Startup Experts Discuss Doing Things That Don't Scale

Summary

The video script discusses the concept of 'doing things that don't scale' as a strategic approach for startups, popularized by Paul Graham's essay. It highlights the importance of focusing on immediate customer needs and learning from direct interactions, rather than worrying about scalability from the outset. The transcript shares examples of companies like Airbnb, Algolia, and Instacart that leveraged unscalable tactics to gain traction and validate their ideas. It emphasizes the need for founders to be hands-on, adaptable, and to embrace the chaos of early-stage entrepreneurship to build a scalable business.

Takeaways

• 🚀 **Embracing the Unscalable**: Startups should focus on doing things that don't scale in order to learn and grow, even if it means manual and one-off efforts to delight early customers.
• 🛠️ **Scalability Misconceptions**: Many early-stage companies become overly concerned with scalability, often at the expense of more immediate concerns like acquiring and satisfying customers.
• 📈 **Scalability is Secondary**: Paul Graham's essay 'Do Things That Don't Scale' encouraged founders to prioritize solving immediate problems over theoretical future challenges like scaling.
• 💡 **Inversion of Obsession**: Graham's advice to do unscalable things was a direct response to the widespread obsession with scalability in Silicon Valley, aiming to invert the focus to more practical, customer-centric activities.
• 🔍 **Learning Through Action**: By engaging in unscalable activities, founders can gain deeper insights into customer needs and preferences, which is invaluable for product development.
• 🤝 **Founder Involvement**: Personal involvement of founders in the early stages, such as FaceTime with customers, can create strong relationships and provide a competitive advantage against larger, less agile competitors.
• 🛑 **Knowing When to Pivot**: Unscalable efforts can quickly reveal if a product or service is not desired, allowing for early pivots and saving time and resources that would be wasted on an unviable idea.
• 🔑 **Manual 'Hacks' for Growth**: Companies like Instacart and DoorDash used creative, manual workarounds to jumpstart their services and demonstrate demand without initial infrastructure.
• 🚧 **Transitioning from Unscalable to Scalable**: There comes a point where the focus must shift from unscalable to scalable operations, which requires recognizing the right time to make this transition with the help of advisors or investors.
• 📚 **Essential Reading**: Paul Graham's essay is a must-read for founders, providing a foundational perspective on the importance of unscalable efforts in the early stages of a startup.

Q & A

What is the main idea behind Paul Graham's essay 'Do Things That Don't Scale'?

The main idea is that startups should focus on solving their most immediate problems rather than worrying about scalability from the outset. This approach allows founders to learn quickly and iterate on their ideas based on real customer feedback.

Why did the early internet companies face scalability issues?

Early internet companies faced scalability issues due to slow processors and limited bandwidth. As a result, websites could only serve a limited number of users before crashing, making it difficult to expand their reach without technical improvements.

How did Google influence the mindset of founders and investors regarding scalability?

Google's success with content marketing and scalability made it a model that many founders and investors wanted to emulate. This led to an expectation that any venture worth investing in had to have a scalable solution from the start.

What is the significance of the Airbnb founders' approach to getting high-quality listings?

The Airbnb founders personally took photos of the properties to ensure high-quality listings, which helped attract customers and get the business off the ground. This approach, though not scalable, was crucial in building the initial user base and validating the business model.

How did the founders of Fleek start their marketplace for secondhand clothing?

The founders of Fleek started by physically going to wholesalers, borrowing boxes of clothes, and selling them to secondhand clothing shops around London. This hands-on approach helped them understand the market dynamics and build relationships with both buyers and sellers.

What did the founders of Algolia do to get their first customer?

The founders of Algolia personally implemented their search solution for Product Hunt, helping the platform by directly working on their software. This not only established a strong relationship with the customer but also provided valuable insights into customer needs.

Why is it important for founders to sell themselves in the early stages of their company?

In the early stages, when the product may not be fully developed, founders need to convince potential customers to take a chance on their vision. By selling themselves—showing their dedication, passion, and commitment—they can build trust and encourage customers to invest in the company's future.

What is the advantage of doing things that don't scale for startups?

