Category Archives: Business

Y Combinator Startup School Notes

These are my notes from the last startup school that Y Combinator put on. I also have some notes from past startups schools they did when they were one day events. (1, 2, 3, 4) Lots of great inspirational and actionable content there and below.

How and Why to Start A Startup

Dustin Moskovitz:

It is important to know why you want to start a startup.

In order to (get through six rounds of funding/become a unicorn) you need a truly great idea that is defensible.

You need to have a better strategy than your competitors.

You need to be really, really lucky because there are a lot of things that can get in your way and a lot of them are out of your control.

It is getting harder over time (to get through the rounds of funding).

It is getting harder to disrupt incumbents. They are not the slow-moving giants they were ten years ago and are getting better at taking advantage of their position.

You can still join teams as Google or Facebook today and do something that reaches a billion people.

The media tends to talk about success cases and ignore failures.

You are a role model. If you take your foot off of the gas then so will your team.

The best reason for starting a company is that “you can’t not do it”.

You can be entrepreneurial within an existing company.

Work with someone you have known a long time. Discuss as many details as you can so that you are on the same page. Those discussions get more difficult over time.

Sam Altman:

You don’t want to write off wild ideas about the future.

In most of the world (outside of Silicon Valley) people will mock you (for having those wild ideas).

Silicon Valley has a culture of paying it forward.

You have to get the idea right.

Idea first; startup second.

A bad cofounder is way worse than no co-founder.

Startups are really hard. Determined people are what make it work.

You want to start with a small number of users that really love you.

If you don’t get a great product (your startup) isn’t going to work.

You need to find a small number of users to help you build a great product.

You need to find exactly what people like about (your product).

Ask people if they would recommend (your product) to someone else. If not, why not?

Ask people if they have paid you (for your product). If not, why not?

If it is a paid product charge (your first users).

Your growth strategy needs to be ongoing.

You want to get to know your users really, really well.

Make it one of your top goals to build the fastest iterating company that the world has ever seen.

Almost no-one makes a very long-term commitment to a project. If you (do it) you will do very well.

Stay small. Once things are working you can get very big.

Resist the urge to hire mediocre people. The team you build is the company you build.

Have a clear mission. You need to be an evangelist for this mission.

Startup Mechanics

Kristy Nathoo

The entity is independent of the founders.

Investors can only really invest in C-corps.

Startups should incorporate in the U.S. because the vast amount of capital available to startups is in the U.S.

You don’t have to be physically in the U.S. while incorporating.

The state most startups incorporate in is Delaware.

One option (to incorporate) is to just use a lawyer. This is a great option if you want to do something not standard or if you want a high-touch experience. This option usually costs $3,000 to $5,000 plus filing fees.

Assigning equity is a really, really important process. It creates discussion between the founders. It ferrets out issues early that could potentially become big problems down the road.

It is important to get (equity) right and that all founders think it is fair.

(When assigning equity) think forwards not backwards.

They way you buy your shares as founders is through the “Stock Purchase Agreement”. You usually buy your shares for a few dollars that you deposit into the company bank account.

Vesting protects (from bad situations).

If you don’t file your 83(b) election then you can end up with huge tax liabilities.

Pre-money is the valuation before the investor puts any money in.

Post-money is the valuation after the investor puts their money in. The amount of the valuation before the investor put the money in plus the amount that was invested.

If you are doing a priced round then you need to hire a lawyer to help you do that.

SAFE = Simple Agreement for Future Equity

You usually wouldn’t have a cap and a discount.

You need to keep working with your investors until the money is in the bank.

When you are hiring people you do need to pay them.

Early employees are usually being paid above minimum wage and below market rate. Giving them shares is what compensates them for the reduced cash they are being paid.

Know your key metrics in the company.

Preferred shares have rights that common shares do not such as liquidation rights (they get their money back prior to the common shares see money).

How to Get Ideas and How to Measure

Stewart Butterfield

People are very ego-laden in (feature) discussions.

Focus on new user experience.

Every one of your complaints is an opportunity for improvement.

Don’t explain by malice what can be explained by ignorance.

Have awareness of your own limitations.

Adam D’Angelo

You don’t need to make a product that will appeal to everyone immediately. You need to make a product that appeals to some people more than anything else.

Do something that is easy for you but difficult for existing companies.

Measurement can turn a vague idea into a good idea.

You don’t want to build a fad. You want to build something that is going to last.

You need to measure your existing users.

Make sure you are measure percent growth per week.

You want to focus on stuff that will cause the product to grow in the short-term as well as the long-term.

One of the most important advantages of a startup is that you can iterate faster than a big company.

