Lecture 1 – How to Start a Startup [video] | Hacker News Reader

Lecture 1 – How to Start a Startup [video]

startupclass.samaltman.com

520 pointsdeclan185 comments

I've been watching it for 8 minutes as of now and despite the fact that the content looks good it really bores me to death that he is reading the whole thing like a robot. It does not sound like a natural converstation or presentation. Does anyone else share this feeling?

Not at all.

I was there in person, and I felt the same way. Very surprising.

I disagree.

The content is great and communicated well.

Some people prefer making presentations having only some general idea of what they are going to say before hand. Other people spend a good deal of time thinking about exactly what they want to say and how they want to say it. Both presentation styles are perfectly valid.

Agreed that both presentation styles work. That said, regardless of the "strategy", the delivery needs to be clean to be seen as authoritative (unless a tremendous amount of respect as been pre-built). Imagine your CEO delivering an all-hands with 47 ums and reading from a script -- how much confidence would that instill?

> Both presentation styles are perfectly valid.

Where did the parent claim that this was an 'invalid' presentation style?

Totally agree. The content is great, but the delivery is uncomfortable (both speakers). I stopped watching and just listened. Ultimately, the content is the most important thing and I appreciate the opportunity to access awesome content. If anything, I think the first lecture helped humanize the whole "start-up scene". From the outside, it seems like everyone has figured it all out, but clearly we all have areas to improve.

Lastly, given that this will be so broadly distributed, I totally get the need to be on message so it may make sense to read in this scenario.

Agreed completely, it definitely felt rushed and not particularly well prepared - thus reading off of the paper.

That said, the content is strong and for the desired audience it is all probably novel, besides the fact that this was day 1 of a new course.

When I thought about it more though, it seems like the idea of the class is more of a lecture series style than traditional instruction anyway.

100% agree.

it really bores me to death that he is reading the whole thing like a robot

Give the guy a break. It's Lecture 1, I'd imagine he was nervous.

I have the feeling when watching, but by just listening I'm actually fine with it.

I think the visual indication plays a huge part in the perception.

People are getting way too hung up on the fact the he read from a text. But so what? The content was interesting and compelling. I'd rather listen to somebody using a prepared text and conveying the information quickly (like Altman does here) than painfully reading slides.

I thought he did a good job. Usually I hate watching a video presentation if there's copy of the text to read. It's way more efficient to read the content than to watch most videos and then set the speed to 4x.

I really enjoyed sama's delivery. It was easy to digest; not too fast, not too slow; important ideas/concepts were repeated but not overly so; the choice and sequence of topics covered was very good. Length was just about right too.

I hate it when speakers "over engage" and keep throwing in jokes, personal anecdotes, rhetorical questions, funny slides etc. in a perceived need to keep people's attention. If a presentation's worth listening to, the content (delivered in a friendly and relaxed way) should be all that's needed to keep an audience engaged. If some people haven't got the attention span for that, it's usually their problem not the speaker's.

I think it was a bit choppy, but not distracting by any means. I think having the text is great because it makes the delivery more efficient. All too often presenters, including myself, tend to circle back on a point, even repeating statements as they "find their way" or determine their next point. It can be confusing as a listener and therefore having a script helps to reduce this. The value of this (free!) course and the speakers FAR outweigh any issues with delivery/presentation style etc.

FWIW, this was the same content he gave us at Hack The North when he was visiting less than 24 hours ago. It makes sense to copy it down and repeat it rather than try to memorize all of it.

I'm not sure this is about memorization. Teachers give the same content over and over again and do not memorize (in the sense of repeating it until it's memorized). Great presenters do not memorize their speeches. They practice it until it's natural.

I agree that content is king, but the one reason why we attend to classes, events and speeches is to see a great delivery of the content being presented. If not, better handle the written version by email and be done with it.

I'm pretty sure Steve Jobs wouldn't be remembered by his presentation skills if he read the whole thing. That's also not the reason why I remember my physics teacher from 10 years ago.

True, they I'd have to agree it was something else then that made him choose to read from notes. We still shouldn't judge after just one lecture though.

Let's see how today's goes..

