Lecture 2 - Team and Execution (Sam Altman)

uh before I jump into today's lecture I wanted to answer a few questions people emailed me saying they had questions about the last lecture they we don't have time for so if you have a question about what we covered last time um I'm welcome to answer it now starting with you uh it should be on can you not hear me no maybe you can ask them to turn it on uh hopefully it'll come on anybody else yes uh so one question that was submitted online was uh how do I identify if a market has a

fast growth rate now and also for the next 10 years all right so the question is how you identify markets that are growing quickly um the good news about this is this is one of the big advantages students have um you should just trust your instincts on this um older people have to basically guess about the technologies that are sort of that young people are using right because young people get older and they become the dominant Market um but you can just watch what you're doing and what your friends are doing and um you will

almost certainly have better instincts on fast growing markets than anybody older than you and so the answer to this is just trust your instincts think about what you're using more think about what you're using what you're seeing people your age begin to start using um that will almost certainly be the future maybe I can do one more question in the last lecture before we start um this isn't really the last lecture but another question online is uh how do you deal with burnout while still being effective and remaining effective yeah sure um so the question

is how you deal with burnout as a Founder uh this the answer to this is just that it sucks and you keep going um unlike a student where you can sort of like throw up your hands and say you know what I'm really burned out I'm just going to like get bad grades this quarter uh one of the hard Parts about running a startup is that it's real life and um you just have to get through it uh the canonical advice is like go on vacation or whatever um that never works for found is sort

of all consuming in this way that's very difficult to understand so what you do is you just keep going um you rely on people uh it's like really important and founder depression is the serious thing and you need to have the support network um but the way through burnout is just to address the challenges address the things that are going wrong and you'll eventually uh feel better all right so last week we our last lecture we covered the idea in the product um and I want to just emphasize again that if you don't get those

right none of the rest of this is going to save you um today we're going to talk about how to hire uh and how to execute hopefully you don't execute the people you hire um sometimes uh so first I want to talk about co-founders um co-founder relationships are among the most important in the entire company um and everyone says that you need to watch out for tension Brewing among co-founders um and address it immediately and that's all true and certainly in YC's case the number one cause of early death for startups is is co-founder blowups

but for some reason a lot of people treat choosing their co-founder with even less importance than they put on hiring um don't do this this is one of the most important decisions you make in the life of your startup and you need to treat it as such and for some reason students are really bad at this they just pick someone they're like I want to start a business you want to start a business let's start a startup together um there are these like co-founder dating things where you're like hey I'm looking for a co-founder we

don't really know each other let's start a company and this is like crazy um you would never hire someone like this and yet people are willing to choose their business partners this way um it's really really bad and choosing a random co-founder or choosing someone you don't have a long history with choosing someone that you're not friends with so that when things are really going wrong you have this sort of past history to bind you together um usually ends up in disaster we had one YC batch where nine of about 75 companies added on a

random co-founder between when we interviewed the companies and when they started and all nine of those teams fell apart in the next year uh the track record for Founders that don't already know each other is really bad um a good way to meet a co-founders in college uh if you're not in college and you don't know a co-founder the next best thing I think is to go work in an interesting company if you work at Facebook or Google or something like that um it's probably almost as co-founder rich as Stanford uh it's better to have

no co-founder uh than to have a bad co-founder but it's still bad to be a solo founder um I was just looking at the stats here before we started for the top and I may have missed one because I was counting quickly but I think that for the top 20 most valuable YC companies um all of them have at least two Founders uh and we we probably funded a rate of something like one out of 10 solo teams uh so best of all founder you know co-founder you know um better than that or not as

good as that but still okay solo founder random founder you meet uh again students do this for some reason really really bad uh so as you're thinking about co-founders and people that could be good um there's a question of what you're looking for right and at YC we have this public phrase um and it's relentlessly resourceful and everyone's heard of that and I think that really is a very good description for what you're looking for with co-founders um you definitely need relentlessly resourceful co-founders um but there's a more colorful example that we share at the

