Lecture 20 - Later-stage Advice (Sam Altman)

yeah all right all right uh good afternoon and welcome to the last class of how to start a startup so this is a little bit different than every other class every other class has been things that you should be thinking about in general at the beginning of a startup um and today we're going to talk about things that you don't have to think about for a while in fact you shouldn't but since I'm not going to get to talk to most of you uh again before you get to sort of post product Market fit stage

I wanted to just give you the list of things that you need to think about as your startup scales and the list of the things that usually uh Founders fail to make the transition on so these are the topics we're going to talk about but again um all of these things are things that are not writing code or talking to users which means with a few exceptions that I'll try to note you can ignore them until after you have product Market fit most of these things for most companies become important between months 12 and 24

but it's really more about stage anything else these are things that usually hit around 25 people uh and definitely post product Market fit so just write these down somewhere and look back at them when you get there so the first area we're going to talk about uh is management at the beginning of a company um there is no management and this actually works really well before 20 or 25 employees most companies are structured with everyone reporting to the founder it's totally flat and that's really good and that's what you want um and at that stage

that is the optimal way um for product that's the optimal structure for productivity but the thing that tricks people is that when when lack of structure fails it fails all at once and so what works totally fine at 20 employees is from Zer to 20 employees is disastrous at 30 and so you want to be aware that this transition will happen and you don't actually need to make the structure complicated in fact you shouldn't um all you need is for every employee to know who their manager is and every and there should be exactly one

and and every manager should know who their direct reports are you want to ideally cluster people in teams that make sense of course but the most important thing is that there's just clear reporting structure uh and that everyone knows what it is and if you want to make changes to it uh people understand how to make changes or to hire someone Clarity and simplicity are the most important things here um but failing to do it is really bad so because it works in the early days to have no structure at all and because it sort

of feels cool to have no structure many companies are like we're going to try this crazy New Management Theory and have no structure um what you want to do is innovate on your product and your business model um management structure is not where I would recommend trying to innovate so uh don't make the mistake of having nothing but don't make the other mistake of having something super complicated a lot of people fall into this trap where they think it's like you know people feel cool if they're someone's manager and if they're just an employee they

don't feel cool so people come up with these convoluted circular matrices management structures where you report to this person for this thing and this person for that thing and this person for that thing but you know actually this person reports to you for this thing um that's a mistake too so don't don't try to innovate here this is the first instance of an important shift uh in companies or in in in the Founder's job before product Market fit your only job that matters is to build a great product or your number one job to build

a great product um as the company grows and at about this you know 25 or so employee size um your main job shifts from building a great product to building a great company and it stays there for the rest of your time and this is probably the biggest shift in being a Founder that ever happens there are four failure cases we see all the time as Founders become managers um so I want to talk about the four most common ones the first one is being a to hire senior people in the early days of a

startup hiring senior people is usually a mistake you just want people that get stuff done um and and the willingness to work hard and aptitude matters more than experience as the company starts to scale and about this time when you have to put in place a basic management structure it is actually valuable to have senior people on the team you know Executives that have built companies per and almost all founders after the first time they hire a really great executive and that executive takes over big pieces of the business and just makes them happen the

founder says wow I wish I had done that earlier um but everybody makes this mistake and it waits too long to do this so don't don't be afraid to hire senior Executives um the second mistake is hero mode so um I will use the example of say someone that runs the customer service team someone runs the customer service team um they want to lead by example this starts from a good place it's it's the extreme of leading by example it's saying you know what I want my team to work really hard rather than tell them

to work hard I'm going to set an example and I'm going to work 18 hours a day um and I'm going to show people how to get a lot of tickets done but then the company starts growing also they have the normal discomfort of assigning a lot of work to other people so the company starts growing and the ticket volume keeps going up and now they have to do like 19 hours a day and 20 hours a day and it's just obviously not working but they won't stop and hire people because they're like if I

stop even for one day we're going to get behind on tickets the only way to get out of hero mode in this case is to say you know what we're going to get behind on tickets for 2 or 3 weeks cuz I'm going to go off and I'm going to hire three more support team members and I've calculated based off of our growth rate that this is going to last this long and next time I'm not going to make the same mistake I'll get ahead of it and higher again um but you actually have to