Dustin talks about Financial Reward and Impact of "why to do a startup" for examples like Facebook and Dropbox here: https://www.youtube.com/watch?v=CBYhVcO4WgI#t=2161

Are these values correct? If you join Dropbox as employee #100 with 10bp, you're 10bp is going to get massively diluted through subsequent rounds, no? Isn't it more like $1-2mil? And also this is wealth on paper, which means that you don't all of the sudden have $10mil sitting in the bank. I don't think he explains that but that's how it's portrayed, and is probably worth explaining, given the audience.

The dilution you'll get from Series B onward is maybe 30% total. That's not "massive" IMO. (Obviously much higher dilution in a down round, if you're a founder who gets kicked out and crammed down, or if the company has a marginal exit, you're not part of the retention, and they choose to put all the acquisition into retention...)

Being a senior-ish employee at a Pre-IPO (i.e. Series C/D company, on a great trajectory, and an obvious winner) is probably the optimal outcome for total compensation; for cash, consulting, if you can find the right niche.

(Startup founder MAY actually be superior to Seed/Series A startup employee, though, especially due to both tax issues and what happens when the company does anything less than stellar. OTOH, you can jump ship as a Series A employee, even manager, with no real negatives; if you're a founder, you're pretty much committed until the end, or at least until some serious inflection point, especially in a suboptimal outcome.)

Based on the holdings disclosed at the time of Facebook's IPO, and even accounting for the rise in the company's stock, I doubt very much that employee #100 at Facebook is sitting on $200 million in gains from his or her options or RSUs. In the case of Dropbox, looking at what the Box founders own according to Box's S-1[1] probably provides a more realistic comp.

One thing worth noting is that Dustin's slide apparently fails to take into account the cost of exercising options. You can absolutely make a lot of money at a startup, and you don't even need to be one of the earliest employees to do so, but today's valuation trend works against employees. Startups are raising money at significant valuations earlier and earlier, so even early employees aren't receiving cheap equity.

As an example of this, consider that Facebook had sold shares at a $15 billion valuation just three years after the company was founded. Google went public at a valuation under $27 billion (edit: corrected). If you had your choice, you'd almost certainly have received a better equity package as an early rank-and-file employee of Google versus Facebook.

[1] http://fortune.com/2014/03/25/aaron-levie-owns-more-of-box-t...

When Google went public the valuation was ~$23 Billion (they raised just under $2 billion in the IPO) [1]. However to your point this was around 6 years after founding, whereas Facebook was valued at ~15 billion by Microsoft in 2007, 3 years after it was founded.

I had a friend who turned down a job at Facebook in late 2008 because he felt the 15 billion valuation was very high and it limited his upside. And before about July '13 when FB's stock started a huge rise, this was pretty correct thinking.

There is also still a problem with all of this revisionist valuation stuff for a company like Facebook. It only would be worth some obscene amount if:

a) you got a generous stock option package when you joined

b) you stayed with the company until the IPO (so you could actually both have a chance to sell your stock and pay the exercise costs)

c) you didn't sell until right now after the stock has massively appreciated in the past year.

And even still you are going to be paying regular income tax on all of that gain which is going to be around 50% if you live in California.

[1]: http://www.washingtonpost.com/wp-dyn/articles/A14939-2004Aug...

Yes, you are correct.

Your friend didn't necessarily make a bad decision. Facebook traded as low as ~$18/share in 2012 and didn't get back to its IPO closing price until mid-2013.

According to a media report[1], at one point, even employees who joined the company as late as the end of 2010 were underwater. So anybody (you, me, your friend) could have purchased FB shares with a cost basis lower than that of many employees.

Given this, it's somewhat disingenuous for Dustin to use Facebook's current valuation to demonstrate "getting rich at a startup." It's actually a better demonstration of "getting rich trading the stock market." Adding insult to injury is the fact that the investor with long-term capital gains receives more favorable tax treatment on his or her gains than employees usually receive.

Incidentally, employees who don't exercise and sell as soon as they can are effectively investing their hard-earned gains back into their employer's stock. Depending on how well the company's stock does, and when sales are timed, this can either be a really profitable thing or a really unprofitable thing.

[1] http://www.businessinsider.com/facebook-lockup-release-2012-...

> even employees who joined the company as late as the end of 2010 were underwater

That is not correct usage of the term. According to external report, Facebook stopped issuing stock options to employees as of 2007. People joining in 2010 would be receiving RSUs, whose "strike price" is $0. While the monetary value of the shares at IPO was different than the value they imagined, they would not be underwater (having a strike price above market price, thus rendering options meaningless).

http://www.nytimes.com/2012/02/02/technology/for-founders-to...

