Lecture 2 - Team and Execution (Sam Altman)

Summary

The lecture transcript covers essential startup advice, focusing on market growth identification through youth trends, handling burnout, and the importance of co-founder relationships. It emphasizes the need for a support network, the perils of hiring hastily, and the qualities to seek in early employees. The speaker stresses the significance of maintaining company momentum and growth, the intensity of work required, and the importance of decisiveness and focus in execution. The summary also touches on the challenges of remote co-founding teams and the value of personal referrals in hiring.

Takeaways

• 🎓 Trust your instincts to identify fast-growing markets, especially as a young person, as you are likely more in tune with emerging trends.
• 🔊 Ensure good communication by using the mic feed during lectures to maintain engagement and clarity with the audience.
• 🔥 Address burnout by persisting and relying on a support network, acknowledging that it's a challenging part of being a startup founder.
• 🤝 Prioritize co-founder relationships as they are crucial to a startup's success, and avoid entering into them without a strong foundation.
• 🚫 Be cautious about hiring, especially in the early stages, as the wrong hires can be detrimental to the company's culture and success.
• 💡 Focus on maintaining momentum and growth as the lifeblood of a startup, and avoid distractions that may stall progress.
• 🛠️ Emphasize the importance of execution, where the founder's own dedication to hard work and attention to detail sets the company culture.
• 🧐 Look for co-founders and early hires who are not just smart but also tough, calm, and have a proven ability to get things done.
• 🔑 Understand the importance of equity distribution, especially for early employees, as it can significantly impact their motivation and the company's growth.
• 🔄 Be ready to fire fast if an employee is not working out, ensuring that the company's best interests are prioritized over personal discomfort.
• 🌐 Be aware of the challenges that remote co-founding teams may face, as in-person communication and collaboration are often vital in the early stages of a startup.

Q & A

How can students identify fast-growing markets according to the speaker?

The speaker suggests that students should trust their instincts and observe their own and their peers' behaviors and preferences in technology and products, as these are likely indicators of future market trends.

What is the speaker's advice on dealing with burnout for startup founders?

The speaker acknowledges that dealing with burnout is challenging and suggests that founders should persevere, rely on their support network, and address the underlying issues causing burnout, as there is no easy fix like taking a vacation.

Why is choosing a co-founder considered one of the most important decisions in a startup's life?

The speaker emphasizes the importance of co-founder relationships due to their significant impact on the company's direction and success. Poor co-founder relationships are cited as a leading cause of startup failure.

What is the 'James Bond' model suggested for choosing co-founders, and why is it effective?

The 'James Bond' model refers to looking for co-founders who are unflappable, tough, quick to act, decisive, creative, and ready for any situation. This model is effective because it emphasizes the need for resilience and adaptability in the face of startup challenges.

Why does the speaker advise against hiring too quickly or having too many employees in the early stages of a startup?

The speaker believes that hiring too quickly can lead to a high burn rate, increased complexity, tension, and slow decision-making. It's better to be proud of accomplishing a lot with a small team and to hire only when there is a desperate need.

What is the significance of hiring slowly and carefully in the early days of a startup?

Hiring slowly allows founders to thoroughly assess candidates and ensure they are a good fit for the company culture and mission. The cost of a bad hire in the early stages can be extremely high, potentially even fatal to the startup.

Why does the speaker recommend personal referrals as the best source for hiring?

Personal referrals are seen as the best source for hiring because they often lead to candidates who are already known and trusted by the team, reducing the risk of a bad hire and leveraging existing relationships.

What is the 'Animal Test' mentioned by the speaker, and how does it relate to hiring practices?

The 'Animal Test' is a concept where every employee should be describable as an animal that excels at what they do. It emphasizes the need for hiring people who are unstoppable and excel in their roles, contributing significantly to the company.

How does the speaker suggest handling the equity distribution among the first ten employees?

The speaker suggests aiming to give 10% of the company to the first ten employees, with the understanding that they will earn it over four years. This approach is meant to attract and retain high-quality talent and align their interests with the company's success.

What is the importance of maintaining momentum and growth in a startup, according to the speaker?

Maintaining momentum and growth is crucial because it is the lifeblood of startups. A winning team stays motivated and continues to win, while a team that has not experienced wins can become demotivated and lose momentum, leading to potential failure.

How should a startup deal with a situation where growth has slowed down or stopped?

The speaker advises focusing on small wins to regain momentum. This could involve making incremental improvements to the product, listening to user feedback, and ensuring that the team remains aligned and focused on growth metrics.

What is the role of a board in maintaining a startup's focus on metrics and milestones?

A board can serve as a forcing function to keep the company focused on metrics and milestones. While they may not always add value to business strategy, they can provide structure and discipline to ensure the company maintains its growth trajectory.

Why is decisiveness important in a startup environment, and how can it impact the company's success?

Decisiveness is important because it helps maintain a bias towards action and prevents stagnation due to indecision. Startups need to move quickly, and founders who can make decisions rapidly and effectively are more likely to drive the company forward and adapt to changing circumstances.

How does the speaker define the role of a startup CEO in terms of execution?

The startup CEO's role in execution involves setting the vision, raising money, evangelizing the company, hiring and managing the team, and most importantly, setting the execution bar. The CEO must embody the culture of execution and lead by example, ensuring that the company maintains its focus and intensity.

Outlines

00:00

📚 Lecture Introduction and Market Growth Identification

The speaker begins by addressing leftover questions from a previous lecture, emphasizing the importance of student instincts in identifying fast-growing markets. They suggest that young people are often more attuned to emerging trends and should trust their observations of peers' behaviors as indicators of future market movements. The speaker also tackles the issue of burnout, advising founders to persevere despite the challenges due to the real-life stakes of running a startup. Support networks are highlighted as crucial, but the key to overcoming burnout is to address underlying issues head-on. The lecture then transitions into a discussion on the critical nature of identifying a co-founder and the pitfalls of choosing one without due diligence, using the Y Combinator's experience as a case study.

05:00

🤝 The Importance of Co-founder Relationships

This section delves into the significance of co-founder relationships, highlighting that these are among the most impactful in a startup's journey. The speaker warns against the common mistake of hastily choosing a co-founder without a solid history together, which often leads to startup failure. Using examples from Y Combinator's experiences, the importance of a co-founder who is not only resourceful but also shares a deep bond and understanding is underscored. The lecture also touches on the qualities to seek in a co-founder, such as being 'unflappable' and having a James Bond-like demeanor, and the value of knowing potential co-founders for a significant period before starting a business together.

10:03

🛂 Hiring Best Practices and Avoiding Mediocrity

The speaker shifts the focus to hiring practices within startups, emphasizing the importance of hiring slowly and maintaining high standards to avoid mediocrity. They discuss the high costs associated with early wrong hires and the importance of personal referrals in the hiring process. The speaker also addresses the common misconception that experience is paramount, arguing instead for a focus on aptitude and alignment with the company's mission. They stress the need for founders to be relentless in their pursuit of top talent, dedicating significant time and effort to the recruitment process, and to ensure that new hires are deeply committed to the company's success.