make a trade-off you actually have to say you know what I need to hire more people and we're going to get behind other stuff um that is the right answer the wrong answer is to stay in hero mode until you burn out which is what most people do third mistake bad delegation most Founders have not managed people before and they certainly haven't managed managers and so the way that uh the bad way you delegate is you say hey employee um we need to do this big thing you go off and research it come back to

me with all the data and the tradeoffs I'll make a decision and tell it to you and then you'll go off and implement it um that's how most Founders delegate and that does not make people feel good and it certainly doesn't scale uh a subtle difference but really important is to say hey you're really smart that's why I hired you you go off here are the things to think about here's what I think but you make this decision I totally trust you um and let me know what you decide that's the delegation that actually works

um because I think because Steve Jobs was able to get away with the former um and make every decision himself and people just put up with it and every founder thinks they're the next Steve Jobs um a lot of people try this but but I for 99.9% of people the second method here works a lot better and then the fourth area is just a personal organization one um when you are working on product you don't actually need to be that organized in terms of how you run the company and how you talk to people what

they're working on but if you failed to get your own personal organization system right where you can keep track in some way of what you need to do and what everybody else is doing and what you need to follow up with them on um that will come back to by you so developing this early as the company begins to scale is really important um two other things that we hear again and again from our Founders they wish they had done earlier um and that is simply writing down how you do things and why you do

things um these two things the how and the why are really important in the early days you just tell everyone employee when you're like sitting around having lunch or dinner you know this is how we think about Building Product this is how we push to production you know this is how we handle customer support whatever um as you get bigger you can't keep doing that uh and if you don't do it someone else is just going to say it but if you write it down and put it up on a Wiki or whatever that every

employee reads um you as the founder get to basically write the law and and if you write this down it will become law on the company and if you make everyone read this as the company hires 100 and then a thousand employees people will read this and say all right that's how we do things um if you don't do it it'll be like random oral tradition whatever the hiring manager or their best friend that they make their first week in the at the company tells them so writing down um how you do things and the

why the why is the cultural values Brian chesky talked about this really well um every founder I know wishes that they'd written down both of these the how and the why earlier um to just establish it as the company grows and then this becomes what happens I think it's one of the highest leverage things you can do that that people don't all right next area HR HR is another thing that most people correctly ignore in the first phase of a startup because again it's not writing code it's not talking to users but it's a huge

mistake to continue to ignore it and the reason that I think most Founders ignore it is they have in their mind this idea of like TV sitcom HR you know awfulness but it doesn't have to slow you down actually it speeds you up most Founders will say out of one side of their mouth people are most important asset and on the other side we don't want any HR so what they mean is we don't want HR we don't want like the bad kind of TV HR what good HR means is a few things a clear

structure which we already talked about you know a path for people about how they can um evolve their careers most important one of the most important things is performance feedback um again this happens organically early on people know how they're doing as the company gets to 25 30 45 people um that gets lost and it doesn't have to be complex it can be super simple but there should be a way that it happens and it should be frequent you know people need to hear pretty quickly how they're doing and it should tie you know if

they're doing badly to a way you get them out of the company or if they do doing well it should there should be a clear path to how this ties to compensation um and that's the next thing uh in the early days of a startup people's compensation is whatever they negotiate with the founder and it's all over the place as you grow it feels hopelessly corporate but it really is worth putting in place these compensation bands so a mid-level engineer is in this range a senior engineer is in this range here's how you move from

this to this and it keeps things really fair uh someday everyone will find out everyone else's comp um if it's all over the place it will be a complete meltdown disaster if you put these bands in place early it will at least be fair it will also save you a lot of crazy negotiation um one thing that I think is really important when it comes to HR is equity um most people get this right for the early employees they give a lot of equity but I think you should continue to give a lot of equity

all the way through and this is one place that your investors will always give you bad advice I think not YC but all other investors give bad advice here most do um you should be giving out a lot of equity to your employees uh now this dutes everyone right this dutes you as the founder and the investors equally um for some reason Founders usually understand this is good investors are very shortsighted and don't want to dilute themselves um so they'll like fight you over every Equity Grant but we've seen a lot of data at YC

