I have been following Stanford’s excellent How To Start a Startup class, some great material I compile here for entrepreneurs and wannabe startupers.
- Ideas, Products, Teams and Execution Part I, Why to Start a Startup by Sam Altman (President, Y Combinator), Dustin Moskovitz (Cofounder, Facebook)
- Ideas, Products, Teams and Execution Part II by Sam Altman
- Before the Startup by Paul Graham (Founder, Y Combinator)
- Building Product, Talking to Users, and Growing by Adora Cheung (Founder, Homejoy)
- Business Strategy and Monopoly Theory by Peter Thiel (Founder, Paypal)
- Growth by Alex Schultz (VP Growth, Facebook)
- How to Build Products Users Love by Kevin Hale (Founder Wufoo, Partner Y Combinator)
- Do things that don’t scale, and how to handle the press by Stanley Tang (Founder of Doordash), Walker Williams (Founder of Teespring) and Justin Kan (Founder of TwitchTV)
- How to raise money with Marc Andreessen (Venture capitalist, Andreessen Horowitz), Ron Conway (Founder, SV Angel) and Parker Conrad (Founder, Zenefits)
- How to build a strong startup culture, by Brian Chesky (CEO, Airbnb) and Alfred Lin (Sequoia, former Zappos)
- Startups hiring and Culture, by Ben Silbermann (Pinterest), John Collison (Stripe) and Patrick Collison (Stripe)
- Building for the Enterprise by Aaron Levie (CEO of Box)
- How To Be A Great Founder by Reid Hoffman, Partner, Greylock Ventures and Founder, LinkedIn
- How to Operate by Keith Rabois, Partner, Khosla Ventures
- How to Manage by Ben Horowitz, Founder, Andreessen Horowitz, and Founder, and Opsware
- How to Run a User Interview by Emmett Shear (Founder and CEO, Twitch)
- How to Design Hardware Products by Hosain Rahman (Founder, Jawbone)
- Legal and Accounting Basics for Startups b< Kirsty Nathoo and Carolynn Levy (Partners, Y Combinator)
- Sales and Marketing by Michael Seibel (Partner, Y Combinator)
- How to Talk to Investors by Qasar Younis and Dalton Caldwell (Partners, Y Combinator)
- Later-Stage Advice by Sam Altman
Lecture 1 – Sam Altman, Dustin Moskovitz (video)
IDEAS ARE EVERYTHING, NOT
– startups = idea + product + team + execution + luck (from 0 to 10’000)
– idea not much importance, but still. Bad idea can derail you.
– having a mission is better, cause it will be easier to federate people around it
– copycat companies don’t excite the public or the team
– good ideas can look terrible at the beginning (ex: Facebook: social network for moneyless students)
– find a small market inside which you can have a monopoly and quickly expand
– first version of your product doesn’t have to sound very big. Product can be imperfect but has to improve rapidly
– investors make the mistake of only thinking of the growth of the startup, while they should look at the growth of the market
– you can change everything in a startup but the market
– ask “why now” (Sequoia question), why not two years ago, why not in two years?
– two things you should be doing: build a great product, talk to your customers
– most startups don’t die of competition, but because they don’t do something that people love
– do sales at the beginning cause you need to understand client needs. Great founders don’t put anyone between themselves and their users. Don’t hire sales and customer support people at the beginning
– start with a simple product
– build something a few people love, and expand to a lot of people (orange in the graph below), rather than build a thing a lot of people like, and expand to love (grey in graph)
– iterate around the same loop:
1) user feedback
2) product decision
3) show and test
– startups do what founders measure: measure growth indicators like total registrations, active users, activity level, cohort retention, revenue, net promoter score (https://en.wikipedia.org/wiki/Net_Promoter)
UGLY SIDE OF BEING A FOUNDER
– you’re responsible for opportunity cost of the time of people who follow you
– you’re always on call
– unwanted media attention
– you’re more committed, i.e. less option value
– number one thing is to manage your own psychology
STARTUP = BEING THE BOSS?
Phil Libin (Evernote CEO): “People have this vision of being the CEO of a company they started and being on top of the pyramid. Some people are motivated by that, but that’s not at all what it’s like. What it’s really like: Everyone else is your boss–all of your employees, customers, partners, users, media are your boss. I’ve never had more bosses and needed to account for more people today. If you want to exercise power and authority over people, join the military or go into politics. Don’t be an entrepreneur.”
Lecture 2 – Sam Altman (video)
FINDING HIGH GROWTH MARKETS
– Use your intuition
– watch what younger generations are using
WHAT MAKES A GOOD CO-FOUNDERS TEAM
– co-founders are the most important part of startup teams. Co-founder fights one of the main reason startups fail
– choosing someone that you’re not friends with usually ends up in disaster
– be a student or work in a cool company like google or Facebook cause it has lots of co-founders
– much better to have co-founders than solo founder
– qualities of co-founder: unflappable, tough, calm, creative, decisive, ready for anything: James Bond 😉
– If you’re not technical get a technical co-founder
– know your cofounders or early hires for years
– 2-3 co-founders good, 4 or 1 usually does not work, 5 really bad
– skeptical of remote teams: for early days, communication and speed are key. Don’t work remotely, really really tough.
WHEN TO HIRE
– it sucks to have a lot of employees (high burn rates, slow decisions, complex management). Try to have very few employees in the first year. Should definitely hire (in the early days) when dying need. Then when growth comes you’ll need to hire fast. Very bad first hires can kill the company.
– best source of people: people you already know or your staff already knows
– at Facebook or Google, HR sits down with new hires and goes through their network for good people
– look outside your geographical boundaries, bring people from the outside
WHO TO HIRE
– for early hires: go for attitude over experience. Most good hires are people who have never done it.
– attitude: good communication skills, manically determined, like a little bit of risk, people who you would feel confortable reporting to.
– mediocre people in a small company will kill a startup
– lose a mediocre potential hire (who can kill the company) over losing a client (you can recover from that).
HOW TO HIRE
– took 5 months for airbnb to hire first employee
– 5 questions:
1) are they smart?
2) do they get things done?
3) do I want to spend a lot of time with them?
4) what are concrete projects the person have worked on?
5) call references, people who worked with them in the past. Really dig in: are they in the top 5% you worked with? would you hire them back? what are they good at?
– many people are bad at hiring, but good at assessing a person after they have worked with them. Try to work with people on a project before you hire them
– have a list of values and make sure people adhere to them
– have an extremely high bar, hire slowly
– founders underestimate how hard it is to get the very best people
– founders should spend 0 to 25% time hiring people.
– employee equity: you should aim to give 10% of the company to the first 10 employees. Founders are generous with equity to investors, less with employees. Totally wrong. Employees have more value over time, while investors write a check and tend to vanish
– At YC, companies who have been more generous with equities to employees are the most successful
– set cofounders equity very soon after you start working together. If you don’t want to give people the same equity than you, you should think hard about whether you want them as a cofounder
– pre-negotiate what happens if one of the founders leaves. In Silicon Valley, it takes 4 years to own all your equity. So if you leave after one year, you get 25% of your equity. If you don’t do that, deadweight in equity table will make it hard to find investors.
– keeping people: founder thinks he/she’s doing things the best but need to learn to delegate and trust people
– praise your team for things that work.
– Get people new areas of responsibilities
– be aware that as a first time founder you’re likely to be a bad manager
– fire fast: firing people is one of the worst part of running a company. Every first time founder waits too long.
– fire fast: better for company, better for employee
– fire people who are bad are their jobs, create politics, are negative. Completely toxic to the company. Might work in a large company, will kill a startup
– one or two fuck ups -> ok, team spirit. If somebody consistently fucks up -> fire them. Fire those who are consistently doing bad things over weeks, and people doing the opposite of what you would do.
CEO HAS 5 JOBS
1) set the vision
– say no a lot
– have a few clear goals
– communicate on goals so whole company is aligned
– always focus on growth and momentum, see how you’re doing against metrics
– don’t get caught up in the PR, can make you feel like you’ve made it while you’re not
– be in the same space, remote slows down the cycle time
– indecisiveness is a startup killer
2) raise money
4) hire and manage
5) make sure the entire company executes (intensity)
– being a founder is signing up for years of grind around execution
– work hard, pay attention to details, care for customers
– company needs to see CEO as maniacal execution machine
– ideas aren’t worth anything, execution is where the value is
– most good funders have a small number of goals for the company. Everybody in the company should be able to say each week what the goals are.