Doing things that don't scale allows startups to quickly test assumptions, learn from customers, and iterate on their products. It provides the flexibility to make changes and adapt based on feedback without being constrained by complex systems or processes.

How did Instacart initially launch their service without any grocery store partnerships?

Instacart initially launched by purchasing items from Trader Joe's, photographing them in a rented studio, and listing them on their platform. This allowed them to offer a wide selection of products and gauge customer interest without the need for formal partnerships.

What is the recommended approach for startups when it comes to scaling their operations?

Startups should focus on validating their ideas and understanding customer needs through unscalable methods first. Once they have proven demand and learned enough to build a scalable solution, they should then invest in infrastructure and processes that can support growth.

How can founders know when it's time to stop doing unscalable things and start scaling their business?

Founders should look for signs that their product is in demand, such as consistent customer interest and the ability to handle increased workload. Additionally, advice from experienced investors and advisors can help determine the right time to transition to scalable operations.

Outlines

00:00

🚀 Embracing the Unscalable for Early Growth

This paragraph discusses the importance of doing things that don't scale in the early stages of a startup to facilitate learning and growth. It references Paul Graham's influential essay, which encouraged founders to focus on immediate problems rather than theoretical scaling issues. The narrative highlights the shift in Silicon Valley's culture towards valuing the manual and personal efforts that lead to the acquisition of early customers and employees, emphasizing the scalability of business models and technical infrastructure as secondary concerns until the product-market fit is achieved.

05:02

🛠 The Essence of Urgency and Manual Labor in Startups

The second paragraph delves into the concept of urgency and the willingness of startup founders to engage in manual labor to solve immediate problems. It uses Airbnb's founders as an example, illustrating how they personally took photos of properties to enhance listings, a task that was crucial in the early days but not scalable. The paragraph emphasizes the value of hands-on work in understanding customer needs and building a product that resonates with the market, advocating for a mindset where no task is too small or manual if it serves the customer.

10:04

👕 Fleek's Hands-On Approach to Building a Marketplace

This paragraph narrates the story of Fleek, a secondhand clothing marketplace, and its founders' unorthodox methods to initiate their business. Without a website or inventory, they physically transported boxes of clothes from wholesalers to shops, learning about market dynamics and customer preferences through direct interaction. This approach allowed them to understand the nuances of their market, which would have been difficult to ascertain through a traditional online platform alone, highlighting the benefits of doing things that don't scale for gaining deep market insights.

15:06

🤝 Founder FaceTime: A Competitive Advantage Through Personal Connections

The fourth paragraph emphasizes the power of personal connections in the early stages of a startup. It discusses how founders can leverage their personal involvement to recruit customers and employees, using their commitment and dedication as a selling point. The narrative shares insights from a sales expert who stresses the importance of selling oneself and being available to customers at all times, suggesting that this personal touch can provide a significant advantage over larger, less agile competitors.

20:08

🛒 Instacart's Creative Launch Without Traditional Partnerships

This paragraph tells the story of Instacart's unconventional launch strategy. Instead of pursuing lengthy negotiations for partnerships with grocery stores, Instacart's founders purchased items from Trader Joe's, photographed them, and listed them online, creating an illusion of a fully functional service. This approach allowed them to test their concept and gain traction without being hindered by the slow process of establishing corporate partnerships, demonstrating the effectiveness of unscalable methods in validating a business idea.

25:09

🔧 DoorDash's Rapid Prototype and the Advantage of Startup Flexibility

The sixth paragraph describes how DoorDash was built in a single afternoon using basic tools like Google Drive, HTML/CSS, and a phone, to create a functional prototype. The founders opted for a manual process to simulate real-time dispatch, which allowed them to test the market demand for their service quickly. This example illustrates the advantage of startups being able to move fast and adapt to errors, embracing chaos as a feature of growth, rather than striving for error-free, slow development cycles typical of larger companies.

🔄 The Transition from Unscalable to Scalable: Knowing When to Flip the Switch

The final paragraph addresses the transition from unscalable to scalable operations in a startup. It discusses the importance of knowing when to stop relying on manual, unscalable methods and start investing in infrastructure that can support growth. The narrative suggests that this decision is critical and often guided by advisors and investors, who can help identify when a startup has validated its concept and is ready to scale. The paragraph also warns against becoming addicted to unscalable revenue streams, emphasizing the need for ambition and the setting of aggressive growth targets.

