are doing something right even if, according to Sam Altman,
they have a harder time spotting fast-growing markets.

[1] [http://www.washingtonpost.com/national/on-innovations/the-
ca...](http://www.washingtonpost.com/national/on-innovations/the-case-for-old-
entrepreneurs/2011/12/02/gIQAulJ3KO_story.html)

[2] [http://taxfoundation.org/article/who-are-americas-
millionair...](http://taxfoundation.org/article/who-are-americas-millionaires)

~~~
sama
actually i think younger founders have a lot more disadvantages, so it's very
important to be aware of the advantages they do have. spotting market trends,
stamina, and a relatively distraction-free life are at the top of the list.

~~~
7Figures2Commas
Market trends? The meaningful market trends that offer entrepreneurs
realistic, _actionable_ opportunities are typically industry-specific. It's
not "Hey, everybody is sexting so let's build an iPhone app to share pictures
that self-delete." It's more like, "Hey, consumers are increasingly showing an
interest in unbundling financial services, so there may be an opportunity to
do _x_ better than the large banks that have historically dominated the
market." How do you spot those kind of market trends if you have never worked
in an industry? You typically don't.

Stamina? What is that supposed to mean? That 35 year-old entrepreneurs are in
bed by 9:00 pm?

Distraction-free life? You know what's distracting? Not knowing where the
money to pay your rent and buy groceries is going to come from. Starting a
business when you have stable finances and the moral support of a spouse is
very helpful. Interestingly, many of the things that Silicon Valley pop
culture tells us are distractions (like family, homeownership, etc.) are
ironically correlated with wealth. For instance, well over 90% of millionaire
households in the US are made up of married couples.

~~~
mdorazio
I think you're getting downvoted for a few reasons.

1) The kind of startup you're espousing is generally not easy to implement and
test, and also very hard to rapidly grow. As a result, it fails the typical
"good startup idea" test that SV applies. It's also at odds with this lecture
series so far.

2) "Stamina" in this case means being able to throw yourself into something
and work stupid hours fueled by ramen and passion until it's built. It _tends_
to be a lot easier to do this when you're younger than it is later in life.
The flip-side is that the "35 year-old entrepreneurs" you refer to are often
able to work more steadily toward goals, but again this isn't what SV looks
for in hyper-growth startups eyeing a fast exit.

3) "Distraction-free" refers to being able to focus solely on your startup
without having to split time with a family, or worry about making mortgage
payments, or most importantly, being afraid of failing. When you're young it's
easy to take a hit and start over. When you're older and have large
responsibilities it's a lot more difficult.

Also to your earlier point, if your target market is HNIs, you're probably not
in the startup business because that's a very small number of people to sell
to. Please note that I don't disagree with you and think this is a valuable
add to the discussion, but it's important to distinguish between the types of
small businesses you're referring to and the types of startups that Ycom
wants.

~~~
7Figures2Commas
> The kind of startup you're espousing is generally not easy to implement and
> test, and also very hard to rapidly grow.

How is talking to potential customers before you invest time implementing and
worrying about growth "not easy"? It's the definition of easy.

> "Stamina" in this case means being able to throw yourself into something and
> work stupid hours fueled by ramen and passion until it's built. It tends to
> be a lot easier to do this when you're younger than it is later in life. The
> flip-side is that the "35 year-old entrepreneurs" you refer to are often
> able to work more steadily toward goals, but again this isn't what SV looks
> for in hyper-growth startups eyeing a fast exit.

My post above refers to a study that looked at hundreds of founders of
_successful_ tech companies. If you believe that eating ramen and working
"stupid" hours improves one's odds of success, and that 20-somethings are most
capable of living this lifestyle, why did the study find twice as many
successful founders older than the age of 50 as it found successful founders
younger than 25?

> "Distraction-free" refers to being able to focus solely on your startup
> without having to split time with a family, or worry about making mortgage
> payments, or most importantly, being afraid of failing.

Again, if you look at the study I referred to, and look at the demographics of
the millions of millionaires in this country who are business owners, it
becomes really difficult to keep repeating the argument that older
entrepreneurs have too many distractions. This notion is simply not supported
by the numbers.

> ...but it's important to distinguish between the types of small businesses
> you're referring to and the types of startups that Ycom wants.

 _How_ you go about building your business can determine _what_ happens to
your business. There are a good number of YCombinator companies that will
never be billion-dollar companies but could have been highly-profitable small
businesses if their founders didn't buy into the high-growth hype, apparently
not recognizing that YCombinator's portfolio has a power law distribution not
dissimilar to just about any venture fund.

