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.
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.
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.
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.
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."
I am sure some, perhaps even Sam himself, don't view it that way; that they really, honestly believe the rhetoric they're using is not negative or indicative of an exploitative relationship. That's just how dog whistles work, though: in some cases the audience and messenger are merely casual, unwitting participants in a larger, cultural narrative, but in others one or more parties "knows what they mean."
So the words about employees having to be passionate and believe in the mission are basically dog whistles indicating "it's culturally acceptable to target would-be employees who are easily exploited." These would-be employees don't have to think they're being exploited, by the way, in order for an exploitative relationship to exist.
At least that's how I read it.
It might be possible to calculate the pay per hour of extra work for employees in startups. But some of the parameters would be hard to get data on.
How many more hours of work per week?
For how many years?
For how much less pay?
With how much chance of a big win?
And the big win gets you how much?
However, its one type of entrepreneurship they teach in SV. Pity lectures don't discuss the fun part. Because no matter how difficult it is, and not only in SV, there is a lot of fun & happiness.
But I love to heard the actual pitch from the founder(s) with 1-10 employees with maybe limited tractions that can really successfully convince a potential employee to say 'yes' to that.
Maybe Steve Jobs..... But he is too famous now, can he do it if he is an unknown and just one of the thousands of founders in Silicon Valley?
IMHO the advice about not hiring before you have traction is far, far more important than the advice about what sort of person you want to hire. The former is strategy; the latter is tactics. You can swap out the latter based on what your needs are and what sort of company you want to build, but the former seems to be universal.
What's more painful than death is not getting a chance to discharge at least some of your ideas. Ignoring your dreams is the number one regret of the dying. Death is not the worst thing that can happen to a man.
No. He set out looking for people who were crazy in a way he liked, and he hired them. If there's anything ridiculous about that it's the behavior of those first hires, not of the CEO.
What am I missing here? If people like that exist, what's wrong with looking for them?
You want dedicated employees. Not lunatics. And you certainly shouldn't do things that encourage people to be lunatics.
Would you demand that your employees egregiously break the law for your company? Now THAT is dedication, right? No, you wouldn't (god I hope not), because that's not ethical.
Because it could be a young kid and brainwashing techniques like that could be dangerous. The question implies that the right choice is "Yes, I would like to work for this God blessed startup for the last 12 months of my life because working here is not a job, it's a mission".
The point is that if you don't believe in your core that the startup's mission is worth spending the last year of your life on, you're not the kind of person who'll do what's necessary to make it happen.
Maybe you can't think of a cause you'd make that sacrifice for, but many founders and startup employees can. I don't think that's disgusting.
it's airbnb, you're not curing cancer!
Air B and B is about changing the global economy. Tearing down the walls that keep everybody from getting what they deserve in in life.
This application is like our first steps on the moon. It will launch the very future of human commerce...etc...etc
Your point now is that employees should be rewarded more. That's a fair point . But it's still separate to being dedicated to what you do.
There are several occupations people enter knowing there is little monetary reward. Schoolteachers don't make much but they are dedicated to building children's lives and can't imagine themselves doing anything else. So are artists and generally anyone who has found their calling.
If I had a only a year to live I probably would still be working on the things I'm working on now.
 - It's a fair hypothesis that the most valuable company would be the one where everyone involved is rewarded in proportion to the value they generate. You can't build some kinds of companies if you keep 100% of the equity as a founder btw. Look at Alibaba's $210b IPO and Alibaba's founder who has only 8.4%.
80 hours a week means 11 hours a day every single day. That means you wake up at 8am, roll into office at 9am (ya, show me a startup where everyone's there at 9am!), work straight until 8pm, and get home 9pm. Including Saturdays and Sundays.
I completely reject the notion that even in the most dedicated startup, you will find a large number of people who do this for any sustained period of time.
People have limits. After a few days of 11-hour shifts, anyone will say "fuck, I need a break." Even the fabled CEO, who will be on email and essentially on call 24/7, will take breaks that bring the number down from 80 hours sustained.
People who are convinced they have an idea for a billon dollar startup idea(no matter how unrealistic) are far more willing to sign lopsided deals, and destroy themselves trying to make it happen. They are so tunnel vision that they just refuse to acknowledge what a 90% failure rate means.
Start-ups are frequently on the cutting edge of business practices - the ideas that are generated here often have impact for people working in big business as well.
The one implicit assumption that I find the most difficult to grasp is the "change the world" attitude, especially when you see that as soon as they try to make money at the same scale they are valuated, startups do "wrong" things. Take FB or Twitter; I guess that connecting people is a noble goal. But trying all the time to get me to click on promoted content, is that good ?
Y-Combinator is designed to build $1B+ companies, however, it is not designed to not build $1B companies at all. So if you don't want to do that, yes do not work 80h/week. However, this way, you are also very unlikely to build a company of that size.