Keywords

💡Scalability

Scalability refers to the ability of a system, process, or business model to handle a growing amount of work, or its potential to be enlarged. In the context of the video, scalability is initially presented as a concern for early-stage startups, especially in the tech industry, where investors and founders often prioritize the potential for a business to grow and serve a large number of customers without degrading performance. However, the video emphasizes that early-stage startups should focus on immediate needs over scalability concerns, as highlighted in Paul Graham's essay 'Do Things That Don't Scale'.

💡Silicon Valley

Silicon Valley is a region in Northern California known for its high-tech innovation and venture capital investments. The video mentions how Paul Graham's essay influenced the culture of Silicon Valley, particularly among startups and investors, by encouraging a shift in focus from scalability to immediate customer needs and satisfaction. This cultural transformation is exemplified by the stories of companies that succeeded by doing things that didn't scale initially but allowed them to validate their business models.

💡Y Combinator

Y Combinator (YC) is a well-known startup accelerator that provides seed money, advice, and resources to early-stage startups. In the script, Y Combinator is mentioned as the organization that Paul Graham co-founded and which played a significant role in promoting the 'Do Things That Don't Scale' philosophy among startups, helping them to focus on solving immediate problems rather than worrying about long-term scalability.

💡Airbnb

Airbnb is a platform that allows individuals to rent out their properties to travelers. The video uses Airbnb as an example of a company that employed unscalable tactics in its early days, such as founders personally taking photos of rental properties to ensure high-quality listings. This hands-on approach helped Airbnb to attract users and gain traction, illustrating the concept of doing things that don't scale to achieve initial growth.

💡Product-Market Fit

Product-Market Fit is a term used to describe a situation where a product satisfies a market demand and is well-received by its target audience. The video emphasizes the importance of achieving product-market fit for startups, suggesting that founders should focus on this critical milestone before addressing scalability. The concept is central to the video's theme, as it represents the primary goal that startups should aim for while employing unscalable tactics.

💡Algolia

Algolia is a search-as-a-service platform that provides hosted search capabilities. The video shares a story about the Algolia founder personally implementing their search service for Product Hunt, which was an unscalable approach. This hands-on experience allowed Algolia to better understand customer needs and build a stronger relationship with the customer, demonstrating the benefits of doing things that don't scale for learning and customer engagement.

💡Fleek

Fleek is a marketplace for secondhand clothing, connecting wholesalers with secondhand clothing shops. The video describes how the founders of Fleek started by manually handling clothes and selling them to shops to learn about the market dynamics. This unscalable method allowed them to understand what sells, pricing strategies, and demand elasticity, which is crucial for building a successful marketplace.

💡Instacart

Instacart is an online grocery delivery service. The video tells the story of how Instacart launched without grocery store partnerships by purchasing items from Trader Joe's, photographing them, and listing them online. This unscalable approach allowed Instacart to test their business idea and gain traction before eventually negotiating partnerships with grocery stores, illustrating the concept of doing things that don't scale to validate a business model.

💡DoorDash

DoorDash is a food delivery service. The video explains that DoorDash was built in one afternoon using simple tools like Google Drive, HTML/CSS, and a phone for orders, and 'Find My Friends' for real-time dispatch. This rudimentary and unscalable approach allowed the founders to quickly test whether people wanted their service, demonstrating the advantage of doing things that don't scale for rapid experimentation and validation.

💡Consulting Services

Consulting Services refers to the business of providing expert advice or guidance to clients. The video mentions that early-stage startups might earn revenue by offering consulting services, such as manually setting up AB tests for clients. However, it warns against becoming reliant on this revenue stream, as it doesn't scale and can hinder the growth of a software business, illustrating the need to transition from unscalable to scalable business practices.

💡Office Hours

Office Hours is a term used in the context of the video to refer to a series of discussions or Q&A sessions where experienced individuals, such as investors or founders, share insights and advice with startups. The video script includes an episode of 'Office Hours' where the theme of doing things that don't scale is explored, providing practical examples and advice for early-stage startups.