15:05

🔍 In-depth Hiring Strategies and Employee Retention

Continuing the discussion on hiring, the speaker provides a detailed examination of strategies for identifying and securing the best candidates. They advocate for a three-pronged approach to evaluating potential hires: intelligence, ability to execute, and personal likability. The speaker also emphasizes the importance of working with candidates on a trial basis before making a hiring decision, as this can provide valuable insights into their work style and culture fit. Additionally, they stress the significance of clear communication, risk-taking attitudes, and determination in potential employees, as well as the need for founders to be aware of their own tendencies toward poor management and to compensate for these by focusing on employee satisfaction and retention.

20:06

🏆 Maintaining Momentum and Execution Excellence

In this section, the speaker discusses the critical role of execution in a startup's success, distinguishing between having a great idea and the ability to execute that idea effectively. They outline the key responsibilities of a startup CEO, including setting the company's vision, fundraising, promoting the company, hiring and managing the team, and setting the standard for execution. The speaker also addresses the importance of focus and intensity in achieving excellence in execution, highlighting the need for founders to model these behaviors and create a culture that values and rewards them.

25:06

📈 Prioritization and the Power of Incremental Progress

The speaker emphasizes the importance of setting clear priorities and maintaining focus on the most critical tasks to drive a startup's growth. They argue that founders must identify the top two or three priorities each day and concentrate their efforts there, while delegating or deferring less important matters. The speaker also discusses the need for founders to develop a strong bias towards action, breaking down large goals into smaller, manageable projects that can be completed quickly, thereby building momentum and maintaining the company's growth trajectory.

30:07

🚀 The Role of Urgency and Dedication in Startup Success

This part of the lecture highlights the necessity of urgency and dedication in a startup's operations. The speaker explains that the intensity with which a startup operates can be a key differentiator from competitors and that this intensity must be driven by the founders' own commitment and work ethic. They discuss the importance of maintaining a high level of focus and the challenges of remote co-founding teams, advocating for co-location to ensure effective communication and alignment. The speaker also touches on the need for decisiveness and the ability to make quick decisions to avoid stagnation and keep the startup moving forward.

35:08

🛑 Responding to Momentum Loss and Competitive Distraction

The speaker addresses the challenges that arise when a startup loses momentum, such as internal disagreements and demotivation. They suggest that the best response is to focus on small, achievable wins to gradually rebuild momentum, rather than attempting to rally the team with speeches about the company's vision. The speaker also warns against the distractions posed by competitors, especially in the press, and advises startups to concentrate on their own business improvements rather than being preoccupied with competitors' noise. The importance of maintaining an operating rhythm, such as regular product launches and metric reviews, is also emphasized to sustain the company's forward momentum.

Keywords

💡Instincts

Instincts refer to the natural or intuitive reactions a person has to a situation without the need for conscious thought. In the context of the video, the speaker emphasizes trusting one's instincts when identifying fast-growing markets, particularly for young people who have a better pulse on emerging technologies and trends. The speaker suggests that personal intuition can often be more insightful than the guesses of older individuals who may be out of touch with current market dynamics.

💡Burnout

Burnout is a state of chronic physical and mental exhaustion often caused by excessive and prolonged stress. It is mentioned in the script as a challenge faced by startup founders who must continue to persevere despite the intense pressures they face. The speaker candidly discusses the harsh reality that unlike students, founders cannot simply give up during tough times; they must push through and rely on their support networks to manage burnout.

💡Co-founder

A co-founder is an individual who, together with one or more others, establishes a business venture and shares in its ownership. The script discusses the critical nature of co-founder relationships, noting that the selection of a co-founder is one of the most important decisions in a startup's life. The speaker warns against the casual selection of co-founders and emphasizes the importance of shared history and mutual trust in these partnerships.

💡Hiring

Hiring refers to the process of recruiting, interviewing, and appointing suitable candidates for jobs within an organization. The video script highlights the importance of hiring the right people, especially in the early stages of a startup. It underscores the high stakes involved in early hires, as they can significantly influence the company's culture and success. The speaker advises against hiring too quickly and stresses the need for a slow, deliberate process to find employees who are deeply committed to the company's mission.

💡Execution

Execution in a business context refers to the act of effectively and efficiently implementing plans or strategies to achieve desired outcomes. The speaker in the video emphasizes that execution is a critical component of startup success, often overshadowed by the allure of innovative ideas. The script discusses the importance of founders leading by example, setting high standards for themselves and the team, and maintaining a relentless focus on getting things done.

💡Focus

Focus denotes the act of concentrating one's attention on a particular object or activity. In the video, the concept of focus is presented as a key element of successful execution. Founders are advised to identify and prioritize the most critical tasks and goals, ignoring or delegating less important matters. The speaker warns against the tendency to become distracted by the many demands competing for a startup's attention.

💡Intensity

Intensity refers to the degree of strength, effort, or concentration applied to a task or activity. The script describes intensity as a necessary component of startup success, suggesting that a high level of dedication and effort is required to outperform competitors. The speaker mentions that startups require an 'all-consuming' commitment that may not be compatible with a balanced work-life approach.

💡Momentum

Momentum in a business sense refers to the impetus or driving force behind a company's growth or progress. The video script stresses the importance of maintaining momentum for a startup to thrive. Loss of momentum can lead to demotivation and decline, whereas consistent growth and positive momentum can propel a company forward, making small wins积累ulate into significant achievements.

💡Remote Teams

Remote teams are groups of employees who work from different physical locations, often outside of a central office. The speaker expresses skepticism about remote co-founding teams in the script, arguing that the early stages of a startup require intense communication and speed that can be hindered by geographical separation. The speaker suggests that in-person collaboration is crucial for rapid decision-making and alignment in the early days of a company.

💡Equity

Equity in a business context refers to ownership interests in a company, often represented through shares or stock. The script discusses the importance of equity分配, particularly how it should be generously granted to early employees as an incentive and a reflection of their contribution to the company's value. The speaker advises founders to be mindful of equity distribution, ensuring that it is fair and motivating for the team.

💡Quality

Quality denotes the standard of something as measured against other things of a similar kind; it is the degree of excellence of a product or service. The video emphasizes the need for a high-quality bar to be set and maintained across all aspects of a startup's operations. The speaker points out that successful companies like Apple, Facebook, and Google are known for their relentless pursuit of quality, which contributes to their reputation and success.

💡Decision-Making

Decision-making is the process of selecting a course of action from among multiple alternatives. The script touches on the importance of being decisive in a startup environment, where indecision can stall progress and lead to lost opportunities. The speaker encourages founders to have a bias towards action, making choices quickly and moving forward, even when faced with imperfect information or uncertain outcomes.

💡Growth Rate

Growth rate refers to the speed at which a company, product, or market expands. The video script discusses identifying markets with fast growth rates as a key challenge. The speaker suggests that young people, being closer to emerging trends, are often better at recognizing markets that are primed for rapid expansion, indicating the importance of intuition and observation in predicting growth potential.

