How to start a Startup [Part-1]

Start-ups are very different, from normal companies. I am going to try to give an overview of the four areas that you need to excel at, in order to maximize your chances of success to start-up.

For a successful start-up, you need to focus on four areas: you need a great idea, a great product, a great team, a great execution. These overlap somewhat, but I am going to have to discussion about them somewhat individually, to make it make sense. You may still fail the outcome is something like idea times product, times execution, times team, times luck, where luck is a random number between zero and 10,000, literally that much.

One of the exciting things about start-ups is that they are surprisingly even playing field. Young and inexperienced, you can do this. Old and very experienced, you can do this too.

In addition, one of the things that I particularly like about start-ups is that some of the things that are bad in other work situations, like being poor and unknown. Are actually huge assets, when it comes to starting a start-up! Before we jump in on the how, I want to discuss about why you should start a start-up.

I am somewhat hesitant to be doing this discussion at all, because you should never start a start-up just for the sake of doing so. There are much easier ways to get rich and everyone who starts a start-up always says that they could not have imagined how hard and painful it was going to be.

You should only start a startup if you can, feel compelled by a particular problem and that you think starting the company is the best way to solve it. This specific passion should come first and the start-up the second. In fact, all of the big successes we have at start-up community followed this.

Okay, so the first of the four areas: A great idea. It has become popular in recent years to say that the idea does not matter. In fact it is almost uncool, to spend a lot of time, thinking about the idea for a start-up. You are just supposed to start, throw stuff at the wall, see what sticks, and not even spend any time thinking about if it will be valuable if it works, and pivots are supposed to be great the more pivots the better.

Therefore, this is not very wrong, things do evolve in ways that are difficult to predict, and there is a limit to how much you can figure out, without actually getting a product in the hands of users. Moreover, great execution is at least 10 times more important and a 100 times harder than a good idea.

Nevertheless, the pendulum has swung way out of wacky here. A bad idea is still bad. In addition, the pivot happy world that we are in today feels suboptimal. Great execution towards a terrible idea will get you nowhere. There are exceptions of course, but most great companies start with a great idea.

If you look at successful pivots, they usually are a pivot into something, the founders themselves wanted. Not a random made up idea. Airbnb happened because Brian Chesky could not pay his rent, but he did have some extra space. In general, though, if you look at the record of accomplishment of pivots, they do not become big companies.

I myself used to believe ideas did not matter that much but I am very sure that is wrong now. The definition of the idea as we talk about it, is very broad, it includes the size and the growth of the market, the growth strategy for the company, the defense ability strategy and so on.

When you are evaluating an idea, you need to think through all these things, not just the product. If it works out, you are going to be working on this for ten years. Therefore, it is worth some real upfront time, to think through the long-term value and the defensibility of the business.

Even though plans themselves are worthless, the exercise of planning is valuable and missing in most start-ups today. Long-term thinking is so rare anywhere, but especially in start-ups. However, is a huge advantage if you do it! Remember that the idea will expand and become more ambitious as you go.

You certainly do not need to have everything figured out, in a path from here to world domination. Nevertheless, you really want a nice kernel to start with. You want something that can develop in interesting ways. As you are thinking through ideas. Another thing that we see young founders get wrong all the time, is that someday, you need to build a business that is difficult to replicate.

This is an important part of a good idea. I want to make this point again because it is so important. The idea should come first and the start-up should come second. Wait to start a start-up, until you come up with an idea you feel compelled to explore. This is also the way to choose between multiple ideas.

If you have several ideas that all seem good, work on the one that you, think about most often, when you're not trying to think about work. However, we hear repeatedly from founders, that they wish they had waited to start a start-up until they came up with an idea that they really loved.

Another way of looking at this is that the best companies are usually mission oriented. It is difficult to get large groups of people to pay extreme levels of focus and productivity that you need, for a start-up to be successful, unless the company feels like an important mission. Moreover, it is usually hard to get that, without a great founding idea.

A related advantage of mission-oriented ideas is that you yourself will be dedicated to them. It takes years and years, usually a decade to create a great start-up. If you do not love and believe in what you are building, you are likely to give up at some point along the way.

There is no way I know of, to get through the pain of a start-up without belief that the mission really matters. Many founders, especially students, believe that their start-ups only going to take two or three years and then after that they will work on what they are passionate about.