As for "small business", it gets treated like a four letter word around here
but ironically a lot of the people who have been convinced that owning a
"small business" is the second worst thing in the world have never seen a bank
account balance with more than a single comma in it.

------
graycat
One short remark: There was a lot of good in that lecture. But generally the
theme is, that when have 2-3 founders and are growing to 10-15 people, the
situation is, in just one word, _desperate_.

Let's consider that: Yes, the subject is a startup that is intended to grow to
be worth $1+ billion. The field is information technology.

Okay, but at 2-3 people up to 15, whatever the potential is, what is there is,
in two words, still a _small business_.

Now, what can we say about starting and running a small business?

Well, the US, coast to coast, border to border, in cross roads and villages up
to the largest cities, is just awash in small businesses. We know about many
of them quite well, e.g., grass mowing (the guys that mow grass in my
neighborhood arrive with about $70,000 in capital equipment and 3-4 people),
pizza shops, Chinese carry out shops, red/white checkered table cloth, red
sauce Italian-American restaurants, auto body shops, auto repair shops, barber
shops, kitchen remodeling, residential construction general contractors,
suburban paving, masonry, a dental practice, a family medical practice, an
independent insurance company, a SOHO law firm, a CPA accounting firm, and,
actually, many more that are B2B and less well known, e.g., wholesale
plumbing, manufacturer's representative, electrical engineering, and more
generally a huge range of _big truck /little truck_ businesses.

With this background, I come to the main

Point: Now these businesses are often sole proprietorships, file taxes as a
Subchapter S, are not Delaware C corporations, do not have a board of
directors, have no one with an MBA, and have never watched a lecture such as
Altman's. And, commonly they stay in business. And mostly there is usually no
air of being _desperate_.

E.g., for one point of difference with Altman's lecture, one bad hire does not
kill the company. And hiring a good person does not take nearly as long as a
year.

Okay, once a company has done well and grown to, say, 10-15 people, fine; if
then the company has promise of growing to $1+ billion and many employees,
terrific; then let the growth begin. But first step, make it through the stage
of a _small business_ , and that should not necessarily be wildly different
from running, say, a pizza shop.

So, since I'm eager to learn, where is this little point wrong?

~~~
prostoalex
> Okay, but at 2-3 people up to 15, whatever the potential is, what is there
> is, in two words, still a small business.

Couple problems:

1) The burn rate of a software business with 15 employees is likely to be at
$1.5 mil a year. Engineers cost more than line cooks or lawn mowers. Can you
think of a software company that reached $1.5 mil in year two?

2) While running this small business, in the Valley you're competing with
rocketships, which are Square and Uber at the moment. A rational engineer
considering your company versus one of the rocketships is going to sense
there's more upside for him at a rocketship company than a company with small
business vision.

Don't get me wrong, there's a bunch of software-based small businesses
(consulting shops, hosting companies, Web design firms) that are successful,
but employees know that very rarely anybody outside the founding team will hit
it big money-wise.

~~~
graycat
My main point is:

Just why is an information technology startup with explosive growth potential,
early on with just a few employees, as described so vividly in Altman's
lecture, usually so different, say, in level of _desperation,_ from most of
millions of US small businesses? That is, I'm not getting the solid reason for
so much _desperation_.

On your 1) and a startup being a small business:

As a side point, for 1) your $100 K per employee per year might even be too
small. I'd guess that in SV Google spends $300+ K per year per employee.

In your 1), you are assuming a lot of _burn rate_. Yes, I know; I know:
Twitter long ran with rapid growth in usage, i.e., _traction_ , with low or no
revenue but recently, from some VC Fred Wilson comments, worked on revenue and
is doing well with it. Maybe SnapChat and Instagram burned a lot of cash with
low or no revenue. And maybe Square, Uber, and some others have high burn
rates. And recently VCs Bill Gurley and Fred Wilson, and, now, A16Z, are
complaining about high burn rates. I know. Still, from nearly all I've seen,
coast to coast, "pre-revenue" usually means $0.00 equity funding.

So, connecting with my point above, maybe the offices of Square and Uber have
some high level of _desperation_ as described in Altman's lecture, but from
all I can see for information technology startups with explosive growth
potential and just a few employees, that such a high level of _desperation,_
so different from nearly all of millions of US small businesses, is necessary
or usual seems difficult to believe. Instead, with just a few employees, in
nearly all respects the level of desperation should be just ordinary for small
businesses.

Then there is the issue of _burn rate_ and, thus, usually, VC funding:

from what I've seen, for a startup writing software and pre-revenue, about the
best they can get from a VC is either "it appears that you are still in heavy
development" (i.e., not a candidate for equity funding) or "when you go live
with your service we'd like to 'play with it'" meaning that nothing prior to
that is worth equity funding.