YC kickoff um Paul Graham started using this and I've kept it going um so you're looking for co-founders that need to be unflappable tough they know what to do in every situation they act quickly they're decisive they're creative they're ready for anything um and it turns out that there's a model for this in in pop culture and it sounds really dumb um but it's at least very memorable and we've told every class of YC this for a long time uh and I think it helps them um and that model is James Bond um and again

this sounds crazy but it it will at least stick in your memory and and you need someone that behaves like James Bond more than you need someone that is you know an expert in some particular domain as I mentioned earlier you really want to know your co-founders for a while um ideally years this is true for early hires as well but incidentally more people get this right for early hires than they do for co-founders um so again take advantage of school um in addition to relentlessly resourceful you want a tough and a calm co-founder um

there are all the obvious things like smart but everyone knows that you want a smart co-founder uh most people don't prioritize tough and calm well enough especially if you feel like you yourself aren't you need a co-founder who is um if you're not Technical and hopefully most people in this room are you really want a technical co-founder there's this weird thing going on in startups right now where it's become popular to say like you know what we don't need technical Founders we're going to hire people we're just going to be great managers um that doesn't

work too well in our experience you know software people really should be starting software companies media people should be starting media companies um so and in a YC experience two or three co-founders seems to be about perfect um one obviously not great five really bad four works sometimes but uh two or three I think is what to Target okay the second part of how to hire um try not to so one of the the weird things that you'll notice if you start a company is that everyone asks you how many employees you have and this

is the metric people use to sort of Judge how real your startup is and how cool you are um and if you say you have a high number of employees they're really impressed and if you say you have a low number of employees then then you sound like sort of this little joke um but actually it sucks to have a lot of employees and you should be proud of how few employees you can have lots of employees ends up with things like a high burn rate means you're losing a lot of money every month complexity

tension slow decision making the list goes on but it's nothing good so you want to you want to be proud of how much you can get done with a small number of employees um many of the best YC companies have had phenomenally small number of employees for the first year sometimes none besides the founders um they really try to stay small as long as they possibly can at the beginning you should only hire when you have a desperate need to later you need to learn how to hire fast and scale of the company but in

the early days uh the goal should be not to hire not too hire and one of the reasons this is so bad is that the cost of getting an early hire wrong is really high um in fact a lot of the companies that I've been very involved with that have had a very bad first hire in the first three or so employees never recover from it it just kills the company um Airbnb spent five months interviewing their first employee before they hired someone and in their first year they only hired two people um before they

hired a single person they they wrote down a list of the cultural values that that they wanted any Airbnb employee to have one of those was that you had to bleed Airbnb and if you didn't sort of agree to that they just wouldn't hire you um as an example of how intense Brian chesky is he's the Airbnb CEO um he used to ask people before he hired them at Airbnb if they would take the job if they got a medical diagnosis that they had one year left to live um he wanted them to be that

committed later he decided that was like a little bit too crazy um and I think he relaxed it to 10 years but last I heard he still asks that question um but like you know these hires really matter these people are what go on to Define your company and so you need people that believe in it almost as much as you do and it sounds like a crazy thing to ask but he's gotten this culture of extremely dedicated people um that come together when the company faces a crisis uh and when the company faced a

big crisis early on everyone in the company lived in the office uh and they ship product every day until the crisis was over one of the remarkable observations about Airbnb is if you talk to any of the first say I don't know 40 or 50 employees they all feel like they were part of the founding of the company uh and this is really hard to get right and this is really rare um but by having an extremely high bar I'm hiring slowly and making sure everyone believes in the mission you can get that okay so

let's say you know you've listened to the warning about not hiring and now you absolutely have to um when you're in this hiring mode your job is it should be your number one priority to get the best people just like when you're in product mode that's your number one priority and when you're in fundraising mode fundraising is your number one priority um one thing that Founders always underestimate is how hard it is to recruit you know you think you have this great idea everyone's going to kind of join um but that's not how it works

to get the very best people um they have a lot of great options right and so it can easily take a year to recruit someone it's this long process and you have to convince them that your mission is the most important of anything that they're looking at this is another case of why it's really important to get the product right um before anything else the best people know that they should join a rocket ship um by the way that's my number one piece of advice if you're going to join a startup pick a rocket ship

