Learnings from: ‘Y Combinator: How to Start a Startup ’ — Part 1
One decade ago, Sam Altman, then President of Y Combinator, led a Stanford course on the topic of building startups.
Each of the 20 lectures are jam-packed full of interesting information — both conceptual and practical. Further, the age of the course has allowed time for the speakers’ endeavors to play out in the real world — supplying a test of authentication for their statements.
In these articles, I’ll present some of the most interesting/notable pieces of information from my experience watching the lecture series. (Note that this article is not intended to fully summarize information in the series, but rather to help you decide if you’d like to watch it yourself, or to review after you have!)
Part 1 : Lectures 1–3
Part 2: Lectures 4–6: https://medium.com/@justinmilner/learnings-from-y-combinator-how-to-start-a-startup-part-2-da113c89c3bc
Part 3: Lectures 7–9: https://medium.com/@justinmilner/learnings-from-y-combinator-how-to-start-a-startup-part-3-125cbb705ebc
Parts 4+ Coming soon
Lecture 1 — How to Start a Startup (Sam Altman, Dustin Moskovitz)
Sam kicks off the series with a discussion on which ideas are worth pursuing as start ups.
Choosing to pursue an idea:
He focuses on the defensibility of the business. Time is a factor here. If you can build it in 6 months, it’s likely someone else can too.
As a result of this, your mentality heading into the pursuit of building an idea should be focused on the long-term. Building the idea should feel like a mission.
If you had a great idea, most people will think it’s bad, or unachievable. You should know logically why your idea is a good idea.
How to begin pursuit of the idea:
Don’t try to take over huge markets first, you should target a small audience first, or create a new small market.
You want to predict the evolution of the market as best you can. If you can get in on a small market, as it rapidly grows, the market will naturally pull you.
Your goal is to work towards strong product-market fit: the degree to which a product satisfies a strong market demand.
To do this, you widen the channels of communication between you/your team, and your customers. You should maximize communication, and iterate between building, and getting customer feedback. For early-medium term, don’t put anyone between you and your customers. Build product, show to customers, repeat.
Growth should be organic (don’t depend on advertising/marketing, free trials, new user discounts, etc). Organic growth is your central indicator for how strong your product market fit is. Examples of rapid inorganic growth ruining companies will be seen multiple times in this series.
Especially early on, don’t fixate on competition — focus on customer communication, and building the best product you can.
Dustin takes over for the second half of the lecture, addressing the question of ‘Why start a startup?’
Dustin seems to want to demystify the ‘glory’ of creating a startup.
As the founder/cofounder of a startup, you experience:
- People always depending on you
- You’re always on call
- High stakes fundraising pressures
- Unwanted media attention
- You’re more committed
- Hard to take real breaks
Further, if your idea turns out to not have promise, you can waste large amounts of valuable years in your life.
He also explains that if you can get company stock at a mid stage, if that company is going to have a large valuation, then you may end up with the same amount as if you had founded a company with a smaller valuation.
Lastly, he concludes that to endure these things, most people will need true passion for creating their idea, and a feeling of aptitude (The world needs you to do it).
Lecture 2 — Team and Execution (Sam Altman)
Cofounders
Sam (and other lecturers in this series) strongly support the idea that startups should have multiple cofounders.
“Of all successful YC companies, all of them have multiple founders. 2–3 is ideal.”
You don’t want to found with people you don’t know well. As iterated in lecture one, if you’re going to build this idea, you should do so with a long term mindset. You want cofounders ‘like james bond’ — comfortable, tough, and calm in all situations. You also want the majority of the cofounders to be technical.
Cofounders should split equity equally ideally, or close (if you don’t want equal split, do you really want them as a cofounder?)
In order to meet people who could be good cofounders, you should try to place yourself in areas with higher-density of good potential cofounders — such as a school, or workplace, known for startup-like thinking.
First Hires
Try not to hire — only do so when you need to. “Airbnb took 5 months of interviewing before their first hire.”
Your first hires should have the same conviction in the mission that you do. The earlier the hire, the more impact it will have on your company’s culture.
Most early hires are built through personal referrals. Ideally you want to work with them on a small project, rather than an interview.
Don’t be skimpy on giving equity to early employees. Do be skimpy on giving equity to investors.
Execution
“You get no credit for trying”. No one cares if you work hard on the wrong things. Be decisive. Bias towards action. Finish things.
CEOs should set only a few priorities (2 or 3) and just manage those well, you can’t do everything, and what you do do, you should do well. Focus on growth and momentum.
Ideally work with smaller projects, and knock them off one by one, gathering momentum. If you lose momentum, speeches are not the way back, action is. Repeated small wins.
Geographically — Founding teams should be in the same space — ideas need to move fast. Startups are typically intense.
Competitors should not be worried about, unless they are shipping real competing products (press releases should not be feared).
Lecture 3 — Before the Startup (Paul Graham)
Paul’s lecture advocates for in-domain knowledge, rather than knowledge about starting startups. His lecture suggests that aspiring founders should not seek to become experts in business (initially), but rather experts in a given domain.
In short: “Just learn!”. And don’t go shallow on topics, go deep. Gain perspectives that people with less knowledge in that domain don’t have.
Secondly, Paul suggests that in order to come up with startup ideas, you have to think about them — a lot. He says: “Turn your brain into a brain that unconsciously thinks of startup ideas.”
- Learn about things that matter
2. Work on problems that interest you
3. With people you like and respect
Please leave a like! Link to part 2: https://medium.com/@justinmilner/learnings-from-y-combinator-how-to-start-a-startup-part-2-da113c89c3bc