– always keep momentum: always keep growing, don’t let your ship date slip
– relentless operating rhythm (Facebook: “move fast and break things”)
– obsession with execution quality
– every time you talk to a good team, they have gotten new things done
– when momentum is down, get small wins. “Sales fix everything”
SET AN OPERATING RHYTHM
– ship products, launch new features
– review/report metrics and milestones
– don’t worry about a competitor at all until they really beat you with their product
– don’t let your company get down because a competitor is in the press
– Henry Ford: “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”.
Lecture 3 – Paul Graham (video)
– startups are very counter intuitive, it’s an area where you can’t only rely on your intuition
– many people ignore YC advice because they seem wrong
– you can however trust your instinct about people. Big mistake is to ignore these intuitions about people, because they seem impressive, etc
– pick people as if you were picking people to be friends with
NO STARTUP EXPERTISE NEEDED
– what you need to succeed in startups is not an expertise in startups
– what you need is expertise in your own users
– one of the risk of young founder is they will go through the motions of starting a startup, and neglect the one thing: making something people want
– universities can teach you about startups, but it’s not what you need to know. What you need to learn is the needs of users, and you can’t learn that before starting the company. You can only learn about startups by doing it.
NO GAMING THE SYSTEM
– starting a startup is where gaming the system stops. Can work in a large company (like sending late emails to pretend you’re working evenings). In startups that doesn’t work. There is no boss to trick. All users care is that your product works, you can not trick them.
– faking does work with investors. You can foul them for one or two rounds, but you’re wasting your own time cause all you’ll do is lose your time sending your company down in more time than it would have taken.
STARTUP WILL TAKE OVER YOUR LIFE
– if it succeeds it will take over a long time, 10 years or your own life
– being the boss of a very successful company has drawbacks: there are many things only you as the emperor can deal with. As the company daddy you can never show fear or weakness. As a billionaire you get no sympathy when complaining about stuff.
– as startup grows, it never gets easier. New kind of problems, but total volume of worry never decreases, if anything it increases. It’s similar to having kids, it never stops.
OPTIMAL AGE TO START A STARTUP
– don’t start at 20, travel and enjoy life first because you can’t do it later, and you’ll learn a lot
– success takes a lot of serendipity out of your life. You run your company as much as your company runs you. Serendipity gives you more options.
YOU CAN’T TELL IF YOU CAN RUN A STARTUP
– you probably haven’t done a startup when you start one
– as an investor, easy to predict if someone is smart. Hard to predict how tough and ambitious they are
– in the army, you can’t tell who is going to be successful between the arrogant and the quiet recruits. Same for entrepreneurs.
– if you’re terrified of starting a startup, don’t do it, unless you’re someone who is fuelled by fear and excels under pressure
THE WAY TO GET STARTUP IDEAS IS NOT TO THINK ABOUT IDEAS
– the way to come up with good ideas is not to make a conscious effort, and take a step back
– twitter, google, yahoo, apple, facebook were all side projects, rejected by the conscious mind as ideas for companies
– how to turn your brain into the kind that has startup ideas unconsciously:?
1) learn a lot about things that matter
2) think of problems that interest you
3) with people you like and respect (how you get cofounders at the same time than the idea)
– get yourself on the edge of a technology, “live in the future”
– example: student who built voice over IP because he wanted to talk for free with his girlfriend
– role of non technical founder? run the business side of things. For ex: Uber, non technical founder will bring domain expertise, and run sales.
– any value in business school for entrepreneurs? Not really. What business school was designed for was to teach people management, a problem you only have in startups if you’re sufficiently successful. You might be better off going to design school. Best way to learn is to start something. You might fail but you will learn.
– ideally, you’re successful before you hire your first employees. So you don’t need to manage before you have traction.
– are we in a bubble? There is a difference between high prices and bubble prices. In bubble years, VCs knowingly invested in bullshit trying to unload it on retail investors before it would blow up. That is now what’s happening today. Prices are high, it won’t be as easy as today. Bubble right now? no.
Lecture 4 – Adora Cheung, founder of Homejoy (video)
Lecture on how to get users. Disclaimer: every business is different, bring those advices smartly in your context
PRE-REQUISITES TO START A STARTUP
– Find a problem: what is it?
– Am I really passionate about that problem?
– Is it a problem other people have?
– have a lot of time to develop solutions to the problems you want to solve
THE NEWBIES APPROACH TO STARTUPS (I.E. WHAT NOT TO DO)
– build product in secret
– excessive press launch
– wait for users
– buy users
– give up
Don’t get into that cycle because you won’t get anything good.
WHERE TO START?
1) learn a lot, become an expert in a certain area, immerse yourself. Become a cog in your industry. You can become trapped into an industry you know too well, and start thinking like everybody else. But on the other side, if you’re totally new to an industry, you should immerse yourself in it to see where the pain points are.
Example of HomeJoy: Adora became a cleaner at a local company, learned how to do that job week, but more importantly, why cleaning companies would not scale, and what the market needed. Immersion resulted in key knowledge used to disrupt the industry.
2) identify customer segments. At the beginning, focus on a subset of users and really cater to their needs. You can expand to larger public later, but start with a smaller segment.
3) storyboard ideal user experience, that’s before you create the product or start coding. Not only the web site, but how customers find out about you, how they visit your site, learn more about you, then sign up, to after they finished using the product. Then put it into code, etc.
BUILD A MINIMAL VIABLE PRODUCT
– minimal features set. Smallest feature set to solve the problem you want to solve. You should be able to go to a person and explain what the company does in one sentence. When you start with no users, need to explain value simply.
– simple product positioning
– but this is not the hard part… getting first users is
– build fast, but optimise for now
– propose features even if they involve manual work, you’ll automate later
– perfection is irrelevant during early stage. Worry about giving a product to as many people as possible, ignore the edge cases
– beware of the frankenstein effect: listen to user feedback, but don’t build all the features you are asked. Give it a bit of time and consolidate all ideas, build only the most relevant ones.
– you and co-founder
– friends and family
– online communities: HackerNews, Reddit
– local communities: influential local community mailing lists (for ex: sites for parents)
– niche influencers
– cold calls + emails
– immediately after first users, make yourself easily available for customer feedback
– if you setup a phone line, have a voicemail so you don’t have to pick up
– survey ok, interviews much better. Meet people using your product, make it into a conversation. Get users at a level where they feel they should be honest with you
– quantitative feedback: customer retention is one of the key metric, but a very hard one to measure.
– qualitative: ask why, why and why again
– beware of honesty curve. People won’t necessarily dare to tell you your product sucks in your face
– you will get more honest feedback on a paying product than on a free product (click on image to enlarge)
FEAR OF BEING COPIED
– S is for stealth, and stupid…
– there is a first mover advantage
– execution is the key, beat competitors with a superior product
READY FOR A LOT OF USERS?
– learn one channel at a time (Facebook ads ≠ google ads, android ≠ iOS) [See for example BuzzFeed, company organised by channel http://a16z.com/2014/09/18/a16z-podcast-for-buzzfeed-sharing-is-the-metric-that-matters/]
– iterate on things that work, get better at them
– revisit a failed channel and try to crack it at a later time
TYPES OF GROWTH: STICKY
good experience wins
customer lifetime value + cohort analysis (https://en.wikipedia.org/wiki/Cohort_Analysis) important. Look at the graph below, what you want is to push the black solid line up, as repeat users buy more and more (click to enlarge)
TYPES OF GROWTH: VIRAL
wow experience: what’s going to make people shout about your product on twitter and Facebook?
good referral programs (where users can refer the product to their friends, and perhaps get rewards in the process):
1) touch points (where can people learn they can refer their friends? after a certain time of usage, or just after signup? Propose referring friends at point when users are highly engaged and happy)
2) program mechanics: make money when people you refer sign up
3) referral conversion flow: optimise the signup process for someone who has been referred. Might have to be a different process from traditional signup process (for ex, user will already be connected to user who referred them).
TYPES OF GROWTH: PAID
[Personal note: remember “advertising is the price you pay for being boring”]
– Search Engine Marketing, display ads, Facebook ads, groupon / daily deals, street marketing, b2b sales, direct mailers
– is your CLV (customer lifetime value) superior to your CAC (customer acquisition cost)?