um pick a company that's already working uh and that the you know not everyone yet realizes that but it's you know you know because you're paying attention that it's going to be huge and and again you can usually identify these um but good people know this right and so good people will wait and they want to see that you're on this breakout trajectory before they join one question that people asked online this morning is how much time you should be spending hiring um the answer is either like zero or 25% you're either not hiring at

all or it's probably your single biggest block of time um in practice like all these books on management or whatever say that you should spend 50% of your time hiring but the people that give that advice it's rare for them to even spend 10% themselves 25% is still a huge amount of time um but that's really how much you should be doing once you're in hiring mode um okay so if you compromise and hire someone mediocre you will always regret it uh we always like to warn founders of this no one really feels it until

they M make the mistake the first time um but it can poison the culture mediocre people at a big company cause some problems they don't usually kill the company a single mediocre hire in the first five will often in fact kill a startup A friend of mine has a sign up in the conference room that he uses for interviews and he like positions the sign so the candidate is looking at it while they're interviewing and it says that mediocre Engineers do not build great companies um yeah it's true um it's really true you can get

away with it uh in a big company right because people just sort of like fall through the cracks but but every person in a startup sets the tone um so if you compromise in the first you know say five 10 hires um it might kill the company and you should think about that for everyone you hire like will I bet the future of this company on the single hire um and that's a tough bar at some point in the life of the company when you're bigger you will compromise on a hire um there will be

some pressing deadline uh or something like that you will still regret it um but this is the difference between theory and practice and we're going to have uh later speakers talk about what this H what to do when this happens but in the early days you just can't screw it up um sources of candidates this is another thing that students get wrong a lot um the best source by far for hir in is people that you already know um and people that other employees in the company already know most great companies in Tech have been

built by personal referrals for the first at least 100 employees and often many more um most Founders feel awkward about calling everyone good that they ever met and asking their employees to do the same but you'll notice that if you go work at Facebook or Google one of the things they do in your first few weeks is an HR person sits you down and like beats out of you every smart person you've ever met no matter how like you think you are to be able to recruit them um and these personal referrals really are the

trick to hiring so you have to like go Way Beyond your comfort zone here um another tip is to look outside the valley it is brutally competitive to H Engineers here um but you probably know very good people living elsewhere in the world that would love to work with you another question that Founders ask us a lot about is experience and how much that matters um the short version here is that experience matters for some roles and not others um when you're hiring sort of like you know someone that is going to run a large

organization of your company experience probably matters a lot um for most of the early hires you make in a startup experience doesn't matter very much uh and you should go for aptitude and believe in what you're doing most of the best hires that I've ever made in my entire life have never done that thing before um so it's really worth thinking like is this a role where I care about experience or not most of the time you don't in in the in the early days um there are three things that I look for when I

hire people um are they smart do they get things done and do I want to spend a lot of time around them and if I get an answer if I get ended up with a yes for all three of these um I almost never regreted the hire it's almost always worked out you can learn a lot about all three of these things from an interview but the very best way is by working together so ideally it's someone you worked with in the past and in which case you probably don't even need an interview um if

you haven't then I think it's way better to work with someone on a quick project for a day or two before hiring them um you'll both learn a lot they will too and most uh first-time Founders are very bad interviewers but very good at evaluating someone after they've worked together so one of the pieces that we give advice one of the pieces of advice that we give at YC is try to work together on our project rather than just doing an interview um if you are going to interview which you'll probably do as well you

should ask specifically about projects that someone has done in the past um you'll learn a lot more than you will with brain teasers for some reason young technical Founders love to ask brain teaser questions rather than just ask what someone's done really dig into projects people have worked on and call references uh that is another thing that first-time Founders like to skip um you want to call some people uh that these people have worked with in the past and when you do you don't just want to ask like oh how was so and so like

you really want to dig in like is this person in the top 5% of people you've ever worked with with what specifically did they do would you hire them again like why why why aren't you trying to hire them again um you really have to press on these reference calls um another thing that I've noticed from talking to a lot of YC companies is that good communication skills tend to correlate really well with hires that work out um I used to not pay attention to this we're going to talk more about why communication is so