That is, VCs want to see at least a product ready for usage. That is, they
don't want to pay for software development. That is, we get reminded of the
Mother Goose story of _The Little Red Hen_ who got no help or interest from
anyone until she had hot, fragrant loaves of bread fresh from the oven and
lines of eager customers out front.

So, what is a founder of an information technology startup to do about equity
funding? A big point here, at times also mentioned by VCs, is that now the
expenses, at least the capital expenses, for an information technology startup
can be so low that really, by the time VCs are interested, the startup should
be within just some weeks of getting users, ads, revenue, earnings, and enough
in earnings to have a nicely successful small business with plenty of cash for
organic growth and low to no need for equity funding. So, from all I can see,
usually by the time VCs are willing to meet, there's a profitable small
business or nearly so.

E.g., Menlo Ventures told me that they want to see at least 100,000 _uniques_
per month. Okay, for my Web site that would be, say, for each _unique_
visitor, an average of, say, 8 visits a month with an average of 8 Web pages
seen per visit, with an average of 5 ads per page. So, if take the Mary Meeker
KPCB estimate of $2 revenue for each 1000 ads displayed, then get monthly
revenue of

100,000 * 8 * 8 * 5 * 2 / ( 1000 ) = 64,000

dollars for my solo startup. Moreover they want that _traction_ growing
quickly. At that time I'm looking for equity funding? I doubt it! Even if the
$64,000 is too high by a factor of 10, still I'm not looking for equity
funding; instead I'm profitable with plenty of cash for organic growth.

So, for equity funding, here is my

Point: For information technology startups of just a few people, nearly
always, by the time the VCs are ready to write a first check, the company
doesn't much need it. Then what's left for VC funding is _expansion stage_ or,
maybe, some funding in pursuit of the company being acquired. Or, again, I'm
not seeing as very common Altman's description of VC funded startups with
desperation.

For your

> Can you think of a software company that reached $1.5 mil in year two?

I'm not sure what Microsoft, Plenty of Fish, etc. did already in year two.
Still I'm lost on your point here: You seem to have an implicit assumption
that an information technology startup with explosive growth potential must go
at least two years burning a lot of cash instead of making at least a little
in earnings, and I'm not seeing a very good argument for that.

For 2), maybe the company is not in Silicon Valley? Even if the company has
only a few employees and level of desperation like most small businesses, it
might still have explosive growth potential and a corresponding "vision".

You seem to be suggesting that there is high competition for good employees,
say, in developing software. I very much do not see that at all: From all I
can see, the US is just awash in highly motivated, highly talented, Bachelor's
degree and higher graduates in STEM fields with some to a lot of software
development experience who can send 1000 resume copies and get back only
silence or at best some absurd questions about how many golf balls will fit in
a school bus, a question "What is your favorite programming language?" with,
apparently, only one acceptable answer, C++, or a requirement that the
candidate have several years of experience with just the combination of
software tools and infrastructure the company is using that day. Nonsense.
I've seen very highly qualified and otherwise just excellent people in
computer science and practical software go for years looking for jobs and be
essentially totally unemployable.

E.g., there is the parody, too close to being true, "If Carpenters Were Hired
Like Programmers" at

[http://www.jasonbock.net/jb/News/Item/7c334037d1a9437d9fa650...](http://www.jasonbock.net/jb/News/Item/7c334037d1a9437d9fa6506e2f35eaac)

Indeed, some famous companies have a personnel policy for technical employees
of promotion into management by age 35 or fired. The US is awash in people
with 5-20 years of software development experience essentially totally
unemployable in software. For such a person, they would have been better off,
literally, at age 20 starting a lawn mowing service so that by age 35 they
would have a nice business with, say, 8 crews, be immune from being fired,
able to continue the business as long as they were physically able, and also
able to involve their family members in the business -- make it a family
business. Software developers do not have good careers, and the US is awash in
highly qualified people at relatively low wages, e.g., not enough to buy a
house and support a family.

The US is just awash with good universities with good STEM and computer
science programs with highly talented, well educated, highly motivated
students ready, willing, able, and eager to get going in a career in
information technology and with no significant offers for months or years.