– CAC = CPC (cost per click) x conversion. For ex: CPC = $10, conversion = 10%, so CAC = $100. If your CLV > 100 -> this advertising makes sense
– try to calculate CAC & CPC per customer segment
– beware of payback time. If CAC takes time to come your way (for ex: customers pay after 6 months), CPC is immediate and will kill your cash-flow.
THE ART OF THE PIVOT
– when do you decide to pivot? when growth stops, or when the business stops making sense.
– if you see a stagnation in the growth of users for 3-4 weeks [startup time is x10 corporate time!], then it’s time to consider a pivot, you’re probably doing fundamentally wrong.
Lecture 5 – Peter Thiel, co-founder Paypal (video)
– if you start a company, you should always aim for a monopoly and avoid competition, “competition is for losers” [easier said than done…]
– two types of business: businesses in a very competitive environment, and businesses with monopolies
– differences between these two types of businesses not obvious, but enormous
monopoly: will downplay its dominance to avoid being regulated
perfect competition: will always pretend to be doing something unique to stand out or raise capital
– Monopolies say “we’re in a huge market”
Non-monopolies say “we’re in a narrow market”
– “the something of somewhere is often the nothing of nowhere”.
MONOPOLY? DEPENDS ON HOW YOU LOOK
– Google has 66% of search traffic -> monopoly?
– but if you consider Google as an advertising company:
$17b = US search advertising
$37b = US online advertising
$150b = US Advertising
$495b = global advertising
So actually Google becomes a company competing with others for a share of a larger pie
START SMALL & EXPAND
– Build a monopoly in a small market, then expand to other markets
– Facebook: was addressing a super small market (10k people at Harvard), but went from 0 to 100% market share in a few days.
– Amazon: started with book store, slowly expanded to other markets
– Paypal: started with power sellers on ebay, expanded to the general public
– Many people miss these big companies because they start small. If you’d assess Paypal or Facebook back in the days, you’d think their market was way too small
– Companies that failed: people who wanted to address huge markets, who had tons of competitors who they didn’t even know who they were. Large existing markets = lots of competition
THE MANY WAYS TO BUILD A MONOPOLY
– The next Bill Gates won’t be building an OS. The next Larry Page won’t be building a search engine. You need to find a totally new market, or…
– Building a monopoly is not about being the only one: it can also be about being so much better you differentiate radically. Amazon was different/monopoly cause it was selling 10 times more books than its closest competitors
– Network effect can also create a monopoly
– Regulation / high fixed costs that prevent new entrants from coming in
– Proprietary technology
– Build a complex, vertically integrated structure. Examples: Tesla, SpaceX, no real innovation but very good at making different things fit
– You don’t want to be the first mover, you want to be the last mover. Google is the last mover, Facebook is the last social network.
– You want to be the last breakthrough for a long time (ex: Google’s search algorithm outpacing competition, hasn’t been surpassed since)
– Keep improving on your product faster than people can catch up
– Economies of scale
– Most of the value of these companies exists far in the future. Paypal: most of the value in 2001 was in the cash brought by the business 10 years later. 85% of the value of good companies happens 10 years down the road
– Value for entrepreneur = X * Y, X = market size, Y = market share
– technological innovation -> people coming up with innovation can get some of the value
– scientific innovation -> inventors rarely come up with value for their inventions. X = 0
– Structure of your industry is what defines your potential for success
PSYCHOLOGY OF COMPETITION
– We find it reassuring if other people do what we do
– Competition is a form of validation [This is where we go into cultural differences. True in the US, probably not as much in Europe]
– Competition does make you better
– But competition makes people lose sight of the bigger question: is what I’m competing for worth my time?
– when investing: don’t focus on the narrative market, but on the real market
– Google had all four advantages of a monopoly: network effect (ad network), proprietary technology (page rank technology), economies of scale (storage), brand
– successful companies didn’t really do market testing and lean startup methodology. Founders had better ideas that differentiated them from the rest of the pack. If you take too much time to figure out what people want you risk missing the boat.
Lecture 6 – Alex Schultz, VP Growth, Facebook (video)
WHAT MATTERS MOST FOR GROWTH
– retention! it is more important than new users
– you can attract all the new users in the world, if they don’t stick to your product there will be no growth
– so it all starts with a great product that will make people come back
– daily active users is more important than total number of users
– make a graph from user’s activity on the platform. If the line inches towards 0 (i.e. people stop coming to your site after a few days) do NOT hire someone to grow your user base, you will just be increasing number of users that will leave and not create value.
– if you don’t have a great product there is no point in growing it
– don’t focus on your returning users, look at the fringes. Example: users closing their accounts, or users not coming for 30 days and resurrecting. These are the people you need to understand (why did they leave?), drive back to your product, and learn how to prevent other users to leave.
– set a north star – a metric that really matters to your business – and have the whole organisation focus on growing that number. It all starts from the top.
– people in the valley think marketing is useless, that you build a good product and people will come. This is not true [anymore in a saturated market like today’s web]. Build a great product, then market it.
RETENTION TARGETS DIFFER PER INDUSTRY
– 20-30% active users for an ecommerce site is probably good business
– but for social media you need closer to 80% active users
– depending on your vertical, you will have a different target on activity. Look at heavyweight in your sector and figure out their active users, compare yourself to that
OPERATING FOR GROWTH
– if you are a startup you shouldn’t have a growth team: the whole startup is the growth team
– if you’re a social site, set monthly active users as the metric you hold people accountable to (ex: Facebook always communicated on that number more than total users).
– if you’re whatsapp, the metric should be the number of messages. Airbnb: metric is nights booked.
– the key metric is real activity, not number of users. Define that as a north star and let the team follow it manically.
– registrations don’t matter unless they become active users
– ex: Uber focuses their growth not only on users, but also on drivers.
EXAMPLE: ACQUIRING USERS ON EBAY
– Ebay started a program to attract users in 2004 through affiliates
– affiliates would be paid for each confirmed registered users
– then ebay changed to pay only for activated confirmed users (activated = listed an item, bought or bided on an item)
– overnight, ebay lost 20% of confirmed registered users sent by affiliates, but active confirmed users dropped only by 5%, then it started to grow and accelerate
– before: affiliates would send people to registration page
– after: affiliates would send people to search results for item they are searching, allowing them to engage directly with ebay’s value: find the product you’re looking for
DRIVE FOR THE MAGIC MOMENT
– when is the magic moment users understand the value they are going to get?
– on Facebook, this is when you see a picture of a friend. Facebook tries to show that to you as early as possible
– Airbnb, when you see an amazing house you can stay at, or when you receive your first client wanting to pay to stay at your place
FACEBOOK’S TACTICS FOR GROWTH
– get people to the magic moment: get them at least 10 friends, and have them use the site for at least 14 days.
– translate the site but in a scalable way. Instead of professional translators, place where community could translate and contribute. Took more time to launch, but after allowed for much faster translation of the service.
Virality = payload * frequency * conversion rate
– payload: how many people can you hit with any viral blast? [note sure how you can calculate that… What was Gangnam style payload?]
– frequency (how many times can you hit them)
– conversion rate (how many open an account)
Viral potential = payload x frequency x conversion rate
– ex: Hotmail: in the early days every message going out had a “get your free account” link. Bottom line for hotmail it had +++ frequency ++ conversion – payload
– ex: Paypal: was targeting ebay users, and to collect their money people had to open an account. +++ conversion rate – frequency – payload
– frequency can be an issue: don’t hit people too often because they will get tired and you’ll get the opposite effect. The more people see an ad on Facebook the less they are likely to click on it.
– Another way to look at vitality is through user importing their contacts / inviting others to your service. There is a (possibly) virtuous circle of: import friends list -> send invite to list -> friends click on invite link -> friends signup for service -> newly signed friends invite their friends (and it starts all over again). If you can get more than one newly invited user to invite their friends, you’re viral (because one user inviting gets you more than one new user inviting, it accelerates).
