Lecture 1 - How to Start a Startup (Sam Altman, Dustin Moskovitz)

Summary

In the CS183B lecture, Sam Altman, President of Y Combinator, and Dustin Moskovitz, co-founder of Facebook and Asana, discuss the fundamentals of starting a successful startup. Altman emphasizes the importance of a great idea, product, team, and execution, while cautioning that startups are not for everyone and require a deep passion for the problem being solved. Moskovitz shares insights on the realities of entrepreneurship, highlighting the commitment, stress, and the necessity of a compelling reason to start a company. They stress that the most successful startups often stem from a strong mission and personal conviction in the value of the idea being pursued.

Takeaways

• 🎓 Sam Altman, President of Y Combinator, emphasizes the importance of a great idea in starting a successful startup, contrary to the popular belief that ideas don't matter.
• 🚀 The first step in building a startup is turning a great idea into a great product; without a product that users love, other efforts are less impactful.
• 💡 The idea for a startup should be broad, encompassing market size, growth strategy, and defensibility, not just the product itself.
• 🔍 Long-term thinking is crucial in startups, and founders should consider the evolution and growth of the market over time.
• 🌟 Startups often start with simple products that are easy to understand and use, which can then be expanded upon.
• 👥 A great team is essential for a startup's success, and the founder's role is pivotal in building and maintaining that team.
• 🛠️ Execution is critical and often more important than the initial idea; a great idea without great execution will not succeed.
• 📈 The script highlights the importance of organic growth through word of mouth, indicating that users love the product.
• 🤔 The decision to start a company should be driven by a compelling need to solve a problem, not just for the sake of being an entrepreneur.
• 💼 The script dispels common misconceptions about entrepreneurship, such as glamour and flexibility, and stresses the hard work and stress involved.
• 💰 Financial reward and impact are significant considerations, but they should be pursued through a startup only if the founder is deeply passionate and well-suited to the idea.

Q & A

What is the primary focus of the CS183B class taught by Sam Altman?

The primary focus of the CS183B class is to teach the 30% of startup knowledge that is generally applicable, which includes a mix of hands-on experience and specific advice tailored to startups, aiming to help students understand and excel in the process of creating a successful startup.

Why did Sam Altman drop out of Stanford?

Sam Altman dropped out of Stanford nine years prior to the class to start a company, which eventually led him to become an investor and later the President of Y Combinator.

How many companies has Y Combinator funded, according to the transcript?

Y Combinator had funded 720 companies at the time of the class lecture.

What are the four key areas that Sam Altman believes are necessary for a startup to succeed?

The four key areas for a startup to succeed are a great idea, a great product, a great team, and great execution.

What is the role of guest speakers in the CS183B class?

The guest speakers, who are involved in creating billion-dollar companies, will teach 17 out of the 20 classes in the CS183B course, providing practical advice and insights based on their experiences.

What is the importance of having a mission-oriented startup idea according to the transcript?

A mission-oriented startup idea is important because it compels the team to work hard, excites people both inside and outside the company, and provides a sense of purpose that can help sustain the business through the long-term challenges of building a successful startup.

What does Sam Altman suggest about the relationship between the startup idea and the market?

Sam Altman suggests that the startup idea should be something that can develop in interesting ways and has the potential to be difficult to replicate. It should also be part of a market that is expected to grow significantly in the future.

Why does Sam Altman emphasize the importance of having a simple product initially?

Sam Altman emphasizes the importance of having a simple product initially because it is easier to make something that users love when the product does one thing extremely well. Simplicity also allows for a tighter feedback loop with users and makes it easier to iterate and improve upon the product.

What is the significance of building something that a small number of users love rather than something that a large number of users like?

Building something that a small number of users love is significant because it is easier to expand from a passionate user base to a larger audience than it is to increase the level of love for a product from mere liking. A product that users love can also lead to organic growth through word of mouth.

What does Dustin Moskovitz emphasize as the best reason to start a startup?

Dustin Moskovitz emphasizes that the best reason to start a startup is when you are so passionate about an idea that you feel compelled to make it happen, and when you believe you are the right person to do it, indicating that the world needs both the idea and your unique contribution to it.

What are some of the common misconceptions about starting a startup that Dustin Moskovitz addresses?

Dustin Moskovitz addresses misconceptions such as the glamour associated with entrepreneurship, the belief that being your own boss means more flexibility, the idea that starting a startup is an easier path to wealth, and the notion that you can have a significant impact and make more money by starting a company rather than joining an existing one.

What advice does Sam Altman give regarding the initial recruitment of users for a startup?

Sam Altman advises to recruit initial users manually, rather than through methods like Google AdWords. He suggests finding a few people who will be good users and getting them to love the product, as they will also likely provide valuable feedback and become advocates for the startup.

What does Sam Altman suggest as the best approach to building a great product?

Sam Altman suggests starting with a simple product that users love, being fanatical about product quality and customer support, and maintaining a tight feedback loop with users to make continuous improvements. He also emphasizes the importance of metrics and being brutally honest with oneself about the product's performance.

What is the importance of thinking about the market and what customers want when starting a startup?

Thinking about the market and what customers want is crucial because it helps ensure that the product or service being developed is something that people are willing to use and pay for. This understanding can provide a significant advantage and is a common oversight among founders, especially students.

Outlines

00:00

📚 Introduction to CS183B and Y Combinator

Sam Altman, President of Y Combinator (YC), introduces the CS183B class, emphasizing that it will cover the 30% of startup knowledge that is broadly applicable. He shares his background as a Stanford dropout turned investor and highlights YC's hands-on approach to teaching startup creation. The class aims to make YC's teachings available to a wider audience, with guest speakers who have created billion-dollar companies sharing their insights. The focus is on startups aiming for hyper-growth, and Altman warns that the advice may not apply to all businesses. He outlines the four key areas for startup success: a great idea, product, team, and execution, acknowledging that even with these, success is not guaranteed due to the significant role of luck.

05:02

💡 The Importance of a Great Startup Idea

Altman discusses the critical nature of a great startup idea, countering the popular belief that ideas are less important than execution. He argues that a strong idea is foundational and that successful companies often start with one, not through pivots. The definition of a great idea includes market size, growth strategy, and defensibility. Long-term planning is encouraged, as is the idea's potential to expand and become more ambitious. Altman stresses the importance of creating a product that is difficult to replicate and warns against derivative ideas that lack compelling novelty. He also emphasizes the value of being mission-driven and the role of passion in sustaining a startup through its challenges.

10:03

🚀 Choosing the Right Market and Idea

The speaker elaborates on the importance of market choice and the evolution of the idea. He advises that the market should be poised for growth and that investors often overlook this in favor of current market size. The ideal market is small but rapidly expanding, with customers desperate for solutions. The speaker also points out the advantage students have in predicting market growth and warns against trying to create a market that doesn't exist. He stresses the need for a clear and concise idea that can be easily explained and understood, and suggests that the best startup ideas are often very different from existing companies or entirely new.