That almost never works. Good start-ups usually take ten years. A third advantage of mission oriented companies is that people outside the company, are more willing to help you. You will get more support on a hard, important project than a derivative one. When it comes to starting start-ups, in many ways it is easier to start a hard start-up than an easy start-up.

This is one those counter intuitive things it takes people a long time to understand. It is difficult to overstate how important being mission driven is, so I want to emphasize it one last time. Derivative companies, companies that copy an existing idea, with very few new insights do not excite people and they do not compel the teams to work hard enough, to be successful.

The big question is how to get start up ideas? It is something that a lot of founders struggle with, but it is something I believe you can better with it. Better at with practice. The hardest part about coming up with great ideas, is that the best ideas often look terrible at the beginning.

You want an idea that turns into a monopoly. However, you cannot get a monopoly, in a big market right away. You have to find a small market, in which you can get a monopoly and then quickly expand.

This is why some great start-up ideas look bad at the beginning. It is good if you can say something like, today, only the small subset of users is going to use my product. However, I am going to get all of them, and in the future, almost everyone will use my product.

Here is the thing that is going to come up a lot. You need conviction in your own beliefs, and a willingness to ignore others saying. The hard part is that this is a very fine line. There's, right on one side of it and crazy on the other. But keep in mind that if you did come up with a good idea, most people are going to think it is bad.

You should be happy about that. It means they will not compete with you. This is also a reason, why it is not usually dangerous to tell people about your idea. The truly good ideas, do not sound like they are worth stealing. You want an idea about what you can say “I know it sounds like a bad idea, but here specifically why it is actually a great one.”

You want to sound crazy, but you want to be right. And you want an idea that not many other people are working on. And, it's okay, if it doesn't sound big at first. The common mistake among founders, especially among the first time founders is that they think that the first version of their product, the first version of their idea, needs to sound big.

However, it is not the case. It needs to take over a small specific market and expand from there. That is how most great companies have started. Unpopular but right, is what you are going for. You want something that sounds like a bad idea, but is a good idea. You also want to really take the time to think about how the markets going to evolve.

You need a market that is going to be big in ten years. Most investors are obsessed with the market size today, and they do not think at all about, how the market is going to evolve. In fact, I think this is one of the biggest systemic mistakes investors make. They think about the growth of the start-up itself, they do not think about the growth of the market.

I care much more about the growth rate of the market than its current size and I care if there is any reason it is going to top out. You should think about this I prefer to invest in a company that is going after a small, but rapidly growing market, than a big but slow growing one.

One of the big advantages of these sorts of markets these small but rapidly growing markets, is that customers are usually pretty desperate for a solution, and they will put up with an imperfect, but rapidly improving product. And a big advantage of being a student, one of the two biggest advantages is that you probably have better intuition about which markets, are likely to start growing rapidly than older people do.

Another, thing that students usually do not understand or at least takes a while to understand is that you cannot create a market that does not want to exist. You can change everything in a start-up, but the market. So, you should actually do some thinking to be sure or at least as sure as you can be, that the market you're going after is going to grow and be there.

There are many different ways to talk about the right kind of market. For example, surfing someone else's wave or stepping into an up elevator are being part of a movement. But all of this is just a way of saying, you want a market that's going to grow really quickly.

It may seem small today, it may be small today, but you know, and other people do not that it's going to grow really fast. So think about where this is happening in the world. You need this sort of a tailwind to make a start-up, successful. The exciting thing is there are probably more of these tailwinds now than ever before.

There are like so many great ideas out there. And you just have to pick one and find one that you really care about.

Why now? Why is this the perfect time for this particular idea? And to start this particular company? Why could not it have been done two years ago? And why will two years in the future be too late?

In general, it is best if you are building something that you yourself need. You will understand it much better, than if you have to understand it by talking to a customer, to build the very first version. If you do not need it yourself and you are building something that someone else needs, realize that you're at a big disadvantage, and get very, very close to your customers.

Try to work in their office if you can, and if not, talk to them multiple times a day. Another somewhat counter intuitive thing about good start-up ideas, is that their almost always very easy to explain and very easy to understand. If it takes, more than a sentence to explain what you are doing it's almost always a sign, that it's too complicated.

It should be a clearly articulate, articulated vision with a small number of words. And the best ideas are usually either, very different from existing companies. In one important way like Google being a search engine, that worked just really well and none of the other stuff of the portals, or very new like Space X.

Any company that is a clone of something else that already exists, with some small or made up differentiator, as we are going to x beautiful design, or we are going to y for people that like red wine instead. That usually fails. So as I mentioned one of the great things about being a student, is that you have a very good perspective on new technology.