Highlights

The importance of doing things that don't scale in the early days of a startup for recruiting customers and employees.

Paul Graham's influential essay 'Do Things That Don't Scale' and its impact on Silicon Valley culture.

The historical focus on scalability in the tech industry and its challenges.

Google's influence on the scalability mindset among founders and investors.

The problem of creating scalable solutions that no one wants.

The contrarian approach of focusing on immediate problems rather than future scalability.

Airbnb's early strategy of manually taking high-quality photos for listings.

The mindset of no task being beneath a founder, especially in the pursuit of product-market fit.

Nico from Algolia's personal implementation of his software for early customers.

Fleek's founders physically moving secondhand clothes to understand their marketplace dynamics.

The advantage of founder facetime with customers in the early stages of a startup.

Instacart's unconventional launch without grocery store partnerships.

The benefits of doing unscalable things for learning and validating product ideas.

DoorDash's rapid one-day product development using manual workarounds.

The importance of knowing when to stop doing unscalable things and start focusing on scalability.

The contrast between the startup approach and big company approach to product development and error handling.

The advice to do things that don't scale as a strategic advantage for startups.

Transcripts

there's nothing like that founder

FaceTime in the early days right and

that's a great example of something that

doesn't scale but that's so important in

recruiting customers recruiting

employees anything you can do to uh

optimize for these learnings is good to

do and doing things that don't scale I

think the main goal is that how much can

I learn in 2013 Paul Graham the founder

of white combinator wrote an essay

entitled do things that don't scale and

this essay transformed the culture of

Silicon Valley PG said not to worry

about the theoretical problems of

scaling and fix the thing in front of

you right now do everything you possibly

can to get early customers and Delight

them even if it meant doing things in a

manual and one-off way the essay created

A playbook for startups who needed to

get from zero to one and many of them

made it and they're making it right now

so today we'll hear from the Y group

Partners about the best examples of

companies that did unscalable things to

get off the ground let's get

started so I think to start with to set

this up what I remember from being a

Founder in the early 2000s is that

investors and people in general at Big

tech companies were obsessed with this

word

scalability because the issue with the

internet and the issue with websites was

that people created these early web

serers processors were pretty slow the

size of bandwidth is pretty slow and so

if you wanted to build an internet

company um if it only could serve 10,000

or 100,000 people and the site crashed

it didn't scale it was actually pretty

hard to scale it was a real problem yeah

this meant in addition to technically

scaling which in this case just means

the servers can handle the load it also

meant business bus models had to scale a

scalable business model would mean a

business model that does not top out at

a small amount of money it's a business

model that could go all the way into

making billions of dollars I actually

think Google is indirectly responsible

for responsible for basically warping

the minds of a whole generation of

Founders and investors and creating the

problem that Paul Graham had to solve

with his essay because Google became so

famous for this because they did so much

content marketing everybody wanted to

emulate Google and so everybody from one

wanted to do the same thing and to be

thinking about how they were going to

build something that was as scalable as

Google and you wouldn't be able to raise

a dollar from investors if you did not

have a scalable solution yeah period

full stop and again I'm not saying this

is wrong but this created the elephant

in the room when you were a Founder

during that era and I would argue to a

lesser extent still to this day was if

you did not have good answers to how

your product or solution or business

model scaled it was not considered a

venture capital fundable company Paul

Graham heard this problem because many y

combinator companies were obsessed with

this thinking of scalability yeah for

all the reasons I just mentioned and so

he had to invert it and say the opposite

ignore this and he wrote this Essay with

this amazing title do things that don't

scale yep and this essay I would argue

it transformed the culture like it

actually transform not overnight but

over the years that followed it actually

transformed Silicon Valley culture and

it became ingrained in the psyche of the

current generation of ERS I agree

because what he

realized was the biggest problem that

most startups have is they can't get

users and they're not making something

people want not that their architecture

is not scalable enough think about how

many startups build

something this beautiful thing that has

like so much scalability and no one

wants it it's like if you build it they

will come the field of Dream It's the

field of dream startup right it's the

it's this beautiful thing and you hire

big team and it's like you got all the

servers set up and you're ready to scale

you got a Chief Architect in place and

like no one cares and you and and and

everyone churns it's game over yeah

right and so this do things that don't