15:05

🛠️ Building a Great Product

The focus shifts to building a great product, which includes all aspects of customer interaction. The speaker stresses that until a great product is built, other concerns are secondary. Successful founders spend most of their time working on their product or engaging with customers. The advice is to create something that users love rather than just like, as it's easier to expand from a product that a small number of users love to one that many love. The speaker also emphasizes the importance of organic growth through word of mouth as an indicator of a great product. He advises starting with a simple product and being fanatical about product quality, customer support, and attention to detail.

20:07

🔄 The Feedback Loop and Metrics for Success

The speaker discusses the importance of establishing a tight feedback loop with users to rapidly improve the product. He suggests recruiting initial users manually and getting close to them to understand their needs and preferences. The speaker also highlights the importance of metrics, advocating for the use of active user growth, activity levels, cohort retention, revenue, and net promoter scores to measure success. He warns against vanity metrics like total registrations and emphasizes the need for brutal honesty with oneself about the product's performance.

25:07

🤔 The Realities of Entrepreneurship

Dustin Moskovitz takes over to discuss the realities of entrepreneurship, debunking common misconceptions and highlighting the true challenges. He addresses the glamorized image portrayed by media and emphasizes the hard work, stress, and commitment required. Moskovitz talks about the responsibilities of being an entrepreneur, the stress of fundraising, and the lack of a balanced life. He also discusses the risks of unwanted media attention and the commitment level expected from founders, noting that leaving a startup is often viewed negatively and can harm one's career.

30:08

💼 The Myth of Entrepreneurial Freedom and Flexibility

Moskovitz challenges the idea of flexibility and freedom that comes with entrepreneurship. He points out that being always on call, the pressure of being a role model, and the relentless drive to work hard can overshadow any perceived flexibility. He also addresses the misconception that entrepreneurs can have a more significant impact and earn more money, using examples from companies like Dropbox and Facebook to illustrate the potential earnings of joining a successful company versus starting one.

35:11

💰 The Financial Reality of Entrepreneurship

The speaker delves into the financial aspects of entrepreneurship, discussing the potential earnings of joining a late-stage company versus starting one. He uses hypothetical examples of 'Uber for Pet Sitting' and 'Uber for Space Travel' to illustrate the varying levels of financial reward based on the scale of the idea. Moskovitz emphasizes that financial reward is often correlated with the impact one has on the world and encourages joining or creating companies with a significant impact.

40:11

🌟 The Best Reason to Start a Startup

Moskovitz concludes by identifying the best reason to start a company: an uncontrollable passion for an idea that the world needs and for which the entrepreneur is well-suited. He shares his personal experience with Asana, explaining how the passion for solving a problem drove him and his co-founder to work relentlessly. He advises that the right idea will feel like it's 'beating itself out of your chest,' and this is the signal that one has found the right entrepreneurial path.

Keywords

💡Startup

A startup refers to a young company that is typically seeking to develop and expand its business model. In the context of the video, startups are the focus of the CS183B class, where the theme revolves around teaching students how to successfully initiate and grow a startup. The script mentions that startups are different from normal companies and emphasizes the importance of having a great idea, product, team, and execution for a startup to succeed.

💡Y Combinator (YC)

Y Combinator is a well-known startup accelerator that provides seed money, advice, and connections to help startups succeed. In the video, Sam Altman, the President of Y Combinator, is teaching the class and sharing insights on how to start a successful company. YC's involvement signifies the practical and hands-on approach to startup education that the class aims to provide.

💡Idea

In the video, 'idea' is a core concept that refers to the initial concept or inspiration for a startup. It is emphasized that a great idea is crucial for a startup's success, and the script challenges the notion that ideas do not matter. The idea encompasses market size, growth strategy, and defensibility, which are all important factors to consider when starting a company.

💡Execution

Execution in the context of the video refers to the act of implementing the startup's idea effectively. It is highlighted that great execution is more important than a good idea, and it is a critical factor in the success of a startup. The script mentions that even with a great idea, without proper execution, a startup will not succeed.

💡Team

Team in the video represents the group of people working together to build the startup. The script mentions that having a great team is one of the four key areas needed for a startup's success. The team's role is pivotal as they are the ones who will carry out the idea and execute the company's strategy.

💡Product

Product in the script denotes the actual good or service that the startup offers. It is one of the four areas emphasized for the success of a startup. The video stresses the importance of turning a great idea into a great product that users love, which is a critical step in building a successful company.

💡Hyper-growth

Hyper-growth, as mentioned in the video, refers to a rapid and extensive increase in a company's size, typically measured by revenue or user base. The advice given in the class is tailored towards individuals aiming to start a business with the goal of achieving this level of growth, eventually building a very large company.

💡Pivot

A pivot in the context of the video is a strategic change in the direction or focus of a startup. The script discusses the common belief that pivots are beneficial, but challenges this by stating that most great companies start with a solid idea rather than a pivot. Pivots are seen as less successful in creating big companies compared to startups that begin with a strong foundational idea.

💡Market

Market in the video refers to the industry or sector in which the startup operates, and it is a critical component of the startup's idea. The script talks about the importance of the market's size and growth, as well as the need for a startup to be part of a growing market to achieve success.

💡Organic Growth

Organic growth in the video is the natural increase in a company's user base or revenue without relying on external factors like advertising or paid promotions. The script mentions that if a startup makes something people love, organic growth will occur through word of mouth, which is a strong indicator of a great product.

💡Mission-oriented

Mission-oriented in the context of the video describes a company that is driven by a strong purpose or goal. The script highlights that the best companies are often mission-oriented, as this helps maintain focus and productivity, and it is a key factor in attracting support and dedication from both the team and customers.

💡Competition

Competition refers to the rivalry between different businesses in the same market. In the video, it is mentioned that very few startups die from competition; instead, most fail because they do not create a product that users love. This suggests that focusing on building a great product is more important than worrying about competitors.

💡Metrics

Metrics in the video are the quantitative measures used to assess the performance of a startup. The script advises startups to ignore vanity metrics like total registrations and focus on meaningful metrics such as active user growth, cohort retention, and net promoter scores, which are better indicators of a product's success.

💡Feedback Loop

A feedback loop in the video is the process of gathering user feedback and using it to make product improvements. The script emphasizes the importance of creating a tight feedback loop for rapid iteration and improvement, which is essential for building a great product in the early stages of a startup.

💡Passion

Passion in the video is described as a driving force behind starting a company. It is mentioned as a key reason for beginning a startup, where the entrepreneur feels compelled to solve a particular problem or bring an idea to life. The script suggests that passion is essential for enduring the challenges of entrepreneurship and for effectively recruiting others to join the cause.

💡Impact

Impact in the video refers to the influence or effect that a startup has on the world. It is discussed in relation to the potential for financial reward and the ability to make a significant difference through one's work. The script suggests that joining an established company can also provide a large impact, especially if it has a massive user base and infrastructure.