now and the most successful companies and the ones where the investors do the best end up giving a lot of stock out to employees year after year after year um so I tell Founders like you should think about you know for the next 10 years you're going to be giving out 3 to 5% of the company every year because you just get bigger and bigger so the individual grants get smaller but in aggregate it's a lot of stock and I think this is really important to do if you value your people you should be doing

this um specifically you need to do this with refresher grants um and you should get a uh a plan in place for this early you know I think you never want an employee in a place where they vested three out of their four years of stock and they start thinking about leaving so you should always stay in front of people's vesting schedules um and you know have a plan early where you have professional grants in place there are lot of new structures that people have been using here um I personally like sixy Year big grants

but six years of vesting uh because I think these companies just take a while to build um there's pyramid vesting where you back weight someone's Grant so in year four they get a lot more of the vesting than year one um there's a concept different names for it but something like continuous forward vesting where people's grants are automatically re-up every year at the same number of shares whatever you decide uh get an option management system in place at about this point uh the normal way people do this is just someone keeps an Excel spreadsheet um

I have seen mistakes that have cost employees or companies tens of millions of dollars because they didn't get this right uh so there's really good option Management systems or software and you should get those in place around this point the other sort of HR stuff to touch on um there are a bunch of rules that change around 50 employees uh common examples are that you have to start sexual harassment training and diversity training um there's a bunch of others as well but just put a little pin in your mind that when you cross 50 employees

there's a new set of HR rules that you have to comply with um monitor your team for Burnout again it's up to product Market fit it's just a Sprint now becomes a marathon at this point you actually don't want people to work 100 hours a week forever you want them to go on vacation you want them to have new challenges and do new things um and if you let the whole company get burned out all at once that that is often a company ending thing this is also a good time to put in place a

a hiring process um another thing that most Founders regret is is they don't hire as soon as everything is working I think you should hire a full-time recruiter um if you do this too early that's bad because you'll hire too fast and that usually implodes but uh most Founders get behind the ball on this the there are a lot of other sort of just hiring process tips uh for example I think most companies even until they get up to say three or 400 employees should announce every offer on some internal mailing list or something before

they make it um because like half the time you do that someone in the company will know something good or bad about that employee uh and the companies that I know that have instituted this have been really happy um also a good time to have a program in place to ramp up employees so when someone starts you know what does their first week look like how do they get how do they get spun up how do they learn everything they need to learn are they going to have a buddy that's going to think through them

um that's going to help them think through kind of everything about the company here is one that you actually do need to think about before the 12 to 24 month Mark which is diversity on the team um the most common place this comes up honestly is people that hire you know all guys on their engineering team for the first 15 or 20 people um and at that point you get a culture in place that sort of takes on a life of its own and most Founders that I've spoken to that have made this mistake regret

it and they wished they had hired some diversity of perspective on the team earlier on um engineering teams are not the only place where it comes up but that's where you see it the most often and if you get this right early uh you'll be able to grow the team much more quickly over over the long term the other thing to think about is what happens to your early employees so a common situation that happens is the company evolves past the early employees um you know the company so like you hire an engineer who's a

really great engineer but then as the engineering team grows you need a VP of engineering the early engineer wants to be the VP of engineering um you can't do that and and but you don't want the early employee to leave they're an important important part of the culture they know a lot people love them uh and so I think you want to be very proactive about this you know you want to like think about what's the path for my first 10 or 15 employees going to be as the company grows and then just talk to

them about it very directly be upfront you know I want like sit them down and say I want to talk about sort of where you want to see your career go inside of this company all right so company productivity um um this is something that you don't need to think about in the early days because small teams are just sort of naturally productive most of the time um but as you grow it uh the productivity I think goes down with the square of the number of employees if you don't make an effort because it's sort

of one of these like connections between nodes every pair of people adds communication overhead um and so if you don't start thinking about the systems that you're going to put in place when the company is 25 to 50 people to stay productive as you grow um things will grind to a halt faster than you can imagine the single word that matters most I think to keep the company productive as it grows is alignment um the reason companies become unproductive is people are either not on the same page and you know don't know what the same

priorities are or they're actively working against each other which is obviously worse but if you can keep the entire company aligned in the same direction um you'll have one well over half of the battle uh and and the way to start with this is just a very clear road map and goals um everyone in the company should know what the road map for the next three or six months or a year depending on where the company is in its life cycle looks like um you know a classic test that I love to give is if