If you want to build a huge tech-company like Uber, Twitter, AirBnB, you will need to spend all your brain capacity for what you are doing in order to make a company like that happen, you will simply need to sacrifice a lot, friends, sports, having a girlfriend, sometimes even sanity. Most people would never do that and that is fine, however, there are some people can't imagine doing something else, because they really, really want to change the world and there is nothing else that would give them more satisfaction. This is not possible as a side-project and the evidence is that the huge companies we have these days were not built part-time. They were built full-time, probably double full-time.
Hope the other point of view makes a bit more sense to you now.
So I'd modify your first sentence to make it more accurate: "It might be you do not want to build a company with a $1B value that is largely paper-money based on investor provided funding."
The main takeaway from the last lecture was identify a good problem and a good idea that resonates with you personally - or as you phrased it "solve real problems".
The key difference between a start-up and a normal small business is that a start-up's main aim is to grow very quickly to benefit from the economies of the business model. Unfortunately in that environment raising venture capital and working 80 hour weeks is a bit of a fact of life - I hope some people take away from this course that there are other options to this. Specifically a slower self-financing growth phase, bank loans or family/friends etc.
I see it as a protocol to reduce uncertainty and expect more protocols (appcoins? kickstarters?) to arise. You know that the next carrot in front of you is going to an accelerator, then raise more money (repeat), then get acquired, get profitable, go public, or simply die.
Or perhaps you are speaking against the SV startup culture in general, with this video as a catalyst for touching off those thoughts? In that case, perhaps there's just a difference of values.
(recommendation: listen to Porcupine Tree - The Sound of Muzak)
i respect everyone who starts a business, it's tough (and success is heavily influenced by luck & personal connections).
i just want to make the point that from an outside perspective this doesnt look like a building a business, its more like big corp work disguised as entrepreneurship.
(1) > my advice to young people with drive is ... solve real problems.
You say burnout is intrinsic to startups but ignore that hard work is needed for other things that aren't startups. What makes you think solving real problems doesn't require dedication?
(2) > the goal of a startup is to make money
No. It's a goal, but not the only goal. Another goal is to make the world a better place.
(3) Can you be precise about what "hurts you to see" those lectures? Is it because what they say is true and the truth is uncomfortable? Or do the lectures say something that's false? Can you point to a specific sentence that's false?
If you can't boil something down to a single sentence then you don't know what you are saying and judging from the length of your comment you don't.
Being able to turn a complicated idea into a sentence does generally mean you get the concept, but you can still get the concept with out expressing it at a 5th grade language level.
It can't be a total accident there's a high correlation between being a good communicator and being a successful founder.
It is more political then technical. It is about connection.
Highlighting that I think helps people to focus on a completely different skill set. I know I got bogged up in the joy of my technical development and needed to remind myself to be an evangelist which is fundamentally an application of rhetoric.
It also means skilfully using cognitive short cuts that already cluster information in order to simplify.
It is not that the public cannot understand, it is just that it is hard to not use domain specific vocabulary and still communicate the concept.
Take search engine. It is a perfect example of this process.
Words start to break once you push them too far.
This is because new ideas/concepts may require new words or words outside the scope of the 5th grade rule. An idiom is a cognitive miser of sorts.
Example - search engine
search - familiar vocabulary
engine - cognitive short cut
- related to car
- transports from point A to B (car)
- requires steering (car)
- most are comfortable with operating (car etc)
It is a hack to communicate when the available vocabulary does not convey the true intention of the speaker.
And/or the existing level of vocabulary is inefficient.
Star Trek Example: http://youtu.be/ukMNfTnI5M8
Archer Example: http://youtu.be/GzHhgPgO7wA
You are saying to communicate complex ideas one tends to need words a 5th grader wouldn't know.
I was saying to communicate an idea one should fit it an a single sentence.
Unless I missed something, we are not in disagreement. You are arguing for word quality, I'm arguing for word quantity. You don't disagree that boiling an idea to a single sentence is good, and I learned something new from you. The cognitive miser theory is fascinating.
Thank you for having put the effort to follow up.
It is the framing 'You do not UNDERSTAND your app unless you can simplify it in a single sentence' that I disagree with.
It is more 'You do not UNDERSTAND your market unless you can simply in a single sentence'.
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.
As my friend says, "If you can't take a few days off at a startup, you're doing something wrong. Yes you need to work hard, but honestly not that hard."
Great point about talking to someone with no vested interest.
“Two qualities are indispensable: first, an intellect that, even in the darkest hour, retains some glimmerings of the inner light which leads to truth; and second, the courage to follow this faint light wherever it may lead.”
―Carl von Clausewitz
It is like the navy SEALS. You can ring the bell any time to end hell week. Don't ring that bell.
Stress like dehydration is a self inflicted wound. I have found myself coping with extreme stress using meditative practice to manage when I get to far but forgetting it in the good times. That is definitely a sin of mine.
You gotta manage your 'chi'. I mean that as a metaphor of life energy and that is 100% real. It is like your mana in an MMO.
It is morale, it is rest, it is breathing right, it is exercise, it emotional connectedness, it is appreciation, it is respect...it is letting go and moving with the wave.