For my startup, I have no question that I can hire and, with minimal training,
have people writing the necessary Visual Basic .NET code using the .NET
Framework, ASP.NET, SQL Server, etc. E.g., they can write what is needed for
customer service. They can also learn, especially with some good consulting,
how to plug together servers and get them into standard racks, connect the
cables, automate the software installation and configuration, set up and
operate the server and network monitoring, management, and administration,
develop reports on users, usage, errors, loads, etc. For the tricky, unique,
difficult to duplicate or equal crucial core code, that's mine and already in
good shape.

~~~
prostoalex
> technology startups with explosive growth potential and just a few
> employees, that such a high level of desperation, so different from nearly
> all of millions of US small businesses, is necessary or usual seems
> difficult to believe

I see what you're saying, thanks for clarifying.

I think majority of small businesses are formed to serve pent-up demand, e.g.
somebody opens up a pizza restaurant, just because there's no pizza joint in
that specific neighborhood, but it's high on people with disposable income
(and many franchise companies will actually run market analysis for you,
should you decide to go that small business route). A lawn-mowing business
might also start with a few friend-and-neighbor customers, and make some back
of the envelope estimates on the demand and customer base.

With technology startups not only you have to build the product outright (your
Mother Goose example), but then you have to acquire the customer base, so all
along you're quite unsure that is achievable. As @sama mentions, you could
spend a few years of your life building something, and then discovering the
market doesn't need it. The realization of that weighs on founder, as by the
time you've hired a few people (@moskov's quote from lecture 1), you also feel
responsible for their time and opportunity cost.

It's hard to debate the point on over-supply/under-supply of software
engineers without concrete data, but I think as far as your point on them
being experienced in a completely different stack, a lot of startups would
tend to follow the Python Paradox -
[http://www.paulgraham.com/pypar.html](http://www.paulgraham.com/pypar.html)
\- " if a company chooses to write its software in a comparatively esoteric
language, they'll be able to hire better programmers, because they'll attract
only those who cared enough to learn it. And for programmers the paradox is
even more pronounced: the language to learn, if you want to get a good job, is
a language that people don't learn merely to get a job".

Your point on being able to assemble a team quicker/cheaper/more efficiently
on relying on .NET stack is also valid nevertheless. I was just trying to
guess _why_ a certain company would choose a specific language and a specific
set of tools, and require proficiency in it.

~~~
graycat
Yes, recently I was asked about Python. So, the original version was based on
C and is sometimes called C Python. The usual version is interpretive and,
thus, ballpark 10 times slower than a compiled language.

And the person asking wanted me to have experience using Python in a
"production" environment. That's like asking if I've used a Toyota to haul hot
asphalt, bricks, sand, and gravel. I wouldn't want to face a factor of 10
times slower in speed in a production environment.

Next I wondered, K&R C has no threading. Yes, Posix does, but, when building
on very standard, portable C, there is no standard threading infrastructure.
So, I looked: Right, from what I saw, on a fast look, C Python has problems
with threading. No surprise. So, on a processor that can run 8, 12, 16 threads
or a server with two such processors, I want to use a language that has no
threading, in production? Bummer.

Otherwise as I looked at Python a little, I saw a bottle of a blend of mostly
very old wine. I saw next to nothing new.

Then I found that much of the interest in Python is some _packages_ following
some _package_ functionality (back at least to Ada). Some of the packages are
good for getting and parsing Web pages as an alternative to _screen scraping_
\-- good to know in case I need to do a lot of screen scraping.

So, maybe some of the packages are nice.

So, Python looks like a promising one-shot project or scripting language.
Okay. However, I'm writing production code.

Then I saw Iron Python, on Windows, apparently with good access to the .NET
Framework. Okay. But Windows already has a scripting language with good access
to the Windows APIs, their Power Shell. The scripting language I've been using
is Mike Cowlishaw's Rexx. I've gotten a lot of good from it, but, really, I
should convert over to something closer to Windows, likely Power Shell. Here I
agree with Altman -- focus and don't get distracted. Well, for now, Rexx is
just fine, and converting to Power Shell would be a distraction. Same for Iron
Python and C Python.

For evaluating programmers by their eagerness to learn Python, sorry PG. I've
learned a lot of languages. Net, net, I see that more than the language, or
whatever flavor of syntactic sugar is there, is important. On Windows now,
what's really important is their work for _managed code_ , memory management
(with automatic garbage collection, apparently mostly good enough for
production -- "Look, Ma, no C++ memory leaks!"), their _common language run
time_ (CLR) and it's benefit in permitting programs in different languages to
work closely together, and their .NET Framework. To me, those are more
important than anything about C Python, and without even mentioning a
programming language.

I chose Visual Basic .NET because it looks verbose, easy to write, easy to
read, easy to teach and learn, integrates nicely with ASP.NET (surprisingly
nicely, even without Visual Studio), compiles fast, has good compiler error
messages, and is about as powerful in access to the CLR and the .NET Framework
as anything on Windows. And it is essentially compiled. And it has thread
support. And so far I may yet to have found an error in the compiler -- good.