💡Equity

Equity in the video represents the ownership stake one has in a company, often translated into potential financial gain if the company succeeds. The script discusses the potential financial rewards of joining a late-stage company versus starting a company from scratch, highlighting that the actual financial benefit depends on the valuation of the company and one's equity share.

Highlights

Introduction to CS183B and Sam Altman's background as the President of Y Combinator and a Stanford dropout.

Y Combinator's experience teaching startup founders and the class's focus on the 30% of advice applicable to all startups.

The significance of having guest speakers who have created billion-dollar companies to provide practical advice.

The importance of focusing on hyper-growth and building a large company for those seeking startup success.

The four key areas for startup success: a great idea, product, team, and execution.

The role of luck in startup success and the importance of excelling in the controllable areas.

The advantages of being young and inexperienced in the startup field.

Why you should only start a startup if you are compelled by a particular problem and not just for the sake of it.

Dustin Moskovitz taking over the lecture to discuss the reasons to start a startup.

The common misconception that startup ideas don't matter and the counterargument that great companies start with great ideas.

The importance of having a long-term vision and defensibility strategy for your startup idea.

Why mission-oriented startups are more likely to succeed and how the best ideas often start as niche markets that grow.

The necessity of conviction in your beliefs and ignoring others' negative opinions about your startup idea.

The advantage of starting with a simple product and the importance of fanaticism in product quality and customer support.

The advice on building something that a small number of users love rather than something many users just like.

The necessity of organic growth through word of mouth as an indicator of a great product.

Dustin Moskovitz's personal insights on the stress and commitment required to be a successful entrepreneur.

The reality of entrepreneurship versus the glamorous portrayal by media and the importance of managing one's own psychology.

The fallacy of having more flexibility and control over one's schedule as an entrepreneur.

The financial perspective on entrepreneurship, including the potential rewards and the risks involved.

The best reason to start a company: an uncontrollable passion for a problem and the belief that you are the right person to solve it.

Transcripts

Welcome.

Can I turn this on?

Maybe, all right.

>> Can people hear in the back?

>> Can you guys hear me?

Is the mic on?

No, ah, maybe you can ask them to turn it on.

Maybe we can get a bigger, ah, there we go.

All right.

Maybe we can get a bigger auditorium, we'll see.

So welcome to CS183B.

I'm Sam Altman.

I'm the President of Y Combinator.

Nine years ago, I was a Stanford student and

then I dropped out to start a company.

And then I've been an investor for the last few.

So, at YC, we've been teaching people how to

start startups for nine years.

Most of it's very hands on and

specific to the startups.

But, 30% of it is pretty generally applicable.

And so, we think that we

can teach that 30% in this class.

And even though that's only 30% of the way

there hopefully it'll still be really helpful.

We've taught a lot of this at YC already, but

it's all been off the record.

And this is the first time that a lot of what we

teach in YC is gonna be on the record.

So we've invited some of our best speakers to come and

give the same talks they give at YC.

We've now funded 720 companies.

And so, we're pretty sure

that a lot of this advice is pretty good.

We can't fund every startup yet, but we can

hopefully make this advice very generally available.

Guest speakers are gonna teach 17 of the 20 classes.

I'm only teaching three.

Counting YC itself,

every guest speaker has been involved in the creation of

a billion plus dollar company.

So the advice shouldn't be that theoretical.

It's all been, it's all from people who have done it.

All of the advice in

this class is geared towards people starting a business

where the goal was hyper-growth.

And eventually building a very large company.

Much of it doesn't apply in other cases and

I wanna warn people up front.

That if you try and

do these things in a lot of big companies or

non startups, it won't work.

It should still be interesting.

I, I really do think that startups are the way of

the future and it's worth trying to understand them.

But startups are very different

than normal companies.

So over the course of today and

Thursday, I'm gonna try to give an overview of the four

areas that you need to excel at in order to

maximize your chances of success at a startup.

And then throughout the course, the guest speakers

are gonna drill into all of these in more detail.

So the four areas, you need a great idea,

a great product, a great team and great execution.

These overlap somewhat, but I'm gonna have to talk about

them somewhat individually to make it make sense.

You may still fail.

The outcome is something like idea times product

times execution times team times luck,

where luck is the random number between 0 and 10,000.

Literally that much.

But if you do really well in the four areas you can

control, you have a good chance of at

least some amount of success.

One of the exciting things about startups, is

that they are surprisingly even playing field.

Young and inexperienced, you can do this.

Old and very experienced, you can do this too.

And one of the things that I particularly like about

startups is that some of the things that are bad in

other work situations, like being poor and unknown are

actually huge assets when it comes to starting a startup.

Before we jump in on the how.

I want to talk about why you should start a startup.

I'm somewhat hesitant to be doing this class at all,

because you should never start a startup just for

the sake of doing so.

There are much easier ways to get rich and

everyone who starts a startup always says,

always, that they couldn't have imagined how hard and

painful it was going to be.

You should only start a startup if you com,

feel compelled by a particular problem.

And that you think starting a company is

the best way to solve it.

The specific passion should come first and

the startup second.

In fact, all of

the big successes we have at YC followed this.

So, for the second half of today's lecture,

Dustin Moskovitz the co-founder of Facebook and

Asana, is going to take over and

talk about why to start a startup.

We're so surprised by the amount of

attention that this class got.

That we wanna make sure we

spend a lot of time on the why.

Okay. So

the first of the four areas.

A great idea.

It's become popular in

recent years to say that the idea doesn't matter.

In fact, it's almost uncool to spend a lot of time

thinking about the idea for a startup.

You're just supposed to start.

Throw stuff at the walls.

See what sticks.

And not even spend any time thinking about if

it'll be valuable if it works.

And pivots are supposed to be great.

The more pivots, the better.

So this isn't totally wrong.

Things do evolve in

ways that are difficult to predict.

And there's a limit to how much you can figure out,

without actually getting a product in

the hands of users.

And great execution is at

least ten times more important and

a hundred times harder than a good idea.

But the pendulum has swung way out of whack here.

A bad idea is still bad.

In the pivot happy world that we're in today,

it feels really sub optimal.

Great execution towards a terrible idea

will get you nowhere.

There are exceptions, of course.

But most great companies start with

a great idea, not a pivot.

If you look at successful pivots, they almost always

are a pivot into something the founders

themselves wanted, not a random made up idea.

Airbnb happened because Brian Chesky couldn't pay

his rent, but he did have some extra space.

In general, though,

if you look at the track record of pivots,

they don't become big companies.

I myself used to believe ideas didn't matter that

much, but I'm very sure that's wrong now.

The definition of the idea,

as we talk about it, is very broad.

It includes the size and the growth of the market,

the growth strategy for the company,

the defensibility strategy and so on.

