Four Essential Insights into Starting a Company
In the first two weeks of Stanford’s CS 183C course “Blitzscaling,” we’ve been exploring what instructor Reid Hoffman refers to as the “Family” stage of starting a company. Some common themes have appeared through our class discussions with Sam Altman (Y Combinator), Michael Dearing (Harrison Metal) and Ann Miura Ko (Floodgate). Here are some of their most salient — sometimes obvious, sometimes surprising — recommendations and insights with respect to founding a company, and some tips for applying them to your own life and/or business.
Tip #1: Don’t start a company unless you have to.
Starting a company is one of the hardest things you can choose to do. It’s lonely, it’s challenging, and it takes a heavy psychological toll on the founding team. If your skin isn’t 100% in the game, you’ll be much more likely to give up when it gets hard, says Ann Miura Ko. It’s only founders that “can’t keep the idea inside them…whether it’s a good idea or a bad idea” that end up eventually succeeding, according to Michael Dearing. This kind of founder has the passion and resilience to work through the grueling and lonely beginning stages of starting a company. Anyone who doesn’t have this drive and determination won’t make it through the lowest lows that the startup will inevitably face.
Try this: When you have an idea, try to find a reason that you shouldn’t pursue it. Ask people “What’s wrong with my idea?” and only move forward if you can’t find a single reason not to.
Tip #2: You have to see or believe in something that nobody else has figured out yet.
In order to start a successful company, you need to firmly believe in something that most of the world hasn’t yet figured out. Ann Miura Ko describes this as a startup’s “proprietary power,” something that she and her partners at Floodgate look for when investing in seed stage startups. Y Combinator similarly looks for “great ideas that look bad,” which Sam Altman explains are often made possible by some new shift in the world. They’re hard to spot, but these are the ideas with the potential to become the next billion dollar company.
Ask yourself: Is your idea a derivative of an already successful idea, or is it based off of a unique insight about the world? If it’s more along the lines of an “Uber for _____,” it’s probably not reflective of a fundamental shift in thinking.
Tip #3: Network is everything.
You’ve probably heard this before, but it’s true. The biggest key to success for a founder is also what makes Silicon Valley the special hotbed of innovation that it is: the network of individuals that exist outside of the startup itself. In your network you’ll find your first employees, first customers, and probably first investors, so make sure you and your founding team are well connected before diving into your new venture.
Ask yourself: Do I really have the network I need in order to turn this idea into reality? If you don’t, you might have better luck investing in your network before investing in your startup.
Tip #4: Don’t do it alone.
Having a co-founder (or co-founders) is one of the best ways to balance out the psychological toll of starting a company. Ann Miura Ko believes that having co-founders creates an overall healthier work environment and also provides social pressure to stay in the game. Sam Altman aptly reminds us that starting a company is a lot of work, so having a co-founder at the beginning is quite helpful. Wondering who to pick? Michael Dearing recommends finding a co-founder who balances you in terms of cognitive distortions, which you can read more about here. But be warned: Altman cautions that having a bad co-founder is worse than having no co-founder at all, so don’t settle on someone until you find the right fit.
Try this: Take the formation of your founding team seriously. If you have co-founders, make sure these are the people you really want to work with. If you don’t, start looking and don’t stop until you find the right one(s).
The bottom line: Starting a company is one of the most difficult yet potentially most rewarding things you can choose to do. If you have a burning idea that keeps you up at night, and that you believe reflects a fundamental shift in the world that most others have yet to discover, maybe it’s the right time for you to start working on it. If you mostly want to start a company for the sake of starting a company, it’s probably wise to wait.