I walk into a company getting beginning to struggle with these scaling issues um I'll ask the founders like if I walked around and pulled 10 random employees and asked them what the top three goals for the company are right now would they all say the same thing and 100% of the time the founder says yes of course they would and then I go do it and 100% of the time uh no two employees even stay the same three top three goals in order um and the founders can never believe it because they're like well I

announced it in all hands like three months ago what our goals were going to be and how can they not remember um but it's really important to keep reiterating uh the the message about the road map and the goals and almost no founder does this enough and if you do it you know the company will say you know all right these are our goals we understand them we're going to get them done and I'll self-organize around that but if people don't know what the road map or the goals are it won't happen we've already talked

about figuring out your values early but I want to reiterate that because that also will really help the company make the right decisions if everyone knows what the framework to decide is they'll make hopefully the same decisions if they're smart people um you want to continue to be run by great products and not process for its own sake this is a fine fine line um because you do need to put some process in place but you never want to put process in place that rewards the process the focus has to always be on great product

one easy way to do this that a lot of companies try is they just say we're going to ship something every day and if you do that uh you know there's at least a continued focus on delivery and then transparency and Rhythm and how you communicate are really important um most Founders wait way too long on these but having a management meeting every week of just the people that report directly to the founder the CEO critical um all hands meetings not quite sure how often is optimal for those at least once a month where you

go through the results and the road map with the entire company really important and then you know doing a plan every quarter of what we're going to get done over the next three months and how that fits into our goals for the year also becomes really important I put offsides up there because I don't think people do those nearly enough um a surprising number of the successful companies we've been involved with do a lot of offsites where they'll take their best people for a weekend to a cabin in the woods or somewhere and just talk

about what do we want to be when we grow up what are our most important things to be doing what are we not doing that we should be doing but get people out of the office and out of the day-to-day um everyone I know that does those thanks they're well worth the time so the goal in all of this productivity planning is that you're trying to build a company that creates a lot of value over a long period of time and the long period of time is what's important here you can avoid all of this

and just like with the authority of the founder make sure the company ships a great next version but that won't work for version 10 it won't work for version 11 um I I really believe that the single hardest thing in business is building a company that does repeatable innovation and just has this ongoing culture of Excellence as it grows if you look at the examp examples of this um most companies fail here most companies do one great thing where the founder just pushes to get it done um and then don't innovate that well on follow-on

products and it really takes Founders that think about how I'm going to do this second thing this really hard thing to get something like an apple that can turn out great products for 30 or 40 years or longer um all right these are super tactical mechanics this is this is definitely to just put on a list and remember these things for later um all right in the early days people basically ignore all accounting and they have like maybe if they're lucky a shoe box full of receipts they certainly don't have anything that looks like a

financial report uh this is a good time to get it in place you know when things are working say month 18 or whatever you can do this with an outsourced person just say you know what we want like to get our books in order we want to start getting audits every year um we want to start a relationship with an accounting firm easy to do definitely worth it um this is also a good time to collect your legal documents um because it's easy to fix things now so if you actually assign someone to go through

and collect every agreement the company has ever signed uh then when you're a landlord tries to screw you out of your lease and no one can find the lease which happens like half the time somehow um someone will be able to find it also you're almost certainly missing something you know some employee didn't sign their P or whatever um and you'll find it now it's easy to fix now it gets really hard to fix like in the middle of your next round of financing so again this is time to bring like a little bit of

the order to to chaos um FF stock is a special class of stock for Founders that the founders can sell in a later round without messing up the common stock valuation it used to be that most people set this up right when they started the company uh Founders fund sort of popularized this which is why it's called aath stock um but it became a really bad signal right Founders that were obsessed with their own personal liquidity when the company had nothing turned out to like fail most of the time and so investors learned that if