When you're evaluating an idea,

you need to think through all these things,

not just the product.

If it works out, you're gonna be working on this for

ten years.

So it's worth some real upfront time

to think we've a long term value in

the defensibility of the business.

Even though plans themselves are worthless,

to exercise a planning is really valuable and

totally missing in most startups today.

Long term thinking is so where,

anywhere, but especially in startups.

That it's a huge advantage if you do it.

Remember that the idea will expand and

become more ambitious as you go.

You certainly don't need to have everything figured out,

in a path from here to world domination.

But you really want a nice kernel to start with.

>> You want something that can develop in

interesting ways.

As you're thinking through ideas,

another thing that we see young founders get

wrong all the time, is that someday you need to

build a business that's difficult to replicate.

This is an important part of a good idea.

I wanna make this point again because it's

so important.

The idea should come first, and

the startup should come second.

Wait to start a startup, until you come up

with an idea you feel compelled to explore.

This is also the way to

chose between multiple ideas.

If you have several ideas that all seem pretty good,

work on the one that you think about most often when

you're not trying to think about work.

But we hear again and again from founders that they

wish they had waited to start a startup until they

came up with an idea that they really loved.

Another way of looking at this is that the best

companies are almost always mission oriented.

It's difficult to get large groups of people to

the extreme levels of focus and productivity that you

need for a startup to be successful,

unless the company feels like an important mission.

And it's usually really hard to get that without a great

founding idea.

A related advantage of mission oriented

ideas is that you yourself will be dedicated to them.

It takes years and

years, usually a decade to create a great startup.

If you don't love and

believe in what you're building,

you're likely to give up at some point along the way.

There's no way I know of to get through the pain of a

startup without belief that the mission really matters.

A lot of founders, especially students,

believe that their startup's only gonna take two or

three years and then after that they'll work on

what they're really passionate about.

That almost never works.

Good startups usually take ten years.

A third advantage of mission-oriented

companies is that people outside the company,

are more willing to help you.

You'll get more support on

a hard important project than a derivative one.

When it comes to starting startups,

in many ways it's easier to

start a hard startup than an easy startup.

This is one of those counter-intuitive things.

It takes people a long time to understand.

It's difficult to overstate how

important being mission-driven is, so

I wanna emphasize it one last time.

Derivative companies, companies that

copy an existing idea with very few new insights,

don't excite people and they don't compel the teams to

work hard enough to be successful.

Paul Graham is gonna talk about how to

get startup ideas next week.

It's something that a lot of founders struggle with but

it's something I believe you can get better with it,

better at with practice.

And it's definitely worth trying to get better at.

The hardest part about coming up

with great ideas is that

the best ideas often look terrible at the beginning.

The 13th search engine and

without all the features of web portal.

Most people thought that was pointless, search was done,

and anyway, it didn't matter that much,

Portal's where the value is at.

The tenth social network, and

limited only to college students with no money?

Also terrible.

MySpace had won, and

who wants college students as customers, or

a way to stay on strangers' couches?

That just sounds terrible all around.

These all sounded really bad,

but they turned out to be good.

If they had sounded really good,

there would have been too many people working on them.

As Peter Tills discussed in the fifth class,

you want an idea that turns into a monopoly, but

you can't get a monopoly in a big market right away.

Too much competition for that.

You have to find a small market in which you can get

a monopoly, and then quickly expand.

This is why some great startup ideas look

really bad at the beginning.

It's good if you can say something like, today only

the small subset of users are going to use my product.

But I'm gonna get all of them.

And in the future,

almost everyone will use my product.

>> Here's the thing that's gonna come up a lot,

you need conviction in your own beliefs, and

the willingness to ignore others nay saying.

The hard part is that this is a very fine line.

There's right on one side of it, and crazy on the other.

But keep in mind that if you do come up with

a great idea, most people are going to think it's bad.

You should be happy about that.

It means they won't compete with you.

This is also a reason why it's

not usually dangerous to tell people about your idea.

The truly good ideas don't sound like

they're worth stealing.

You want an idea about which you can say,

I know it sounds like a bad idea.

But hear specifically why it's actually a great one.

You wanna sound crazy, but you wanna actually be right.

And you want an idea that not many

other people are working on.

And it's okay if it doesn't sound big at first.

Common mistake among founders,

especially first time founders,

is they think that the first version of their product,

the first version of their idea,

needs to sound really big.

But it doesn't.

It needs to take over a small,

specific market and expand from there.

That's how most great companies have started.

Unpopular but right is what you're going for.

You want something that sounds like a bad idea, but

is a good idea.

You also really wanna take the time to

think about how the market's going to evolve.

You need a market that's going to be big in

ten years.

Most investors are obsessed with the market size today,

and they don't think at all about how the market is

going to evolve.

In fact, I think this is one of the biggest

systemic mistakes that investors make.

They think about the growth of the startup itself,

they don't think about the growth of the market.

I care much more about the growth rate of

the market than it's current size.

And I also care if

there's any reason that it's gonna top out.

You should think about this.

I'd prefer to invest in

a company that's going after a small but

rapidly growing market than a big but slow growing one.

One of the big advantages of these sorts of markets um,

these small but rapidly growing markets, is that

customers are usually pretty desperate for a solution.

And they'll put, put up with an imperfect but

rapidly improving product.

And a big advantage of being a student, one of

the two biggest advantages is that you probably have

better intuition about which markets are likely to

start growing rapidly than older people do.

Another thing that students usually don't understand, or

at least takes a while you cannot create a market that

doesn't want to exist.

You can basically change everything in

a startup but the market.

So you should actually do some thinking, to be sure or

at least as sure as you can be, that the market your

going after is going to grow and be there.

There are a lot of different ways to

talk about the right kind of market.

For example, surfing someone else's wave or

stepping into an up elevator or being part of a movement.

But all of this is just a way of saying you want

a market that's going to grow really quickly.

It may seem small today.

It may be small today.

But you know, and

other people don't that it's gonna grow really fast.

So think about where this is happening in the world.

You need this sort of

a tail wind to make a startup successful.

The exciting thing is there are probably more of

these tail winds now than ever before.

As Mark Andreessen says,

software is eating the world.

It's just everywhere.

There are like, so many great ideas out there and

you just have to pick one, and

find one that you really care about.

Another version of this,

that would, gets down to the same idea,

is Sequoia's famous question.

Why now?

Why is this the perfect time for this particular idea and

to start this particular company?

Why couldn't it have been done two years ago?

And why will two years in the future be too late?

For the most successful startups we've been

involved with, they've all had a great idea,

great answer to this question.

And if you don't, you should be at

least somewhat suspicious about it.

In general, it's best if

you're building something that you yourself need.

You'll understand it much better than if you have to

understand it by talking to

a customer to build the very first version.

If you don't know it yourself and

you're building something that someone else needs,

realize that you're at a big disadvantage and get very,

very close to your customers.

