Insights from YC's Startup School

I was fortunate enough to drop by YC's Startup School while I was back in the Bay Area. It's an annual conference packed with advice on how to build, run, and scale a startup. This year’s speaker lineup featured Reid Hoffman (LinkedIn, Greylock), Marc Andreessen (a16z, Netscape), and some incredible partners and alumni of YC.

Please share with anyone who will get value from these notes. All photo credit goes to @ycombinator.

My 3 biggest takeaways:

(1) Startup success is about moving fast and staying resilient.

• The best founders have an action bias – they focus on execution and experimentation over conceptualization and talk. 
• They don’t give up easily – as Paul Graham has written before, the fastest route to failure is by getting demoralized. Stay scrappy and power through “failure.”
• They’re resourceful and willing to do things that don’t scale – whether that means manually recruiting users or providing white glove service to your first customers. 

(2) Build the right company by hiring the right people.

• Hire for mission – look for people who believe in what you’re doing; they’re the ones who will stay with you through tough times.
• Find entropy reducers – hire the people who will build, enhance, and train others in systems that make your organization more efficient. They make your company run more efficiently. It’s a good heuristic for evaluating a team member – do they reduce or increase the entropy in your company?

(3) Know your calling.

• What do you want the first line in your Wikipedia page to say?
• Carefully choose the company you build, because it could become your life’s work and your ultimate legacy.

3 things I’m going to do in the next 3 months because of Startup School:

1. Invest in quantity and action over perfection – Kevin and Qasar’s advice around getting the sales engine revving was critical. Sometimes a “shotgun approach” – with hundreds of outbound messages going out every week – is the smartest bet. Don’t over-engineer the process.
2. Codify the culture – I'm proud of the culture I've built at previous teams. But to ensure that it scales, we need to explicitly define my personal principles.
3. Be mindful – of the everyday decisions that will ultimately become my company and legacy.

And now, for the full notes:

Ooshma Garg, Gobble

-Have passion for your mission and always play the long game

-Had a growth graph that resembled Paul Graham’s startup curve – struggled through the trough of sorrow, crash of ineptitude, and wiggles of false hope before finally reaching the promised land

-Worked tirelessly for 4+ years with very little traction before exploding in recent years

-Be relentless

• Was turned down by Keith Rabois 6+ times before she finally got a meeting with him (a mutual friend of theirs texted Keith on her behalf)
• When she finally got the meeting, closed a check after 5 minutes

As a founder, remember to always go back to the basics

• Talk directly to users and customers
• Be involved with the product you’re building

Hire for mission over (and ideally in addition to) ambition

• People with only ambition will leave you when times are tough
• People with mission will stick it out through the lows of building a business – and their belief will keep your venture going during the tough times

Play the long game with investors; don’t ever burn bridges

• Ooshma raised her Series A from investors who had rejected her multiple times in the past

Parting advice:

• Have grit in your core – resilience to get through the tough times and an unwillingness to surrender
• Experiments in your head – willingness to test different models and mental flexibility to adjust your path as you go
• Mission in your heart – passion to soldier on and deliver and evangelize your vision

Ben Silbermann, Pinterest

Had an extensive history of small side projects, building tech products for himself

Was motivated to learn programming through these projects

Best advice he ever got was to “stop talking about it and just do it,” from his girlfriend (and now wife)

Raising money

• Simply cold-called everyone wealthy in alumni directories (even from schools that he didn’t attend)
• Applied to a bunch of college business plan competitions that had loose rules about who could apply

The reality 

• Pinterest actually grew quite slowly
• Acquired many users manually (e.g., in coffee shops), and watched them as they tested the app

Think and plan as if your company will be huge

Hiring

• Give people the “guarantee of adventure, not success” – people who join a startup are looking for the experience over a guaranteed win
• Make people feel like they’re part of the mission, not just a cog in the wheel – instill a real sense of purpose
• Look for builders – people who serially build things – rather than talkers
• Find people who are curious and broad, but also deep in one area

Culture

• Your company is the sum of your employees’ collective experiences; as such, there are real benefits to diversity

“As you grow, there’s an ever expanding gap between the reality of what you’ve achieved and your ambitions” (paraphrased)

Mentors were critical throughout the life of Pinterest

• Kevin Hartz, the founder of Eventbrite, was a critical help
• Ask your mentors, “what should I look out for?”
• Mentors can be critical in helping you scale as a leader
• The life and death language around startups can actually be counterproductive; mentors can help you put things back and to perspective and make you realize that failure and struggles in a startup are actually not that bad

Chad Rigetti, Rigetti Computing

Building a “hard tech” startup is a race to define the future, and can be something that’s worth spending your life on

• You create epochal moments for mankind
• It’s the kind of progress that’s not captured in investor reports (transient), but hieroglyphs on cave walls

Succeeding in hard tech creates incredible barriers to entry and tremendous leverage – “look at the fucking leverage that the Manhattan Project created!”