Sorry, I don't want my background in computing evaluated by my enthusiasm for
Python. Sorry PG --- I really like a lot of your essays but not that one.

When I teach a class in programming, I'll start with the basics -- define
places to put data, allocate (and if necessary free), expressions and
assignment, If-then-else, Do-While, call-return, try-catch. Then I'll teach
the Visual Basic .NET versions of these.

I'm regarding programming languages not just for curiosity but as tools for
another purpose, a successful business that provides as a service that
improves the lives of 1+ billion people and that they like a lot, that makes
money enough to do nice things, e.g., add a wing to a local hospital, help a
private school, provide stable jobs, let employees put down roots in the
community and improve it, pay the employees enough to have a nice house, one
parent, likely the wife, stay at home with the kids, as many kids as they
want, puppy dogs and kitty cats, nice vacations, private schools for the kids
if desirable, college for the kids, late model cars, nice backyard parties for
friends, sports, time for the family to be together, and a nice retirement.
For that goal, I see Visual Basic .NET as a fine programming language.

For the guy asking about Python, I also sent him some code for two nice,
original at least for me, algorithms. And I sent them a nice paper in computer
science, published in _Information Sciences_. He and his buddies were more
concerned about Python! No, I don't want to work with them. And, no, I won't
hire like that.

> I was just trying to guess why a certain company would choose a specific
> language and a specific set of tools, and require proficiency in it.

The HR people and the _suits_ have contempt for technical people and, really,
are afraid of them and are really unable to evaluate technical people. So, as
in the parody, they have little check boxes.

In information technology where software, etc., is "eating the world", the HR
people and suits are total losers and in line to gather like dead flies on a
window sill, fall like stalks of wheat before a John Deere combine, etc.

Thus, the opportunity is for technical CEOs. And that's why I watched Altman's
lecture.

------
AndrewKemendo
Enjoying seeing these lectures.

One thing sticks in my craw that Sam mentioned as common with these young
founder startups:

 _" Learning just a little bit of management skill, which first time CEO's are
terrible at goes a long way"_

Sam goes on to discuss how shit management is kind of par for the course in
young startups.

It seems to me like getting this part wrong would be the death knell for any
company and Sam went on to mention an example of someone who had multiple
turnovers/"massive team churn."

As someone who has been a front line supervisor for almost 7 years these are
absolutely basic fundamental day 1 skills that any manager should have, like
giving credit and taking blame. Yet investors don't give a shit about these
types of things and basically assume they don't matter - until they are
causing problems.

I guess I just find it frustrating that teams with this management dynamic are
getting serious money, especially with all we know about management.

~~~
jkaunisv1
I think shit management is kind of par for the course in a lot of businesses
all over the place, from small startups to medium sized businesses to large
corporations to government.

------
zkirill
Did anyone else feel sad when Sam skipped over two pages of notes? I hope
we'll get a chance to read them or hear them in a future lecture.

~~~
sama
sorry about that. going to try to add to the last lecture of the course.

------
thu
Why is it so bad to have a bad employee among the first employees ? I don't
understand why it is that bad because it seems that if he/she is bad, you'll
notice quickly and then can just fire him/her. Even here in Belgium where
employee contracts protect more the employees than the company (at least
that's the theory), at the starting period, firing can be done very quickly
and I think it can be done even more easily in the US.

Also I think the best way to see if someone's good or bad is to put that
person to work. This would e.g. mean that if you have filtered out candidates
to 8 persons, you could get the one you prefer to work for 1 week. If your
choice was bad, you try the second. In the worst case, you have made a very
deep assessment of 8 candidates in two months. I mean that I don't understand
the point of recruitment processes that take weeks with all kind of proxy
metrics for how a candidate would fit in a very small team.

If you can't find out in a week that the person is bad, how can a recruitment
process be better ?