important in an early startup if someone is difficult to talk to if someone cannot communicate clearly uh it's a real problem in terms of their likelihood to work out also for early employees um you want people that have somewhat of a risk-taking attitude uh you you generally get this or they wouldn't be interested in a startup but now that startups are sort of more in fashion um you you want people that actually sort of like a little bit of risk if someone's choosing between like McKenzie and joining your startup um very unlikely that person is

going to work out at the startup uh you also want people who are maniacally determined and that is slightly different than having a risk tolerant attitude so you really should be looking for both by the way people are welcome to interrupt me with questions um as stuff comes up there's a famous test from Paul Graham called the animal test um and and the idea here is that you should be able to describe any employee as an animal at what they do um and I don't think that probably translates out of English very well but um

you know you need Unstoppable people uh you want you want people that are just going to get it done um Founders that end up being really happy with their early hires usually end up describing these people as the very best in the world at whatever they do Mark Zuckerberg once said uh that he tries to hire people that a he would spend time with socially and be that he'd be comfortable reporting to if the roles were reversed um this strikes me as a very good framework you don't have to be friends with everybody um but

you should at least enjoy working with them and if you can't have that you need at least deeply respect them um but again the if you don't want to spend a lot of time around people uh you should sort of trust your instincts on that while I'm on this topic of hiring uh I want to talk about employee Equity Founders screw this up all the time um I think that is a rough guideline you should aim to give 10% of the company to the first 10 employees um they have to earn it over four years

anyway and if they're successful they're going to contribute way more than that uh they're going to increase the value of the company by way more than that um and if not then they won't be around anyway so for whatever reason Founders are usually very stingy with Equity to employees and very generous with Equity to investors and I think this is totally backwards um I think this is one of the things that Founders screw up the most often you know employees will only add more value over time investors sort of like write the check and then

despite a lot of big promises don't usually do that much sometimes they do um but but your employees are really the ones that build the company over years and years so I believe in like fighting with investors to reduce the amount of equity they get um and then being as gener generous as you possibly can with employees um the YC companies that have done this well the YC companies that have been super generous with Equity to early employees um in general the most successful ones that we funded um all right so one thing that Founders

forget is that after they uh after that they hire employees they have to retain them I'm not going to go into a huge amount of detail here because we're going to have a full lecture on this later um but I do want to talk about it a little bit because Founders get this wrong so often um you have to make sure that your employees are happy and feel valued this is one of the reasons that big Equity grants are important um people in the excitement of joining the startup don't think about it much but as

they come in day after day year after year um if they feel like they've been treated unfairly that will really start to on them uh and resentment will build but more than that learning just a little bit of management skill um which first time CEOs are usually terrible at uh goes a long way um one of the speakers at YC this summer uh who who is now extremely successful but struggled early on and had his team turn over a few times someone asked him what his biggest learning was and he said that uh it turns

out you shouldn't tell your employees they're up every day unless you'd like them all to leave because they will um but but as a Founder this is this like very natural instinct right you think you can do everything the best and uh it's easy to tell people when they're not doing it well so learning just a little bit here will prevent this like massive team Churn it also doesn't come naturally to most Founders to really praise their team um it took me a while to L this too you have to let your team get all

the credit for everything good that happens um and you take responsibility for the bad stuff you have to not micromanage you have to like continually give people new areas of responsibility these are not the things that most Founders think about um I think the best thing you can do is be aware that as a first-time founder you are likely to be a very bad manager and try to overcompensate for that uh Dan pink talks about these three things that motivate people to do great work autonomy autonomy Mastery and purpose um I never thought about that

when I was running my company but I've thought about it since and I think that's actually right and I think it's worth trying to to think about that um it also took me a while to learn to do things like one-on ones and give clear feedback all of these things that firsttime CEOs just don't do uh until they get burned a few times but maybe maybe I can save you from doing that all right and the last part on the team section uh is about firing people when it's not working um no matter what I

say here this is not going to prevent anyone from doing it wrong and the reason is that firing people is one of the worst parts of running a company um actually in my own experience I think it is the worst uh every firsttime founder Waits too long everyone hopes that an employee will turn around but the right answer is to fire fast when it's not working out um it's better for the company it's also better for the employee but it's so painful and so awful that everyone gets it wrong the first few times um in

