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Startup School 2017 from Y Combinator: “Why?” (Part two)

“All the best startups that we financed at Y Combinator had an idea first and foremost, and then the startup itself.”

- Sam Altman







- Today I wanted to summarize all the other things that will be affected in the course. And since these are mostly lectures from invited guests, this is my chance to talk about my convictions. And I would like to start by making Silicon Valley so special. 100 people in the audience here at Stanford. There will be hundreds of thousands or millions of people around the world who watch this video online. And when I travel the world talking about start-ups, the most popular question I’m asking is “Why is Silicon Valley? What is happening there? What makes it different from others? Why can't we do it where I come from? ”





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I think this is a cognitive question, even for people living here. Because you want to know what it is and surround yourself with its most concentrated version. The most important, in my opinion, is the inexorable belief in the future. There are people here who will take your crazy idea seriously instead of mocking you. All because they found out that giving in and saying that every idea is stupid will cost them a lot.



Therefore, if you have someone who says, “I will create an electric car company,” and they know little about batteries, and even less about cars, it will be easy to write it off. And yesterday, Tesla led Ford to the market. Therefore, people found out that you don’t want to write off these wild ideas about the future so quickly. You want to give them a chance. You want to think about them. And in many parts of the world and in the context of other professions, you will simply be taunted behind your back or looking straight into your face, no matter.



You really want to find a small number of people in your life who will support your ambitions and not belittle them.



And it is difficult to find. This is not the default. We do not realize how rare it is that we are in an environment where most people are like that. This is not the tendency to criticize successful people. In many other countries, in many other cultures, there are words for the case when a person becomes too successful, too ambitious, too globally minded, and you cut them off. But in America there is not even a phrase for this, and in many other cultures there are.



There is also a high ratio of people working on startups and here is a culture that is ready to pay them back for it. People helped me with my startup, I will help them with their startup. And you want to surround yourself with that attitude no matter where you're from. You may find out that you need to find this community online. You still want to do this. Oh, this is my old version of slides. Did I send you a new one? Okay, let's stick to this one.







One of the things that must necessarily be right with a startup is an idea. In the Silicon Valley has developed a myth that the idea is not important. That you have to create a startup, make your way randomly and hope that you will do something big. But as Dustin said, all the best startups that we financed at Y Combinator, this was first of all an idea and only then a startup itself, it was not a series of pivots . Very few pivots were successful, and only then, when the creators in the process of work found out that there was some other idea, which they lit up more than the original one. Or they have identified some new problem. The original idea is very difficult to reproduce well, but it is really important. The most successful startups were not derivative. They are not a copy of anything that worked well. Many people try to create a copy of what worked well last year. I don't know how many people created a Facebook clone a year after Facebook appeared. It must be a lot.



- Lot.



- A lot, and not one of them has become something significant. The next Facebook never looks like Facebook, it looks like something completely different. And in order to succeed, you need to start noticing problems in your own life. And the big advantage that you have as a student is that students, in general, are all young people, as a rule, up to date with advanced technologies. You can predict another boom before it happens. And this idea of ​​boom, I believe, is the most important concept of identifying good ideas.



People wonder why startups are formed in such small periods of time. Why were there a number of startups, were there companies that were created in the late 90s, early 2000s and they were very successful? Why were there a number of startups that were created between 2009 and 2011 and they were very successful? And the reason for this hype, the Internet and mobile phone in these two cases, smartphones. Suddenly things become possible that were previously impossible. And when this happens, because startups can grow quickly, you can do things that would not have been possible with a different outcome or which a large company would have won if everything had turned out differently. And you want to think about what will be the next boom.



My personal guess is that this will be machine learning, applicable to each vertical . I think this is the easiest way at the moment if you want to create a company. But you probably know that this is so much better than me. Whatever your peers do, whatever they like, even if now it looks like a toy, especially if it looks like a toy today, it’s probably another boom. But you want to define it. What big technological tectonic shift will happen in the next couple of years? Do something that will enable it, and build a platform on it. It is also easier to create a difficult company than a light one.







Most people, especially young people, want to choose something that does not sound too big, does not sound too difficult. Because they think that creating a company sounds like something very difficult. I'd rather choose the lightest company possible. But in fact, the creation of a company is always hard, you will be equally difficult regardless of what you do. Although if you create a difficult company, if you inspire passionate people, if you build general artificial intelligence or supersonic aircraft or nuclear energy, you will have much more people interested in this than, for example, in the Facebook idea of ​​1952. that it's easier to create a difficult company than an easy one, I think it's still a big secret in startups. But this is the idea that works, and I see it time after time.