I was not privy to when Facebook started granting RSUs instead of options. My use of the term "underwater" was based on what was reported.

Still, this is a red herring. The fundamental point of my comment was that in the past couple of years, every single person here had the ability to purchase Facebook shares on terms just as favorable if not more favorable than many Facebook employees without having to spend a single day working for the company.

In fact, in the past several years, you could have on favorable terms purchased shares in any number of tech companies that have delivered fantastic gains to shareholders. Obviously, timing investments (or trades depending on your persuasion) is easier said than done, but it's probably no more difficult than trying to determine whether the startup you're going to work at for the next four years of your life is the next Facebook or the next MySpace.

> every single person here had the ability to purchase Facebook shares on terms just as favorable if not more favorable than many Facebook employees

But RSUs are not purchased, they are gifted. So having an opportunity to purchase 10,000 shares of FB at low-low 2012 prices is still expensive compared to a gift of 10,000 shares vesting over 4 years.

I pulled the 10,000 number out of a hat, but I'm not too far off - here's a question from 2011 http://www.quora.com/Is-110-000-and-15000-RSUs-a-good-starti... numbers were probably more attractive at earlier years.

RSUs are not "gifted." They are a part of one's compensation package, and you have to work for them.

Consider this scenario: a company offers me 10,000 RSUs when its shares are valued at $50/share. When the company goes public the value of the shares soon drops to $20/share. What I thought was worth $500,000 is now worth just $200,000 (pre-tax). That's a huge difference. Had the company's shares been valued at $20 the time I was offered a position, I might have negotiated for more of them.

Now, to be fair, maybe salary plus $200,000 is still the best compensation package (and overall outcome) available to me, but that doesn't mean that it was risk-free or cost-free.

As for the cost of purchasing 10,000 shares of Facebook stock outright, yes this is expensive. But you can easily establish a meaningful leveraged position through the use of options if you have the conviction. Also, keep in mind that this is precisely what employees do when they fail to sell their shares when they first have the chance. A Facebook employee who has $500,000 in newly-vested shares that can be sold, but who doesn't sell, is in effect purchasing $500,000 in Facebook shares in the hopes that they will rise in price. If they fall in price, his or her loss is still very much a loss, even if it looks less painful because the shares were purchased with labor instead of cash.

> I had a friend who turned down a job at Facebook in late 2008 because he felt the 15 billion valuation was very high and it limited his upside.

He was way off and probably did not ask the recruiter proper questions. Common stock issued to employees is a different class from preferred stock issued to Microsoft.

Well really at the end of the day all that matters is whether this statement (from the video) is true:

> Even if you joined Facebook as employee #1000, so you joined it in like 2009, you still made 20 million dollars.

I find it hard to believe that it is true, but obviously both you and the speaker know much more about it than I do. However I've also seem people commonly overstate things like this.

Some basic math:

$200 billion current value / ($15 billion value in 2009 * 50% discount factor from preferred to common) = 26.6x

So already assuming the most optimistic things [1], to get to $20 million dollars today, you'd have needed to get the equivalent of $750k worth of RSUs in 2009. Even vesting over 4 years that seems like an extremely high amount, high by a factor of about 5-10x of what I'd guess.

And don't get me wrong, I have no doubt people who joined Facebook in 2009 earned quite a bit of money assuming they held onto the stock. But 20 million dollars is a big number.

---

[1]: The employee joined in 2009, you still work there, you haven't sold most of your stock (which is impossible because you had to sell some in the IPO to pay your taxes, but whatever)

Right, Dustin assumes a 0.1% grant for employee #100 and a 0.01% grant for employee #1000, but

* typically at that stage those levels of equity are reserved for highly desirable hires that would otherwise be tough to get

* this discounts the effects of dilution that each new investment round (as well as IPO) brings along

I think his point was to provide a ballpark figure to illustrate the main idea - you might have more impact (and receive appropriate compensation) even when joining a late-stage company, so don't dismiss that opportunity without at least considering it.

Taxation rarely plays into such arguments, since by the time the company reaches employee #1000 it's likely to be global, and similar employees with similar compensation packages in California, Washington, Canada or Switzerland are likely to see substantially different after-tax amounts.

> As an example of this, consider that Facebook had sold shares at a $15 billion valuation just three years after the company was founded.