scale and at the time it was such a

contrarian title I would anal I would

say it's analogous to Mark Zuckerberg's

move fast and break things do things

that don't scale it sounded at the time

like somebody was crazy it was so

contrar especially coming from an

investor yeah

which is why it had a real

impact and so that is the context to me

the point of Paul Graham's essay and

that we talk about all the time in

office hours is worry about the thing

that is your biggest problem at any one

point of time and try to slay that

Dragon first before you worry about

later dragons you have to slay and for

most startups it's just getting zero to

one it's getting a first customer it's

building the first product yeah and to

just get from zero to one you don't need

to worry about scalability y so don't

yep and then if you're if you're lucky

enough that people want your product

enough yes that you have the luxury of

worrying about scalability great okay

then you should totally scale again like

he's not saying never scale ever for any

reason that is not what the advice is

it's just worry about it at the right

time yes as Dalton and Jared pointed out

do things that don't scale really

encouraged founders to focus Less on the

future problem of scaling and more on

solving the hair onf fire problems of

their first customers it was about

focusing on what really matters in the

moment next Harge and Pete talk about

the Airbnb Founders and what they did to

inspire Paul Graham's essay so what do

we mean Harge when we say do things that

don't scale what are those actual things

I feel like a lot of the spirit behind

like PG's essay here was to get stups to

be urgent feel urgency and be like hey

like you don't have time to spend 6

months writing the perfect piece of

software before you go and get a real

customer and I feel like what inspired

him with this was the Airbnb guys they'd

been working on that idea for a while

had no users and they needed to get the

flywheel turning and so one of the

pieces of advice he gave them was hey

look like you need just like really high

quality listings like the most important

part of a listing is a photo and so if

you can't get people to upload high

quality photos just go and take the

yourself and like have this catalog of

really great places to stay with like

professional quality photos and so the

Airbnb guys would go out and do that and

that was clearly something that did not

scale that's what got them that like

flywheel turning early on um and if they

had been like oh like we can't do that

because like that's never going to scale

um they were totally missed out on that

totally right it's like so much of that

work is actually just like it can feel

beneath you in a way like if if you come

in particular I think the archetype here

is like you come from like a really

wellp paid job at like Google Facebook

you like used to having like reports and

infrastructure and people do all this

stuff and then you come into a startup

and it's like okay like I've got to send

the cold email I've got to like cold

call I've got to do all of this like

I've got to like manage all of the admin

stuff I got to get the Company

Incorporated like no one else is going

to do it yes um and one thing I've just

noticed again is the best Founders no

matter how smart they are like they just

like dive into that I think you just got

to have that mindset of like nothing is

beneath me the only thing I care about

is like getting to product Market fit

serving customers getting users um and

that will like send you in the right

direction as an early stage founder no

task is beneath you no action is too

small or manual if it is in service of

your customers that's an important piece

of this philosophy next Nicholas and

Brad talk about the unscalable things

that Nico did at algolia to get his

first customer

and how he used that practice to more

deeply understand what his users needed

we in our jobs run across companies

sometimes that are like terrific

examples of doing things that don't

scale um there's a company from the

winter 22 batch that I worked with

called Fleek and they are a Marketplace

for secondhand clothing connecting

wholesalers the people who just like get

tons and tons of clothes coming in in

boxes from all over the world and actual

secondhand clothing shops so it's like

the back office stuff how did how does

the clothing and the secondhand clothing

shops get there Fleek is this

Marketplace that connects the two more

what did they do so when they started

out it was just three guys with an idea

and they didn't have a website they

didn't have any clothes they didn't have

anything and and they had to figure out

how do we get a Marketplace started

between these two parties and so they

would go to the wholesalers in London

these giant warehouses full of clothes

and they would say give us this box and

just pick a box of clothes and say give

us six hours just give us the box for

free we'll bring it back in six hours

and either you'll have all the clothes

back or you'll have a bunch of money and

so they would get these clothes

basically and they would slept to all

these shops around London and come back

with $6,000 for the store and they would

do that over and over and over again and

go to these different wholesalers and

eventually people knew them as these

like useful people in the wholesale

Community who were helping you know

match buyers and sellers so what did

they learn from that I mean why did they

do that well they they did it because

they had to figure out um who actually