Try to work in their office if you can.

And if not, talk to them multiple times a day.

Another somewhat counter-intuitive thing

about good start up ideas,

is that they're almost always very easy to explain,

and very easy to understand.

If it takes more than a sentence to

explain what you're doing um,

it's almost always a sign that it's too complicated.

It should be a clearly articulate,

articulated vision with a small number of words.

And the best ideas are usually either,

very different from existing companies in one

important way.

Like Google being a search engine that worked

just really well and none of the other stuff of

the portals or totally new, like Space X.

Any company that's a clone of

something else that already exists with some small or

made up differentiator,

like we're gonna be x beautiful design or

we're gonna be y for people that like red wine instead.

That usually fails.

So as I mentioned one of the great things about being

a student is you

have a very good perspective on new technology.

And learning to get good at having new

ideas takes a while.

So start working on that right now.

That's one thing we hear from people all the time,

that they wish they had

done more when they were a student.

The other is meeting potential co-founders.

You have no idea how good of an environment you are in

right now for meeting people that you

can start a company with down the road.

And the one thing that we

always tell college students, is more

important than starting any particular startup

is getting to know a lot of potential co-founders.

So I want to finish this section of my talk

with a quote from 50 Cent.

This is from when he was asked about vitamin water.

I won't read it, its up there.

But it's about the importance of

thinking about what customers want, and

thinking about the demands of the market.

Most people don't do this,

most students especially don't do this.

If you can just do this one thing, if you can just

learn to think about the market first, you will have

a big leg up on most people starting startups.

All right, and this is something.

This is probably the thing that we

see wrong with Y Combinator apps most frequently, is

that people have not thought about the market first.

And what people want first.

So for the next section,

I'm gonna talk about building a great product.

And here again,

I'm gonna use a very broad definition of product.

It includes customer support and

copyright explaining the product.

Anything involved in your customer's interaction with

what you built for them.

To build a really great company, you first have to

turn a great idea into a great product.

This is really hard, but it's crucially important,

and fortunately it's pretty fun.

Although great products are always new to the world and

it's hard to give you advice about what to build,

there are enough commonalities that we

can give you a lot of advice about how to build it.

One of the most important tasks for a founder is to

make sure that the company builds a great product.

Until you've built a great product,

almost nothing else matters.

When really successful startup founders tell

the story of their early days.

It's almost always sitting in front of the computer,

working on their product or talking to their customers.

That's pretty much all the time.

They do very little else, and

you should be very skeptical if your time allocation is

much different.

Most other problems that founders are trying to

solve, raising money, getting more press,

hiring, business development, et cetera.

These are significantly easier when you

have a great product.

It's really important to take care of that first.

Step 1, is to build something that users love.

At YC, we tell founders to work on their product,

talk to users, exercise eat and

sleep and very little else.

All the other stuff I just mentioned, PR conferences,

recruiting advisers, doing partnerships,

you should ignore all of that and

just build a product.

And get it as good as possible by

talking to your users.

Your job is to build something that users love.

Very few companies that go on to be

super successful get there without first doing this.

A lot of good on paper startups fail because they

merely make something that people like.

Making something that people want,

but only a medium amount is a great way to fail and

not understand why you're failing.

So these are the two jobs.

Something that we say at

YC a lot is that it's better to build a small number,

it's better to build something that a small

number of users love than a large number of users like.

Of course, it'd be best to

build something that a small number of users love.

But opportunities to do that for V1 are rare, and

they're usually not available to startups.

So in practice,

you end up choosing either the grey or the orange.

You make something that a lot of users like a little

bit, or something that a small number of users,

like, love a lot.

And this is a very important piece of advice.

Build something that a small number of users love.

It's much easier to expand from something that

a small number of

people love to something that a lot of people love.

Than from something that a lot of

people like to a lot of people love.

If you get this right,

you can get a lot of other things wrong.

If you don't get this right,

you can get everything else right,

and you'll probably still fail.

So when you start on a startup, this is the only

thing you need to care about until it's working.

>> Excuse me, can you explain that again?

>> Sure. So you have

a choice in a startup.

The best thing of all worlds would be to

build a product that a lot of people will really love.

In practice you

can't usually do that because of big company.

If there's an opportunity like that, Google or

Facebook will do it.

So there's like a limit to the area under the curve

of what you can build and you can either build

something that lot of users like a little bit or you can

build something that a small number of users love a lot.

And, like, the total amount of love is the same,

it's just a question of how it's distributed.

And there's like this law of conversation of

how much happiness you can put into the world

with the first product of a startup.

And so startups always struggle with which of

those two they should go.

And they seem equal,

right, cuz the area under the curve is the same.

But we've seen this time and again that they're not.

And that it's so much easier to expand.

Once you've got something that some people love,

you can expand that

something that a lot of other people love.

But if you only get ambivalence or

sort of like weak enthusiasm.

And then try to expand that,

you'll never get up to a lot of people loving it.

So the advice is, uh, find a small group of users and

make them really love what you're doing.

Does that make sense?

All right.

I'm, I'm, one way that you know when this is

working is that you'll get growth by word of mouth.

If you make something people love

people will tell their friends about it.

This works for consumer products and

enterprise products, as well.

When people really love something,

they tell their friends about it and

you'll see organic growth.

If you find yourself talking about how it's okay that

you're not growing because there's a big partnership

that's gonna come save you or something like that,

it's almost always a sign of real trouble.

Sales and marketing are really important, and

we're gonna have two classes on them later.

But if you don't have some early organic growth,

then your product probably isn't good enough yet.

A great product is the secret to

long term growth hacking.

You should get

that right before you worry about anything else.

It doesn't get easier to put off making a great product.

If you try to build a growth machine before you

have a product that some people really love,

you're almost certainly gonna waste your time.

Breakout companies almost always have a product

that's so good that it grows by word of mouth.

Over the long run great products win.

Don't worry about your competitors raising a lot of

money and what they may do in the future.

They probably aren't very good anyway.

Very few startups die from competition.

Most die because they themselves fail to

make something users love.

They spend their time on other things.

So worry about this above all else.

Another piece of advice to make something that

users love is to start with something simple.

It's much, much easier to make a great product if

you have something simple.

Even if your eventual plans are super complex, and

hopefully they are,

you can almost always start with a smaller subset of

the problem than whatever you think is the smallest.

And it's hard to build a great product.

So you wanna start with as

little surface area as possible.

Think about the really successful companies and

what they started with.

Think about products that you really love.

They're generally incredibly simple to use and

especially to get started using.

The first version of

Facebook was almost comically simple.

The first version of Google was just an ugly

webpage with a textbox and two buttons but it returned

the best results, and that's why users loved it.

The iPhone is far simpler to

use than any smartphone that ever came before it and

it was the first one that people really loved.

Another reason that simple is good,

is because it forces you to do one thing extremely well.

And you have to do that to make

something that people love.