💡Support Network

A support network consists of relationships and resources that provide assistance and encouragement, especially in times of need. In the context of the video, the speaker mentions the importance of having a support network to help manage burnout. This network can provide emotional, professional, or practical support, which is crucial for founders navigating the intense pressures of startup life.

💡Product-Market Fit

Product-market fit is a concept that describes a situation where a product satisfies a large, existing market demand and is able to grow without relying on extensive marketing. The script implies the importance of product-market fit by discussing the significance of creating a product that the market wants. The speaker suggests that maintaining momentum and growth often depend on whether a startup has achieved product-market fit.

Highlights

The importance of trusting one's instincts when identifying fast-growing markets, especially for younger individuals who are more attuned to emerging technologies.

Addressing the issue of burnout in startup founders and the necessity of persistence and a strong support network.

The significance of co-founder relationships in the success of a startup and the potential pitfalls of choosing the wrong co-founder.

The advice against hiring based on convenience rather than finding a co-founder with whom one shares a strong bond and history.

The recommendation to find a co-founder who is relentlessly resourceful, tough, and calm, using the James Bond analogy for ideal co-founder traits.

The suggestion that the best way to meet a co-founder is through college or by working in a dynamic company where potential co-founders are likely to be.

The emphasis on the importance of hiring slowly and carefully in the early stages of a startup to avoid the high costs of early hiring mistakes.

The strategy of Airbnb's CEO, Brian Chesky, in interviewing potential employees and the high commitment he sought from them.

The advice that hiring should be the top priority when in hiring mode, similar to how product development is the focus when in product mode.

The warning against compromising on the quality of hires and the long-term negative impact that mediocre hires can have on a company's culture and success.

The value of personal referrals in hiring and the effectiveness of this method in building strong early teams in startups.

The three key qualities to look for in a hire: intelligence, ability to get things done, and personal enjoyment in their company.

The importance of equity distribution among early employees and the recommended 10% allocation for the first ten hires.

The necessity of managing and retaining employees effectively, with an emphasis on fairness, recognition, and providing opportunities for growth.

The advice on firing practices, highlighting the need for swift action when an employee is not working out, and doing so in a way that is best for both the company and the individual.

The discussion on the challenges of remote co-founding teams and the preference for co-founders to be in the same location for better communication and speed.

The critical role of the CEO in setting the execution bar and the importance of personal involvement in execution to establish a culture of excellence.

The emphasis on focus and intensity as key components of execution, and the necessity for startups to maintain growth and momentum at all times.

The strategy of responding quickly to emails and making fast decisions as a way to build a reputation for speed and reliability.

The importance of maintaining a regular operating rhythm for product launches and metric reviews to keep the company aligned and focused.

The advice to not be distracted by competitors or press, focusing instead on incremental improvements and execution excellence.

Transcripts

Uh, before I jump into today's lecture,

I wanted to answer a few questions.

People emailed me saying they had questions about

the last lecture they ran out of time for.

So if you have a question about what we

covered last time um,

I am welcome to answer it now starting with you.

>> Can you use the mic feed?

>> Uh, it should be on.

Can you not hear me?

No?

Maybe you can ask them to turn on.

Ah, hopefully it will come on.

Anybody else?

Yes?

>> Ah, so one question that was submitted online was um,

how do I identify if a market has

a fast growth rate now, and also for the next ten years.

>> All right, so the question is

how you identify markets that are growing quickly.

Um, the good news about this is is this is one of the big

advantages students have.

Um, you should just trust your instincts on this.

Um, older people have to basically guess about

the technologies that are sort of,

that young people are using, right?

Because young people get older and

they become the dominant market.

Um, but you can just watch what you're doing,

what your friends are doing.

And um,

you will almost certainly have better instincts on

fast-growing markets than anybody older than you.

And so the answer to this is just trust your instincts.

Think about what you're using more,

think about what you're using, what you're

seeing people your age begin to start using.

Um, that will almost certainly be the future.

Maybe I can do one more question on

the last lecture before we start.

>> Um, this isn't really last lecture, but

another online is, how do you deal with burnout while

still being effective and remaining effective?

>> Yeah. Sure.

Um, so the question is

how you deal with burnout as a founder.

Uh, this, the answer to this is just that it sucks and

you keep going.

Um, unlike a student, where you can sort of throw up

your hands and say, you know what, I'm really burned out.

I'm just gonna like get bad grades this quarter.

Uh, one of the hard parts about running a start up

is that it's real life.

And um, you just have to get through it.

Uh, the canonical advice is like go

on vacation or whatever.

Um, that never works for founders.

It's sort of all consuming in this way.

It's very difficult to understand.

So what you do is you just keep going.

Um, you rely on people uh, it's like really important.

And founder depression is this serious thing.

And you need to have a support network.

Um, but the way through burnout is just to address

the challenges, address the things that are going wrong,

and you'll eventually feel better.

All right, so, last week we, or last lecture we

covered the idea and the product, um, and I want to

just emphasize that if you don't get those right,

none of the rest of this going to save you.

Um, today, we're gonna talk about how to hire ah, and

how to execute.

Hopefully you don't execute the people you hire.

Um.

Sometimes.

Uh, so, first, I wanna talk about co-founder.

Um, co-founder relationships are among the most

important in the entire company.

Um, and everyone says that you need to watch out for

tension brewing among co-founders, and

address them immediately, and that's all true.

And certainly in YC's case.

The number one cause of early death for

start ups is, is co-founder blow ups.

But for some reason a lot of treat choosing their

co-founder with even less importance than

they put on hiring.

Um, don't do this.

This is one of the most important decisions you

make in the life of your start up,

and you get treated as such.

And for some reason,

students are really bad at this.

They just pick someone,

they're like I wanna start a business,

you wanna start a business, let's start it,

start it together.

Um, there are these, like, co-founder dating things

where you're like hey, I'm looking for a co-founder.

We don't really know each other,

let's start a company.

And this is like crazy.

Um, you would never hire someone like this, and yet

people are willing to

choose their business partners this way.

Um, it's really, really bad.

And choosing a random co-founder or

choosing someone you don't have a long history with.

Choosing someone that you're not friends with.

So that when things are really going wrong, you have

this sort of past history to bind you together.

Um, usually ends up in disaster.

We had one YC batch where nine of about 75 companies

added on a random co-founder between when we

interviewed the companies and when they started,

and all nine of those teams fell apart in the next year.

Uh, the track record for founders that

don't already know each other is really bad.

Um, a good way to meet a co-founder is in college.

If you're not in college and

you don't know a co-founder, the next best thing I

think is to go work in an interesting company.

If you work at Facebook or Google or

something like that, um,

it's probably almost as co-founder Rich at Stanford.

It's better to have no co-founder uh,

than have a bad co-founder, but

it's still bad to be a solo founder.

Um, I was just looking at

the stats here before we started.

For the top, and

I may have missed one cause I was counting quickly, but

I think, but for the top 20 most valuable YC

companies um, all of them have at least two founders.

Uh, and we, we probably fund at a rate of something like

one out of ten solo teams.

Uh, so best of all,

founder you know, co-founder you know.

Um, better than that or not as good as that but

still okay, solo founder.