With metrics you get more in touch with reality. That can be painful.

How to Build a Product I

Every company is really different and there are a lot of different paths you can take. (Steve Huffman)

Angry users will often become your most loyal supporters if you can turn them around. Find those users and treat them well. (Steve Huffman)

Tiny issues can really matter to your users. (Emmet)

You won’t know what the one-day fixes are unless you talk to your users (Steve)

Pick your top five to seven user interactions and log those. You don’t need to log everything. (Emmet)

Your users don’t care about your tech. (Steve)

Fix everything one at a time. (Emmet)

Talk to your users first and then have an idea about the product. You do not talk to your users to validate your ideas. You talk to your users to generate your ideas. (Emmet)

The goal of talking to users is not to learn what features to build. It is to really get to know your users. (Emmet)

The best product ideas are the ones your users are doing anyway and you just grease it a little bit. (Steve)

It is really obvious when you have product/market fit. (Emmet)

How to Build a Product II

Aaron Levie

Enterprises want a lot of predictability. They don’t want their technology to change at the same rate that it does for (consumers).

Their strategy is to build a company for the enterprise that operates like a consumer company.

It does not matter the industry. Companies of all sizes have realized the opportunities of moving to the cloud.

Every single company is going to have to upgrade the technology they use and the business models they have.

Every single company is being disrupted in every way they are looking at the market.

Start with something insanely simple and focus on expanding it over time.

Focus on one thing you are going to do better than anybody else.

Make sure you are benefiting from a major technology tailwind.

Don’t create unnecessary headwinds for yourself.

Your product should literally sell itself (viral adoption).

Sales should be use to close big deals not drive product adoption.

Listen to your customers but don’t build just what they ask for. You’ll be pulled in a lot of different directions by a lot of different customers.

AI and cheap computing together are the powerful force right now.

Anything that is not a core competency you need to make sure you are using the best-in-class outside solution for.

The moment the market catches up and commoditizes something you are good at you need to get away from that part of the market as fast as possible.

How to Build a Product III – Jason Lemkin, Solomon Hykes, Tracy Young & Harry Zhang

Have an understanding of why a company is going to talk to you. What is the problem you are solving for them. (Harry)

It is easy to get our friends to try out our software. It is incredibly difficult to get our friends to pay for our software. (Tracy)

Consulting can be helpful but get out of it as fast as you can because it is too distracting. (Solomon)

As founders so much of our jobs is learning on the spot. (Tracy)

You need to hire good managers. (Harry)

You want people who have already done it once before. You cannot discount experience. (Harry)

Something that is true of all startups is that you have focus and you have speed. (Solomon)

How to Build a Product IV – Jan Koum

Messaging is the killer app for the smartphone. There is nothing else you do more with a smartphone than communicate.

The world in Silicon Valley is very different than the world outside.

Our destiny is in our hands. We can’t worry too much about our competition. We need to spend our time thinking about our product and our users.

When you offer people something that is cheaper and easier they will use it.

If you are going to raise and you need money you are probably not going to get the terms you want.

You don’t want to raise money when it is too late.

Early on focus on localization.

How to Get Users and Grow – Alex Schultz

The single most important thing in growth is retention.

Use monthly active (as your metric). It is important that you have skin in the game and people keep coming back to your product every month.

What you’re looking for in a retention curve is one that flatlines (above zero).

If the whole team isn’t clear about what the goal is then they will be in conflict.

Having a clear goal that your company looks to drive is really, really important.

Understand what is going on. Look at all of the data you have. Talk to your users.

Data, when used in the right way, gives you empathy with your users.

If you build the right metrics you are optimizing for the users.

Use A/B tests.

Data helps you make decisions faster.

Ask your friends first for your first 100 customers.

(Ad) targeting matters.

A good plan violently executed on this week is better than a great plan next week.

How to Invent the Future I – Alan Kay

If you want to make money don’t bother with a startup–create an industry. You’ll get trillions instead of billions.

There is a factor of a thousand between doing invention over innovation. In other words, not going incrementally from the present.

Learn the rules like a pro so you can break them like an artist.

The best way to predict the future is to invent it.

Startups have vastly more resources for doing new things that any venture capitalist.

The company quarterly cycles are really antithetical to long range thinking,

Pick an idea that is worth dedicating your life to.

Fund people–not projects. If you are going to do that you must have the very best people.

How to Invent the Future II – Alan Kay

Being clever doesn’t do it.

Every once in awhile you might have an outlaw thought.

Our beliefs project out.

Traditional cultures think they are in reality so they react strongly to other people’s versions of reality.

The natural state of humanity is to be crazy.