And learning to get good at having new ideas takes a while, so start working on that right now that's one thing we hear from people all the time. That they wish they had done more when they were a student. The other, is meeting potential co-founders. You have no idea how good of an environment you're in right now for meeting people you can start a company with down the road.

And the one thing that we always tell college students, is more important than starting any particular start-up, is getting to know a lot of potential co-founders. Most people don't do this. Most students especially do not do this. If you can just do this one thing. If you can just learn to think about the market first, you will have a big leg up, on most people starting start-ups.

And this is something, this is probably the thing that we see wrong: people have not thought about the market first and what people want first. So for next, I am going to discuss about building a great product. And here again, I'm going to use a very, broad definition of product.

                                                                                          

It includes customer support and copyright expending the product. Anything involved in your customer's interaction with what you have built for them. To build a great company, you first have to turn a great idea into a great product. This is hard, but it is crucially important and fortunately, it is fun.

Although great products are always new to the world and it is hard to give advice about what to build, there are enough commonalities that we can give you a lot of advice, about how to build it. One of the most important tasks for a founder is to make sure that the company builds a great product.

Until you build a great product, almost nothing else matters. When successful start-up founders tell the story of their early days, it is usually, sitting in front of the computer working on our product, or talking to their customers. That is pretty much all the time. They do very little else.

And you should be very skeptical, if your time allocation is much different. Most other problems that founders are trying to solve, raising money, getting more press, hiring, business development, et cetera, these are significantly easy when you have a great product. It is important to take care of that first.

Step 1 is to build something that user’s love. We tell founders to work on their product, talk to users, exercise eat and sleep. And very little else. All the other stuff I just mentioned, PR conferences recruiting advisers doing partnerships. You should ignore all of that. And just build the product.

Then get it as good as possible by talking to your users. Your job is to build something that user’s love. Very few companies that go on to be super successful get there without first doing this. Many good on paper start-ups, fail because they nearly make something that people like.

Making something that people want, but only a medium amount is a great way to fail and not understand why you are failing. So these are the two jobs. Something that we say a lot, is that it's better to build a small number, it's better to build something, that a small number of users love, than a larger number of users like.

Of course, it would be best to build something that a small number of users love. But opportunities, to do that for V1, are rare and they're usually not available to start-ups. So in practice you end up choosing either the gray or the orange, you make something that a lot of users like a little bit, or something that a small number of users like love a lot.

And this is a very important piece of advice. Build something that a small number of users love. It is much easier to expand from something that a small number of people love, to something that many people love, than from something that many people like to a lot of people love.

If you get this right, you can get many other things wrong. If you do not get this right, you can get everything else right and you will probably still fail. So when you start on the start-up, this is the only thing you need to care about until it is working.

You have a choice, in a start-up. The best thing of all worlds would be to build a product that many people really love. In practice, you cannot usually do that. Because a big company, if there is not an opportunity like that, Google or Facebook will do it.

So there's like a limit to the area under the curve. Of what you can build. And you can even build something that a lot of users, like a little bit or you can build something even with a small number users love a lot. And the total amount of love is the same.

It is just a question of how it's distributed. And there is like this love conservation of how, much happiness you can put into the world. Start-ups always struggle, with which of those two they should go. And they seem equal, right?

Because the area under the curve is the same, but, we see this time and again that they are not. And they're so much easier to expand. Once you have something that some people love, you expand that to something that a lot people love. But if you only get, ambivalence or sort of weak enthusiasm, and then try to expand that, you'll never get up to a lot of people loving it.

So, the advice is find a small group of users and make them really love what you're doing. Does that make sense? All right! And, and one way that you know when this is working, is that you'll get growth by word of mouth. If you make things people love people will tell their friends about it.

This works for consumer products and enterprise products as well. When people really love something, they tell their friends about it and you will see organic growth. If you find yourself talking okay it is not growing because there is a big partnership that is going to come save you or something like that, it is usually a sign of real trouble.

Sales and marketing are important. But if you don't have some early organic growth, then your product probably isn't good enough yet. A great product is the secret to long-term growth hacking. You should get that right, before you worry about anything else.

It does not get easier to put off, making a great product. If you try to build a growth machine before you have a product that some people really love, you are almost certainly going to waste your time. Breakout companies usually have a product that is so good that it grows by word of mouth.