Founders pushed on this in the seed round was a very very bad sign um most Founders don't actually want to sell stock until the company is worth like a billion dollars or something like that so I think you can actually safely set this up after things start working in the next financing round and then you can sell it two 3 four years down the road but it's a good thing to remember by about the time you get to the B um IP trademarks and patent uh actually just IP and trademarks so you have 12 months

after you announce something if you want to patent it and if you miss that window it's very hard to do uh so 11 months after you launch or first publicly talked about you're doing is a good time to file provisional patents um we recommend people just file provisional patents all that does is like hold your place in line at the patent office and it gives you another year to decide if you want a patent something or not it only costs about $1,000 uh it takes way less effort than a full patent and most of the

time you'll know uh whether or not you need the full patent a year later but if you just do this one step you'll at least have the option it's also a good time to file trademarks for uh the US and major International markets again if you don't do this at this stage most people end up regretting it and while you're at it a good time to grab all the domains um fpna good time also I think to think about someone to start doing fpna um I think most companies don't end up realizing where the knobs

on their financial model are until far too late um and I think it turns out that if you have someone build a really great model at the business um and by really great apparently uh Roff B who was the PayPal CFO and built their fpna model um the top the like the top sheet of his spreadsheet was, 1500 lines um just as a level of the detail people build these to but you can really optimize the business and understand it at a level that I think most people Totally Miss most people don't hire someone like

this until they're many hundreds of employees I think it's worth hiring earlier another thing that I think is worth hiring earlier um that almost no one does is a full-time fundraiser let's say you hire someone like really really great and their full-time job is to raise money for the company um you hire them after your B round and you say you know what by the time we raise our C round we want the valuation to be double what it would have been otherwise you almost certainly get better results than if you hire an investment banker

or someone else uh if it's just someone internal to the company and you end up paying way less money and take like literally half the delution so I think this is one of these like slightly non-obvious optimizations that people just fail to make um tax structuring so this is another thing um most once things are working uh it would be worth you spending a little bit of time thinking about how you set up the tax structure for the company I confess I don't know a lot about the details here because I just find it personally

really boring but like somehow if you assign all the IP to like some Corporation in Ireland that licenses it back to the US Corporation you end up paying like no tax no corporate tax um but I know you you can only do that like relatively early on and this ends up being a huge issue for companies that don't do it that compete with companies that do do it uh wants their big public companies so that's what worth doing um a lot of people throughout the class have talked about your own psychology as a Founder um

here's what they haven't said it gets worse not better um as the company grows you continue to oscillate the highs are better but the lows keep getting worse and you you really want to think about this early on and just be aware that this is going to happen uh and try to try to manage your own psychology through the expanding swing that it's going to go through another thing that happens as you begin to be successful as you go from being someone that most people rooted for kind of the underdog to someone that a lot

of people start hating on and you know you see this first in Internet commenters who will be like I can't believe this shitty company raised money it sucks like awful um and it only bothers you a little bit but then like journalists that you kind of care about start writing this and it just goes on and on um this also will go on and on as you get more and more successful and you just have to make peace with this early um but if you don't it will bother you all the way through um this

is also a good time to start thinking about how long of a journey this is going to be very few Founders think longterm um most Founders think kind of a year in advance and they think that you know what in 3 years I'm going to sell my company and either I'm going to become a VC or sit on the beach or something um because so few people make an actual long-term commitment to what they're building uh the ones that do have a huge Advantage they're they're in a very rarified class and so this is a

good time to like sit around with your co-founders and decide you know what we're going to work on this for a very long time and we're going to build a strategy that assumes that we're going to be doing this for the next 10 years um just thinking that way alone uh I think is probably a very high leverage thing you can do for success take vacation um another common thing that we see is Founders will run their business for three or four years uh without ever taking you know more than a day of vacation um

and that works for like a year or two years or something like that it really leads to nasty burnout if you don't do it losing focus is another uh way that Founders get off track I actually think this is a symptom of burnout when you get really burned out on running the business you want to do easier things or sort of more gratifying things you want to go to conferences and have people tell you how great you are you know you want to do all these things that are not actually building the business and the

most common post YC failure case for the companies we fund is that they're incredibly focused during YC on their company and then after they start doing a lot of other things you know they they advise companies they go to conferences whatever um focus is what made you successful in the first place um there are a lot of reasons people lose focus but fight against that really really hard this is the special case of focus um as you start to do well you will start to get a bunch of um potential acquires sniffing around and it's