The word fanatical comes up again and

again when you listen to successful founders talk

about how they think about their product.

Founders talk about being fanatical in the way

they care about the quality of the small details.

Fanatical in getting the copy that they use to

explain the product just right and fanatical in

the way they think about customer support.

In fact, one thing that correlates into

success among the YC companies is the founders

that hook up pager duty to their ticketing system, so

that even if the user emails in the middle of

the night when the founders are asleep.

They still get a response within an hour.

Companies actually do this in the early days.

These founders feel physical pain when the product sucks.

And they wanna wake up and fix it.

They don't ship crap.

And if they do they fix it very, very quickly.

And it definitely takes some level of

fanaticism to build a great product.

You need some users to help with the feedback cycle.

But the way to get those users is manually.

You should go recruit them by hand.

Don't do things like buy Google ads in

the early days to get initial users.

You don't need very many.

You just needs ones that will give you feedback every

day and eventually love your product.

So instead of trying to get them on Google AdWords,

just find a few people in the world that will be

good users.

Recruit them by hand.

Ben Silverman when everyone though Pinterest was a joke,

recruited the initial Pinterest users by

tagging up strangers in coffee shops.

He really did. He just walked around

Palo Alto and said will you please use my product.

He also used to run around the Apple store in

Palo Alto.

And he would like set all the browsers to

the Pinterest home page real quick before they caught him

and kicked him out.

So then when people walked in there, they were like oh,

what is this?

This is an important example of doing things

that don't scale.

If you haven't read Paul Graham's essay on

that topic you definitely should.

So get users manually and remember that the goal is to

get a small group of them to love you.

Understand that group extremely well,

get extremely close into them, close to them,

listen to them and you'll almost always find out

that they're very willing to give you feedback.

Even if you're building the product for

yourself, listen to outside users and

they'll tell you how to make a product they'll pay for.

Do whatever you need to make them love you,

make you're doing, cuz they're also gonna be

the advocates that help you get your next users.

You wanna build an engine in the company that transforms

feedback from users into product decisions then get

it back in front of the users and then repeat.

Ask them what they like and

what they don't like, and watch them use it.

Ask them what they pay for.

Ask them if they'd be really bummed if

your company went away.

Ask them what would make them recommend the product

to their friends.

And ask them if they've recommended it to any yet.

You should make this feedback loop as

tight as possible.

If your product gets 10% better every week,

that compounds really, really quickly.

One of the great advantages of start,

of software startups is just how short you

can make the feedback loop.

It can go circle in hours, and the best

companies usually have the tightest feedback loops.

You should try to keep this going for

all of your company's life.

But it's really important in the early days.

The good news is that all of this is doable.

It's hard, it takes a lot of effort, but

there's no magic.

The plan is at least straight forward and

you will eventually get to a great product.

Great founders don't put

anyone between themselves and their users.

The founders of

these companies do things like sales and

customer support themselves in the early days.

It's critical to

get this loop embedded in the culture.

In fact, the specific problem that we

always see with Stanford startups for

some reason is that the students try and

hire sales and customer support people right away.

And you've gotta do this yourself.

It's the only way.

You really need to use metrics to

keep yourself honest on this.

It really is true that the company will

build whatever the CEO decides to measure.

If you're building an internet service,

ignore things like total registrations.

Don't talk about them.

Don't let anyone in the company talk about them.

And look at growth in active users, activity levels,

cohort retention, revenue, net promoter scores.

These things that matter.

And then be brutally honest if they aren't going in

the right direction.

Startups live on growth.

It's the indicator of a great product.

So this about wraps up

the overview on building a great product.

I wanna emphasize again,

that if you don't get this right,

nothing else we talk about in the class will matter.

You can basically ignore everything else that we

talked about until this is working well.

On the positive side,

this is one of the most fun parts of building a startup.

So I'm gonna pause here,

I'll pick back up with the rest of this on Thursday and

now we're gonna have Dustin talk about why you should

start a startup.

Thank you for coming Dustin.

>> Sure.

But yeah. So Sam asked me

to talk about why you should start a startup.

There's a bunch of reasons you might have.

And there's a bunch of common reasons that

people have that I hear all the time for, for

why you might start a startup.

It's important to know, like, what reason is yours.

Because some of them only make sense in,

in certain contexts.

Some of them will actually like lead you astray.

You may have been misled by the way that Hollywood or

the press likes to

romanticize entrepreneurship.

So I wanna try and like illuminate you know,

some of those potential fallacies, so

you guys can, can make the decision in a clear way.

And then I'll talk about the,

the reason I like best for actually starting a startup.

It's very related to a lot of what Sam just talked

about but surprisingly I don't think it's the most

common reason usually people have one of these other

reasons or they just wanna start up, you know,

start a company for the sake of starting a company.

So the, the four common reasons just to

numerate them are it's glamorous.

You know, you'll be, you'll get to be the boss.

You'll have flexibility,

especially over your schedule.

And you'll have the change to have, you know,

bigger impact.

And make more money than you'd,

than you might by joining a later stage company.

So, okay, so uh, you know, you,

you guys are probably pretty familiar with this concept.

When I wrote the Medium post,

which a lot of you guys read a year ago uh, I felt like

the story in the press was a, a little more unbalanced.

You know, entrepreneurship just

got romanticized quite a bit.

You know, the movie, The Social Network,

came out, had a lot of sort of like bad aspects of,

of, you know, what it's like to be an entrepreneur.

But mainly pa,

sort of painted this picture of like.

There's a lot of partying and you just

kinda move from like one brilliant insight to another

brilliant insight um, and really made it, you know,

seem like this, like really cool thing to do.

And I think the reality is just, you know,

not quite so glamorous.

There's sort of a, there's an ugly side to being

an entrepreneur and also just more importantly what,

what you're actually spending your time on is,

is just a lot of hard work.

Sam mentioned this, but you're

basically just sitting at your desk heads down,

focused answering customers, customer support, emails,

doing sales, figuring out hard engineering problems.

So it's really important that you kind of like,

go in with, with eyes wide open.

And then also it's, it's really quite stressful.

This has been a popular topic in the press lately.

The Economist actually ran a story just last week

called like entrepreneurs anonymous, and

shows like a founder kinda like hiding under

his desk And talking about like founder depression.

This is like a very real thing, like, you know,

let's be real.

This, if you start a company,

it's gonna be extremely hard.

Why is it so stressful?

So, a couple reasons.

One is you've got a lot of responsibility.

So people in any kind of of career have fear of failure.

It's kind of just like a dominant part of

the psychology.

But when you're an entrepreneur your fear of

failure on the behalf of yourself and

all of the people who decided to follow you ah, so

that's really stressful.

In some cases these people are depending on

you for their livelihood.

Even when that's not true,

they have decided to devote the,

the best of your, years of their life to following you.

And so you're responsible for

the opportunity cost of their time.

So that's a big deal.