That is not the entire story.

Microsoft invested $240 million in exchange for certain number of shares (constituting 1.6% of total Facebook shares issued) at the time plus a 3-year exclusive right to sell banner ads on Facebook through Microsoft AdCenter.

The $15 billion valuation is only correct if:

1) Microsoft bought common stock with no liquidation preferences or special dividends.

2) An exclusive 3-year right to sell banner ads on Facebook is worth $0.

Companies cannot grant equity to employees at below fair market value without creating adverse tax consequences for those employees. Transactions like the Microsoft investment absolutely factor into the determination of fair market value. Bottom line: just three years after its founding, Facebook had a very significant valuation.

You are correct on the bottom line, I was just pointing out that mainstream media's definition of valuation = number of all stocks * the price per share of the latest transaction, no matter what preferred dividends, liquidation preferences or special side deals are thrown in to close that deal.

The other point to note here is that there is not a way to tell what is the next facebook/dropbox either. So the amount of risk or the time that one might take to figure whether they are going to make a huge sum in options is pretty much the same. By the time the market guesses the big company, my guess is they are already on high valuation with highly diluted equity.

On Sam's part -- am I the only one who got the "heard this before" feeling? Obviously he attributed everything pretty appropriately, but I thought I could've placed 50-75% of his sentences in the "Summary" sections of various PG essays, Peter Thiel writings, and other luminaries of the startup-sphere.

I'm not saying it was wrong or that his delivery was bad. But I remember reading the Class Notes from Thiel's class after Blake made them available and thinking "Wow, there's some original thoughts in here I haven't come across before."

Maybe it's because PG already put it all to paper, and some of these other figures just added post scripts. Maybe it was a solved problem by the time Sam got a seat at the table. Just some food for thought. Looking forward to the other lectures regardless.

I think on Sam Altman's part this is deliberate. He has distilled the core message of Grahamsian thought beautifully into slides. YC has been espousing this specific philosophy for a while, and I think Sam & PG both represent this school of thought.

This is part of the reason I believe PG picked Sam, he thought Sam internalized & helped form the YC approach to startups. The two are like Epicurus & Lucretius; Leucippus & Democritus.

Surely, but for lecture 1 in a "Startup 101" series, you don't need to reinvent the wheel. We're talking about a very, very well documented path at this point, with established best practices.

Disagree completely with the very first opinion expressed - 'Don't do a startup just to do one - do it only if you really want to solve a problem'.

India has produced about 3 big ~billion dollar compaines in the recent past - inmobi, flipkart, druvaa. None of the founders really started to 'solve' a problem they were passionate about. What they were really passionate about was just 'starting up' - and based on their personal strengths, industry knowledge and what they thought could be sold, stumbled on these big businesses. This was probably true for HP too.

It is absolutely ok to do a startup just for the heck of it. Get in the game and find out the intersection of what you can build and what a customer will buy. If you build a big business - the passion will follow. Do not forget to bullshit though on your big interview on how the so solved problem kept you awake at nights - it makes for some good reading and impressionable pr.

That could be more survivor bias. I think what he's saying is that if you're going to start something you better be in love with it because there will be bad times and you're going to need to lean on that passion to keep going. If you happen to get lucky and ride a rocketship then this requirement will be less applicable.

but since he came from a rocketship, I think he's pointing no matter what it's hard on you.

I made some notes while watching/listening. Might include minor errors or misinterpretation on my side

4 critical parts: Idea, Team, Product, Execution

1. Idea

-> Good startups take about 10 years

-> Startup should feel like an important mission

-> Hardest part coming up with great ideas: best look terriblea t the beginning (e.g. search engine, social networks limited to college students without money, a way to stay at stranger's couches)

-> "Today only a small subset of users want to use my product, but I'm going to get all of them"

-> You need to believe and willing to ignore naysayers

-> Most people will think your idea is bad: be happy. they won't compete. it's not dangerous to tell people your idea.

-> it's okay if it doesn't sound big at first. first version should take over a small specific market and expand from there. unpopular but right

-> take the time to think about how the market will evolve. market size in ~10 years. think about growth rate of the market instead of its current size. small, but rapidly growing market! people are desperate for a solution

-> you cannot create a market that does not exist

-> there are many great ideas, pick and find one you really care about.. "SW is eating the world"

-> "Why Now?" - dixit Sequoia - have a great answer to this question

-> Build something that you yourself need. You'll understand it a lot better.