like what sells what doesn't sell um

when's the best time to bring clothing

in there um how to price this stuff how

elastic is the demand for it and these

are things that you need in a

Marketplace but it's very very hard to

figure that out by building a a

Marketplace web page and then emailing a

bunch of people and asking them to

transact in it and instead they did this

like mish mash in person carrying

cartons of clothes around and selling

them by hand to get all those lessons

into their bones how long did they do

that they did that for about 4 months

that was a great way for them to get

started but eventually they needed to

transition and start introducing the

buyers and sellers to each other through

their website because at the end of the

day they in order for them to like have

a scalable business that can start

making money with good margins they need

the buyers and sellers to be

transporting the clothes themselves and

using their own delivery uh uh Fleet and

employees to to actually make the

connections it can't just be the CEO and

the founders of the company moving

products back and forth I mean a great

great story um one one of the stories I

remember that uh gave me a a good

impression was the story of stripe I

it's a pretty well-known story when the

stripe Founders would uh would actually

work with their customers like Implement

their software their API directly in the

software of their customers and uh and

we actually did that with aloya too I

remember when we implemented Alodia in

product hunt you know Ryan the founder

that was before product hunt became huge

and he didn't have like any resource to

implement search himself and so we

remembered the strive story we did it

like he gave us access to his GitHub the

first version of algolia of search on

product tant was us implementing it and

pull request and him put that and he was

probably thrilled for the help at the

time he loved it he loved it he couldn't

ever have done it otherwise and so for

him it was such a help and for us I mean

of course it paid back like thousand do

you feel like you learned anything from

from setting customers up in that way

yeah because that created connection

because from that point uh you have that

contact that connection with the

customer that is so much stronger you

can ask them anything and you have a way

more candid conversations with them than

if they are your customers and always

worried about what else you going to ask

them like money or whatever that that's

a great point you have context that all

of your later conversations and

interactions with them kind of grows out

of you know why they're using it what

they want to get out of it and a that

helps you developing the product

yourself but also helps them have a much

better experience using the product

anything you can do to uh optimize for

these learnings is good to do and doing

things that don't scale I think the main

goal is that how much can I learn mhm

today not waiting to have developed

anything maybe what I'm going to develop

is going to be the wrong thing like if I

can do anything like manually uh even

going physically doing the job yourself

not the software uh you are going to uh

make sure that what you're building is

actually providing value yeah and better

do that before being need too much yeah

and and so said differently um really

strong like exciting Founders that we

run across are people that are operating

in a way that optimizes for learning

yes right like when we when we see

people oh like let's jump to

self-service early on it's it's in some

ways you wonder like oh they're they

want to hide behind their computers uh

versus going out and talking to their

customers and really grappling with

their with their problems and their pain

optimizing for learning it's a good way

of looking at it as Brad pointed out the

best Founders we work with at YC operate

in ways that optimize for learning and

getting in the trenches with your

customers is an incredible way to learn

about their biggest pain points next

serban Aaron talk about how founder

FaceTime with customers can give you a

real advantage over your bigger better

funded competitors there's nothing like

that founder FaceTime in the early days

right and that's a great example of

something that doesn't scale but that's

so important in recruiting customers

recruiting employees one of the best um

sales Founders that I worked with was

Ryan from vendor and Vendor by SAS

software um for um startups and and big

companies and he's really great at sales

and one of the things that I've heard

him talk about and that I learned from

him is that as a Founder you have to

sell yourself especially when you don't

have a product you have a product that's

that's the only thing you have exactly

it's like really janky and so you know

it's when you're reaching out to

somebody you say here's my cell phone

contact me any hour of the night or um

you know reach out to me because I am

you know basing the future success of my

company on making you successful and I'm

going to do whatever it takes to do that

I will stop at nothing to do that and

ultimately when you're selling to

somebody especially as an early stage

founder what you're really selling is

yourself you have to get them to make a

bet on you and so really leaning into

that is important because especially

sometimes people are scared like oh I'm

going up against this big well-funded

competitor or a public company or

whatever like what middle manager is

going to give out their personal cell

phone number when trying to win a

customer's business like nobody's going