very gratifying and you're like wow I could be so rich and I'd be so cool and m&a negotiations feel really fun um this is one of the biggest killers of of companies is that they entertain acquisition conversations you you distract yourself you get demoralized if it doesn't happen um if an offer does come in it's really low you've already like mentally thought that you're done and so you take the offer um as a general rule don't start any acquisition conversation unless you're willing to sell uh for a pretty low number don't ever just check it

hoping that you're going to have the one Miracle High offer if that's going to happen you'll know because they'll just make you a big offer before you even meet them um but this this is a big company killer and then just as a reminder to everybody the thing that kills startups at some level is the founders giving up um so sometimes you should quit but if you mismanage your own psychology and you quit when you shouldn't uh that that is what kills companies I mean that is that is the sort of final cause of death

for most of these startups and so if you can manage your own psychology in a way that you don't quit don't get to a place where you need to quit um or give up on the startup you'll be in a far far better place so marketing a PR is something that we tell companies to ignore for a long time um everyone thinks in the early days that the Press is going to be what saves them we tell them all the time it doesn't work that way it's definitely true you know press is not what's going

to save your startup but as you start to be successful um this is something that the founders themselves need to spend time on so once your product is working switch switch from not caring about this to caring about it a little bit and the two most important things for the founder to do the founders to do uh figure out the key messaging yourselves uh never Outsource this to you're how of marketing or PR firm you Founders have to figure out what the message of the company is going to be and once you set that it

kind of sticks very hard to change this once the Press decides how they're going to talk about you um the other thing is getting to know key journalists yourself um PR firms will always try to prevent you from doing this because they need to have a reason to exist uh and so they're like we're going to handle the relationship with a journalist we'll just bring you in for interviews no journalist wants to talk to a PR Flack ever they're so much more happy to just hear from a Founder uh I think the biggest PR hack

you can do is to not hire a PR firm um just pick three or four journalists that you develop really close relationships with that like you that understand you that you get um and then you contact them yourself they will cover every story you ever give them and they'll actually pay attention and get to know you and care about the company um this is so much better than the normal strategy of having a PR from blast 200 contacts that never read their emails with every piece of news um so this is something that I think

is important to start doing um this is also the time in a company when business development starts to matter um and so in the early days you can basically ignore anything that would be like doing deals except maybe fundraising and sales um um you know this is the time when they're important and and everything or many things that you do like even fundraising it falls under the the category of doing deals so there are here's my one minute crash course on this um there are five points that I think are important to understand here we've

talked about this a lot nothing will Ser nothing will matter if you don't build a great product so assume that you've done this before you go try and get anyone to do anything with you um um developing a personal connection with anyone you're trying to do any sort of big deal with is really important um for whatever reason most Founders fail to do this or many Founders fail to do this um but no one wants to feel like they're this transactional thing that you're using them to get distribution for your product or to raise money

or whatever and so figuring out some way to actually care about this person and care about what you're doing with them and not view them you have to in your own mind not just view them as this one-off transaction you have to actually care about and what they're going to get out of this um competitive Dynamics uh so this is like basic principle of negotiation most Founders learn this the first time in fundraising but it actually matters for everything um the way you get deals done the way you get good terms is to have a

competitive situation you know if you don't do this deal with party a you're going to do with party B it's not always an option but it usually is and this is like the single thing that makes deals happen and makes deals move Tyler talked about persistence the last lecture so I want to hit on that again too much other than to say uh you have to go beyond your comfort point here most of the time as a founder and then the fifth point is you have to ask for what you want um this is another

thing I still have trouble with this and certainly most other Founders we do have you know if you want something in a deal just ask for it most of the time you know you won't get left out of the room and you might get it uh but you have to be like at some point you actually have to say you know this is what i' would like you to do even if it feels aggressive or an overreach or whatever so I'm going to close uh this part of the talk with an image um one of

the Airbnb Founders Drew this on like a business card or something for another founder that was starting a company and then I saw it once and took a picture of it because I thought it was such a good summary and what he had tried to draw here was the Y combinat process as he remembered it um and I love it cuz it's like so simple and it looks so doable when it's written on a business card um but you're trying to find product Market fit uh you know you're trying to build a product and you're