Random founder you meet.

Uh, again students do this for some reason.

Really, really bad.

Uh, so as you're thinking about co-founders and

people that could be good,

there's a question of what you're looking for, right?

And at YC we have this public phrase.

Um, and it's relentlessly resourceful.

And everyone's heard about it.

And I think that really is a very good description for

what you're looking for with co-founders.

Um, you definitely need

relentlessly resourceful co-founders.

Um, but there's a more colorful example that we

share at the YC kickoff.

Um, Paul Gram started using this, and

I've kept it going.

Um, so you're looking for

co-founders that need to be unflappable, tough.

They know what to do in every situation.

They act quickly.

They're decisive.

They're creative.

They're ready for anything.

Um, and it turns out that there's a model for

this in, in pop culture.

And it sounds really dumb, but

it's at least very memorable.

And we've told every class of YC this for

a long time, and I think it helps them.

Um, and that model is James Bond.

Um, and again it sounds crazy but it, it, uh,

it will at least stick in your memory and, and

you need someone that behaves like James Bond

more than you need someone that is you

know an expert in some particular domain.

As I mentioned earlier,

you really want to know your co-founders for

a while, ideally years.

This is true for early hires as well.

But incidentally, more people get this right for

early hires, than they do for co-founders.

Uh, so again, take advantage of school.

Um, in addition to relentlessly resourceful,

you want a tough and a calm co-founder.

Uh, there are all the obvious things like smart.

But everyone knows that you want a smart co-founder.

Uh, most people don't prioritize tough and

calm well enough.

Especially if you feel like you yourself aren't,

you need a co-founder who is.

Um, if you're not technical, and

hopefully most people in this room are,

you really want a technical co-founder.

There's this weird thing going on in

start ups right now where it's become popular to say,

like you know what?

We don't need technical founders,

we're gonna hire people,

We're just gonna be great managers.

Um, that doesn't work too well, in our experience.

In a software,

people really should be starting software companies.

Media people should be starting media companies.

Um, so and in the YC experience, two or

three co-founders seems to be about perfect.

Um, one obviously not great,

five really bad, four works sometimes, but uh, two or

three I think is what to target.

Okay, the second part of how to hire.

Um, try not to.

So one of the weird things that you'll notice if

you start a company is that everyone asks you

how many employees you have.

And this is the metric people use to sort of

judge how real your start up is and how cool you are.

Um, and if you say you have a high number of employees,

they're really impressed.

And if you say you have a low number of employees

then, then you sound like sort of this little joke.

Um, but actually it sucks to have a lot of employees and

you should be proud of how few employees you can have.

Lots of employees ends up with things like a high burn

rate, meaning that you're losing a lot of money every

month, complexity, tension, slow decision making.

The list goes on but it's nothing good.

So you want to, you want to be proud of how much you can

get done with a small number of employees.

Um, many of the best YC companies have had

phenomenally small number of employees for

the first year, sometimes none besides the founders.

Um, they really try to

stay small as long as they possibly can.

At the beginning, you should only hire when you

have the desperate need to.

Later you need to learn how to hire fast to scale up

the company.

But in the early days uh,

the goal should be not to hire, not too higher.

And one of the reasons this is so bad is that

the cost of getting a early hire wrong is really high.

Um, in fact a lot of the companies that I have been

very involved with that have had a very bad first hire

in the first three or

so employees never recover from it.

It just kills the company.

Um, Airbnb spent five months interviewing their first

employee before they hired someone.

And in their first year they only hired two people.

Um, before they hired a single person they,

they wrote down a list of the cultural values that

they wanted any Airbnb employee to have.

One of those was that you had to bleed Airbnb.

And if you didn't sort of agree to

that they just wouldn't hire you.

Um, as an example of how intense Brian Chesky is,

he's there being CEO.

Um, he use to ask people before he hired them at

Airbnb, if they would take the job if they got a

medical diagnosis that they got one year left to live.

Um, he wanted them to be that committed.

Later he decided that, that was like a little too crazy.

>> Um, and I think he relaxed it to ten years.

But last I heard, he still asks that question.

Um, but like, you know, these hires really matter.

These people are what go on to define your company.

And so you need people that believe in it almost as

much as you do.

And it sounds like a crazy thing to ask, but

he's gotten this culture of extremely dedicated people.

Um, that come together when the company faces a crisis.

Uh, and when the company faced a big crisis early on,

everyone in the company lived in the office, and

they shipped product everyday until

the crisis was over.

One of the remarkable observations about Airbnb is

if you talk to any of the first,

say 40 or 50 employees, they all

feel like they're apart of the founding of the company.

Uh, and this is really hard to get right and

this is really rare.

Um, but by having an extremely high bar and

hiring slowly and

making sure everyone believes in the mission,

you can get that.

Okay, so let's say, you know,

you've listened to the warning about not hiring and

now you absolutely have to.

When you're in this hiring mode, your job is, it should

be your number one priority to get the best people.

Just like when you are in product mode that is

your number one priority.

And when you are in fundraising mode,

fundraising's your number one priority.

Um, one thing that founders always estimate is how

hard it is to re recruit.

You know, you think you have this great idea and

everyone's going to come and

join, but that's not how it works.

To get the very best people they have a lot of

great options, right?

And so it can easily take a year to recruit someone.

It's this long process and you have to convince them

that your mission is the most important of

anything that they're looking at.

This is another case of why it's really important to

get the product right, before anything else.

The best people know that

they should join a rocket ship.

Um, by the way, that's my number one piece of advice.

If you're gonna join a start up, pick a rocket ship.

Um, pick a company that's already working.

Uh, and that the,

you know, not everyone yet realizes that.

But it's, you know,

you know cuz you're paying attention and

it's going to be huge.

And, and again you can usually identify these.

Um, but good people know this, right?

And so good people will wait and they want to see that

you're on this break out trajectory before they join.

One question that people asked online this morning

is, how much time you should be spending hiring.

The answer is either like 0 or 25%.

You're either not hiring at all, or

it's probably your single biggest block of time.

Um, in practice, like all these books on management or

whatever say that you

should spend 50% of your time hiring.

But the people that give that advice, it's rare for

them to even spend 10% themselves.

25% is still a huge amount of time.

Um, but that's really how much you should be doing

once you're in hiring mode.

Um, okay, so if you compromise and

hire someone mediocre, you will always regret it.

We always like to warn founders of this.

No one really feels it until they miss,

make the mistake the first time.

Um, but it can poison the culture.

Mediocre people at a big company cause some problems.

They don't usually kill the company.

A single mediocre hire in the first five will often,

in fact, kill a start up.

Uh, a friend of mine has a sign up

in the conference unit, he uses for interviews.

And he like positions the sign, so

the candidate is looking at it,

while they're interviewing.

And it says that mediocre engineers do not

build great companies.

Um, yeah.

That's true.

Um, it's really true.

You can get away with it, in a big company, right?

Cuz people just sort of like,

fall through the cracks.

But, but every person in a startup sets the tone.