TACTIC: SEARCH ENGINE OPTIMIZATION (SEO)
– research what keywords people search about your site (beware of cultural differences! Ex: “cocktails recipes” in the UK, “drinks recipes” in the US):
1) what do people search
2) how many people search for it
3)how many people are fighting for that keyword
4) how much value does that keyword create for you
– get valuable links from high authority websites
– make your site accessible to search engines. For ex: to see someone friends on Facebook you had to click on a profile, then on their friends list. Turns out creating a directory of friends allowed for 100x better ranking from google.
EMAIL SMS PUSH NOTIFICATIONS (ESPN)
– email is dead to people under 25 (instant messaging instead). If you are targeting >25y it’s a useful channel
– email, SMS and push notifications behave in the same way: you can be blocked, emails can bounce, you can be blacklisted as a spammer.
– be a high class citizen with these mediums
– you can hardly ask users to turn notifications back on after they’ve turned it off
– key metrics are open rate and click rate
– differentiate low engaged vs high engaged users. On Facebook, you want to send a email when someone who is not very active gets a “like”, but you don’t want to send multiple emails to someone who receives tons of likes.
– ask yourself what notifications you can send, make sure you create value
– Search engine marketing (SEM)
– Affiliates / referral programs
Lecture 7 – Kevin Hale, (Founder Wufoo, Partner Y Combinator) (video)
How do you build products people are so passionate about they want the company to succeed?
Think of new users like people you need to date. Existing users are people you’re married to.
NEW USERS (DATING)
– First impressions are important for the start of a relationship.
– First time interaction: no room for error. Make your homepage, landing pages, plans/pricing/login/signup/first email/account creation/login link really good
– There is taken for granted quality and enchanting quality, shoot for the second one
– show your personality immediately
BUILDING A PERSONALITY FOR YOUR PRODUCT
– Vimeo, makes you feel like the experience is going to feel different
– Cork (social network for wine lovers): signup form offers funny tips below each field. Makes you like people behind this, gives personality to the product.
– Chocolat: when trial expires they change the font to comic sans
– Wufoo programming contest, prize was a (real) battle axe, makes people program for weapons 😉
KEEPING USERS (MARRIAGE)
– just like in real life, it’s ok to argue every once in a while
– Real life and startup equivalents:
Real life vs startup
Money = Cost/billing
Kids = User’s clients
Sex = Performance
Time = Roadmap
Jealousy = Competition
In laws = partnerships
– user support is what happens between all the steps of your funnel
– programmers and designers are divorced from the consequence of their actions (= users complaints)
FEEDBACK DRIVEN DEVELOPMENT
– before launch, everything looks perfect, no negative feedback
– after launch, one needs to get into customer support, but also fixing crap, business crap, hiring crap, and well, crap. We thing of all the crap things as something we want to outsource to other people. But you don’t want to outsource because it divorces you from users needs
– Feedback driven development, everyone should do user support
– Ex: Kayak has a red phone that customers can call. Reasoning is that after 3 clients call the engineers to fix a problem, engineers start fixing the problem and stop getting phone calls about it.
– the four horsemen of why people break up: criticism (“you never listen to users”), contempt (someone purposely trying to insult another person), defensiveness (trying to make excuses), stonewalling (shutting down). Stonewalling happens all the time in startups (which is one of the worst thing you can do, cause of large churn)
– good founders do support all the time [example: when I met Craigslist’s founder he was constantly answering customer emails – after more than a decade in business]
– in feedback form, add “emotional state” drop down to let people communicate on how they feel (filled 75.8% of the time by users despite not being mandatory)
– there is a direct connection between how much time we spend being exposed to our users, and the quality of our design. Direct exposure is important. Minimum every 6 weeks for at least 2 hours.
– Wufoo: developers exposed to users 4 to 8 hours a week
– Knowledge gap is the gap between your users’ capabilities to use your product, and the knowledge they need to use it well. Adding new features increases the knowledge gap.
FIGHTING RELATIONSHIPS ATROPHY
– constantly add energy to the relationship
– Ex: Wufoo had a system where new features would be listed and timestamped. Every time a new user would login, his last login time would be compared to the list of new features, and he would get an alert showing him what’s new since he last came to the site. This really showed users the team was catering to their needs, and that the product was lively.
– send thank you cards to your users (handwritten).
– also something you want to do with your team. Ex: “king for one day” at Wufoo. One person would be chosen as the king, and could decide what the company would work on for a week-end. Allowed to release new features very quickly, and made people feel like they had made a difference.
MAINTAINING MARKET DOMINANCE
– best price
– best product
– best overall solution
– Everyone at the company had a todo list on a dropbox named after them. At the end of the week, review would happen on what has been done or not.
– Nobody hired only based on interviews. Actually had people work for a week on a project before they would get hired
– make sure people have writing skills (for customer support), ask them to write a letter for 15m during interview
Startups: do things that don’t scale, and how to handle the press (video)
Stanley Tang (Doordash, food delivery startup)
– wanted to start a delivery business, but felt like something was wrong. How could customers be so unhappy about this, yet nobody had figured it out?
– built a prototype in an hour: simple homepage with PDF menus from restaurants and phone number. People called on founder’s mobile number who was handling delivery. [ties back to previous lecture on how you first do manually what you’ll automate/simplify later]
– used square to charge people, apple’s find my friends to keep track of drivers, google doc for orders tracking
– people started to call, and they knew they had a market
– learning experience through contacts with clients, restaurants, drivers
– 3 things: test your hypothesis, launch fast, it’s ok to do things that don’t scale (figure out how to scale once you have the demand)
Walker Williams (Teespring, ecommerce platform)
– advantage of a startup: you can do things that don’t scale.
– finding first users: there is no silver bullet. First users as impossibly hard to get. Do whatever it takes to bring them in.
– don’t focus on ROI at the beginning, focus on growth
– don’t give away your product for free. Value your product, free could give you a false sense of security
– delight users with experiences they will remember, talk to them (constantly, for as long as possible)
– you’ll never get a better sense for your product than listening to users
– reach out to churned customers. Painful but will really help you make your product better.
– listen to social media and communities
– the feature set you start with is not the feature set you’re going to scale with
– if you turn them around, frustrated and unhappy users can become the best champions
– only worry about the next order of magnitude. When you have 10 users, worry about 100. When 100 worry about 1000. You’ll find a way to make it work.
Justin Kan (Twitch.tv) How do you get press?
– before you reach out to the press, ask yourself who do you want to reach (investors, customers, industry)
– getting in the news is useless unless is fulfils one of your business goals
– target your message geographically (sometimes national is less good than local coverage)
– what’s a story? Product launches, fundraising, milestone/metrics, business story (happens once you’re succesful), stunts, hiring announcements, contributed articles
– think about your story objectively… Most of the things you do people won’t care about
– be original: be the first one in your field, this will make things much easier. First game console to raise money on kickstarter got good press, second one much less.
– Keep your contacts fresh [also: give before you receive]
– help your fellow entrepreneurs get coverage, they will help you back
MECHANICS OF A STORY
– think of it as a sales funnel (talk to lot of people, won’t all convert)
1) think of a story
2) get introduced to reporter(s). Ask people who got recent coverage, and ask them to introduce you
3) set a date (4-7 days in advance) for news to go out
4) reach out (get a commitment to invest time). More time reporter spends with you more likely they will cover you.
5) pitch. Write out all the key points you’d like to see published
6) follow up a couple days before the story goes out. thanks for meeting, collateral (photos, videos), how to spell important peoples’ names
7) launch your news
– make sure getting press is worth it, it doesn’t mean you’re successful
– press is not a scalable user acquisition strategy
– can only help with contacts (maybe) and follow-up
– can’t generate stories
– are expensive (generally not a good use of money in the early days)
– can help know what’s interesting about your company
How to raise money (video)
HOW DOES AN INVESTOR CHOOSE A STARTUP?
– Think about a startup as having all conceivable risks on day one (right founders? can you build the product? right technology? launch risks? market acceptance risks? revenue risks?). Raising money helps you peel away risks from the project. Each round has to help you remove some risks from the equation.
– To pitch: show for each round what risks you’ve eliminated. Show what risks the money you’ll raise will help you get rid of.
– questions asked about founder: is this person a leader? is the person focused and obsessed by the product?