How to Find Product Market Fit – Peter Reinhardt

The biggest problem that startups have today is building something that no one wants.

You need to solve a specific problem that customers have today, here, now.

The market always wins.

80% of startup founders fail to find product/market fit.

Finding product/market fit is an emotional grind.

It is important pre product/market fit to spend as little as possible, save as much as possible, and extend your runway as much as possible.

Until you find product/market fit you should only be spending your time talking with customers and iterating.

Be interested in category leaders. They are often a thousand-times the size of their competitors.

(Becoming a category leader) comes down to building a platform. It allows other businesses to build their business on top of your business.

You’re not a platform until you have $100MM in revenue.

You’re no more likely to (find product/market fit) the second time around if you fail the first time around.

If you at all are questioning if you have product/market fit or not–you don’t.

It is really clear if you have something that is transformative for your customers or not.

The problem isn’t having good ideas the problem is killing the bad ideas quickly enough.

The size of the business problem has almost nothing to do with the amount of code written.

You don’t know how much value you are delivering until you start asking for money.

If you are solving a real business problem people are going to be happy paying for it.

(Talking with customers) is more about listening and digging than about pitching.

How to Think About PR – Sharon Pope

Without product innovation, PR is not an option.

How you get great PR results is by creating an amazing product.

(Early stage founders) should not hire a PR person. Reporters like hearing from founders.

You’re a better spokesperson and founder if you follow the news.

Story always trumps relationships.

Lead with the what (you do). Not the why.

Make it conversational.

If everything is a priority, nothing is a priority.

It is nice to get a warm introduction to a reporter.

Provide your own visuals.

If you have an important story to tell you really want (to make it) an exclusive story. You want a reporter who is willing to spend a lot of time with you and working on the story. (Steven Levy)

The big part of news is that it is new and nobody has talked about it yet. That is big for reporters.

Diversity & Inclusion at Early Stage Startups

The best founders sign up to solve big problems. (Kat Manalac)

You create an ecosystem (when founding a company) with its own culture and structure that is modeled on your personality and belief as founders. (Kat Manalac)

“Diversity and inclusion” mean different things to different companies and people. (Kat Manalac)

Diversity is not a codeword for gender and race. It can mean different backgrounds, education… (Kat Manalac)

If you want to build a diverse team you have to think about it deliberately. (Kat Manalac)

Inclusion is about building a culture where everyone can feel safe and people don’t have to fear having tough and awkward conversations. (Kat Manalac)

The more diversity you have the more pathways you have to solving a problem. (Kat Manalac)

When the cause isn’t your own it can feel really uncomfortable to speak out on its behalf. (Jennifer Kim)

If you see something, say something. The standard you walk past is a standard you accept. (Jennifer Kim)

Women may not be minorities but they are minorities in tech. (Jennifer Kim)

There is no one-size-fits-all solution. (Cat Perez)

How to Raise Money, and How to Succeed Long-Term – Jess Lee, Aaron Harris, & Ali Rowghani

How to Raise Money

It is almost irrational to start a company because the odds are so against you. You need to have a lot of grit. (Jess Lee)

A lot of times people spend time pitching a solution when they don’t understand the problem. The problem should be so crystal clear that the solution flows from it. (Jess Lee)

On average it takes eight years for a great company to exit. (Jess Lee)

You can’t kick someone off the cap table. (Aaron Harris)

You hurt your company’s chances by raising too much money too fast. You’re setting up hurdles. (Aaron Harris)

Try not to take office space at your investor. It inhibits culture. (Aaron Harris)

How to Succeed Long-Term

There is no way around learning to be a great leader if you want to succeed.

Simplicity of communication is vital.

You can get better at communication.

Clarity of thought always precedes clarity of language.

Great leaders have exceptional personal integrity.

Integrity means standing for something bigger than yourself.

Always try to optimize for trust.

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Developing an idea for a business

Often wanna-be entrepreneurs place too much emphasis on the idea and not enough on the hard work that follows. However the idea is not to be discounted. It is the zygote that grows into your business.

I specifically used the word “developing” in the title of this post rather than “finding”, “thinking of”, or “creating”. Rarely does inspiration for a business arrive with a flash of lightning. Rather you notice something and think that you can fix it or do better. You further refine and develop that idea as you think about the market and marketing, about creating and accounting, and about failure and success.

Often an idea is pivoted on many times before an entrepreneur deems it ready to start a business. It continues to evolve based on the obstacles presented up to, and after, getting their product or service in front of customers.

Before looking for business ideas it is important to remember that a great business is one that provides a solution to a problem.

Here are a few places to search for inspiration:

Your place of work

 

Every single company has inefficiencies

Every. Single. Company. Has. Inefficiencies.