Um, so if you compromise in the first, you know,

say five, ten hires, um, it might kill the company and

you should think about that for

everyone you hire like will I bet the future of this

company on the single hire um, and that's a tough bar.

At some point in life at the company when you're bigger,

you will compromise on a hire um,

there'll be some pressing deadline uh, or

something like that.

You will still regret it, um, but

this is the difference between theory and

practice, and we're gonna have later speakers talk

about what this, what to do when this happens.

But in the early days you just can't screw it up.

Um, sources of candidates,

this is another thing that students get wrong a lot.

Um, the best source by far for

hiring, is people that you already know, and

people that other employees in the company already know.

Most great companies, in tech have been built

by personal referrals, for the first at least 100

employees and often many more.

Um, most founders feel

awkward calling everyone good that they ever met.

And asking their employees to do the same.

But you'll notice that if you go work at Facebook or

Google, one of the things they do in your first few

weeks, is an HR person sits you down, and like beats out

of you every smart person you've ever met.

No matter how likely you

think you are to be able to recruit them.

Um, and these personal referrals really

are the trick to hiring.

So you have to

like go way beyond your comfort zone here.

Um, another tip is to look outside the valley.

It is brutally competitive to hire engineers here.

Um, but you probably know very good people living

elsewhere in the world that would love to work with you.

Another question that founders ask us

a lot about Is experience and how much that matters.

Um, the short version here,

is that it experience matters for some roles and

not others.

Um, when you're hiring sort of like you know,

someone that is gonna run a large organization of

your company, experience probably matters a lot.

Um, for most of the early hires you make in

a start up, experience doesn't matter very much uh,

and you should go for

aptitude and believe in what you're doing.

Most of the best hires that I ever made in my

entire life have never done that thing before.

Um, so it's really like is this a role where I

care about experience or not.

Most of the time you don't in the, in the early days.

Um, there are three things that I look for

when I hire people.

Um, are they smart?

Do they get things done?

Do I want to spend a lot of time around them?

And if I get an answer, if get, ended up with a yes for

all thee of these,

um I almost never regretted a hire.

It's almost always worked out.

You can learn a lot about all three of

these things from an interview.

But the very best way is by working together.

So ideally,

it's someone you've worked with in the past.

And in which case,

you probably don't even need an interview.

Um, if you haven't, then I think it's way

better to work with someone on a quick project for

a day or two before hiring them.

Um, you'll both learn a lot, they will too.

And most uh,

first time founders are very bad interviewers.

But very good at evaluating someone after

they've worked together.

So one of the pieces that we give advice,

one of the pieces of advice that we give at YC is,

try to work together on

a project rather than just doing an interview.

Um, if you are gonna interview, which

you'll probably do as well, you should ask specifically

about projects that someone has done in the past.

Um, you'll learn a lot more than you will with

brain teasers.

For some reason,

young technical founders love to ask brain teaser

questions rather than just ask what someone's done.

Really dig into projects people have worked on and

call references.

Ah, that is another thing that first time

founders like to skip.

Um, you want to call some people uh,

that these people have worked with in the past.

And then when you do,

you don't just want to ask like how was so and so.

Like you really want to dig in, like is this person in

the top 5% of people you've ever worked with?

What specifically did they do?

Would you hire them again?

Like why,

why, why aren't you trying to hire them again?

Um, you really have to press on,

on these reference calls.

Um, another thing that I've noticed from talking to

a lot of YC companies,

is that good communication skills tend to

correlate really well with hires that work out.

Um, I used to not pay attention to this.

We're gonna talk more about why communication is so

important in an early startup.

If someone is difficult to talk to, if

someone cannot communicate clearly uh, it's a real

problem in terms of their likelihood to work out.

Also for early employees you want people that have

somewhat of a risk taking attitude.

Uh, you, you generally get this or

they wouldn't be interested in a startup.

But now that startups are sort of more in fashion um,

you, you want people that actually sort of

like a little bit of risk.

If someone's choosing between like Mackenzie and

joining your startup, very unlikely that,

that person's going to work out at the startup.

Uh, you also want people who are maniacally determined.

And that is slightly different than

having a risk tolerant attitude, so

you really should be looking for both.

By the way, people are welcome to

interrupt me with questions, as stuff comes up.

There's a famous test from

Paul Graham called the Animal Test.

Um, and, and the idea here is that you should be able

to describe any employee as an animal at what they do.

Um, and I don't think that probably translates out of

English very well, but

um, you know, you need unstoppable people.

Uh, you want,

you want people that are just going to get it done.

Um, founders that end up

being really happy with their early hires.

Usually end up describing these people as the very

best in the world, at whatever they do.

Mark Zuckerberg once said uh,

that he tries to hire people, that A,

that he would spend time with socially and B,

that he'd be comfortable reporting to,

if the roles were reversed.

Um, this strikes me as a very good framework.

You don't have to be friends with everybody,

but you should at least enjoy working with them.

And if you can't have that,

you need to at least deeply respect them.

Um, but again, the,

if you don't wanna spend a lot of time around people,

uh, you should sort of trust your instincts on that.

While I'm on this topic of hiring uh,

I want to talk about employee equity.

Founders screw this up all the time.

Um, I think that as a rough guideline you should aim to

give 10% of the company to the first ten employees.

Um, they have to earn it over four years anyway.

And if they're successful,

they're gonna contribute way more than that.

Uh, they're gonna increase the value of

the company by way more than that.

Um, and if not, then they won't be around anyway.

So for whatever reason founders are usually

very stingy with equity to employees and

very generous with equity to investors.

And I think this is totally backwards, um,

I think this is one of the things founders screw up

the most often.

You know, employees will only add more

value over time.

Investors sort of like write the check, and

then despite a lot of big promises,

don't usually do that much.

Sometimes they do.

Um, but, but your employees are really the ones that

build the company over years and years.

So I believe in like fighting with investors to

reduce the amount of equity they get.

Um, and then being as gen,

generous as you possibly can with employees.

Um, the YC companies that have done this well,

the YC companies that have been super generous with

equity to early employees in general are the most

succesful ones that we've funded.

Um, all right.

So one thing that founders forget is that after they

ah, after that they hire employees,

they have to retain them.

I'm not gonna go into a huge amount of detail here,

cuz we're gonna have a full lecture on this later.

Um, but I do wanna talk about it a little bit.

Because founders get this wrong so often.

Um, you have to make

sure that your employees are happy and feel valued.

This is one of

the reasons that big equity grants are important.

Um, people in the excitement of

joining a startup don't think about it much.

But if they come in day after day, year after year,

um if they feel like they've been treated unfairly,

that will really start to grate on them,

uh, and resentment will build.

But more than that,

learning just a little bit of management skill,

which first time CEOs are usually terrible at,

uh, goes a long way.

Um, one of the speakers at YC this summer, uh, who,

who is not extremely successful.

But struggled early on and

had his team turn over a few times.

Someone asked him what his biggest learning was.

And he said that it turns out you shouldn't tell your

employees they're fucking up every day

unless you'd like them all to leave because they will.

>> Laugh.

>> Um, but as a founder this is

this like very natural instinct, right?