Edit: I'm surprised by how the 1 (paid, in my mind) work week is perceived in
the (so far) 3 answers below. It happens all the time to have phone
interviews, HR interviews, technical interviews, possibly pseudo-psychological
tests, and technical tests in a recruitment process. All that time without
being paid (sometimes well before you know what the salary could be). It's all
about trade-off, I'm not talking about ditching the selection process and
instead hire-and-fire liberally. My question was really just about why is it
so damageable to get a bad hire.

~~~
Balgair
I don't know how bad the job market is for employees in Belgium, but any self
respecting job hunter here in the US would balk at the idea of such a scheme.
Would you be paid for your week of work? What in god's name would you do for
just a week? You'd still be getting your log-ins and payroll sorted out. Say
you are the 5th choice, what are the odds that you'll have found a job
already, one that will pay you for more than a week of work? What about, you
know, laws that say you must have cause to fire someone (yes, CA is not a
state that has those). If you get sick, does that disqualify you, a car
accident?

Suffice to say, if an employer does this scheme to you, run.

Also, maximizing the time sunk into finding employees and the payoff for a
good one is a solved problem, known as Optimal Stopping theory or the
Secretary problem:
[https://en.wikipedia.org/wiki/Secretary_problem](https://en.wikipedia.org/wiki/Secretary_problem)

~~~
prostoalex
Yeah, this scheme is highly effective in attracting candidates that few other
companies want to interview.

------
startupfounder
Lecture 2 Slide Deck PDF:

[https://www.dropbox.com/s/f1xgbo6c976di06/Lecture2.pdf?dl=0](https://www.dropbox.com/s/f1xgbo6c976di06/Lecture2.pdf?dl=0)

------
staunch
Now that the knowledge of how to start a high growth startup has become so
well distributed it's amazing how few seed deals Silicon Valley firms actually
do. Even YC only invests in dozens of companies per year.

Only a tiny fraction of would-be founders actually attempt to jump through the
hoops to raise money. Only a fraction of those succeed. And yet just about any
team of hungry and determined tech workers has a chance at creating something
of immense value in the world. Advances in technology have created many more
opportunities than we can deal with.

A single VC firm could fund 10,000 teams at $100k/each reasonably easily.
Based on something as simple as LinkedIn profiles maybe.

~~~
TimPC
Think the series A crunch is bad now, imagine if a fund did this clearing out
its entire capital with no ability to follow-on...

~~~
staunch
The "series A crunch" suggests that VCs don't have enough money to invest in
all the startups that they want to. But almost all VCs have much more money
than they know what to do with. They raise huge funds to rake in millions per
year through management fees.

The problem is that traditional VCs can't manage very many investments. So
only a handful of series A VC deals can happen per year.

But there is a nearly infinite supply of money just waiting for another way to
invest in startups that isn't VC. Things like Kickstarter from the bottom up
and AngelList from the top down are the harbingers of doom for most VCs.

------
rdlecler1
Some comments on conferences.

When Sam talks about founders spending all of their time at conferences, I
assume he means attending conferences rather than speaking/moderating, because
these have totally different dynamics. We have an investment marketplace for
agriculture & agtech (AgFunder) and so our success is measured by having
thousands of investors rather than millions of users. For these kind of high-
touch clients, speaking/moderating at conferences is the best way we've found
to source new deal flow, investors (our customers), and potential channel
partners outside of having major media coverage. Our deal team gets crushed
when I return from a run of back-to-back conferences. I could imagine it would
be the same thing for enterprise sales and healthcare IT.

In cases like ours, if you can speak/moderate at a conference you have the
social proof to pitch to your customers horizontally rather than pitching up.
Moreover, once you get one or two speaking/moderating gigs under your belt
it's really easy to get more (Point to previous track record) as conference
organizers are typically sourcing speakers/moderators from previous
conferences. I also watch for new conferences like a hawk, and fire off emails
offering to speak/moderate for anything that looks like it will have our
audience. And the best thing about it is that you won't have to pay. Final
tip, if you have a content marketing channel (We created AgFunderNews.com) you
can offer to promote the conference in exchange for some media placement of
your own. Again, a big $$ saver.

------
howradical
Timestamped notes for lecture 2: [https://timelined.com/how-to-start-a-
startup/lecture-2-how-t...](https://timelined.com/how-to-start-a-
startup/lecture-2-how-to-start-a-startup)

------
pptr1
I understand the cynicism about YC and silicon valley. I think it's great to
have some critical thoughts about the why and how.

However these lectures are pretty good. I would highly recommend to watch them
even if your skeptical about all things silicon valley. Some of the lessons
and points of Lecture 2 about focus and intensity also apply to small
businesses and large businesses as well.

I thought the ending quote from Henry Ford was great.

"The competitor to be feared is one who never bothers about you at all, but
goes on making his own business better all the time"

------
philipDS
Some notes I made. Might include minor errors or misinterpretation on my side.

-> how do you identify markets that are growing quickly?
    
    
      trust your instincts
    
      students: watch what you're doing or your friends are doing
    

-> how do you deal with burnout as a founder?
    
    
      it's real life. you just have to get through it. canonical advice: go on a vacation. almost never works for a founder. you just keep going. you rely on people. you need a support network. address the challenges and things that are going wrong.
    