to and so if you make people feel like

you care about them and you're going to

stop at nothing and your personal career

depends on making them successful people

are going to want to go with you every

single time every single time yeah don't

be afraid of taking that first step that

doesn't scale so you could truly

validate what it is you're working on

anything is better than standing still

and sometimes making progress means

doing things that don't scale one of my

favorite examples of a company that did

unscalable things to get off the ground

is instacart in his original essay says

Partnerships usually don't work they

don't work for startups in general but

they especially don't work as a way to

get growth started startups can't rely

on big Partnerships with Brands to get

going so they're forced to be more

creative here's the story of how

instacart launched without a single

grocery store partnership do you have

any good examples of this maybe from

your own companies or from other

companies you work with the best example

that I love is from instacart MH and so

you instacart is service that lets you

I'm sure a lots of people are familiar

with you open your app and you can

browse the inventory from a grocery

store and make an order and so a normal

person starting this business might

think oh we've got to um you know we

want to support Trader Joe's and Whole

Food so let's go and like talk to like

management of Trader Joe's and try and

get a some kind of like corporate

partnership or something get access to

the data and like it's going to take a

really really long time you know we have

to pay salaries and some lawyers and all

this kind of stuff that might take years

and instead what instacart did was they

took their YC money and went to Trader

Joe's and just bought one of every item

at Trader

Joe's and over a weekend got access to a

photography studio took all the produce

that they bought took it to the studio

and took pictures of it all wrote down

the prices and on Monday morning put all

of it online and said we're instart you

can order anything from Trader Joe some

Founders might say like maybe this is

not like perfectly legal Trader Joe's

might object you get a cease even if it

is legal does this matter I think it

matters that you're not doing anything

illegal yeah I think

if Trader Joe's object to you running

this thing honestly they'll probably

only notice when you get to a certain

scale and then you have the negotiating

leverage you have all these customers

who are already buying through Trader

Joe's that actually they don't want to

shut you down and that's exactly how it

played out with with instacart they

struck deals with these grocery stores

eventually after they got to scale and

they'd use this kind of hacky janky

solution to get to scale because it took

a Founder to highlight to them that this

idea was actually a good idea otherwise

they would have never never come up with

it themselves absolutely if you'd have

gone to Trader Joe's or Whole Foods uh

with nothing and tried to present this

idea you'd have been laughed out the

room probably at the very least it would

have taken you years to get that deal

yeah okay all of these examples ends up

succeeding but the cases where you do

things that don't scale and it turns out

no one wants a thing actually that's

good as well right because you've just

saved yourself months or potentially

years of building something that

actually no one wants it's way bad

better to know that up front and be able

to like pivot your product slightly or

choose a whole new idea completely and

by doing this stuff that doesn't scale

you've not like hardcoded yourself into

a corner you know you haven't written so

much software that it's hard to change a

lot of the processes are manual you're

doing it yourself and so if you want to

try something different the next day

it's really easy because there's no

software to change and the bet that

you're making ultimately is once you

figured out the right configuration of

the service or the product or whatever

it is that you will then be able to use

software right an algorithm that will

provide the same level of quality of

service at scale yeah um but it might

take you several years of investment to

do that and so in the early days without

making that investment you can give the

appearance of that service or product

already existing by basically faking it

manually by pulling the strings in the

background doing tons and tons of hard

work yourself to deliver that incredible

White Glove experience to customers

doing things that don't scale lets you

experiment fail fast and try new things

it lets you test your assumptions before

you spend months building a product from

an engineering perspective doing

unscalable things gives you freedom to

move more quickly the first version of

your product doesn't need to have a of

technical infrastructure next Diana and

Michael will talk about door Dash and

how they built the first version of

their product in one day and did a lot

of clever manual work to find out

whether people wanted what they were

building door Dash as a product was

built in one

afternoon whether you believe it or not

the text tack was basically Google drive

to upload the menus M HTML CSS for

putting the menus the phone was Tony's

phone Y and then find my friends to

pretend to have real time dispatch so it

would be one of the founders going to go

pick up the order and then the other

founder it was a team of four would be

watching in real time where with find my

friend where the order was and it would