You think you can do everything the best?

And, it's easy to

tell people when they're not doing it well.

So, learning just a little bit here will

prevent this like massive team churn.

It also doesn't come naturally to

most founders to really praise their team.

Um, it took me a while to learn this too.

You have to let your team get all the credit for

everything good that happens, and

you take responsibility for the bad stuff.

You have to not micromanage.

You have to like continually give people new areas of

responsibility.

These are not the things that

most founders think about.

Um, I think the best thing you can do is be aware that

as a first time founder, you are likely to be a very bad

manager and try to overcompensate for that.

Uh, Dan Pink talks about these three things that

motivate people to do great work, autonomy, autonomy,

mastery and purpose.

Um, I never thought about that when I was running my

company, but I've thought about it since.

And I think that's actually right, and

I think it's worth trying to think about that.

Um, it also took me a while to learn to do

things like one and ones and give clear feedback.

All of these things that first time CEOs just don't

do, uh, until they get burned a few times.

But maybe, maybe I can save you from doing that.

All right.

And the last part on the team section uh,

is about firing people when it's not working.

Um, no matter what I say here,

this is not gonna prevent anyone from doing it wrong.

And the reason is that firing people is one of

the worst parts of running a company.

Um, actually in my own experience I

think it is the worst.

Uh, every first time founder waits too long.

Everyone hopes that an employee will turn around.

But the right answer is to

fire fast when it's not working out.

Um, It's better for the company.

It's also better for the employee.

But it's so painful and so

awful that everyone gets it wrong the first few times.

Um, in addition to firing people who

are doing bad at their job.

You also wanna fire people who A, create an office

politics, and B, who were persistently negative.

Um, the rest of the company is always aware

of employees doing things like this.

And it's just this huge drag,

it's completely toxic to the company.

Ah, again, this is an example of something that

might work okay in a big company,

although I'm still skeptical.

But will kill a startup.

So I think you need to watch out for

people that are, yes?

>> How do you balance firing people fast, and

making your other employees feel like

they're secure even if they screw up sometimes?

Cuz you don't want them to

feel like they're out the door on the first mistake.

>> Yeah, sure.

So the question is how do you fi,

balance firing people fast and

making the early employees feel secure?

Um, the answer is the, when an employee is not working,

it's not like they screw up once or twice.

Um, anyone will screw up once or

twice, or more times than that.

Ah, and, you know, you should be like very loving,

not take it out on them.

Like, be a teamwork together.

Ah, if someone is getting every decision wrong,

that's when you need to act.

And at that point,

it'll, it'll be painfully aware to everyone.

It's not a case of the few screw ups.

It's a case where every time someone does something you

would've done the opposite yourself.

You don't get to make their decisions, but

you do get to choose the decision makers.

And if someone's doing everything wrong uh,

just like a consistent thing over like a period of

many weeks or a month.

You'll be aware of it.

This is one of those cases where in theory it sounds

complicated to be sure what you're talking about.

And in practice there's almost never any doubt.

It's the difference between someone making one or two

mistakes and just constantly screwing everything up, or

causing problems, or making everyone unhappy is,

is painfully obvious the first time you see it.

Yes?

>> When should cofounders decide on the equity split?

>> Great question, when should cofounders decide on

the equity split?

Uh, for some reason, I've never really been sure why

this is, a lot of founders, a lot of cofounders like to

ah, leave this off for a very long time.

You know, they'll even

sign the incorporation documents in some crazy way,

so that they can wait to have this discussion.

This is not a discussion that gets easier with time.

Um, you want to set this uh, ideally you

know very soon after you start working together.

Um, and it should be near equal.

Um, if you're not willing to give someone,

your cofounder, you know,

like an equal share of the equity.

Uh, I think that should make you think hard

about whether or not you want them as a cofounder.

Um, but in any case,

you should try to have the ink dry on this before

the company gets too far along.

Like certainly in the first number of weeks.

Yes? >> Inexperience can be

okay uh, but then how do you know if it's gonna be

crippling and you fire them?

That way >> Um,

so the question is I said that inexperience is okay.

Um, how do you know if that's going to,

you know, I someone is going to scale pass, not scale up

to a roll as things go on and later become crippling.

Um, people that are really smart, and

they can learn new things can almost always find

a role in the company as time goes on.

You may can move them into something else,

something other than where they started.

Um, you know, it may be that you hire someone to

lead the engineering team that, over time,

can't scale as you get up to 50 people.

And you give him a different role.

Um, really good people, though,

can almost always find some great place in the company.

I have not seen that be a problem too often.

>> What if your relationship with your founder or

founders breaks down over time and

you're ready to split equity and everything?

What's the best way to >> All

right, so the question is, what happens when your

relationship with your co-founder falls apart.

Um, we're gonna have a session on mechanics.

At, near the end of the course.

But here's the most important thing that

founders screw up.

Which is every foun, every cofounder of,

you yourself, of course, has to have vesting.

Um, basically what you're doing with

cofounder vesting is you're

pre-negotiating what happens if one of you leaves.

And so the normal stance on this in Silicon Valley

is that it takes four years.

Let's say you split the equity 50 50?

It takes four years to earn all of that.

Um, and the clock doesn't start until one year in.

So if you leave after one year,

you keep 25% of the equity.

If you leave after two years, 50 and

on and on like that.

Um, if you don't do that and if you have a huge fallout

and one founder leaves early on with half the company uh,

you have uh, like this dead weight uh, of the uh,

on your equity table.

And it's very hard to get investors to fund you or

to do anything else.

So number one piece of advice to prevent that

is to have vesting on the equity.

Uh, we pretty much won't fund a company now,

where the founders don't have vested equity

vesting equity, cuz it's just that bad.

The other thing to do is as soon as problems come up

in the relationship between the cofounders,

which happens to some degree in every company.

Um, talk about it early,

don't let it just sit off there and fester.

If you have to choose between hiring an employee

that's not ideal and losing your customer, you lose one

of the particular working >> If you have to choose

between hiring a suboptimal employee and losing

your customers to your competitor what do you do?

Um, if it would be one of the first five,

say employees of the company.

Uh, I would lose those customers.

Um, I just,

I think the damage that it does to the company.

Um, you, you know, you don't wanna, it's better to lose

some customers than kill the company.

Um, later on I might have a slightly different opinion,

but it's really hard to say in the general case.

How about one more question, and I'll keep going, yes?

>> Uh, what's your experience with cofounders

who aren't working uh, in the same location?

>> I'm gonna get to that later.

The question is what about cofounders that are not

working in the same location.

>> Um, don't do it.

I am skeptical of remote teams in general.

But in the early days of a startup where

communication and speed outweigh everything else.

Um, for whatever reason, video conferencing or

calls just don't work that well.

The data on this is look at the say, like,

30 most successful software startups of all time.

And try to point to a single example

where the cofounders were in different locations.

It's really, really tough.

Um, all right.

We'll skip a little bit of this.

All right.

So, now we're gonna talk about execution.

Um, execution for most founders is

not the more fun part of starting a company.

But it is often the most critical.