– look for communication skills, because to be successful you will need to communicate a lot, especially with your team
– better founders are solving a personal problem, something they really struggle with
– Venture capital is about outliers, you’re looking for people that are different. There are only a few winners every year
– Invest in extreme strength rather than lack of weakness. Look at extreme strength that makes a project an outlier, but projects with extreme strengths also have weaknesses
– Make sure the startup does not conflict with an existing investment
– Think in terms of opportunity cost: is this really the best way to use that money/time/bandwidth? Every investment reduces the capacity of the investor to make other deals.
– Ron Conway: “we invest in people first”.
– Don’t ask people to sign a NDA, it tells the investor you don’t trust them. Relationship has to involve a lot of trust
– Send a really great, short executive summary. Investors are busy. If you make the cut you’ll get a phone call. If phone call goes well, you’ll get a meeting, and then there is a good chance the investor will invest.
– You want the investors to understand in your first sentence what you do. Get that first sentence perfect.
– Pitch to a lot of people so that your pitch gets better
– Raising capital is the easiest thing an entrepreneur will have to do, much easier than hiring, or promoting your product. If you get in a situation where raising money is hard, keep in mind the hardest is yet to come
– Biggest mistake from founders is to not get things in writing. When somebody makes a commitment, email to them and confirm what they just said to you. Investors have very short memory, forget the valuation, etc. Get rid of all controversy by putting everything in writing. Take notes in meetings, and follow up on what’s important.
CHOOSE THE RIGHT INVESTOR
– investors with a good rolodex and domain expertise will add more value than their money. Dumb money vs smart money debate…
– Seed stage: find someone who can introduce you to VCs for your A-round
– You’re going to live, deal with and go to war with your investors. It’s like a marriage, make sure you like these people because you will spend a lot of time with them. Shared values and ethics are a must. Second time founders take that point very seriously. It really matters who you partners are.
– Your 2 hours meeting with an investor is a microcosm of years to come, so make sure you learn from them and enjoy their presence
RAISING THE RIGHT AMOUNT
– Bootstrap as long as you possibly can, if you can don’t raise money [point coming from a VC…]
– don’t forget there are ways to borrow money instead of selling capital.
– raise as close to your needs as possible, don’t raise too much money because you will dilute yourself too much and complicate your life further down the road (C+ rounds)
– Identify investors mental thresholds. Example: just go below 10M and suddenly the investors turning you down might fight for bits of your project
– How much should a founder sell?
Seed stage: sell between 10 and 15%
Series A: sell between 20 and 30%
Real question: at what point of dilution does the founder get demotivated? If you give away 40% on the seed round, not much remains for the founders who could lose interest.
RAISING MONEY ≠ SUCCESS
– Raising money is not a success, it’s not a milestone. Don’t let your ego get involved. Raising money just puts you in a position to do other things.
How to build and sustain a strong corporate culture (video)
– Culture is important to scale the business and the team. How to build a company culture?
– company culture = beliefs and actions leading towards the company goal
– Mahatma Ghandi: “Your beliefs become your thoughts. Your thoughts become your words. Your words become your actions. Your actions become your habits. Your habits become your values. Your values become your destiny.”
– Why does corporate culture matter? Provides alignment, stability, trust, exclusion (what not to do) & retain right employees.
– Why does corporate culture matter? Returns of best companies to work for close to double of others
– Create a “core value worksheet”
1) what are the personal values most important to the founder(s)?
2) what are the most important values for business success?
3) what values will you look for in employees?
4) what could not be tolerated?
5) incorporate your mission into your core values
– Elements of high performing teams:
2) trust leads to the ability to have debates and constructive conflicts
3) if you don’t have debate, there can be no commitment. You need to come to the right answer before people commit
4) If people don’t commit, you can’t hold them accountable
4) if people can’t be held accountable, there will be no results
– Some best practices for culture:
1) incorporate your mission with your values
2) think harder, deeper, longer about values
3) interview for cultural fit
4) evaluate on culture as well
5) make it a daily habit
Brian Chesky, Airbnb
– First you build a product, then you build a company. To build a company you need a culture
– Our product changed, but our values didn’t. There have to be things that don’t change, that are unique to you
– Wrote core values before hiring anyone
– First hire took time, because this person would bring some of their DNA to be added to the company’s DNA
– You want diversity of culture, age, background, education, but you don’t want diversity on values
– We want people who join the company for the one thing that will never change: the mission of the company. Not because they like the valuation, or the money.
– Constraints bring creativity. The less money ou have, the more creative and frugal you will be
– Three things you never hear about culture:
1) nobody talks about culture, it’s mystical and fuzzy
2) culture is hard to measure, and what’s hard to measure has a tendency to be discarded
3) culture doesn’t pay off in the short term. If you want to make money quickly, don’t pay attention to culture. Culture makes you hire slowly, which in the short term can slow your progress down.
– hire only people who are world class and adhere to the culture
– have people interview on technical aspects (employees with similar jobs) but also on culture (with employees doing other jobs, that can meet with the potential hire only in the culture)
– Airbnb was ripped off by Rocket Internet who cloned the site, and at a time Airbnb was 90 people they put together a team of 400 with 90M raised. Airbnb shied away from buying them because they wouldn’t fit culturally. Mercenaries vs missionaries.
– Your brand evangelists are you employees. The stronger the culture, the stronger the brand because it will be relayed by all employees.
– Don’t communicate on the details of your products, communicate on your mission (cf Apple’s think different campaign)
– In the early days, airbnb communicated as a utility: save money, find many rooms. Then changed tagline to “travel like a human”, meant to say the company thinks in a certain way, that the world should be a village. Did a lot of story telling.
– Role of the CEO: vision, strategy, people.
– Automate services after they took off. Example: photographers making photos of hosts’ rooms. First was the founders doing it themselves. Then named an intern to manage the process. Then interned was upgraded and hired other interns to manage the photographers. Then it became impossible to manage by hand and then airbnb built a system for it.
How to hire and create a strong corporate culture (Video)
MOST IMPORTANT ASPECTS OF BUILDING A COMPANY CULTURE
– who do you hire
– what do you do everyday, why you do it
– what you choose to communicate
– what you choose to celebrate (and punish)
– have everyone informed (transparency), which becomes a challenge as your company grows
– have everybody aligned on the vision
WHAT DO YOU LOOK FOR IN THE FIRST 10 EMPLOYEES
– hire people that look like you and share your values
– look for multitalented people who have a lot of interests outside of work [ties into what E.Schmid is calling “smart creatives”]
– nobody knows your company, so you will have to fight lack of awareness and relatives telling future employees not to join
– have your early employees refer friends, word of mouth is a very powerful way to recruit
– get people early in their career, most of them will likely be undervalued
– genuine, straight people, trustworthy, who like getting things finished, with no ego getting in the way
– there is no wrong place to find people
HOW TO IDENTIFY RAW TALENT
– you never 100% know if people are going to be good [remember to use that trial period as a real trial period]
– ask yourself what’s really world class. Ask people who are world class at a certain thing what you should be looking at in a new hire, the questions to ask
– good people want to solve tough problems, to come on hard things
– be very transparent why it’s an amazing opportunity, but also explain that it’s gonna be hard.
– tech people: spend a week-end working with the person
WHAT CHANGES DID GROWTH BRING TO YOUR COMPANY?
– either you fail, or growth becomes your number one problem [Better be good at it]
– try to make people feel like they are in startups inside a larger organization. Let people control the ressources and priorities and let them know how success is measured.
– recreate diversity inside teams (designers + writers + programmers together)
– as you grow, your time horizon grows. At the beginning you hire people for a month, then you hire them for years
– at the beginning, you need people who can contribute immediately. After a few years, you can make longer term investments, start working on things that will pay off down the road and not immediately.
– your tools will need to evolve (from email to better communication tools, because it becomes harder to copy the whole company on emails)
– make sure people don’t HAVE to grow into leadership roles. Some early hires have what it takes to become managers, others don’t. Don’t create an organization where the only way to evolve within the company is by taking a management role.
Building for the Enterprise (video)
– Box was founded in response of founder’s need to fix file sharing on the internet
– 3 forces contributed to Box emergence: cost of storage dropping dramatically, more powerful browsers and networks, and people wanting to share more and more and from more locations
– after product launched, was in between a consumer product (too many features) and an enterprise product (not enough features)
– consumer looks really fun, enterprise looks really hard. But in consumer space, it’s hard to monetise. Only two ways: people either pay for the app, or you sell advertising.