Over the long run, great products win. Do not worry about your competitors, raising a lot of money, and what they may do in the future. They probably are not very good anyway. Very few start-ups die from competition. Most die because they themselves failed to make something users love. They spend their time on other things.

So worry about this, above all else. Another piece of advice to make something the users love, start with something simple. It is much, much easier to make a great product if you have something simple. Even if your eventual plans are super complex and hopefully they are, you can usually start with a smaller subset of the problem, than whatever you think is the smallest.

And it's hard to build a great product, so you want to start with as little surface area as possible. Think about the successful companies and what they started with. Think about products that you really love, they are generally incredibly simple to use and especially to get started using. The first version of Facebook was almost comically simple.

The first version of Google was just an ugly webpage with a text box and two buttons, but it returned the best results and that is why users loved it. The iPhone is far simpler to use than any smartphone that ever, came before and it was the first one that people really loved.

Another reason that simple is good, it is because it forces you to do one thing extremely well. And you have to do that, to make something that people love. The word fanatical comes out again and again, when you listen to successful founders talk about how they think about their product.

Founders talk about being fanatical in the way the care about the quality of the small details, fanatical in getting the copy that they use to explain the product just right and fanatical in the way they think about customer support. In fact one thing that correlates with success, among companies, is the founders that hook up pager duty to their ticketing system, so even if the user emails in the middle of the night when the founders are asleep.

They still get a response within an hour. Companies actually do this in the early days. These founders feel physical pain when their product sucks and they want to wake up and fix it. They do not ship crap, and if they do, they fix it very quickly. And they definitely take some of fanaticism, to build a great product.

You need some users to help with the feedback cycle. But the way to get those users is manually, you should go recruit them by hand. Do not do things like buy Google Ads in the early days, to get initial users, you do not need very many, you just need ones that will give you feedback every day and eventually love your product.

So instead of trying to get them on Google AdWords, just find a few people in the world that will be good users, recruit them by hand. Ben Silverman, when everyone thought Pinterest was a joke, recruited the initial Pinterest users by chatting up strangers in coffee shops, he really did he just walked around Palo Alto and said, will you please use my product? He also used to run around the Apple store in Palo Alto. And he would like set all the browsers to the Pinterest home page real quick before they caught him and picked him up. So then, when people walked in there they were like, oh what is this.

This is an important example of doing that do not skill. If you have not read Paul Gram's essay on that topic, you definitely should. So get users manually and remember that the goal is to get a small group of them to love you. Understand that group extremely well. Get extremely close into them, close to them. Listen to them. And, you'll almost always find out, that they're very willing to give you feedback. Even if you're building the product for yourself, listen to outside users. And, they'll tell you how to make a product they'll pay for. Do whatever you need to make them love you; make them all you are doing.

Because they are also going to be the advocates that help you get your next users. You want to build an engine in the company, that transforms feedback from users into product decisions, then get it back in front of the users and then repeat. Ask them what they like and what they do not like and watch them use it. Ask them what they pay for, ask them if they would be really bummed if your company went away, ask them what would make them recommend their product to their friends and ask them if they have recommended it to any yet. You should make this feedback loop as tight as possible.

If your product gets 10% better every week, that compounds quickly. One of the great advantages of start, of software start-ups, is just how short you can make the feedback loop. It can be measured in hours. And the best companies usually have the tightest feedback loops. You should try to keep this going, for all of your company's life.

But it is really important in the early days. The good news is the oldest is doable. It is hard; it takes a lot of effort. But, there's no magic. The plan is at least straightforward and you will eventually get to a great product. Great founders do not put anyone between themselves and their users.

The founders of these companies do things like sales and customer support themselves in the early days. It’s critical to get this loop embedded in the culture. In fact the specific problem that we always see with start-ups for some reason, is that the students try and hire sales and customer support people right away and you got to do this yourself, it’s the only way.

You really need to use metrics to keep yourself honest on this. It really is true, that the company will build whatever the CEO decides to measure. If you're building an Internet service, ignore things like total registrations. Don't talk about them, don't let anyone in the company talk about them and look at growth and active users, activity levels, cohort retention, revenue, net promoter scores, these things that matter.

And then be brutally honest it's not going in the right direction. Startups live on growth. It's the indicator of a great product. So this about wraps up, the overview on building a great product. I want to emphasize again, that if you don't get this right, nothing else we talk about in the class will matter.

For more details view: https://www.youtube.com/watch?v=CBYhVcO4WgI