Um, most people that start a company think that they

are signing up to have this brilliant idea.

And, you know, then they're just going to be,

like, be on magazine covers and go to parties.

>> But really what it's about more than

anything else, what, what being a founder means is, is

signing up for this year's long grind on execution, and

you can't outsource this.

Um, the way to have a company that executes well

is to execute well yourself.

Everything in startup gets modeled after the founders.

Whatever the founders do becomes the culture.

So if you want a culture where people work hard and

pay attention to detail and focus on the customer and

are frugal um,

you have to do it yourself there is no other way.

You cannot hire a COO and have them, you know,

do this while you go off to conferences.

The company just needs to see you as

like this maniacal execution machine.

As I said in the first lecture,

there's like a hundred times at least more people with

great ideas.

Than people that are willing to put in the effort,

um, to execute them well.

Ideas by themselves are not worth anything.

Only executing well is what, what adds value,

or what creates value.

A big part of execution is just putting in the effort.

Um, but there is a lot you can learn about how to

be good at it and so we're gonna have I

think three classes that just talk about this.

Uh, so the CEO, people have asked me a bunch of

times like the jobs of the start up CEO.

And there are probably more than five but, you know,

here are five that come up a lot in the early days.

Um, the first four,

I think everyone thinks of as CEO jobs.

Set the vision.

Raise money.

Evangelize the company to people you're trying to

recruit.

Existing employees, partners, press,

customers, everybody.

Hire and manage the team.

Um, but the fifth one is setting the execution bar,

and this is not something that

most founders get excited about.

Probably think about themselves doing that I

think is actually one of the critical CEO roles.

And no one but the CEO can do this.

Um execution gets divided into two, two key questions.

One can you figure out what to do?

And two can you get it done?

Um so I wanna talk about two parts of getting it done.

Assuming that you've already figured out what to do.

Um, and those are focus and intensity.

Ah, so, so focus is critical.

Um, one of my favorite questions to ask founders

is what they're spending their time and money on.

Um, this reveals almost everything,

about what founders think is important.

One of the hardest parts about being a founder.

Is it there are 100 important

things competing for your attention every day.

Um, and you have to identify the right two or three, work

on those and then ignore or delegate or defer the rest.

And a lot of these things that,

that founders think are really important, you know.

Interviewing a lot of different law firms,

going to conferences, recruiting advisors,

whatever, they just don't matter, right?

And what really does matter, varies with time but

it's an important piece of May Day advice.

You need to figure out what the two or

three most important things are and then just do those.

And you can only have two or three things every day,

because everything else will just come at you.

You know fires of the day, and

if you don't get really good at setting what these two or

three priorities are every day.

Um, you'll never be great at actually getting stuff done.

This is really hard for founders right.

Founders are people that get

excited by starting new things.

Unfortunately, the trick to great execution is to

say no a lot.

You know, you're saying no 97 times out of 100,

um, and most founders find that they have to

make a very conscious effort to do this.

Most startups are not nearly focused enough.

They work really hard, maybe, but

they don't work hard on the right things.

And you'll still fail.

Um, one of the great and

terrible things about starting a startup is that

you get no credit for trying.

You only get points when you

make something that the market wants.

So if you work really hard on the wrong things.

Uh, no one will care.

So then there's this question of how do

you figure out what to focus on each day?

And this is where it's really important to

have goals.

Most good founders that I know uh,

at any given time have a small number of

overarching goals for the company.

Everybody in the company knows.

Could be things like ship a product by this date.

You know, maintain this growth rate,

get this certain engagement rate, hire for

these key roles, get this deal done.

But anybody could tell you in the company every week

what are our, what are our key goals?

And then everybody executes based off of that.

The founder really does set the focus.

Um, whatever the founder cares about,

whatever the founders think are the key goals.

Um, that's going to

be what the whole company focuses on.

And, and the best founders repeat these goals over and

over far more often than they

think they should need to.

They put em up on the walls,

they talk about them in one on one's,

all hands meeting every week.

Um, but it keeps the company focused.

One of the keys to focus on why I said I think.

Co-founders in different places struggle is that

you can't be focused without really great communication.

Um, even if you only have say four or

five people in a company.

A small communication breakdown is enough for

everybody to be working on slightly different things.

Um, and then you lose focus and

the company just scrambles.

I'm going to talk about this a little bit more later.

Um, but growth and

momentum are something you can never lose focus on.

Uh, growth and momentum are what a start up lives on.

Uh, and you always have to focus on maintaining these.

You should always know how you

are doing against your metrics.

You should have a weekly review meeting every

week and you should be

extremely suspicious if you're ever talking about.

We're not focused on growth right now,

we're not growing that well right now, but

we're doing this other thing, you know.

We don't have, we don't have a timeline for when we're

gonna ship this cuz were focused on this other thing.

We're doing a rebrand,

whatever, almost always a disaster.

So you wanna have the right metrics and

you want to be focused on growing those metrics and

having momentum.

Um, don't, don't let the company get distracted or

excited by other things.

Um, a common mistake is that company's gets excited by

their own PR.

It's really easy to get PR with no results and

it feels like your actually really cool.

But in a year, you'll still have nothing, and

at that point you won't be cool anymore.

And you'll just be

talking about these articles from a year ago.

That oh, you know, like these Standford students

start this new startup, it's gonna be the next big thing.

And now you have nothing, and that sucks.

Um, and then,

as I mentioned already, be in the same space.

Ah, this is like,

I think this is pretty much a non starter.

Remote co-founding teams is just really really hard.

It slows down the cycle time more

than anybody ever thinks it's going to.

The other piece, besides focus for

execution is intensity.

Um, startups only work at a fairly intense level.

Um, a friend of mine says that the secret to startups

is extreme focus and extreme dedication.

You know you can like a have a startup in one

other thing, you can have a startup in a family but

you probably can't have many other hobbies.

Startups are not the best choice for

work life balance.

And that's sort of just, the sad reality.

Um, there's a lot of great things about a startup, but

this is not one of them.

Um, they are all consuming in

a way that is difficult to explain.

You, you generally need to

be willing to outwork your competitors.

The good news here, uh, why that's hard to see um, is

that a small amount of extra work on the right thing.

Makes a huge difference.

One example that I like to give is thinking about

the viral coefficient for a consumer web product.

Um, how many users how many new users each

existing user brings in.

If it's .99 the company will

eventually flatline and then die.

Uh, and if it's 1.01 you'll be in this happy place of

exponential growth forever.

Um, so this is just one concrete example of where

a tiny bit of extra work is the difference between

success and failure.

And, when we talk to successful founders they

tell stories like this all the time.

You know, just outworking their competitors by

a little bit, was what made them successful.

Um, so you have to be really intense, you know,

this only comes from the CEO,

this only comes from the founders.

Uh, one of the biggest advantages that

startups have is execution speed and

you have to have this relentless operating rhythm.

Um, Facebook has this famous that says, move fast and

break things.

Um, but at the same time,

they manage to be obsessed with quality.

And this is why it's hard.

It's easy to move fast or be obsessed with quality.

Um, the trick is

that you have to do both at a start up.