As Dustin mentioned when answering a question, the co-founders are very good. But a bad co-founder is much worse than his absence. Because due to the fact that so many people say that you need a co-founder, there are people who will take a random person from the street and make him their co-founder. This is very bad. In fact, we conducted a small analysis of the data in Y Combinator and found that these random co-founders always bring 100% failure, 100%.



You need a common shared story . You want someone who is good in his business as you know, with whom you know that you can work and with whom you must. Many times in the course of a startup, the expected estimates of the line fall below the x-axis. And now it is irrational to continue. But if you have a joint history and connection with someone, you will continue anyway, because you do not want to let your friend down. It is very important. You want to choose for dedication.



Decisiveness is the most important value in a co-founder that I have ever been able to determine. And this is not what most people are looking for. Startups are very, very difficult. Purposeful people achieve the desired. In startups, the main thing is not to give up. When we talk to our best founders, they say something like “I always deal with it,” “I never give up,” and these are properties that, in fact, work. This is not the picture that Dustin showed in the style of the movie “Mind Games”, writing equations on the window. It is just persistent perseverance. And you keep trying, and ultimately it works. This should be the co-founders. When I think about co-founders, I tell people to first consider value, then professional suitability and, finally, certain skills. I think many people go in the opposite order. They think like this: I need a co-founder who knows javascript, and x, and y. And you, in fact, want to meet a person who would meet your expectations, especially regarding dedication.



You want someone with great potential and professional suitability. And then you think about certain skills. You want someone humble and unintelligent. Someone asked Dustin about what changed in startups from 2004 to 2017. My answer to this question is that now there are many more people than before that they want to start startups for the wrong reasons. They want to do it because it's cool. Such people would go into investment banking in 2004. You want modest and unintelligent people who are ready to do whatever it takes. And they do it because they want to create this thing. They have an idea they can't let go. In this course, we have five lectures dedicated to the product, since all you have to do is make a wonderful product.







The only thing I want to mention right now is what you need to consider when you think about the product you want to build. It is much more important to have a small number of users who love you than many users who just like you. And almost all startups do not understand this. In the end, of course, you want to have many users who are very fond of your project. But this is almost impossible to achieve. In practice, you have two choices. You can delve into the narrow sphere and have a small number of users who will love you. And then you can figure out how to attract more and more such users and expand the application of the product. Or maybe there are a lot of people who have used your product once or twice, they kind of liked it and you are trying to figure out how to get them involved again with time.







With great confidence, I can say that you want to start with a small number of users who really love you. Almost all great companies have products that are created that way. Think about the ones you use in life, about products that are so good that you do not hesitate to tell about them to your friends. Products that are so good that if they were closed, you would have written a complaint to the company. That's what it really means to love a product.



A good indicator of this is storage and frequency of use. In fact, I think it is very important to understand that you should not track the growth and the number of users in the early stages of a startup. You just have to keep track of how often they use it, we will have a lesson on scorecards later. You need to learn how to qualitatively analyze your scorecards and say to yourself: “Is this the user I save and who uses my product often? How can I compare this with other products in this area? ” This is a very good early indicator of users who love you. But it is still better if they, without hesitation, advise their friends to purchase your product. But that's not the main point. Nothing but a great product will save you.



We will talk about many other different things in this course and they are all significant. But if you do not have this, if you do not make a wonderful product, then nothing will come of it. You need several users to create a truly wonderful product. You cannot do this in a vacuum. You need people with whom you can talk and by whom you can iterate. You need to find a small number of users to help you build this great product.







And one of the most common clichés in all tips about a startup is talking to your users. I learned that not all people understand what this means. Most people will say, “oh, I have to talk to my users,” and they call their user and say, “Hello, is this Sam, do you like my product?”. And the user says: "Yes, I like it, it is good." People usually don't want to upset you. And you say “oh, great,” and hang up. This is what most founders do when I advise you to communicate with users. This is not what I mean.



Emmett Shir, who will later be one of the lecturers, is very good at interviewing users and he will tell you about it in detail later. But you need to get to the bottom. And remember, people will be too cute with you. You need to find out exactly what they like so much. You need to see how they use it. You need to try to find out if they are doing something that seems strange to you because they are trying to achieve something else? You should ask them if they recommended your product to anyone else? If not, why not? Have you already paid me? If not, why not? What is required for this? You need to get to the truth and talk about the special characteristics, the things that are used as something else. You need to talk about those times when they stopped using your product and started using some other product. Top level questions will not help you here. As for the users, everyone thinks that they will launch the site, tell about this pair of people and things will go uphill. But this is not what usually happens.