3\. Team

A. Co-Founders

-> Co-Founder relationships are among the most important in a company. #1 cause for early death: co-founder blowups.

-> Choosing a co-founder is a very important decision

-> Do not choose a random co-founder or someone who you're not friends with.

-> YC batch where 9 startups choose a random co-founder and all 9 fell apart

-> A good way to meet a co-founder is in college. Next best thing is to work at an interesting company (e.g. Facebook/Google)

-> It's better to have no co-founder than having a bad co-founder

-> Top 20 most valuable YC companies: all have at least 2 co-founders

-> "Be relentlessly resourceful" \- look for this in potential co-founders. You need someone that behaves like James Bond. Smart, tough and calm

-> You really want a technical co-founder

-> Software companies should be started by software people. Not great non-technical managers.

-> 2 or 3 co-founders is ideal

B. Try not to hire

-> Try not to hire. It sucks to have a lot of employees (high burn-rate, complexity, tension, slow decision making, ...)

-> Be proud of what you can do what a small number of employees

-> In the early days, only hire when you desperately need to

C. Get the best people

-> AirBnB spent 5 months hiring before they hired a person. Brian Chesky: "Would you take the job if you had a medical diagnosis that says you only have a year left to live?" \- culture of extremely dedicated people

-> Make sure everyone believes in your mission

-> Pick a company that's already working, but that not everyone has noticed yet. Breakout trajectory.

-> Spend about 25% of your time hiring, once in hiring mode

-> "Mediocre engineers do not build great companies". A few bad hires can kill your startup

-> Get person referrals to hire

-> Look outside of the valley

-> For most of the early hires, experience does not matter that much. Go for aptitude

-> Are they smart, do they get things done, do I wanna spend a lot of time around them?

-> Try to work together on a project, instead of doing a formal interview

-> Care about projects and focus on references

-> Look for good communication skills, manic determination, animal test and someone you'd feel comfortable reporting to if the roles were reversed (Mark Zuckerberg)

D. Keep the best people around

-> Aim to give 10% of the company to the first 10 employees. Vested over 4 years. If they're successful, they'll increase the company by way more than that

-> Fight with investors to reduce the amount of equity given. Be generous with employees

-> Don't tell your employees they're fucking up every day, cause they will leave.

-> Give your team all the credit for all the good stuff. Take responsibility for the bad stuff that happens.

-> Daniel Pink: "Autonomy, mastery and purpose"

E. Fire Fast

-> Fire fast. Everyone hopes that an employee will turn around.

-> How do you balance firing people fast and making employees feel secure? Everyone will screw up once, twice or more. You should be very loving, not take it out on them. If someone is getting every decision wrong, that's when you need to act. It'll be painfully aware to everyone.

-> When should co-founders decide on equity split? Not a discussion that gets easier with time. Set this very soon after you start working together.

-> How do you know if someone is not going to scale up to a role if they're inexperienced? Smart people almost always will find a role within the company.

-> What happens when the relationship with your co-founder falls apart? Every co-founder (including yourself) has to have vesting. You pre-negotiate what happens when someone leaves. Normal is 4 years. Try to prevent dead weight.

-> What about co-founders not working in the same location? Don't do it. Skeptical about remote teams in general. Communication and speed outweigh everything else. Video-conferencing and calls don't work that well.

4\. Execution

-> Being a founder means signing up for this years long grind on (good) execution. Everyone gets modeled after the founders. Work hard, be frugal, focus on customers, etc.

-> Only executing well is what adds/creates value

-> 5 jobs for a CEO: Set the vision, Raise money, Evangelize, Hire and manage, Make sure the entire company executes

-> 1\. "Can you figure out what to do?" 2\. "Can you get it done?"

-> Focus. One of the hard things about being a founder: 100 important things to do every day. A lot of things that look important do not matter. Identify the two or three most important things and do these. Say no a lot (97 out of 100 times).

-> Set overarching goals for the company. Everyone in the company should know these. These are the key goals. Repeat them. Put them up on the walls. Talk about them in meetings.

-> Communicate. You can't be focused without great communication.

-> Meet every week. Focus on growth and momentum. Have to right metrics. Don't let the company get distracted by other things. You can easily get excited by your own PR.

-> Be in the same space with your co-founder.

-> The secret to startup success is extreme focus and extreme dedication. Not the best choice for work/life balance. Outwork your competitors

-> Have a high execution speed. But be obsessed with quality at the same time. Focus on quality for everything you do (e.g. buying computers/gear).

-> Be biased towards action. "I could do this great thing". Every time you talk to the best founders, they have done something new.