And you're always on call.

If something comes up maybe not always at 3 in

the morning, but for some startups that's true.

But if something important comes up,

you're gonna deal with it.

That's kinda the end of the story.

Doesn't matter if you're on vacation.

Doesn't matter if it's the weekend.

You kinda always got to be on the ball and

always be in a, in a place, mentally,

where you're prepared to deal with those things.

And then a sorta special example of that is,

is or of this kind of stress is fundraising.

So a scene from The Social Network.

This is us partying and working at the same time.

And somebody's spraying champagne everywhere.

You know, so The Social Network spends a lot of

time kind of painting these scenes.

Mark's not in the scene.

The other thing they spend all their time on is

kind of like painting how, him out to be a huge jerk.

This computer?

>> Yes. Oh.

>> Okay. So.

This is an, an actual scene from um, See it.

I'm gonna move this just a little.

>> Oh, no.

>> This, this will work.

>> This will work. Okay.

On the PDF as well?

>> Yep >> Okay.

Okay, cool. This is

an actual scene from Palo Alto.

Spent a lot of time, his desk,

just kinda heads down and focused.

Mark was still kind or a jerk sometimes, but

in this more like fun loveable way,

not a like sociopathic scorned lover way.

So this is him like, signaling his intention to,

you know, just be focused and keep working.

Not be social.

>> So then there's also the scene sort of

demonstrating the like brilliant insight moment.

It's kind of like straight out of A Beautiful Mind.

>> They literally stole that scene.

So they like to paint it as you just kinda jump from one

of these moments to,

to the other moment with like partying in between,

but really we were just at that table the whole time.

So interestingly if you compare this to

the other photo, Mark is in the exact same position, but

he's wearing different clothes.

This is definitely a different day.

So cool.

So that's what it,

that's what it's actually like in person.

And I just covered this bullet up here.

This is the Economist article I

was talking about a second ago.

So another form of, of, stress is just,

like, unwanted media a, attention.

So part of it being glamorous is

you get some positive media attention sometimes.

It's nice to be on, like,

the cover of Time and, like, be the person of the year.

It's maybe a little less nice to be on the cover of

People with, like, one of your wedding photos.

It depends who you are.

Some people would like that.

I'd really hate it.

But when Valleywag like, you know,

analyses your lecture and just tears you apart, like,

you definitely don't want that.

Nobody wants that.

And then, one thing I almost never hear people talk

about is, you're just a of more committed.

So if you're an employee of a startup.

and, you know, things are stressful,

it's not going well, you're unhappy, you can just leave.

For a founder you can leave but it's, it's very uncool.

It's pretty much a black eye on the rest of your career.

And so you really are committed you know, for

ten years if it's going well probably more

like five years if it's not going well.

So three years to figure out that it's not going well and

then if you find, like,

a nice landing for your company,

another two years at the acquiring company.

And if you leave before that,

again, it's not only gonna harm yourself financially,

it's gonna harm all your employees.

So you pretty much don't um, so if you're lucky, and

you have a bad startup idea you fail quickly um, but

most of the time, it's not like that.

All right, moving right along um, so.

And I should say,

I have had a lot of this stress in my own life,

especially in the early years of Facebook.

You know, I just got really unhealthy.

I wasn't exercising.

I had a lot of anxiety.

Actually, I threw out my back, like,

almost every six months, like,

when I was like, 21, 22.

Which was, like, pretty crazy.

And so, if you do start a company.

make, you know,

be aware that you're gonna have to deal with this and

you have to actually manage it.

It's actually, like, one of your core responsibilities.

Ben Horowitz likes to say, like, the number one rule of

a CEO is managing your own psychology.

It's absolutely true, make sure you do it.

so, another reason so people especially if

they've already had a job at another company.

You tend to develop this narrative of like,

okay like,

the people running this company are idiots,

they're making all these stupid decisions,

they're spending their time in, in these stupid ways.

I'm gonna start a company and I'm gonna do it better.

I'm gonna like, set all the rules.

It's a pretty attractive idea.

Makes a lot of sense.

If you've read my

Medium posts you know what's coming.

I'll give you guys a second to read this quote.

Cool. So this,

this really resonates with me.

And one thing I'd point out is you know, the reality of

these decisions is pretty nu, nuanced.

The people you thought were

idiots probably weren't idiots.

They probably just had like

a really difficult decision in front of them.

And people pulling them in multiple directions.

So the most common thing I have to spend my time on.

And, and focus my energy on as a CEO is like.

The, the problems that

like other people are bringing to me.

The, the other priorities that people create.

And it's usually in the form of a conflict.

People wanna go in different directions.

Or like customers want different things.

And like I might have my own opinion about that.

But really the, the game I'm

playing is like who do I disappoint the least?

And like just trying to like navigate all,

all these difficult situations.

And even on a day to day basis I might come in

on Monday and like have all these, you know,

grand plans for like how I'm gonna improve

the company and what I'm gonna spend my time on, but

then if like an important employee is threatening to

quit, that's what I'm spending my time on.

That's my number one priority.

So a subset of you're

the boss is you have flexibility.

You have control over your own schedule.

This really attractive idea.

So here's the reality.

And their Phil Libin quote.

So this, this truly reson, resonates with me as well.

And some of the reasons for

this, again, you're always on call.

So maybe you don't intend to work all parts of

the day but you might not get to control which ones.

You're a role model, this is super important.

So if you're an employee of a company um, you might have

some good weeks, you might have some bad weeks,

some weeks when you're, you're low energy, maybe you

wanna take a couple extra days off um, that's really

bad if you're, you're an entrepreneur like your team

will really signal off what your bringing to the table.

And so if you take your foot off the gas, so will they.

And you're always working anyway.

So, if you're really passionate about an idea,

it's just gonna like pull you to,

to keep working on it.

If you're working with great investors,

you're working with great partners,

they're gonna wanna be working really hard,

they're gonna want you to be working really hard uh, and

again, you're gonna wanna work really hard.

So some some companies like to tell the story about you

can have your cake and eat it too, you can have, like,

four day week, work weeks maybe if you're, if you're,

Tim Ferris maybe you can have a 12-hour work week.

It's a really attractive idea and

it does work in a particular instance.

Which is if you wanna like actually have a small

business or go after a niche market.

Then you're a small business entrepreneur.

That makes total sense.

But as soon as you get past like two or

three people uh, you really need to step it up and, and

be full time committed.

cool.

So, this is the big one this is the, the one I

hear the most especially like candidates applying to

a Asana they tell me, you know, I,

I'd really like to work for, for

a much smaller company, or start my own because.

Then I have a much bigger slice of the pie,

I'll have much more impact on how that company does and

I'll have more equity so

I'll make more money as well.

So let's examine when this might be true.

So I'll explain these tables they're a little complex but

let's focus on the left first so these is,

this is just explaining.

Dropbox and Facebook.

These are their current valuations.