Not recognizing a point of diminishing returns happens to most of us. And it is good to know your limits and recognize the signs.
Overworking yourself once intentionally ( when it will not do damage). Get a spotter(weight lifting) even. It is good to know your points of failure.
Then build and expand those limits. Learn to recognize the signs in yourself and in others.
One issue is, too many high achievers actually have a case of perfectionism and/or obsessive-compulsive disorder (OCD), and those conditions can lead to stress, depression, clinical depression, and suicide. Treating OCD is not easy.
How do I know? I learned the hard way and "paid full tuition". The OCD case was not me but was my wife. Trust me; I know far too well just what the heck I'm talking about.
"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."
(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.
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.
Meditating, playing an instrument, making art, exercising and playing sports, lunch with a friend - you can do these for half an hour, an hour a day and they yield results.
When I had a short burnout, I tried playing games in order to help, but my mind was still on the project so time passed and still I just couldn't get back to it.
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.
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.
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).
So hard drugs and tons of alcohol? We might have different definitions for partying hard, but that's what I think of when I think of 'hard-working NYC professional'.
Maybe we should chill out on that: http://www.mercurynews.com/business/ci_26219187/use-illicit-...
*Note, I have no idea if mercurynews is a decent source of news
This is just a warning. Down-vote me to heaven.
After all this time of YC doing things, why don't you have have actual criticism, instead of ad hominem. So why troll?
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
Take, for example, the required reading from 1st lesson, Do things that don't scale .
And I know Brian Chesky and Joe Gebbia didn't feel like they were en route to the big time as they were taking "professional" photos of their first hosts' apartments. They were just trying to survive. But in retrospect that too was the optimal path to dominating a big market.
I remember reading somewhere that PG advised the photo thing to AirBnB, I might be wrong, to see if better photos is good for business (it appears it is). Now we have the same advice though a required reading link in the lesson. This does not mean your startup may benefit from such actions that don't scale but it's a good advice nevertheless. And being a long time lurker on HN, I'm sure I have heard most of the advice here and there but it's great for me to get them at home from thousand of kilometers away in a totally different country.
"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 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. 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.
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.
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.
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.
But if you're talking energy, enterprise software, Internet infrastructure software, maybe healthcare, and some other areas, I'd think that it would be a push, or that an older founder might have the advantage.
Thank you for the great courses and it would be super helpful to hear more about your experience here.
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
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
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
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.
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
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
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.
> 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
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
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.
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 - " 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.
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.
I'm not completely wrong! Commonly many people will regard any business, whatever the revenue or acquisition value, with 15 or fewer employees as "small". They just will!
And there is the recent A16Z essay that indicates that we may soon see a startup, with a solo founder, worth $1 billion. So, such an example would agree with your point.
But such an example would conflict with Altmam's lecture where he is really down on solo founders!
There is an example of a successful solo founder: As I recall, early on the Canadian romantic matchmaking site Plenty of Fish was just one person, the founder, two old Dell computers, ads just via Google, and $10 million in annual revenue.
So, let's, see: Since the business was growing, maybe we should assign a P/E of 100? Since likely ballpark $9 million was annual (pre-tax) profit, maybe for the worth of the business we should multiply by 100 and get $900 million, ballpark $1 billion, from one person! A "small" business? Maybe not!
Yes, what Altman was talking about was a venture funded business with some explosive growth potential, but, still, when the company had just 2-3 people and was on the way to 15, trying not to hire, maybe not yet profitable, their value unknown except for the terms of the VC investment, maybe they are still a "small business".
Maybe a point would be that what Altman was talking about is so desperate to achieve the explosive growth potential that the office likely necessarily has a desperate air where one bad hire could wreck the company. Still, the strong conflict with so many millions of US small businesses is tough to swallow.
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.
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.
Hiring and firing willy nilly is also very, very bad for morale. And those people you interviewed two weeks ago will be starting a job for someone else and you'll have to start hiring all over again.
That place was like a kindergarten. It wasn't a bunch of kids, either: most people were in their 30s.
 dumb typo
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
Bad employees are a cancer. They literally spread and infect otherwise healthy employees.
When a bad employee is retained another employee who is at a similar level who does good work begins to see that management is unfair. It is not fair to compensate two people equally when their work is not equal.
Also, the good employees begin to see that management is failing to do their job managing people.
And the list goes on and on.
In a startup the team is very small and resources are tight. For example, if there are 2 founders and 1 employee (who's bad), then 1/3 of the company's capacity is being wasted. Actually, it's worse than that. What happens is that the 2 founders waste additional time "managing" this employee, discussing how to handle the situation, etc. Basically, it's a big time suck at a point in the company's life when time is extremely valuable.
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.
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.
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.
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"
-> how do you identify markets that are growing quickly?
trust your instincts
students: watch what you're doing or your friends are doing
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.
-> 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.
-> 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.
How can I prettify your notes? I find it hard to read.
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.
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.
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.
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.
A major indicator for a successful startup is "Every time you talk to them, they've gotten new things done."