– to measure the opportunities, let’s look at global market sizes:
$35b = money spent on apps
$135b = global digital advertising
$3.7 trillion spent on enterprise IT per year…
Should you fight with millions of people for a bit of money, or with few people you charge lots of money?
– Enterprise software: building is slow, expensive, complex, and sales process is also very slow (and usually involves an intermediary, which internet people hate)
WHAT HAS CHANGED IN THE ENTERPRISE?
Everything has changed in the past 5 years, most magical time to build an enterprise software company
– on-premise computing -> cloud
– expensive computing -> cheap, low cost computing. Barrier for client introducing a product to their enterprise is lower.
– customised software -> standardized platforms, that the client customises themselves
– large enterprises -> every business can be sold an enterprise software. Makes the market much larger for enterprise software
– regional -> global, people will buy enterprise software from anywhere
– IT-led -> user-led, bring your own devices etc
LOTS OF INDUSTRIES NEEDING NEW TOOLS
– every company needs better, faster, more secure technologies
– retail: will need technologies to reach customers across all channels. No current solution addressing this [totally true, huge but complicated opportunity]
– every single healthcare company needs to personalize its services to the patients, electronic health records, assistance for doctors, etc
– media: from linear to on demand experiences, new forms of distribution and production need to appear. Need for big data analytics for marketing, etc
HOW TO GET STARTED?
– spot technology disruptions: look for new enabling technologies that create a wide gap between how things have been done and how they can be done. Ex: iPad disrupting blueprints management and collaboration, www.plangrid.com
– intentionally start small: start simple and expand over time. What are the gaps in the incumbents solution that customers will want to use? Expand to the larger solution at a later time. Incumbents will overlook you [or buy you if they notice you get traction?]
– find asymmetries: do things incumbents can’t or won’t do because the economics don’t make sense to them, or because technically they can’t.
Ex: software suites have a hard time being on multiple platforms, so go multi platforms [lesser service across more platforms]
– Find the fringe/extreme customers: go after those who are working in the future without totally losing their minds
– Listen to customers, but don’t always build exactly what they want, build what they need
– Modularize (openness, APIs), don’t customize
– Your product should sell itself, but you will still need sales people to help clients navigate the competitive environment and your product
Lecture 13 – Reid Hoffman (Founder, LinkedIn) on How To Be A Great Founder (video)
KEY ELEMENTS FOR BEING A GOOD FOUNDER
– founding team with complementary skills
– location: seek the networks that will be essential to your problem or your tasks. For example: if you need large sales team to build your company, don’t go to Silicon Valley because it’s not well understood/respected there.
– be contrarian? It’s hard to be contrarian and be right. What do you know that others don’t know?
– doing the work vs delegate: need to do both
– should be both flexible and persistent, confident and cautious
– vision vs data: vision frames how you look at data, so both are combined. Have a vision but take input from all sources
– take risks vs minimise risks? take focused, intelligent risks
– short term vs long term: both
– learn and adapt
Lecture 14 – Keith Rabois, Partner, Khosla Ventures on How to Operate (video)
– simplify, eliminate stuff
– clarify, ask clarifying questions
– allocate resources
– ensure consistent voice
– delegate: your management style must be dictated by your employees: if someone is good give them some room, if they do something for the first time micro managing is fine
– two types of people: barrels vs ammunitions. Barrels = people shipping stuff, ammunitions = people supporting the barrels
– create a dashboard to track company success, simple enough for the whole company to use
– use transparency
– treat customer support like a product
Lecture 15 – Ben Horowitz, Founder, Andreessen Horowitz, and Founder, and Opsware on How to Manage (video)
When you’re making a critical decision, you must understand how it will be interpreted from each person’s point of view
See your decisions through the eyes of the company
Example: great executive people like, working hard, but over their head, not world class when world class is needed. Fire or demote?
CEO point of view:
it’s tough to fire someone who puts a big effort
Demotion is better because you keep the person in the company
Executive point of view:
– may not want demotion, but at least gives him an option
– saves embarrassment
– does he keep the same equity package?
– is he going to work as hard being the guy who reports to the guy?
– do I have any respect for him now he’s been demoted?
You may think firing or demoting is about one person, but it is about the whole organization.
Example: employee ask for a raise
CEO point of view:
– you want to retain them
– they have done a good job, so it’s fair
– they will like you if you give them the raise
Employee’s point of view:
– might have an offer from another company, might have talked about it to their partner, etc.
– will be very happy for raise
– unfair I didn’t get a raise because I didn’t ask. Whoever asks gets, it’s not based on performance
– I did a better job, so it’s unfair
– Maybe I should quit
– every employee will feel like they have the responsibility to ask for a raise to support their family
– formal performance evaluation process: process protects the culture
– take your decisions on the right inputs
– run as frequently as needed
– no raises outside the process, will make people more comfortable because they know there is a fair process to evaluate them
CEO point of view:
– you want to be fair
– you don’t want employees to stay who don’t want to be there
– you want to rward people who stay
Employees leaving a company point of view:
– I worked for my stock options, I should be able to exercise them
– Did you tell me the truth when you hired me? (in the US, you need money to exercise your options, and many employees don’t have it)
Employees who stay point of view:
– is it smarter for me to stay or leave?
Lecture 16 – How to Run a User Interview by Emmett Shear (Founder and CEO, Twitch) (video)
WHO TO INTERVIEW
– if you’re using your own product, you don’t have to talk to users and can be lucky as you might represent a huge class of people. But often you need to talk to users
– who you talk to is as important as what questions you ask. There is no recipe for finding the important people, use your judgment
– it’s one of the first questions you need to ask yourself: who are my users, and where am I going to find them
– after 6-7 people, it’s unlikely you will learn much new stuff. That’s why you need to talk to different types of people [for example: fringe, extreme users] to make sure you learn useful stuff
– find users who know your space, it’s really great when you talk to a user who has used all the products and know what your competitors are good/bad at
– also talk to people who haven’t even thought about trying a service like yours. How could you convert them (that’s the challenge)
– hire people who speak foreign languages if you need to interview people who speak those languages
– the people you must care about is going to shift over time: maybe your early users will leave and you need to talk to newly important users
HOW TO INTERVIEW
– stay as far away from features as possible. You would end up designing a faster horse (reference to Ford’s quote: “if I had asked people what they wanted, I would have designed a faster horse [instead of a car]). Ask questions about needs and behaviours, try to understand what problem users are trying to solve, and how they are solving it (with the pain points you’d like to address)
– ask for example: you’re using this product, how could we make it one step better? What feature would they want to see developped?
– don’t ask people “I have this feature, what do you think about it?” People will always tell you they love it, but in the end it’s likely they won’t really use it. It’s like market research, asking people “would you pay for this” is very different from them actually paying for it.
– people who are hardcore fans of your products: don’t necessarily listen to them cause they might not be pointing you to huge problems. The problems they have will still make them use the product. Listen to feedback from competitors (for example).
– you’re going to get negative feedback on your pet features, those features you really love. It’s sad but it’s important to listen. Better to not do anything rather than launch and nobody uses what you’ve done.