trying to close the gap between those two gears the only way to do that is to go off and meet the people um you cannot do this without getting really really close to your users um and then he drew this graph that is sort of on a whiteboard at YC and gotten kind of like a one of the YC rights of Passage but that's the the graph of how adoption goes for a new company so you launch in the Press you get a huge spike it falls off to nothing uh at some point at least

one point things look like they're going to completely die and kind of dip below the x-axis they recover a little bit you have this long long long chough of Sorrow before things work in airbnb's case uh it was a thousand days before the graph started ticking upward you have these Wiggles of false hope uh and then finally finally finally things start to grow 3 years later um so starting to Startup ends up being this very long process it is um you know it can be really rewarding it's definitely long but it is doable um and

that's what I love about that drawing so with that I think I have about 10 minutes left um I can answer questions on this or anything else in the course that we've covered if anyone has some yes you talk about diversity being important but an earlier speaker said diversity wasn't important and you should just hire people that are very much like you and that you can trust and to so here is the uh the question is how do you square the device of diversity being important with earlier speakers saying uh you want people that are

very similar um the the difference what you want is you want diversity at backgrounds but you don't want diversity of vision like where companies get in trouble is when they have people that think very differently about what the company should be doing or don't work well together um you don't want that you do want to hire people that you know and that you trust and that you can work with um but if everyone on the team comes from exactly the same background you you do end up developing somewhat of a monoculture which often causes problems

down the road not always some companies have been successful with that um so what what we tell people is hire people that you know and that you've worked with before um but try to try to hire people that are complimentary and align towards the same goal not people that are exactly the same uh because you just get a a better skill set yeah so what are some examples of ways to think about um how to keep track uh productivity systems so the one I use uh which I actually think works really well is I keep

one piece of paper with my goals for sort of a 3 to 12 month time frame and I like that every day and then separately I keep one one page for every day of my short-term goals for that day and so if I need to do something in like a week I just flip forward seven pages and write it down and then I also keep a list of every person and what they're working on and what I need to tell them and what I need to talk to them about what we talked about last time

so every time I sit down with someone I kind of have the full State and a list of things for that person that works really well yes so we've talked a lot about startups growing but most startups fail any advice for kind of how to fail gracefully yeah yeah great question how to fail gracefully so most startups fail um and silic and Valley almost goes too far in how much it loves failure um failure still sucks you should still try not to fail and this whole like thing of like ah failure is great I I

don't agree with um but it will happen to most people most of the time and it's a very forgiving environment as long as you are upfront about it and ethical and don't let anyone get into a bad situation so if you're failing first of all you should tell your investors and second of all you should not totally run out of money what you don't want is a blowup with a bunch of you know debts that the company owe and everyone you know showing up to work one day and the door being locked um you'll know

when you're failing you'll know when the compan is things just aren't going to work and you should just tell your investors like hey sorry this isn't going to work no one will be surprised like I expect to lose my or I'm willing to lose my money on every investment I ever make I know that happens most of the time and the winners pay for it you know still with a factor of 100 so it's okay um no one people will be very understanding and supportive um but you want to tell people early you don't want

to surprise them and you want you don't want to like let your employees get shocked one day when they another job you know you you you want to shut the company down in a graceful way help them find jobs make sure you give them two or four weeks of severance payment so that they're not suffering a cash problem um all of this stuff is pretty important yes how many immigrant Founders have you seen in y combinator how many immigrant Founders have we seen in y combinator um in the last batch I think it probably went

up for this next batch in the last batch 41% of the founders we funded were born outside the US um from 30 different countries so it's yeah pretty big percentage and from the Val what do you think are other good places to start a startup apart from the valley where do I think are other good places to start a startup um well I still think the valley is the best by a very significant margin but I think it's finally maybe beginning to weaken a little bit because the costs have just gotten so out of control

um to be clear if I was going to start a company I still wouldn't think about it I would still pick Silicon Valley and I think if you look at the data of companies over the last few years Vala wins by a lot but Seattle La um lots of places outside the US I think all of these make sense what um I hesitate to make recommendations there because I haven't spent enough time in the cities to really have an intuitive feel uh but like I mean you know as well as I do the common ones

people talk about startup hubs and I just I can't make a personal recommendation there so when did the founders should start to think about hiring a professional CEO senior guys when should the founders think about hiring a professional CEO never um you if you look at the most successful companies in Tech um they are run by their Founders for a very long time um sometimes forever uh and sometimes they even hire a professional CEO and then realize that that is not going to like build a great company and so like Larry pagee came back to