There are four main strategies to help you win the first hundred users. I will go through them, from the best to the worst. You can write to people you already know and ask them to be your customers. You can offer them all the favors that come to your mind. You can offer this to someone with whom you took a course, someone with whom you were friends at school. If this is a paid product, you must go on the attack. This is important, remember, people will be inclined to fulfill your requests, and they will be too nice talking to you. So if this is a paid product, ask them to be your customers.



Another strategy is to research people who you think will use your product and then write to them and ask them to try it out. Conversion rates are low here, about 2%, 3%. Therefore, you will need to do this with a lot of people. But you can send letters and say, "Hey, I just made a new product, it would be great if you tried it." Most people want to be helpful. And probably will. You can use social networks, Hacker News, forums, press, whatever. If this is your growth strategy, you need to think of a way to make it lasting; it should not be just one big bang that everyone will quickly forget. Most people who do this understand that once it worked, and they call the journalist and say, “Hey, would you not write about me again?”. And the journalist asks:



- Has anything changed?



- No, but I really need users, please write about me.



The journalist will still say no.



Air BnB is an example of a company that has been successful thanks to a long process. They did crazy things. They had one spectacular public statement after another. They sent reporters huge boxes of oatmeal, so that they could again sit at the desk. And the mind was able to make this process long. But it is difficult.



And finally, the laziest and least impressive thing we can do is just buy ads on Facebook or Google and send people to your site. I do not recommend it. I don't know startups that started well this way. I included it in the list because it is an idea that many people are trying to follow. I want to end my speech by talking about building a great company before answering a few questions.



We have already talked about this before. Getting to know your users is extremely important. The best founders themselves were engaged in customer support, they visited their users. They sat in their office if they could. In the case of AirBnB, they lived with them. You want to know your users very well. They have a short cyclical plan. The cycle here is this: talk to the client, understand the pain point, build a product that appeals to it, put it in front of the user, ask him, see what he will do with the product and then repeat the cycle. This cycle is about how to iterate and improve your business. The law of complex growth is that if you can make your product 2% better after each iteration of the cycle, and you have a chance to use the iteration cycle every four hours or every four weeks, and you do this after a course for several years, then you are all find yourself in completely different places.







Make one of your main goals the building of the fastest company performing the iteration the world has ever seen. You want to have a long-term commitment.Most companies do not do this, most companies, especially if they are trying to create a light company, think within two or three years. Such things always require much more time, somehow it is almost always a 10-year project if it is successful. And if you think so from the very beginning, you will make very different and much more correct decisions.



I think this is the only arbitrage opportunity that remains on the market. Almost no one makes long-term commitments in their new project. And if you do, you will think differently. You will hire other people and succeed. Speaking of hiring, be content with little until things go uphill. I think this is somewhat bimodal. In the early stages, when you experiment and move in zigzags, you want to be like a fast little boat, and you want to be able to drastically change the whole company. You cannot do this if you have a big company.



Money is spent on the side and this is another problem. The company's broad capabilities generally decrease with the square of the number of employees. Therefore, you want to remain a very small company until you are sure that things are going uphill. As soon as things go uphill, you can become a very big company. And in fact, you need to become such a company. As soon as you switch to large-scale mode, you want to become a very large company as quickly as possible and with great people on board. Because now you do not want to be a boat, you want to be an aircraft carrier, you want to be an armadillo. And you already do not care that you can not turn around as quickly as before. You just want to roll everything in the asphalt. You want to be either in one mode or in another, and you will understand.



At that moment, when users literally beg you to give them your product, and at that moment, when you are sure that you have a great product that adapts to the market, then you can expand the company. When you reach this stage, beware of the temptation to hire mediocre people.







Linnet Khosla, who will later speak here on the course, has a saying that I love. It sounds like: “the team you build is the company you build ”. This, in fact, so. I did not realize this for a very long time. If you put together a team of great people, and you have a product that people love, you will have more than 90% chance of success. Both are very difficult to do, and these are independent variables, but do not ignore the point about the command.



The best CEOs I know spend a lot of time recruiting and retaining their talent. Tell me, how much time did you spend on it?



- Approximately 40-50%.



40-50%! This is Dustin Moskovits, he does not need to do anything that he does not want to do, and he decides to spend half of his time recruiting and retaining employees. If Dustin can do it, you probably should do it too. Every chief executive officer I met has an excuse about why they spent only 5% of their time on team building. This is always a very good reason, but such companies always tend to fail. Invest in this money. Continuous execution. This is a topic about which we will talk a lot. But you need not stop and keep moving forward. And you need to do everything perfectly. And you need to properly consider all the details. You need to be very careful about every experience that a client has with your company.