-> Do huge things in small incremental pieces. There's almost always a way to break complexity down into smaller projects.

-> Be quick, do whatever it takes, show up a lot, don't give up and be courageous.

-> "When I was running my own company, we felt we were about to lose a deal. Critical deal for first customer in the space. We called them saying we had a better project/deal. We drove to the airport and showed up in person. We got to their office at 6am. They told us to go away. Junior guy wanted to meet. Then senior guy wanted to meet. Within a week, we had an agreement."

-> Always keep momentum in growth. It's the lifeblood of startups. You want your company to be winning all the time. A winning team feels good and keeps winning.

-> If you lose momentum, most founders try to get it back in the wrong way (rally troops with speeches). You have to save the vision speeches for when you're winning. Sales fixes everything in a startup. Figure out where you can get small wins.

-> Fights will break out when losing momentum.

-> When Facebook's growth slowed down: Mark created a growth group. Small fixes got the curb pack up. Most prestigious group. One of Facebook's best innovations that turned around the dynamic.

-> Ship product, launch new features, review metrics and milestones

-> Do not care about competitor noise in the press. Don't worry about them at all until they're beating you with a real shipped product.

~~~
jonalmeida
I've kept my notes on my blog because it's easier for me to find later (and
it's open to everyone else at the same time):
[http://jonalmeida.com/posts/2014/09/25/htsas-
lec02/](http://jonalmeida.com/posts/2014/09/25/htsas-lec02/)

How can I prettify your notes? I find it hard to read.

~~~
philipDS
I don't know. I just keep them for my own and thought I'd share them cause
they might be helpful to other people. Maybe you can add some Markdown to them
and keep them in that format.

~~~
jonalmeida
Done:
[http://markdownshare.com/view/ce6982fb-87f3-489e-af93-ec448f...](http://markdownshare.com/view/ce6982fb-87f3-489e-af93-ec448f344858)

------
adotjdotr
This advice is honestly unappealing.

I genuinely expected to hear some new insights or information. Instead this is
ALL re-purposed information. Nothing new here folks.

I certainly will not be listening anymore of these lectures. I'm very
disappointed.

------
Fede_V
I found this lecture much more helpful than the first one - the first one had
some good content, but seemed very generic without specific advice.

Here there was some incredibly useful, detailed advice, for example:

\- Even for really complex projects, break them down into chunks \- Don't
worry about PR/marketing/word of mouth \- Management is an important skill and
not easy for technical people

Those are maybe obvious no brainers for people with more start up experience,
but from someone who is outside the bubble, there was a lot of very good
stuff.

------
rock57
Just in case, here is a fully annotated Lecture 2: Ideas, Products, Teams and
Execution Part II [http://tech.genius.com/Sam-altman-lecture-2-ideas-
products-t...](http://tech.genius.com/Sam-altman-lecture-2-ideas-products-
teams-and-execution-part-ii-annotated)

------
nxh
What should I do if I think I am just a mediocre engineer? Just working for
well established companies?

~~~
analog31
I'd apply the same principles if it's a start-up or an established company:
The nature of the job, work environment, wages, benefits, etc.

What I would take away from the lecture is not to weed yourself out of the
market because you perceive yourself to be mediocre. Instead, I'd consider
what common threads seem to run among companies that perceive themselves to be
start-ups and decide if you'd enjoy working in that kind of environment. Note
in particular the comment that start-up founders tend to be terrible managers.

Also, "startup" is a buzzword, and any small company could call itself one.
This is another reason to carefully consider the particulars of each
situation.

------
timtamboy63
Notes: [http://chintanparikh.github.io/blog/2014/09/25/how-to-
start-...](http://chintanparikh.github.io/blog/2014/09/25/how-to-start-a-
startup-lecture-2-notes/)

------
gatsby
"Don't lose momentum."

So glad Sam brought this up. Whether it's selling, shipping, or hitting
deadlines, it's really difficult to keep moving fast if the energy is low and
momentum slows.

------
bramgg
I'm loving these. How many lectures will there be in total?

~~~
namenotrequired
It seems 20.

[http://startupclass.samaltman.com/](http://startupclass.samaltman.com/)

------
stephengoodwin
My favorite line from this lecture:

A major indicator for a successful startup is "Every time you talk to them,
they've gotten new things done."

------
lukasm
Way better than the previous one. I really like the fact he has statistics. I
wish YC would publish it.

------
smaili
Does anyone know if non-Stanford students can drop in or is this for students
only?

~~~
tedsanders
The lecture hall seats are for enrolled Stanford students only.

------
mustardgas
Start up. Cash in. Sell out. Bro Down.