And this is how much money you might

make as employee number 100 coming into these companies.

Especially if you're like, an experience,

a relatively experienced engineer, like,

you have five years of, of industry experience.

You're pretty likely to

have an offer that's around 10 basis points.

So if you joined DropBox a couple years ago,

the upside you'd have already locked in.

As about ten million,

there's plenty more growth from there.

If you leave the company if you joined Facebook a couple

years into its,

its existence you made $200 million.

This is a huge number.

And if you.

Even if you joined Facebook as employee number 1,000.

So you joined it in like 2009 you still

made $20 million.

That's a giant number.

And that's how you should be benchmarking when you're

thinking about what might I make as an entrepreneur.

So moving over to the table on the right uh,

these are two theoretical companies you might start.

So Uber for Pet Sitting, pretty good idea.

If you're, if you're really well suited to this,

you might have, uh, a really good shot at

building a $100 million company.

And then your share of that company is pretty likely to

be about 10%.

That certainly fluctuates.

Some founders have a lot more than this,

some have a lot less.

But after multiple rounds of dilution multiple rounds of

option table, option pool creation,

you're pretty likely to end up about here.

If you have more than this,

I recommend Sam's post on like the equity split

between founders and employees.

You probably should be giving out more.

And then but so basically, if you're extremely

confident about building this $100 million business,

which is a big ask it should go without saying that

you should have a lot more confidence than Facebook in

2009 or Dropbox in 2014 and

you might, for a start up that doesn't even exist yet.

Then this is worth hearing.

So if you have a $100 million idea and

you're pretty confident you can execute it,

I would consider that.

If you think you're the right entrepreneur to build

Uber, Uber for space travel, that's really huge idea.

$2 billion idea.

You're actually gonna have a pretty good return for that.

You should definitely do that.

This is also only the value after four years.

And this idea probably has legs.

So definitely go after that.

If, if you're thinking of building that,

you probably shouldn't even be in this class right now.

You should go and, go and build that company.

So why is this, financial reward and, and impact, I

really think that financial reward is very strongly

correlated with the impact you have on the world.

If you don't believe that let's talk

through some specific examples and

not think about the equity at all.

So why might joining a, a late-stage company actually

provide you a lot of impact?

You get this multiplier They have an existing massive

user base.

If it's Facebook, it's a billion users.

Or if it's Google it's a billion users.

They have existing infrastructure you

get to build on.

That's also increasingly true for new startups.

Things like AWS.

Like awesome independent service providers.

But you usually get some, like,

proprietary technology and it's all maintained for you.

It's a pretty great place to start uh, and

you get to work with a team and they'll help you

just leverage your idea into something great.

So, a couple of specific examples Bret Taylor came

into employee around or

came into Google as around employee number 1,500.

And he invented Google Maps.

This is a product you guys probably use every day.

I used it to get here.

And it's used by hundreds of millions of

people all around the world.

Didn't need to start a company to do that,

did happen to get a big financial reward.

But the, the point is he had massive impact.

My co-founder Justin Rosenstein.

Joined go, Google a little later after Brad he was

a PM there.

And just as a side project he

ended up prototyping a chat which, which used to be

a standalone app as integrated into Gmail,

like you see it on the upper right there.

And before he did that, like people didn't even think you

could do chat over AJAX, or chat in the browser at all,

and he just kind of like demonstrated it, and

showed it to his team, and made it happen.

Again, this is probably a product most of

you use maybe every day.

And then, perhaps even more impressively,

shortly after that,.

JR left,

he became employee around number 250 at Facebook.

And he led a hack-a-thon project along with

people like Andrew Bosworth and

Leah Pearlman uh, to create the like button.

So, this is one of the most popular elements anywhere

on the web.

Totally changes how people use it.

And again didn't need to start a company to do it and

almost certainly would have failed if he had tried.

Because he really needed the distribution of

Facebook to make it work.

So important to, to keep in mind the context for uh,

what kind of company you're trying to start and like,

where will you actually be able to make it happen.

So what's the best reason?

So, Sam already talked about this a little bit but

basically, you can't not do it.

You're super passionate about this idea.

You're the right person to do it.

You've gotta make it happen.

So how does this break down?

>> Cuz we're getting close to end here.

How am I doing on time?

>> Cool.

Sweet. Perfect.

So this, this is sort of like a word play.

You can't not do it in two ways.

One is, you're so

passionate about it that you're just like,

you have to do it.

You're gonna do it anyway.

And this is really important.

Cuz you'll need that passion to get through all of

those like hard parts of

being an entrepreneur that we talked about earlier.

You'll also need it to effectively recruit.

Candidates can smell when you don't have passion.

And there are enough entrepreneurs out there who

do have passion.

That they may as well work for one of those.

So this is sort of like table stakes for

being an entrepreneur.

Your subconscious can also tell when you

don't have passion and that'll be a huge problem.

And then so the other way to interpret this is the world

needs you to do it.

So this is sort of

validation that the idea is important.

It's gonna make the world better, so

the world needs it.

If it's not em, if it's not something the world needs,

go do something the world needs.

Your time's really valuable. Um,

there are plenty good ideas out there.

Maybe it's not one of your own.

Maybe it's an existing company.

But you may as well work on

something that's gonna be good.

And then the second way to

interpret this is the world needs you to do it.

You're actually well suited to this problem in some way.

If this isn't true it may be a sign that

your time is better spent somewhere else.

But also just best case scenario if this isn't true,

you out compete the team for which it is true.

And you just end

up with like a sub-optimal outcome for the world.

That doesn't feel very good.

So drawing this back to my own experience at Asana,

you know, Justin and

I were kind of like reluctant entrepreneurs.

We, before we founded Asana so

we're working at Facebook.

We were already working on a great problem.

And we would basically work all day

long on our normal projects and

then at night we would keep working on this internal

task manager that was used internally at the company.

And it was just cuz we were like so

passionate about the idea that was so

clearly valuable, that we couldn't do anything else.

And at some point we had to have the hard

conversation of like, okay well what does it

mean if we don't actually start this company.

We were pretty, we were able to

see the impact it was having on Facebook.

We were pretty convinced it

could be really valuable for the world.

We were also pretty

convinced nobody else was gonna build it.

The problem had been around a long time and

we just kept seeing sort of incremental solutions to it.

So if we didn't go out with the one that we

thought was best,

we thought there'd be a lot of value left on the table.

And yeah.

So we just couldn't, couldn't stop working on it.

And literally the idea was like beating itself out of

our chest, like forcing itself into the world.

And I think that's the feeling you should really be

looking for when you start a company.

That's how you know you have the right idea.

So I'll go ahead and stop there.

I'll put some recommended books up here,

but won't narrate them.

And maybe, that's the end of the class.

>> Yeah, thank you.

Maybe you guys could stick around for

a few minutes if you have questions for him.

And uh, see you Thursday.

Thank you.