– don’t do interviews over email as they are not interactive. Most interesting question is “tell me more” which you can’t do over email [detective mode]. Do over skype or in person interviews
MINIMUM VIABLE PRODUCT
– don’t develop a huge solution before talking to users. Fake it and make it a small dev, solve the problem you want to solve but without a clean solution. Then you can see if it works and you can invest in making the solution better and more elegant
– do the money test: make people pay for it, if they do you’re probably on a good product
MOST COMMON MISTAKES
– don’t show people your product
– learn what people have in their head, don’t put anything in theirs
– don’t ask people “would you use this feature”, “would you pay for this”, they’ll always say yes even if it’s not true
– talking to who are available rather than those you really need to talk to
– to create buy in on new features requested by users, record what they say and play it to your team instead of simply showing a synthesis
– try to ask questions that will make you smarter about your thesis, rather than questions who will validate your thinking [comment made in the next lecture by the Jawbone founder]
Lecture 17 – Hosain Rahman (Founder, Jawbone) on How to Design Hardware Products(video)
WHAT DOES IT TAKE TO BUILD HARDWARE
– demands you are active on three fronts: hardware, software, and data
– all these move at different speeds, have different cycles, need to adapt to the slower cycles
– everything is a system: UP band (tracking hardware + sensors + algorithms), Application, Science + data insights, API partners + signals
– you can dream much faster than you can develop products
HOW WE CREATE
1) exploration (validate concepts)
2) early validation
6) continued innovation
– science projects
– inspiration and insights
What you’re doing: building and tinkering
What drives it: people showcasing their ideas to the rest of the team (demo fridays), monthly show and tell with cross-functional representation, personal passions
Tools we use: hackathons, data and insights
Who is involved: Lead with R&D, others include engineering (hard and soft), product experience, product management (to provide ideas, input on opportunities, problems to solve)
What is required from staff: act as a sounding board, provide guidance on where to focus ressources
Required to move to the next phase: meets the $50k investment threshold (CTO has final decision at Jawbone)
– proving your thesis
– exploring the system
– outlining a story
What you’re doing: checking for robustness of concept
What drives it: dev leadership meetings
Tools we use: scientific method, high-level feasibility documents, data and insights, preliminary “hero” experiences, hypothesised “whys”
Who is involved: lead with R&D, others include Fuse [external design agency] (human factor and ID consideration), product experience, manufacturing (feasibility, options, tradeoffs), product management (preliminary business case), someone asking the tough questions
What is required from staff: prioritise concepts and approve budget for resulting programs
Required to move to the next phase: fits into our strategic vision, is feasible to make (you might have to wait a few years for smaller batteries etc), business viability, early experience briefs. Final decision belongs to CEO
– starting a journey
– excitement about what is possible
– painting experience in broad strokes
– asking big questions
– selling the experience
What you’re doing: defining the “whys”, beginning to define features
What drives it: R&D concepts, external tech opportunities
Tools we use: storyboards, interaction models, user research, hero experience, pitch videos, data and insights
Who is involved: lead with product experience, , others involved include engineering (hard and soft, ongoing feasibility, validation, problem-solving), product management (business case)
What is required from staff: imagine what’s possible, help determine if an idea has merit
Required to move to the next phase: highly resolved “whys”, differentiation, product roadmap. Final decision: belongs to CEO + teams. This is where you can fast-track programs
– emergence of a product
– no turning back
– building belief
– trade-off conversations
– lots of diverse inputs
What you’re doing: making a plan, validation of feasibility, beginning to build a story
What drives it: quarterly forecasting, AOP, retail calendar
Tools we use: early prototypes, feasibility documents, functional and inspirational briefs, data and insights
Who is involved: lead with product management, others include engineering, product experience, sales and marketing, finance (capital)
What is required from staff: make key decisions around trade-offs, sign off on the plan and move forward
Required to move to the next phase: prioritised features, functionality and minimum bar (does it cross enough of the value threshold that we want to put on the market), business plan and product roadmap
– bringing it to life
– anchoring the relay
– having a shared understanding of what, why, how
– laser focused problem solving
– pride in craftsmanship
What you’re doing: making a plan, validating feasibility, beginning to build a story
What drives it: quarterly forecasting, AOP, retail calendar
Tools we use: early prototypes, feasibility documents, functional and inspirational briefs, data and insights
Who is involved: Lead is with product management, with support from engineering, product experience, sales and marketing and finance
What is required from staff: make key decisions around trade-offs, sign off on the plan and move forward
Required to move to the next phase: design sing-off, engineering (hard and soft) sign-off, CEO sign-off
– feeding the fire
– going from imagination to execution on specific challenges
– developing strategies to achieve goals
– creating dialogue with the world
– leveraging existing to do much more
What you’re doing: deepening and broadening the engagement, creating more value for users, finding new ways to tell a story and finding new stories to tell
What drives it: retail calendar, sprint cycles
Tools we use: feature briefs, UI screenshots, marcom briefs, data and insights
Who is involved: lead with product management, with support from product experience team, engineering, sales and marketing
What is required from staff: provide guidance on goals and strategies, be the final approver for Jawbone that this is a worthy output
To create rich, continuous and signature experiences
1) ask the whys: a clear and memorable articulation of the human and business problems that we are looking to solve
2) turn them into themes: experience-based, stories that translate the “whys” into actionable concepts
3) assemble pods: cross-functional teams empowered to explore, act, and ultimately ‘own’ a theme
4) develop hero/sidekick experiences: scenarios that elevate concepts to signature solutions: ownable, system-oriented, intentional
5) create features: the building blocks of core objects of an experience: scalable, measurable, delightful
– what is the user problem that once we solve it people can’t live without?
– we don’t think of ourselves about a hardware company, but about an experience company. Think problems, not hardware/service
The why’s of the UP band
– real-time feedback helps me stay on track and achieve my goals today, rather than try to do better tomorrow
– I need to understand my data in a more meaningful, relevant and timely context that makes the “so what” obvious
– I need guidance, including structured and motivating activities to keep me going
– I want ongoing encouragement and in-the-moment validation that I’m on the right track and doing well
– I want a more fluid and frictionless way to manually log activities and never want to “miss” a sleep
What Jawbone tried to achieve:
– remove friction
– promote understanding in real-time
– 24/7 wearability -> 24/7 engagement
– understand today & act tomorrow -> understand and act in the moment
– factual insights -> actionnable insights
– manual logging -> progressive and contextual tagging
– behaviour loop: track -> leads to understanding -> leads to action, loop
– design for different personas
– design main experiences, then side experiences
Lecture 18 – Kirsty Nathoo, Carolynn Levy (Partners, Y Combinator) on Legal and Accounting Basics for Startups (video)
WHAT KIND OF ENTITY?
– create a separate entity to protect yourself from personal liabilities
– where do you form one? Theoretically there are 50 states, but the easiest is Delaware. Law is clear and settled, state that is in the business of forming businesses. Investors are comfortable with investing there.
– keep it simple and familiar for yourself, don’t get fancy
HOW TO SET IT UP
– fax two pieces of paper to delaware
– after that, complete a set of documents + explain structure + bring any IP
– you can use a lawyer or go through an online service that allows you to incorporate using standard documents quickly
– important to keep those documents in a safe place and organised. If due diligence happens, people will ask for these documents
– allocation: execution has greater value to idea. Don’t give too much credit and equity to the people who gave the idea. Idea have zero value, execution does. Resist the urge to give a disproportionate amount of stocks to the founder who came up with the idea
– should the stock be split among founders? Doesn’t have to be exactly equal, but if it’s highly disproportionate it’s not necessarily a good sign. Is a founder not as involved as the other? Shows you the founders are not in sync together.
– if everybody is in 100% and in for the long run, the idea has even less importance.
– as a founder, you buy company back from the company
– vesting is earning the right to permanent ownership of the shares over time. If shareholder leaves before end of vesting period, shares go back to the company which can repurchase them by writing a check
– what should a typical vesting period be? In silicon valley, four years with a one year cliff. After one year, you get 25% of the shares, the rest vests on a monthly basis. If you leave before first year, company buys back 100% of the shares at price founder paid them
– do single founders should have it too? Yes, all founders should be incentivised to stay at the company for a longer time (important for investors)
– logistics: priced vs non-priced rounds. Valuation is set or not. Seed round: no price set, series A/B price is set. Price not set is for example investor puts money in the company, money will stay as debt and convert when another investor sets a price via a more important investment. At the time the paperwork is done, the investor is not a shareholder.
– understand your future dilution
– investors should be sophisticated: your investors should understand putting money in startups is dangerous. Friends and family round investors don’t necessarily understand this, and end up creating most problems for the company when they are their money back. What you’re looking for is “accredited investors”
– keep it simple, raise money using standard documents, understand how much diluted you will be
– beyond the money terms, lots of things matter. The burden is on you to figure these other things out
– board seat: investor wants to keep tab about their money, or help the company. Before accepting this, make sure the person can really create value for the company.
– pro rata rights: it’s the right to maintain your % in the company by buying more shares in the later rounds. Giving this to investors means greater dilution for the founders, so use carefully.
– advisors: so many people who want to advise, so few people who can give good advice. Good investor is a de facto advisor and you shouldn’t have to give anything else (share, money) for their service.
– information rights: you should give monthly information to your investors, but don’t over reach as it is time consuming.