be CEO again um I think if you don't want to be the long-term CEO of a company you probably shouldn't start one I'm not totally sure about that I think there are exceptions but generally um that the transition I talked about today of you go from building a great product to building a great company um being a Founder you know for nine of the 10 years is going to be about building that great company and if you're if you're not excited about doing that I think you should think hard about about it yes what are

some of the most common and most alarming warning signs you should be looking for when you're trying to make this Shi from building a great product to building a great company what are the the most common mistakes um to when you're shifting towards building a great company I think I went through most of them here um I try to put everything in here that I see people mess up most of the time yes is there a way to get involved in the wcom community before getting accepted is there a way to get involved with YC

before um getting funded no and intentionally not um actually I'll say the one thing you can do is if you work at a YC company um and then later apply I think that probably like well not probably that definitely if you get a good recommendation from those Founders will help with YC uh so you know working at a YC company helps um but there's not much you can do to help and that's intentional like there is no pre- startup in the way that there is Premed you should just focus on whatever you're doing and then

when you start a startup there are things like YC and others that are structured to help you um most of the founders we fund we don't know at all before we do it you know you don't you really don't need to get to know us or get involved we're we're all good that way yes there was a statistic you're saying now harder to get into why comp than getting get into Harvard so I'm curious the criteria that you use pickup startups does it change over time or the question is what what criteria do we use

to pick startups and has it gotten harder uh or has it changed um you know we the two things that we need to see are are good Founders and a good idea um and without both of those we we won't fund a company um but that hasn't changed like that that has always been the case um the applicant pool to YC has grown quite a bit but most of or a lot of the growth is you know people that shouldn't be starting startups anyway probably that are just doing it because it's sort of the cool

thing now um so you know if you're really passionate about an idea and the idea is good and you're you know smart and you get things done and you're executing and I still think you have a a very reasonable shot YC even though the headline number is bigger yes there's a c a certain Market that you're really excited about but don't necessarily know a lot about yet is there certain path you recommend or ways to sure um if there's a market that you're excited about but don't know a lot about yet what should you do

um two schools of thought on this one is to just jump right in learn it as you go um that's worked a lot of times the other is to go work at a company in the space or do something in in the market for you know a year or two years um I lean slightly towards the second but as long as you're willing to really learn and really study and really get uncomfortably close to your users either case will work um and I don't even think it's that much of a disadvantage I I I think

all things being equal I would go spend a couple of years learning about it in detail but I don't think you have to Yes uh I have a question related to why yeah so I think y did a fantastic job in promoting entrepreneurship in C Valley in fact as Institutional Investor actually I invested three of the YC in the past few years but however right now seems like uh you know you guys has 180 companies a year dumping into the market and looks like uh it's hard to follow each of Y company anymore do you

think this will create some uh you know uh some people will work away from St because they cannot follow such a bu B for companies and us you know in the old days the company has to be very polished and the fund has to be think over and over about idea the cons we see in San Road and then they got F but right now since the young easy to access the capital all right so I think the question is do I think investors are going to fund less YC companies as we grow um no

definitely not like certainly the trend in this is the other way we have more and more investors saying that you know half their portfolio is not YC companies and they look forward to the day where it's 3/4 um no I don't think that's a problem at all I think that is like so not on my top 100 problem list the opposite of that maybe all right one more question yes when should a group of Founders raise a seed fund or the first when should a group of Founders raise some seed money um this is a

great question uh I think that I think that in general it's nice to wait until you have the idea figured out and initial signs of promise before you raise money um raising money puts some pressure on the company some time pressure uh and once you've raised money you can't be in this exploratory phase indefinitely um you and you end up having to rush and so like if you haven't raised money and your idea is not working you can you know like flail around and pivot until you really hit on the thing that's working but if

you've raised money and your idea doesn't work you're in this like oh moment and you have to Pivot and you pivot to whatever the first vaguely plausible idea is and that's bad um so I think if you can wait to raise any outside Capital more than say like1 or $200,000 if necessary but ideally not even that um until things are working or or at least pointed in the direction of working um you're way better off all right thank you all very much this was fun