Every problem is an opportunity so when you or a co-worker complain about a process that is broken what you really have is something that needs a solution. You can be the one to provide that solution.

Paper forms are a classic place where there is an inefficiency that either need not exist or can be lessened through technology. Pretty much any tool of bureaucracy (including more modern ones such as email and CRM systems) is as much of a problem as it is a solution. Fertile ground for a dedicated individual or group of individuals to disrupt.

Every problem is an opportunityThere are many advantages to creating solutions for problems in your workplace with the two main ones being your industry expertise (often referred to as your unfair advantage) and the fact that businesses are willing to pay for solutions (whereas consumers are often not). Even seemingly small things such as industry-specific Excel templates or Powerpoint consulting can yield big bucks.

Other industries

Many times, particularly when it comes to technology, advances in other industries will eventually reach yours. Examples that come to mind are CRM systems for contractors and ordering from restaurants on the web or phone apps.

Ask your friends about new things that happening in their industries and see if you have ideas about how to apply it to yours.

Other countries

Due to technology, language, and culture many businesses start in one country and take time to cross borders. After eBay started up entrepreneurs around the world created auction sites for their own country and in their own language. eBay ended up competing with or buying many of them but some are still around today. A more recent example is local car-sharing companies starting up in cities around the world before Uber entered them.

This phenomenon isn’t restricted to technology. There is a Japanese-style cat cafe coming to a city near you.

Your hobbies

Passion is the most important trait for an entrepreneur.

This method of finding business ideas is better than any other for one reason. If you do something as a hobby the chances are that you are passionate about it and passion is the most important trait for an entrepreneur.

The catch to monetizing a hobby is finding a way to present it as a solution that somebody would pay for. It is much easier said than done as many craft-lovers have found out. (Luckily sites like Etsy have made it easier for people to find buyers for their goods.) The challenges of turning a hobby into a business have soured many would-be entrepreneurs on both their business and their hobby.

If you go this routes then taking baby steps while you still work full-time is often a prudent approach.

The news

Keeping abreast of macro changes to industries and the economy can yield a wealth of business ideas. When something fundamental changes it opens up opportunities that didn’t previously exist. You’re reading this on the biggest fundamental change of our lifetimes: the Internet.

Legislation can create opportunities as new laws, or the repeal of old laws, open or level markets. Subprime loans created many opportunities to make a lot of money in the run up to the housing crisis and the fallout opened up other opportunities.

Keep an objective and open mind when you read a news article and ask yourself these two questions:

  • What are ways that somebody can make money off of this?
  • Is this something I would want to spend the next ten years of my life doing?

Your idea is not unique

You are not the first person to have you idea. No matter what somebody else, somewhere, has had the same idea. Maybe the acted on it and maybe they didn’t. If you think your idea is truly unique then that is a cause for concern because if nobody else has done it then maybe there is no market for it.

Part of developing your idea is creating a business plan (even a basic one) which forces you to think objectively about the prospects and challenges for your business. You’re going to be way too optimistic the first time around so have somebody you respect read it and let them poke holes in it. The process will hurt but not as much as failing farther down the line when a lot more is at stake.

Eventually you will have developed your business idea enough that you cannot do anything else but move forward. Starting a business is both very exciting and very scary. Remember that you cannot fail unless you quit trying.

National Entrepreneurship Month

National Entrepreneurship MonthNational Entrepreneurship Month just ended but I believe that every day is a great day to start, build, and grow a business. With that in mind PersonalOpz is extending entrepreneurship month through December! (Gotta make money to pay for all of that holiday shopping right?)

Look for a lot of content posted every day. I have a backlog of entrepreneurial advice gathered from my favorites lectures and podcasts that I will be rolling out throughout the month. There will also be a few books being launched that you can receive for free by signing up for the mailing list (look right).

Learn by DoingStart off the month by downloading the ebook Learn by Doing for free. It is a collection of advice from truly amazing entrepreneurs such as Ben Horowitz (Andreessen Horowitz), John Collison (Stripe), and Joshua Reeves (ZenPayroll).

To make sure that you remain productive this month I challenge you to write down one big goal you would like to accomplish during the month. Write it down on paper and tape it above your desk. After doing that break down the steps you need to do to achieve it. First the large steps (weekly) and finally the smaller steps (daily). Now you have a plan to make sure that you finish the month off with solid progress and build some great momentum into the new year.

Have a productive and rewarding month!

First Review Of My Software

A couple of days ago I was looking through the analytics for one of my web apps (I’m currently testing out Heap Analytics and am pleased so far) and saw some traffic was coming from a particular website. I clicked through to it and found a roundup of products in my space (film production software) with a two or three paragraph review of each. And my product was included!