– cost of carrying out the business (salaries, rent)
– get deducted on the company’s tax returns
– investors want you to use their money to make the company successful, not for your personal usage. Don’t steal from your investors
– keep the receipts for when you engage a book keeper
– founders are employees of the company and must be paid salaries. Setup a payroll service, it’s something worth spending your money on this. Don’t give huge salaries, go minimum wages
– founder breakups get super ugly when fired founders haven’t been paid. It’s illegal not to pay someone, so it’s leverage for the fired founder. In the end, disgruntled founder still has shares and other founders work for them. Avoid problems by paying yourself and your payroll taxes.
– hiring people: employee vs contractor. Both will sign documents to assign any IP they create to the company (form of document and method of payment very different for each).
– you need to get the relevant insurance
– you need to see proof that the employee is authorized to work in the US
– fire quickly, even it’s really hard, especially when you hire close friends or former colleagues. Do what is right instead of what is easy
– toxic employees make good employees leave
– communicate effectively: don’t make excuses, don’t apologize. Make simple statements.
– fire the employee face to face, ideally with a third party present
– pay all wages and accrued vacations immediately
– cut off access to digital access, change passwords, etc
– repurchase unvested stock
– keep it simple, do all the standard things when forming a company
– equity and ownership is very important, think long term
– make sure you do the proper paperwork
– make sure you know the rights investors ask
– founders need to be paid (required by law in the US)
– assign IP to the company
– fire employees quickly and professionally
– know your key metrics: cash position, burn rate, when cash is going to run out
– be a legitimate corporation, take it seriously, follow the rules
Lecture 19 – Tyler Bosmeny (Founder and CEO, Clever) on Sales and Marketing (video)
THE MYSTIQUE OF SALES
– impossibly charming
– well connected
– killer closing lines
– we’ll just work on the product and just hire sales people at the end
– the reality: the salesforce is the founder when you start
– build or sell, nothing else matters
– pick a founder to own this
– founder’s passion and good industry knowledge trumps sales experience
THE ALMIGHTY FUNNEL
4) revenue -> promised land
– process of figuring out who will even take your calls
– find the early adopters / innovators
– it’s numbers game: reach out to > 100 companies
– top 3 methods: your network, conferences, cold emails
– what you’ll do: you’ll speak 80%, let them speak 20%
– but remember to shut up! Listen to your customers. founders are so proud of their product they flood the client with their product, the features, etc. Turns out the best sales people do very little talking, and ask a lot of questions. What would the ideal solution look like? why did you take my call today? you can know how likely a sale is when looking at how much talking ou did.
– religious follow up: getting a signature is very hard and demands constant follow up. You need to drive things to closure.
– you die when you have a 1000 maybes. Close close close, and know when people don’t want you so you can save time and stay away from deals that are not going to close in the end.
– send an agreement, let the lawyers mark it up, then close
– don’t quibble on minor points
– sometimes clients will say “I’d buy your product but it’s missing that one feature”. 9/10 times if you build that feature it will not get you the sale. Sign an conditional agreement saying they pay you if you build that feature. Wait to hear demand from more customers. Don’t be opportunistic, be strategic!
– early on you need commitment, validation and revenue. Free trial gets you none of these. Instead, offer a 30 day cancellation period on an annual contract. If client is unhappy they can opt out.
– ask yourself what aspects of your sales are repeatable
– what are you going to be? An elephant (= few clients paying a lot, demanding field sales) or a flea (= lots of clients paying little, in which case you need marketing)
Lecture 19b – Qasar Younis, Dalton Caldwell (Partners, Y Combinator) on How to Talk to Investors (video)
– you need a 30s pitch
– you need a 2 minutes pitch, people who are interested after the 30 seconds pitch
– you can do everything you need in 2 minutes. The more you talk, the more you risk telling something people don’t like
– what does your company do that requires no previous information to understand. “mom test”: your mom should understand in one sentence what you’re doing.
– how big is your market: do a couple hours of research on your market, investors like to hear you’re in a couple billion dollar market.
– how much traction you have: explain how you’re growing, how much sales you have. Very simple.
– from that basis you should be able to start a conversation with anyone interested
– add four additional components:
1) unique insight: what’s your secret sauce, what’s your competitive advantage. Something the biggest players in your market don’t understand. Ah ah moment. Two sentences.
2) business model: how you make money.
3) your team: if one of the founders has done something that returned good money to investors. how many founders are technical, how many are business. since when do you know each other? are you all working full time?
4) big ask: what do you need
DURING MEETING WITH INVESTORS
– make sure the listener understands what you’re working on
– know your numbers, don’t meet if you can’t share numbers
– your team should be suited for the task
– drive the conversation to a conclusion
– capture interest, tell an interesting story
– demonstrate insights and command on the market, passionate
– collaborative meeting
– ask about the money
AFTER THE MEETING
– follow up (anything but a check is a no)
– work on creating deal heat
– do diligence on the investors
– know when to stop, don’t become addicted to fundraising. Fundraising does not equal success
Lecture 20 – Sam Altman on Later-Stage Advice (video)
STUFF THAT COMES UP AFTER 12/24 MONTHS
Ignore these until you have product/market fit. Before product/market fit, you’re building a great product. After you’re in for building a great company. Biggest shift for founders
These are a waste of time until you have something working
– company productivity
– legal, finance, accounting, tax
– your psychology
– marketing and PR
4 COMMON FAILURE CASES
In the transition from building a product to building a company:
– being afraid to hire senior people
– hero mode: extreme leading by example
– bad delegation: not giving enough responsibility, or to the wrong people
– not developing a personal tracking and productivity system: write down how you do things and why to establish it as the company grows
– need it at about 25 employees
– don’t make the structure complicated: every employee should have a manager, every manager should know their reports
– people know to change the structure, add new people – just make it clear
– clarity and simplicity are the key things
– avoid the temptation to have coolness via no structure
– don’t make the other mistake of having something super complicated
– correctly ignore at the beginning, but huge mistake to ignore it down the road
– HR can speed you up if you have a clear structure, performance feedback (simple and frequent), compensation bands tied to performance, equity (be generous: your investors will give you bad advice, distribute 3-5% per year).
– at one point, you cross a threshold and you start to follow new rules (sexual harassment, diversity training)
– monitor for burnout
– put in place a hiring process: hire a full time recruiter, make good internal announcements so people in your company can recommend their friends and network
– have a program in place for people who start with the company: what happens to them in the first week
– hire diversity of perspective on the team as early as possible, it will allow you to grow the team more quickly over time
– allow your employees to evolve. often you will outgrow your first employees. be very proactive about this. What’s the path for the first 10-15 employees about this? Talk to them about this.
– as you grow, productivity goes down as more employees come on board
– one word: alignment
– clear roadmap and goals: all employees can say the same top 3 goals
– figure out values early
– be run by product, not process: ship every day
– have transparency and rhythm in the communication: weekly management meeting, all hands meeting at least once a month (results, roadmap with entire company), planning meeting every quarter, off-sites (where do we want to be, what aren’t we be doing that we should be doing?).
– single hardest thing in business is building a company that constantly innovates and gets better with time.
LEGAL, FINANCE, ACCOUNTING & TAX
– clean books, accounting firm, audits
– collect your legal documents – easy to fix now if you’re missing something
– patents: you have 12 months to patent something after you launch, so ask yourself if there is anything you should patent after 11 months.
– trademarks: do it when you get traction
– grab misspelled domain names etc
– gets worse over time as company grows. Highs are better but lows are getting worse
– ignore the haters: starts in internet comments, moves on to journalists, etc. Will go on and on as your get more successful. Make peace with this early
– think long term, it gives you an advantage over people who are in it for a short term home run
– monitor burnout, take vacation
– focus: don’t lose it
– ignore acquisition interest. Very gratifying but they distract yourself, it’s demoralising if it does not happen. Don’t start any acquisition conversation unless you’re willing to sell at a pretty low number.
– startups fail when founders quit, so manage your own psychology so that you don’t quit
MARKETING & PR
– start thinking about this once your product is working – don’t ignore it
– don’t outsource the key messaging
– repeat the key messages over and over again
– get to know journalists (PR firms will always try to prevent you from doing this)
– build a great product, nothing else happens if you haven’t
– develop a personal connection with your potential buyers, care about them and what you’re doing with them
– have a competitive dynamics: have more than one suitor, it will give you leverage
– be persistent
– ask for what you want. Most of the founders have a problem with this. Just ask for things. most of the time people will take you seriously and you might get it