34 people in Wisconsin built the world’s greatest supercomputer in the 60s – that should tell you about the power of a small group of people devoted to incredibly large challenges

Hire people who reduce entropy, not increase it

• Certain people are high-leverage hires – they help build, enhance, and train others in systems that make your organization more efficient. Look for them. Are they entropy reducers? 
• Other people just add chaos to your company. 

Afterthought from Sam Altman – you’d be surprised how different Rigetti was just 2 years ago, when he had a lot less conviction around the idea. You can become just as inspiring and determined in a short span of time. Don’t think you can’t be like (or eventually become) the people on stage.

Reham Fagiri & Kalam Dennis, AptDeco

Going from 0 to 1

• Do things that don’t scale, and are a bit naughty – founders listed furniture from Craigslist without seller approval to first validate their model
• Follow your users around as they review and use your product

Don’t be married to a path

• Embrace change and learn from how customers are using your product
• This led AptDeco to move from an Uber platform model (didn’t own its vehicles) to something where they owned their own cars and thus were able to better control their brand and customer experience

Become default alive

• Companies should build a real business model and get ramen profitable ASAP
• Founders should personally manage and track burn rate

Ignore the noise

• Know your “True North”
• The founders spent a lot of time obsessing over a competitor that had 20x their financing (who ended up going bust); that was a lot of wasted time

“If you know better, you can do better” – so learn as much as you can

Kevin Hale & Qasar Younis, YC office hours

Marketplaces are unique in that they’re typically winner take all (or most) and generally 0 sum games

Questions that are asked from partners in office hours

• How do people find out about you? What’s the percentage breakdown on how people discover your service?
• Who’s on the supply side of your marketplace? The demand side? How does each side grow?
• What’s your growth rate?
• What’s your user retention / churn?
• What are you most worried about?
• What is your site trying to optimize for? What’s your call to action?
• What does your sales cycle look like?
• What’s your pricing model?
• How many people are you reaching out to every week? (for enterprise sales)
• What % of your users are paid vs. free?
• What’s the moment people realize they need your app?

Other notes

• 2 types of products

(1) Those you use daily – they’re always top of mind, they create user habits

(2) Those you use for “one off” purposes, which fulfill mental queries

• Money is generally a proxy for building something people want
• Focus on your most hungry, active, power users and build the ideal product for them
• Even in marketplaces, build your website for one side of the market (the side that’s more critical to getting the flywheel going, or you’re more likely to capture online)
• “Sometimes, founders say they’re going to build this great new UI/UX the world has never seen before… and users say, ‘what is this, it’s unusable,’… precisely because it’s something the world has never seen before”; don’t try reinventing the wheel with user interface
• Your site should very clearly state what your company does
• For enterprise sales, take a shotgun approach where you go for quantity rather than quality (forget about excess qualification); just hit the Fortune 5000 companies
• There are a lot of outbound sales technology tools – use them

Paul Buchheit & Sam Altman, pitch practice

In your pitch, be able to clearly explain:

• What is your startup?
• What does it do?
• What process does it replace? What’s the current process like?
• Why will this be a huge market?
• Why will you be a leader in this huge market?
• What’s the size of the current market?
• Why will people embrace the technological change your solution brings now? Why will people embrace the new habits that your solution requires?

Other notes

• “It’s harder for companies to build technology than for technology companies to enter new verticals… that’s why we believe startups will succeed” (Sam Altman, paraphrased)
• Always follow up and ask for next steps!

Marc Andreessen, a16z

A16Z provides two critical resources

(1) Network

• Regulators
• Customers
• Advisors
• Engineers
• Reporters 
• Executives

(2) Training

People liken it to “plugging into the matrix.”

To get on the radar of someone like Andreesen, you have to have a warm referral. It’s a good (basic) test for whether you have what it takes to be a founder

VCs are in the business of:           

• Meeting founders
• Giving money to promising ventures

In other words, their incentives are highly aligned with yours as an entrepreneur. Meeting VCs is one of the easiest things you’ll need to do as an entrepreneur. If you can’t do that, you’re in trouble

As an entrepreneur, you’ll also give a 30-60 min pitch. Again, it’s a test of whether you can pitch and convince people (critical skill as a founder)

Reference checks are king

• Front door checks – ask the candidate for names of people you should talk to
• Back door checks – ask around for people who know the candidate
• Any check that isn’t 100% enthusiastic is a bad thing

Tom Watson Sr. was way tougher on people than Steve Jobs…

Some book recommendations   

• Bill & Dave – about Hewlett Packard
• Edison
• Ford – I Invented the Modern Age
• DaVinci’s robots
• Lunar Men

We’re not in a bubble – we’ve just reached a point where technology just works, there’s the infrastructure to support today’s startups (smartphones in everyone’s pocket today are a proven model, while the web in the 90s was not)

3 spaces Andreessen’s most excited about:

1. AI/machine learning/deep learning
2. Intersection of biology, healthcare, and computer science
3. Transportation – self driving cars, etc.