addition to firing people who doing bad at their job you also want to fire people who a uh creating an office politics and be who are persistently negative um the rest of the company is always aware of employees doing things like this and it's just this huge drag it's completely toxic to the company uh again this is an example of something that might work okay in a big company although I'm still skeptical but will kill a startup so I think you need to watch out for people that are yes you balance fast and making other

employees feel like they're secure even if they screw up sometimes you don't want them to feel like they're out the door the so the question is how do you f balance firing people fast and making early employees feel secure um the answer is the when an employee is not working it's not like they screw up once or twice um anyone will screw up once or twice or more times than that uh and you know you should be like very loving not take it out on them like be a team work together uh if someone is

getting every decision wrong that's when you need to act and at that point it'll be it'll be painfully aware to everyone it's not a case of a few screw-ups it's a case where every time someone does something you would have done the opposite yourself you don't get to make their decisions but you do get to choose the decision makers and if someone's doing everything wrong uh just like a consistent thing over like a period of many weeks or a month you'll be aware of it this is one of those cases where in theory it sounds

complicated to be sure what you're talking about and in practice uh there's almost never any doubt it's the the difference between someone making one or two mistakes and just constantly screwing everything up or causing problem or making everyone unhappy is is painfully obvious the first time you see it yes when should co-founders decide on the equity split great question when should co-founders decide on the equity split uh for some reason I've never really been sure why this is a lot of Founders a lot of co-founders like to uh leave this off for a very long

time you know they'll even sign the incorporation documents in some crazy way so that they can wait to have this discussion this is not a discussion that gets easier with time um you want to set this uh ideally you know very soon after you start working together um and it should be near equal um if you're not willing to give someone your co-founder you know like an equal share of the equity uh I think that should make you think hard about whether or not you want them as a co-founder um but in any case you

should try to have the ink dry on this before the company gets too far along like certainly in the first number of weeks yes experience be okay uh but then how do you know if it's going to be crippling and you fire without waiting to um so the question is I said that inexperience is okay um how do you know if that's going to you know if someone's going to scale past not scale up to a role as things go on and later become crippling um people that are really smart and that can learn new

things can almost always find a role in the company as time goes on you may have to move them into something else something other than where they started um you know it maybe that you hire someone to lead the engineering team that over time can't scale as you get up to 50 people and you give them a different role um really good people though can almost always find some great place in the company I have not seen that be a problem too often what if your relationship with your founder or Founders breaks down over time

ready to split and everything what's the best way all right so the question is what happens when your relationship with your co-founder falls apart um we're going to have a session on mechanics at the near the end of the course but here is the most important thing that Founders screw up which is every found every co-founder you yourself of course has to have vesting um basically what you're doing with co-founder vesting is you're pre-negotiated what happens if one of you leaves and so the normal stance on this in Silicon Valley is that it takes four

years let's say you split the equity 50/50 it takes four years to earn all of that um and the clock doesn't start until one year in so if you leave after one year you keep 25% of the equity if you leave after 2 years 50 and and on and on like that um if you don't do that and if you have a huge Fallout and one founder leaves early on with half the company uh you have like this dead weight uh of the on your Equity table and it's very hard to get investors to fund

you or to do anything else so number one piece of advice to prevent that uh is to have investing on the equity um we pretty much won't fund a company now where the founders don't have vested Equity uh vesting Equity because it's just that bad the other thing to do uh is as soon as problems come up in the relationship between the co-founders which happens to some degree in every company um talk about it early don't let it just sit off there and fester if you have to choose between hiring an employee that's not ideal

and losing your users to another compor what will you do if you have to choose between hiring a suboptimal employee uh and losing your customers to competitor what do you do um if it would be one of the first five say employees of a company uh I would lose those customers um I just I think the damage that it does to the company um you know you don't want to it's better to lose some customers than kill the company um later on I might have a slightly different opinion but it's really hard to say in