text the uh customer hey you're order

ETA is 10 minutes 20 minutes and the

orders were just taken on um Google form

granted the team was actually very

technical it was a team of uh with

Stanford Engineers stanf for NBAs they

totally could have done the fancy thing

and build like a dynamic side with

Google Mac real time tracking and

everything but the founders were very

pragmatic that was not the hardest thing

to prove out it was like is this even a

thing that people wanted that was the

startup boy like that's the path no big

company would ever take this is the

advantage you have as a startup right

it's the thing you can do and no one

else can do to your point too many

Founders kind of we have to unte them

what they learn at the big companies and

like if you play the big company game

they will always P you you always have

to think about what would you've gotten

fired for at the big company that should

be your playbook at the startup I think

the second kind of misconception that's

embedded inside of a lot of startups

Founders Minds is is there's a way to do

this in an error free play like if I'm

working at Google I have to be far more

careful all right I need to create plans

that are kind of error proof yeah and

that's why it takes Google forever to do

anything as a startup your path is full

of Errors like Ed errors are the feature

so like should you be so lucky to have a

product that so many people want to use

that it crashes and then you have figure

out how to scale that is the correct

thing

right like the way I always try to

describe this is like imagine a house

that has a number of cracked pipes and

you have no idea which pipes are cracked

or not the big company person would go

and check every pipe one by one and it

would take two years the startup person

turns on all the water yeah and where's

water coming from that pipe's cracked

let's go fix it and turns out that like

when you are dying because too many

people are using your product the

motivation to fix those bugs goes

through the roof and they get fixed

rather quickly I should I don't think

we've seen startups die because of that

reason never that's not that is actually

100% solvable problem and you're not

going to die from it because the

incentives are so high yeah uh to fix it

and you on the path to build a large

company at that point yeah but most of

them don't even get to see that and you

got to like run the pipe and run with

the mess and embrace the chaos yep doing

things that don't scale is the startup

way it's the advantage you have as a

small company but at what point should

you stop doing unscalable things when do

you flip the switch this is a really

important one because people who get

from Zer to one often get stuck here

hard and Pete discuss the other side of

this advice though is like do things

that don't scale is great advice but at

some point you do need to scale and I

think that's where it's useful to have

like good advisors and investors around

you because they can tell you like Hey

look no no no no like you're in do not

do things that own scale mode and like

oh actually like now you need to flick

the switch and now this is working now

you should scale yes yeah I think that's

a great point and you can think of kind

of those early doing things that don't

scale as a quick way to answer an

important question and once you've

answered that question well now you have

license to invest right yep yep one of

the forms that I've seen this question

take

with with Founders that are building SAS

software uh is that there's this moment

in the earliest stages where you can

make money by selling consulting

services to other companies right and so

uh we actually had this example at

optimizely where we were building

software to help companies run AB tests

but at the earliest stages we got

companies to pay us just to go in and

manually build AB tests for them right

and so we're making money great the

first version of our product was

actually something that we used to make

ourselves more productive in delivering

those consulting services and that's all

great right because it helps you answer

the question is this something that

anyone will pay for right yes it turns

out the answer is yes the failure mode

here though is getting addicted to that

Consulting Revenue because like that's

the thing that won't scale quite

literally like it won't scale and you

won't be able to build a big business if

you depend on humans labor right it's a

really interesting example of where you

can't just fixate on just your Revenue

number like because you can always get

Revenue go up by taking on more

Consulting but that's why you can get

around it by just setting yourself

really ambitious growth targets and I

feel like this is partly why we push the

companies to have such big growth

targets is one way investors tell apart

what's a consultancy or a small business

from like a startup that could be stripe

or Airbnb one day is like can it grow

10x you can't grow a consultancy

business like 10x in a year you can grow

like real software business totally the

advice to do things that don't scale

might sound counterintuitive but it is

truly the best Advantage startups have

over their larger competitors it helps

you intimately learn about your customer

and their problems it ties those early

users to you more tightly and gives you

opportunities to Delight them and it

makes it possible to experiment quickly

and fail fast if things aren't working

go read Paul Graham's essay right now

Link in the description below that's it

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