Learnings from: ‘Y Combinator: How to Start a Startup ’ — Part 3
Lectures 7–9
Lecture 7 — How to Build Products Users Love (Kevin Hale)
Kevin’s focus is on the idea of connection with your users — he uses the analogy of a personal relationship.
One method of achieving strong connection is by making your product an ‘experience’. He wants your product to stand out — to be notable (of course in a positive way). Easter eggs are a fun example of this.
His company, Wufoo, was known for having these — as well as a standout and memorable UI design. They sold to SurveyMonkey, which is also known for having a similar experience.
The product should be easy to use — no headaches! And if it’s not already intuitive how to use the product just from trying it out, it should be easier for customers to learn how to use it.
Aside from the experience of using your product, your customers must use the product often for them to connect with it. It needs to fill a certain use case for the customer. When this problem, or use case, recurs in their life, your product should have been notable enough that they come back to it. Each time this occurs, the connection to your product grows.
Lecture 8
This lecture included three brief lectures from Stanley Tang of Doordash, Walker Williams of Teespring, and Justin Kan of Twitch.
How to Get Started — Stanley Tang
Stanley tells the, pretty hilarious, story of how Doordash began. Essentially they had the idea, tested it out the same day in Palo Alto. Their product was a single webpage, with a number of call to place an order, and they would handle the food delivery themselves.
To their surprise, people called — And so then began Doordash.
Stanley’s simple message is: Test your hypothesis, launch fast, it’s okay to do things that don’t scale early on.
Doing Things that Don’t Scale — Walker Williams
Teespring, which allows creators to sell custom t-shirts, at the release of this lecture had a valuation of a whopping $650 million — then dropped below $20 million in 2017.
A major source of this drop was due to underlying dependency on facebook ads. When facebook ad prices rose, Teespring sales dropped. Teespring did not run the ads themselves, rather the partnered-creators had.
This story outlines another example of inorganic growth damaging a startup. When valuation outpaces the organic growth, startups become unsteady.
Since 2017, Teespring went through a recapitalization, a rebrand, and eventually a merge with Amaze. In 2024, Teespring, now SPRING, is still active, but much smaller than anticipated at the time of this lecture.
I think much of Teespring’s story resonates with Peter Thiel’s lecture — durability through long periods of time seems to be an undervalued trait for startups.
Returning to the lecture — “Do things that don’t scale as long as you can”. Walker’s lecture echos that of Stanley’s. He advocates maximizing the channel of communication — so much so that he recommends handling all customer service yourself, until you no longer can.
“The product you launch with will almost certainly not be the product you scale with. Your goal should be to iterate your product version as fast as you can.”
…. Seeing a pattern among these lectures? In early stages, building a fully developed product is often a waste of time — the chances of getting your product market fit right is very slim. Instead, iterate with short term manual implementations until the business idea is refined.
Note: “Do the things that don’t scale” only applies for early stages. In order to scale safely, your business must be able to automate the “things that don’t scale.” (this will be relevant during Zenefits section below)
Press — Justin Kan
Justin’s message is to be deliberate and purposeful about your company’s press.
Your public appearance should be targeted. It should have a specific audience and specific goals in mind.
Justin recommends getting quality introductions to reports, and essentially providing the story for the reporter — bullet point by bullet point.
He also recommends following up with reporters, and assisting them as much as possible: providing photos, spellings, videos, etc — make it easy for them to write a good article about your startup.
He also notes that public image, and relationships with reporters, is a long game. You will build reputation gradually, over long periods of time.
Lecture 9 — How to Raise Money (Marc Andreessen, Ron Conway, Parker Conrad)
Lecture 9 involves a panel of two venture capitalists (Andreessen, Conway) and the founder of Zenefits (Conrad).
I’ll focus on the venture capitalists first.
The character of the founders
Interestingly, they agree that they bias more of their decision to fund a startup based on the founders themselves, rather than the business idea.
The chemistry between the founders, the leadership styles, the personal convictions, the communication ability — each seem to be particular traits the investors narrow their evaluation on.
The investors note that individual founders are rare, and something they are wary of. Multiple cofounders allows the team to be more diverse in skill and perspective.
One indication of your ability to communicate is how well you can explain to the investor what it is your business provides. Another is decisiveness.
Andreessen says “Invest in strength, rather than lack of weakness” — meaning he is more attracted to a company that has a really strong strength, rather than ‘checks all the boxes’. Venture funding is about outliers, to get funding, you will need to stand out in some way.
How to invest
The investors recommend trying to not fundraise at all — companies which don’t need fundraising are the companies which investors truly want to invest in.
If you do need investment, do not give away large chunks of equity, this can be demoralizing for youself and the rest of the team.
When you take money, have a detailed plan about what that money will be used for. You are taking on risk by going into debt, and you need to know specifically how you will get out.
You want your investor to be useful, and understand what you are doing. If they have no domain expertise/experience, you probably shouldn’t take their money. Investors are often a very valuable source for networking — choose them strategically to make the connections you need.
Zenefits
Zenefits, led by Parker Conrad, at the time of the lecture (2014) had upwards of $300 million in funding and a $3 billion dollar valuation.
Then, the company’s growth caught up with itself: layoffs of 17% of its employes in early 2016, 9% in late 2016, followed by 45% in 2017.
Conrad, seemingly pressured by media and internal company conflicts, left the company in 2016. However, recently, in ‘The Social Radars’ podcast (https://www.thesocialradars.com/), Conrad admitted that the main reason he left was not due to the pressures, but rather because the company itself was not healthy.
Zenefits had one of the most rapid growth periods ever in history, however, much of its internal processes had not changed — they were still doing large amounts of processes manually, and now had larger amounts of companies to serve. Similarly to Homejoy — their rapid growth had left their product behind.
In the podcast, Conrad recollects his mindset was to ‘suck up all the oxygen’ in the market, to secure that ever so enticing monopoly.
So, while doing the things that don’t scale is useful for finding product market fit, once it is found, scalability needs to be confirmed. Product scalability should not be outpaced by business growth.
Please leave a like! Part 4+ coming soon…