the general case how about one more question then I'll keep going yes uh what's your experience with co-founders who aren't working in the same location I'm going to get to that later the question is what about co-founders that aren't working in the same location um don't do it uh I am skeptical of remote teams in general but in the early days of a startup uh where communication and speed outweigh everything else um for whatever reason video conferencing or calls just don't work that well the data on this is look at the say like 30 most

successful software startups of all time and try to point to a single example where the co-founders were in different locations it's really really tough um all right we'll skip a little bit of this all right so now we're going to talk about execution um execution for most Founders is not the most fun part of starting a company but it is often the most critical um most people that start a company think that they are signing up to have this brilliant idea and you know then they're just going to like be on magazine covers and go

to parties um but but really what it's about more than anything else what what what being a Founder means is is signing up for this yearslong grind on execution and you can't Outsource this um the way to have a company that executes well is to execute well yourself everything in a startup gets modeled after the founders whatever the founders do becomes the culture so if you want a culture where people work hard and pay attention to detail and focus on the customer and are Frugal um you have to do it yourself there's no other way

you cannot hire a Co and have them you know do this while you go off to conferences uh the company just needs to see you as like this maniacal execution machine as I said in the first lecture there's like a hundred times at least more people with great ideas than people that are willing to put in the effort um to execute them well ideas by themselves are not worth anything only executing well is what what adds value or what creates value a big part of execution is just putting in the effort um but there is

a lot you can learn about how to be good it and so we're going to have I think three classes that just talk about this uh so the CEO people have asked me a bunch of times like the jobs of a startup CEO and there are probably more than five but you know here are five that come up a lot in the early days um the first four I think everyone thinks of is CEO jobs set the vision raise money evangelize the company to people you're trying to recruit existing employees Partners press customers everybody hire

and manage the team um but the fifth one is that setting the execution bar and this is not something that most Founders get excited about or think about themselves doing but I think is actually one of the critical CEO roles and no one but the CEO can do this um execution gets divided into two two key questions one can you figure out what to do and two is can you get it done um so I want to talk about two parts of getting it done assuming that you've already figured out what to do um and

those are focus and intensity uh so so focus is critical um one of my favorite questions to ask Founders is what they're spending their time and their money on um this reveals almost everything about what Founders think is important one of the hardest parts about being a Founder is that there are 100 important things competing for your attention every day um and you have to identify the right two or three work on those and then ignore or delegate or defer the rest and a lot of these things that that Founders think are really important you

know interviewing a lot of different law firms going to conferences recruiting advisers whatever um they just don't matter right and what really does matter uh varies with time but it's an important piece of meta advice you need to figure out what the two or three most important things are and then just do those and you can only have two or three things every day because everything else will just come at you you know fires the day and if you don't get really good at setting what these two two or three priorities are every day um

you'll never be great at actually getting stuff done this is really hard for Founders right um Founders are people that get excited by starting new things unfortunately the trick to Great execution is to say no a lot you know you're saying no 97 times out of 100 um and most Founders find that they have to make a very conscious effort to do this most startups are not nearly focused enough they work really hard maybe but they don't work hard on the right things and you'll still fail um one of the great and terrible things about

a starting a startup is that you get no credit for trying you only get points when you make something at the market wants so if you work really hard on the wrong things uh no one will care so then there's this question of how do you figure out what to focus on um each day and this is where it's really important to have goals most good Founders that I know uh at any given time have a small number of overarching goals for the company everybody in the company knows could be things like ship a product

by the state you know maintain this growth rate get this certain engagement rate hire for these key roles get this deal done but anybody could tell you in the company every week what are our what are our key goals and then everybody executes based off of that the founder really does set the focus um whatever the founder cares about whatever the founders think are the key goals um that's going to be what the whole company focuses on and and the best Founders repeat these goals over and over far more often than they think they should

need to they put them up on the walls they talk about them in one-on ones All Hands meeting every week um but it keeps the company focused one of the keys uh to focus and why I said I think co-founders in different places struggle is that you can't be focused without really great communication um even if you only have say four or five people in a company a small Communication Breakdown is enough for everybody to be working on slightly different things um and then you lose focus and the company just scrambles I'm going to talk