Most of the killer PC and smartphone apps have been made – what’s the next platform to build on?

Great founders often feel like they’re too late to market (because their innovation seems so obvious to them), but they’re almost always early

Google was the 35th search engine. Founders usually fail by being too early, not too late to market.

MA would study CS again in a heartbeat, and probably work in cryptocurrency or one of the 3 domains above

Reid Hoffman, Greylock

Founders should have a “theory of humanity” – where is humanity going, and why does your company fit into your thesis?

3 main topics covered

(1) Paths to startup success (things startup founders should be doing)

Build the strongest network you can around you, and ask your network good questions:

• How would you improve this idea?
• If my venture were to fail, what would be the causes?

Make a habit of deconstructing/reverse engineering success (for example, why did Pokémon Go catch on the way it did?)

Success in the enterprise requires a clear mastery of “enterprise techniques” – for example, mastering the sales process

Know your path to $100M – build the financial model and know what the levers are

Fail fast, and get to proving your core hypotheses quickly (for example, Reid knew that hitting 1M users would be critical to enabling LinkedIn’s success, so he worked towards that top goal)

Great founders don’t give up too early – it’s a big early cause of unnecessary failure (Sam Altman)

Great founders have flexible persistence – they’re open to considering new ideas, listen well, but still have conviction around their core mission and believe a (perhaps unpopular) theory that underpins their venture’s success

Test your hypotheses early and often

Other notes

• Plan B (pivot) is usually a variant of Plan A
• What’s your theory of humanity/distribution/product?

(2) Raising money from Greylock

Warm intros are necessary. They should come from people Reid knows/trusts/respects (e.g., Sam)

Greylock is looking for seriously unique ideas and execution.

Convoy, the “Uber for Trucking,” recently raised from Greylock. What was special about them:  

• The founders knew about the path forward
• They had thought deeply about market dynamics, business model, competition, risks, mitigation

Have a deck that opens with hypotheses that will back an investment thesis

(3) Scaling a company

“First mover” really just means “first to scale” – that’s how you get a real advantage (from a capital, etc. standpoint)

Oftentimes, you have to make a decision to scale (because of competitive pressures) before you’ve completely resolved product/market fit

You must operate at low capital efficiency to scale fast

• Offensive scaling = Uber
• Defensive scaling = Lyft

Good companies are “built to scale”; from early on, they’ve figured out (or thought about) the fundamentals of their:

• Customer acquisition model
• Revenue model
• Service model
• Etc.

Fundraising (the dynamic between an entrepreneur and an investor) is a partnership question

• You should share risk and analysis
• There’s an understanding that the founder has good, but not perfect, confidence

Finding good people and maintaining culture are two big challenges of scaling

Culture

• If you’re serious about your culture, you’ll codify it
• Reed Hastings put it in a deck
• We’re a sports team, not a family
• If you wouldn’t fight for them, then drop them from the team

Reference checks

• Do a “light check” by emailing people and asking how they would rate the candidate from 1-10
• Do “deep reference checks” by spending 10-40 hours with them; really get to know how they work, your chemistry, etc.

YC panel

If you want to start a company, do it now and become a domain expert in the process. You should aim to be an expert in the space within the span of a year

Start a company by looking into your life and solving your own problems

Ask yourself what you want your life’s work to be. What do you want to be the first line in your Wikipedia page?

YC looks for people who will never give up

Tools for startups

• Clerky for legal
• Gusto for payroll
• Ironclad for NDAs and sales contracts

Don’t over-engineer the legal stuff

Don’t be secretive about your ideas

Don’t believe in false dichotomies and easy, black-and-white answers

• Should you grow fast or perfect the product? Both!
• Lots of times, founders are looking for permission to slack off on one thing. You’re not getting that permission. 

Nailing the YC application

• Can be boiled down to one test: Is what you’ve done in the time you’ve been working on this impressive?
• Have a unique insight on your customers and customer acquisition
• Be succinct
• Be action-oriented – just do stuff. Don’t think getting into YC is a permission slip to work on what you want
• Always prioritize action over concepts
• Don’t bury the lead – put the impressive stuff (traction) first
• You should just apply – companies that have gotten in range from $40M ARR to people who first started building their product 2 weeks before application
• 50% of companies in last batch were rejected 2+ times

Best advice Seibel ever got was: “You’re stupid, what you’ve built is useless and will fade in 3 years, and nothing you do will ever matter” – was a good wakeup call to stop resting on laurels.

Forget about the cargo cult of startups – focus on building a company, forget about the optics, the networking, etc. Write your own story for how to succeed.

Ignore hype.