Um, you need to have a culture where

people have very high quality standards for

everything the company does but still move quickly.

Ah, Apple Facebook and

Google have all done this extremely well.

It's not just about the product um,

it's about everything they do.

They move fast and they break things and

they're frugal in the right places.

But they care about quality everywhere.

Um, you know you don't buy people shitty computers if

you don't want them to write shitty code.

You really have to you do have to

set a quality bar that runs through the entire company.

Related to this is that you have to be decisive.

Um, indecisiveness is a start up killer.

Mediocre founders spend a lot of time talking about

grand plans but they never quite make this decision.

You know, they're, they're talking about well I

could do this thing that sounds great or

I could do this other thing.

And they keep going back and forth and they don't act.

Now what you actually need is this bias towards action.

Um, the best founders work on things that seem small,

but they move really quickly, uh,

they get things done really quickly.

Every time you talk to the best founders, they,

they've got new things done.

In fact, this is the one thing that we learned

best predicts success of founders in YC.

If every time we talk to a team they've gotten new

things done that's the best predictor we have of

the company will go on to be successful.

Part of this is that you can do huge things by,

in incremental pieces.

If you just keep knocking down

small chunks one at a time.

In an year you look back you've done

this amazing thing.

On the other hand if you disappear for an year.

And you expect to come back with something amazing all

at once it usually never happens.

You have to pick these right sized projects.

You know even if you're building this

crazy synthetic biology company.

Um, most people would say well I have to go away for

an year, I can't do this incrementally.

There is almost always a way to break it down,

into smaller projects.

Um, so speed is this huge premium, right?

The, the best founders usually respond to email,

the most quickly.

Um, they make decisions the most quickly.

They're generally quick in all these different ways.

Um, and they just have this do

whatever it takes attitude.

They also show up a lot.

Um, they come to you know, they come to

meetings they come in they meet us in person.

Um, one piece of advice uh, that I have.

It's always worked for me is that they get on planes in

marginal situations.

Um, how we doing on time?

I'll tell a quick story here.

Uh, when I was running my own company um,

we found out that we were about to lose a deal.

And it was sort of this, this critical deal from

the first big customer in the space.

Uh, and it was gonna go to this company that had

been around for years before we were.

Um, and they had us, like, all locked up.

So we called. We said,

hey we have this better product.

You gotta meet with us.

They said, you know what.

We're signing this deal tomorrow.

Sorry.

Um, we drove to the airport.

We got on a plane.

Um, we were at their office at 6AM the next morning.

We just sat there.

They told us to go away.

We just kept sitting there.

Um, finally one of the junior guys decided to

meet with us.

Um, finally after that,

one of the senior guys decided to meet with us.

They ended up ripping up the contract and

sell their company.

Um, and we closed the deal

with them about a week later.

Uh, and I'm sure that had we not gotten on a plane,

had we not shown up in person,

that would not have worked out.

Um, and so you just sort of like, you show up,

you do these things, you know.

Uh, it's, when people say get on planes in marginal

situations they usually mean it.

Uh, well they don't usually mean it literally but

I think it's actually good literal advice.

Um, all right.

>> Six minutes, so.

>> I'll skip that part then.

So, I mentioned this momentum and growth earlier.

Uh, once more, that momentum and

growth are the lifeblood of startups.

Um, this is the,

probably in the top three secrets to executing well.

You want a company to be winning all the time.

If you ever take your foot off the gas pedal,

things will spiral out of control, snowball downwards.

Um, a winning team feels good and keeps winning.

A team that hasn't won in a while gets demotivated and

keeps losing.

So always keep momentum is this prime directive for

managing a start up.

Um, if I can only tell founders one thing

about how to, how to run a company, it would be this.

For most start,

software startups, this translates to keep growing.

For hardware startups it translates to don't let

your ship date slip.

Um, this is what we tell people during YC,

and they usually listen, everything is good.

Um, what happens after the end of YC is

that they get distracted on other things.

And then growth slows down.

And somehow after that happens,

people start getting unhappy and quitting and

then everything falls apart.

It's hard to figure out

a growth engine because most companies grow in new ways.

Um, but there is this thing about if you

built a good product, it will grow.

And so getting this good, this product right at the

beginning is the best way to not lose momentum later.

If you do lose momentum,

most founders try to get it back in the wrong way.

They give these long speeches about vision for

the company and

they try to rally the troops with, with speeches.

Um, but employees in a company where momentum has

sagged don't wanna hear that.

Um, you have to save the vision speeches for

when the company's winning.

When you're not winning,

you just have to get momentum back in small wins.

Um, a board member of mine used to say that sales fix

everything in a startup, and that is really true.

So you figure out where you can get these small wins,

and you get that done.

And then you'll be amazed how

all the other problems in a startup disappear.

Uh, another thing that you'll notice if you

have momentum sag is that

everyone starts disagreeing about what to do.

Fights come out when a company loses momentum.

Uh, and so a framework for that that I think works is.

That when there's disagreement among the team

about what to do, then you ask your users and

you do whatever your users tell you.

And you have to remind people like, hey, stuffs not

working right now we don't actually hate each other.

Um, we just need to get back on track and

everything will work.

And if you just call it out, if you just acknowledge that

um, you'll find that things will get way better.

To use a Facebook example again,

when Facebook's growth slowed in 2008

Mark instituted a growth group.

They worked on very small things to

make Facebook real faster.

Uh, all of these things by themselves seemed really

small, but they got the, the curve of Facebook back up.

Um, it quickly became the most

prestigious group there.

Um, Marcus said that it's been one of

Facebook's best innovations.

Um, according to friends of mine that worked at

Facebook at the time.

It really turned around the dynamic of the company.

And went from this thing where everyone was

feeling bad and

the momentum was gone, back to a place that was winning.

So a good way to to keep momentum is to

establish an operating rhythm in the company early.

Where you ship product and

lauch new features on this regular basis.

Uh, where you're reviewing metrics you know,

every week with the entire company.

Uh, this is actually one of

the best things your board can do for you.

Um, boards add value to

business strategy only rarely.

Um, but

very frequently, you can use them as a forcing function,

to get the company to care about metrics,

and milestones.

Um, one thing that often disrupts momentum and

really shouldn't is competitors.

Competitors making noise in the press, I think,

probably crushes a company's momentum more often than

any other external factor.

Um, so here's a good rule of thumb.

Don't worry about a competitor at all.

Um, until they're actually leaving you with a real,

shipped product.

Uh, press releases are easier to write than code,

um, and that is still easier than making a great product.

So remind your company of this, and don't, this is

sort of a founders rule, is not to let the company get

down because of the competitors and the press.

Um, this great quote from Henry Ford that I love.

The competitor to be feared is

one who never bothers about you at all.

But goes on making his own

business better all the time.

These are almost never the companies that put out

a lot of press releases, and they bum people out.

Should we move on to this section...

You know what, we'll cover this in a later lecture.

I will talk about, uh,

finance dealmaking and distribution.

Are there any questions?

Okay, so on Tuesday, Paul Graham is going to speak.

See you then.

Thank you.