about this a little bit more later um but growth and momentum are something you can never lose focus on uh growth and momentum are what a startup lives on uh and you always have to focus on maintaining these you should always know how you're doing against your metrics you should have a weekly review meeting every week and you should be extremely suspicious if you're ever talking about we're not focused on growth right now we're not growing that well right now but we're doing this other thing you know we don't have we don't have a timeline

for when we're going to ship this cuz we're focused on this other thing we're doing a Rebrand whatever um almost always a disaster so you want to have the right metrics and you want to be focused on growing those metrics and having momentum um don't don't let the company get distracted or excited by other things um a common mistake is that companies get excited by their own PR it's really easy to get PR with no results um and it feels like you're actually really cool but in a year you'll still have nothing and at that

point you won't be cool anymore and you'll just be talking about these articles from a year ago that oh you know like the Stanford students start this new startup it's going to be the next big thing and now you have nothing and that sucks um and then as I mentioned already be in the same space uh this is like I think this is pretty much a non-starter remote co-founding teams is just really really hard it slows down the cycle time more than anybody ever thinks it's going to the other piece um besides Focus for execution

is intensity um startups only work at a fairly intense level um a friend of mine says that the secret to Startup success is Extreme focus and extreme dedication you know you can have like a startup in one other thing you can have a startup in a family but you probably can't have many other Hobbies um startups are not the best choice for work life balance and that's sort of just the sad reality um there's a lot of great things about a startup but this is not one of them um they are all consuming in a

way that is difficult to explain you you generally need to be willing to outwork your competitors the good news here uh wow that's hard to see um is that a small amount of extra work on the right thing makes a huge difference one example that I like to give is thinking about the viral coefficient for a consumer web product um how many users how many new users each existing user brings in if it's 099 the company will eventually Flatline and then die U and if it's 1.01 you'll be in this happy place of exponential growth

forever um so this is just one concrete example of where a tiny bit of extra work is the difference between success and failure and we talk to successful Founders they tell stories like this all the time you know just outworking their competitors by a little bit was what made them successful um so you have to be really intense you know this this only comes from the CEO this only comes from the founders uh one of the biggest advantages that startups have is execution speed and you have to have this Relentless operating Rhythm um Facebook has

this famous poster that says move fast and break things um but at the same time they manage to be obsessed with quality and this is why it's hard it's it's easy to move fast or be obsessed with quality um the trick is that you have to do both at a startup um you need to have a culture where people have very high quality standards for everything the company does but still move quickly uh Apple Facebook and Google have all done this extremely well it's not just about the product um it's about everything they do they

move fast and they break things and they're Frugal in the right places but they care about quality everywhere um you know you don't buy people shitty computers if you don't want them to write shitty code you really have to you do have to set a quality bar that runs through the entire company related to this is that you have to be decisive um indecisiveness is a startup killer mediocre Founders spend a lot of time talking about Grand plans but they never quite make this decision you know they're they're talking about well I could do this

thing that sounds great or I could do this other thing and they keep going back and forth and they don't act um and what you actually need is this bias towards action um the best Founders work on things that seem small but they move really quickly uh they get things done really quickly every time you talk to the best Founders uh they they've gotten new things done in fact this this is the one thing that we've learned best predicts the success of Founders in YC if every time we talk to a team they've gotten new

things done um that's the best predictor we have that the company will go on to be successful part of this is that you can do huge things by in incremental pieces if you just keep knocking down small chunks one at a time in a year you look back and you've done this amazing thing on the other hand if you disappear for a year and you expect to come back with something amazing all at once um it usually never happens so you have to pick these right siiz projects you know even if you're building this crazy

synthetic biology company um most people would say well I have to go away for a year I can't do this incrementally there's almost always a way to break it down into smaller projects um so speed is this huge premium right the the best Founders usually respond to email the most quickly um they make decisions the most quickly they're generally quick in all these different ways um and they just have this do whatever it Tak takes attitude they also show up a lot um they come to you know they come to meetings they come in they

they meet us in person um one piece of advice uh that I have that's always worked for me is they they get on planes in marginal situations um how we doing on time I'll tell a quick story here uh when I was running my own company um we found out that we were about to lose a deal it was sort of this this critical deal from the first big customer in the space uh and it was going to go to the this company that had been around for years before we were um and they had