The only problem was that the article was in Spanish. Even after two years of Spanish in high school and two and a half years of Spanish in college (not to mention living in Los Angeles for 15 years) I cannot read or speak it. I can speak just enough to get by in a foreign country with active use of hand gestures. (Thankfully most people are too polite to roll their eyes as I’m throwing around more gestures than a third-base coach.)

I used Google Translate on it and learned that my site has an attractive design! It also praised the number of options and said that the majority of it was simple to use. So far so good.

Unfortunately the review went downhill from there. It said, “almost nothing works as it should.” It followed that with an example but the translation lost the context. More tutorials was also mentioned as something needed. In the end I did not get a recommendation. The blow was softened as the reviewer said, “give it time to grow.”

I’m definitely going to need to solicit more feedback and get some more example workflows (it seems like everybody producing movies has their own workflow). And I’m going to keep improving on what I have until my software is something that people want to recommend to their friends and peers.

Even though it wasn’t favorable I’m honored to have been included in that review and am going to take it as an opportunity to do better. If my software isn’t helping my users then I need to know about it. I’ve still got a lot of work ahead of me.

(As an aside I’m not sure why Google Alerts didn’t pick this up. Maybe due to it being in another language?)

Please Stop Complaining About How Busy You Are

I imagine this Harvard Business Review article, “Please Stop Complaining About How Busy You Are“, hits home for many of us.

We’re all just so “busy” these days. “Slammed” in fact. “Buried.” Desperately “trying to keep our heads above water.” While these common responses to “How are you?” seem like they’re lifted from the Worst Case Scenario Handbook, there seems to be a constant exchange, even a a one-upping, of just how much we have on our plates when we communicate about our work.

I’ve found that the best way for me to not feel busy, and to instead feel productive, is to tame my inbox.

Want to become a billionaire?

I thought this list from the Harvard Business Review of company mission categories was inspirational:

  1. Making the world more beautiful.
  2. Making the world more fun.
  3. Making the world more efficient and smart.

They go on to highlight some billionaires whose companies fit those categories. They all fit my personal mantra (which I think I stole from Justin Rosenstein of Asana but I’m sure he doesn’t mind) which is “have a positive impact on the world.”

Amazon product searches

I think this site is too cool not to share. MerchantWords shows you what Amazon users are searching for and how many are searching for a particular term. If you produce/sell a physical product, or are thinking about doing so, then it should be your next stop on the web.

Resources for Startup Engineering Students

There are a bunch of great resources on the Internet for people interested in startups. A lot of people have made the journey before and shared their success stories, mistakes, and wisdom. Many of them share freely and I’ve collected some of those below.

 

Podcasts: 

Startups for the Rest of Us is a podcast hosted by two solo software developers who offer advice on the challenges of running a startup by yourself.

Entrepreneurial Thought Leaders is the most inspirational thing I’ve ever listened to. Great speakers week after week. I’m sharing my notes as I relisten to each one.

Ebooks:

You can get a free PDF copy of Getting Real which was written by the founders of 37 Signals which is the company behind Basecamp.

Copy Hackers is a site that focuses on the copy that you use on your home page and how that impacts the conversion rate of your visitors into customers. It is a surprisingly large topic.

The Lost Copy Hackers Ebook: Proven Persuasion Strategies is a free book they offer.

Some worksheets you should go through before launching your landing page: Copy Hackers Worksheets.

Nathan Barry has a guide about designing effective forms. What is an effective form? One that gets people to fill it out. You can download the guide for free by…filling out the form at the bottom of this page.

And if you’re looking for some tips on being productive Nathan Barry has a free ebook titled The Productivity Manifesto.

Seth Godin has numerous books available for free that are geared towards entrepreneurship.

Rob Walling (of the Startups for the Rest of Us podcast) has a free ebook on startup marketing that you can get by signing up for his newsletter on his site.

Paul Graham (of Y Combinator and Hacker News) has a collection of essays available that have been widely argued about discussed.

An oldie but a goodie is The Incredible Secret Money Machine by Don Lancaster.

Steve Blank (one of the original forces behind the Lean Startup movement) has a free book available called The Four Steps to the Epiphany.

Once you’ve got your sales page ready you can start to optimize it so that it shows up higher in the Google search results. Google themselves released a guide to help you with that.

Websites:

If you’re doing a Software-as-a-Service (SaaS) startup then this is a great blog to read for insights on landing pages, pricing, etc.

Hacker News is a website which features stories, and at times great discussions, on startups, entrepreneurship, technology, etc.