There is a book called The Score Takes Care of Itself, read it. She is very good. It is about how important it is to properly take into account all the details and just inexorably move forward as quickly as you can. Startups are about not giving up to the extent that most people do not have a good intuitive understanding. One of the best companies in the YC group, he applied seven times before taking it. Most people, if you refuse them six times, will not come to you in the seventh. This is a variant of what happens in startups all the time; you will be knocked down again and again and again. It’s like the last time you were pushed, you think that you don’t have the strength to rise ... And then you suddenly succeed. This is what you subscribe to when you create a startup. Remember that if it's a 10 year marathon,you have a duty towards your caregivers to take care of yourself. Some people are sitting at a startup all night long. They don't care about their health well. They do not sleep. They do not maintain a personal relationship.



It's true, startups are a bad choice for a balance between work and life. There are always posts about how I changed the world with my startup, working only 2 hours a day and doing kitesurfing the remaining time. For some reason, these people are always not one of those who have a great influence. They just talk a lot. Startups are very difficult. You have a duty to yourself, to the team, to investors to take care of yourself and not to neglect your health, your well-being and everything else ... your life, your personal relationships. And then just work. You do not have to sort things out on the first day. But most of the most successful startups I was lucky to have participated in, did it rather quickly ... In the first year or in the first two years they define the main task for themselves. That is the task that makes you join them,this task moves them, moves them as founders.



The media writes about them. And even if you start with a project that just interests you and solves problems in your life, you have to start that way. Remember that at some point, you should have a clear goal. You must become a great preacher for this mission. Another skill that is not imposed on this version of the slides is that you have to be a great conversationalist. You need to bring information to other people in an accessible way, to think clearly, this is your clear task. This is what will convince people to help you. So you tune your idea for a huge list of characteristics. This huge company and all those people who love your product. Okay.It took me longer than I expected. I have about two minutes left to answer questions, if you have any.



- I have been always interested in. If you have two people you can hire. One is very passionately interested in what you create, but he lacks the necessary skills. The other is doing very well what you are not strong at, but not so much interested in your idea. Who should you choose?



“And so, you need to choose who to hire.” One is very passionate about your idea and valuable, but not suitable due to the lack of good skills. The other one has excellent skills, but is not particularly interested in your idea. First of all, we take into account the value of the employee, then professional suitability and only then certain skills. If you can get a pretty smart employee who shares your views and your goal and believes in what you do, then the skills he can learn. This is the truth that never let me down.



- How to learn to come up with good ideas?



- How to learn to come up with good ideas? First, practice a lot and tell people about your ideas. And be prepared for what they say your idea is terrible. I think good ideas are not solo work. You want to find a group of smart people that you can throw your thoughts at and say, “Hey, I noticed that it was awful. What can we do about it? You do not just sit in the room and do not write with a white marker on the window the ideas that came to your mind.



Good ideas come because you communicate with people.



You have smart friends and colleagues, and you solve a problem together, think over ideas. I would say, notice the problems in life, even if you do not have a solution, just discuss the problem and try to think of something. Something else. Ideas are very fragile. When you find this particular group of people with whom you can discuss ideas, you want people who do not immediately criticize the raw, unformed idea. You want people who will tell you, “Well, yes ... But what if we try to do something else.” You do not want people who will tell you: "That sounds silly." You want people who will tell you: “This sounds crazy and is unlikely to work, but imagine what kind of furor it will do if it does work.” You need a person with this attitude. And then how can we figure out how to bring to life what you want? I would say notice the problemsGet the people with whom we can discuss them. Do you have something to add? Ok, go on. One more question.



- It revolves around fundraising. How do you know it's time to start a fundraiser?



- How to understand that it's time to start raising money? We will have a whole lesson dedicated to this. But in general, if you can raise money and it’s easy ... If people desperately want to give you money on good conditions, maybe this is a good time to accept it. Another question, of course, is whether you need money? When you need money, you have to take it, regardless of the conditions that you offer. In general, you want to make progress that justifies the funding you need. When you have enough progress and you need money, because you can easily raise money at this moment, then this is the best time to start fundraising. But again, this is a difficult question. We will have a whole lecture on it. All right, one more.



- How do you decide when to switch from search mode and switch to risk mode?



- How to decide when to switch from a state where you just sit back, trying to get an excellent product that would take root in the market, to a state where you are really expanding the company? You will understand. Everyone is always interested in how to understand that this is the right moment. If you run around the office 80 hours a week, tear your hair out, and people love your product so much that you don’t have time to produce it fast enough, then this is the very moment. I have never met anyone who does not understand it at this moment. Good.On Thursday, we will have a lesson on the financial mechanics of a startup .



And thank you very much.



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Translation: Diana Sheremyeva

To be continued





Full video: It turned out the new video . Who wants to help with the translation - write.







Source: https://habr.com/ru/post/326210/



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