this like all locked up so we called we said hey we have this better product you got to meet with us they said you know what we're signing this deal tomorrow sorry um we drove to the airport we got on a plane um we were at their office at 6:00 a.m. the next morning we just sat there they told us to go away we just kept sitting there um finally one of the junior guys decided to meet with us um finally after that one of the senior guys decided to meet with us they ended up

ripping up the contract with this other company um and we closed the deal with them about a week later uh and I'm sure that had we not gotten on a plane had we not shown up in person that would not have worked out um and so you just sort of like you show up you do these things you know uh it's when people say get on planes in marginal situations they usually mean it uh well they don't usually mean it literally but I think it's actually good literal advice um all right minutes so uh I'll

skip that part then so I mentioned this momentum and growth earlier uh once more that momentum and growth are the lifeblood of startups um this is the probably in the top three secrets to executing a well um you want a company to be winning all the time if you ever take your foot off a gas pedal things will spiral out of control snowball downwards um a winning team feels good and keeps winning a team that hasn't won in a while gets demotivated and keeps losing so always keep momentum is this prime directive for managing a

startup um if I can only tell Founders one thing about how to how to run a company it would be this for most start software startups this translates to keep growing for Hardware startups it translates to don't let your ship date slip um this is what we tell people during YC and they usually listen and everything is good um what happens after the end of YC is that they get distracted on other things and then growth slows down and somehow after that happens um people start getting unhappy and quitting and then everything falls apart it's

hard to figure out a growth engine because most companies grow in new ways um but there is this thing about if you build a good product it will grow and so getting this good this product right at the beginning is the best way to not lose momentum later if you do lose momentum most Founders try to get it back in the wrong way they give these long speeches about vision for the company and they try to rally the troops with with speeches um but employees in a company where momentum has saged don't want to hear

that um you have to save the vision speeches for when the company's winning when you're not winning you just have to get momentum back in small wins um a board member of mine used to say that sales fix everything in a startup and that is really true so you figure out where you can get these small wins and you get that done and then you'll be amazed how all the other problems in a startup disappear uh another thing that you'll notice if you have momentum sag is that everyone starts disagreeing about what to do fights

come out when a company loses momentum uh and so a framework for that that I think works is that when there's disagreement among the team about what to do then you ask your users and you do whatever your users tell you and you have to remind people like hey stuff's not working right now we don't actually hate each other um we just need to get back on track and everything willon work and if you just call it out if you just acknowledge that um you'll find that things get way better to use a Facebook example

again when Facebook's growth slowed in 2008 uh Mark instituted a growth group they worked on very small things to make Facebook grow faster um all of these by themselves seemed really small but they got the the curve of Facebook back up um it quickly became the most prestigious group there um Marcus said that it's been one of Facebook's best Innovations um according to friends of mine that worked at Facebook at the time it really turned around the dynamic of the company and it went from this thing where everyone is feeling bad uh and momentum was

gone back to a place that was winning so a good way uh to to keep momentum is to establish an operating rhythm in the company early where you ship product and launch new features on this regular basis uh where you're reviewing metrics you know every week with the entire company um this is actually one of the best things your board can do for you um boards add value to business strategy only rarely um but very frequently you can use them as a forcing function to get the company to care about metrics and Milestones um one

thing that often disrupts momentum and really shouldn't is competitors competitors making noise in the Press I think probably crushes a company's momentum more often than any other external Factor um so here's a good rule of thumb don't worry about a competitor at all um until they're actually beating you with a real shipped product uh press releases are easier to write than code um and that is still easier than making a great product so remind your company of this and don't this is sort of a Founders role is not to let the company get down because

of the competitors in the Press um this great quote from Henry Ford that I love um the competitor to be feared is one who never bothers about you at all but goes on making his own business better all the time these are almost never the the companies that put out a lot of press releases um and they bum people out uh should we move on to the second se you know what we'll cover this in a later lecture we'll talk about um Finance deal making and distribution are there any questions okay so on Tuesday Paul

Graham is going to speak uh see you then thank you