-> Get close to your customers. Work in their office or talk to them multiple times a day

-> If it takes more than a sentence to you know what you're doing, it likely is too complicated

-> "Do more when you're a student." Think about new ideas and meet potential co-founders

-> Think about the market first and you'll have a big leg up

2. Product

-> Great Idea > Great Product > Great Company

-> Until you build a great product, almost nothing else matters

-> Sit in front of the computer working on product, or talk to your customers

-> Biz Dev, Raising Money, Raising Press, Hiring are significantly easier when you have a great product

-> Step 1: build something that users love

-> YC is all about: Exercise, Eat, Sleep, Work on Product and Talk to Customers

-> "It's better to build something that a small number of users love, than a large number of users like"

-> Get growth by word of mouth. This works for consumer as well as enterprise products. You'll see organic growth. If you don't have some early organic growth, then your product isn't good enough. It's the secret sauce to growth hacking.

-> Breakout companies always have a product that's so good that grows on word of mouth

-> Great products win. Make something users love.

-> Keep it simple. Look at first versions of Google, Facebook, iPhone

-> Founders care about small details. They're fanatical

-> One thing that correlates with success is hooking up PagerDuty to their ticketing system. Response time within an hour.

-> Go recruit your first users by hand to get feedback every day.

-> When everyone tought Pinterest was a joke, Ben Silbermann walked around coffee shops in Palo Alto to convince people to use Pinterest. He set Pinterest to the home page in the Palo Alto public library so people would discover the website. Do things that don't scale. Read Paul Graham's essay.

-> Create a tight feedback loop. What do users like? What do they pay for? What would make them recommend it?

-> Try to keep your feedback loop going for all of your companies' life

-> Do sales and customer support yourself in the early days. This is critical. Do not hire these people right away.

-> Keep track of metrics. Look at active users, activity levels, cohort retention, revenue, etc. Be brutally honest if they don't go in the right direction

-> If you don't get your product right, nothing else in this class will matter.

Why start a startup?

-> "It's glamorous", "You'll be the boss", "Flexibility", ...

-> Entrepreneurship gets romanticized

-> The reality is not so glamorous. It is a lot of hard work. You're sitting at your desk, focused, figuring out hard engineering projects. It is quite stressful.

-> Founder depression is a real thing. If you start a company, it's gonna be extremely hard

-> You have loads of responsilibity

-> You're responsible for the opportunity cost of the people who decide to follow and help you out

-> You're more committed. A founder cannot leave a company. For 10 years if it's going well. Probably for 5 years if it's not going well.

-> "Number one role of a CEO is managing your own psychology"

-> You're always on call, you're a role model. You'll always be working anyway

-> If you joined Dropbox or Facebook early on, your financial reward might be a lot better than when starting a startup

-> If you join a later stage startup, you have more impact - massive userbase, existing infrastructure, work with an established team. E.g. Brett Taylor was employee #1500 at Google and he invented Google Maps. He got a big financial reward for this.

-> What's the best reason? You can't NOT do it. You have to make it happen

-> Do it out of passion

-> The world needs it (if not, go do something else) and/or the world needs you (you're well-suited to do it). The world needs you somewhere, find where.

Thanks for the great summary, saved me time and was a great snapshot of the take aways.

There's a book contract here somewhere.

One to Two?

FYI Bret Taylor, with one T in Bret

Thank you for analyzing this video to give us great notes to look back over.

Small thing - the Pinterest story involved the Palo Alto Apple Store, not the public library, if I recall correctly.

Good notes. A few typos.

Yup, I think you're right. Thanks.

The surprising thing was that Sam's advice about working on a big mission and something "important" seems directly contradicting what pg has been writing for years.

Just as trying to think up startup ideas tends to produce bad ones, working on things that could be dismissed as "toys" often produces good ones. When something is described as a toy, that means it has everything an idea needs except being important. It's cool; users love it; it just doesn't matter. But if you're living in the future and you build something cool that users love, it may matter more than outsiders think. Microcomputers seemed like toys when Apple and Microsoft started working on them. I'm old enough to remember that era; the usual term for people with their own microcomputers was "hobbyists." BackRub seemed like an inconsequential science project. The Facebook was just a way for undergrads to stalk one another.

http://www.paulgraham.com/startupideas.html

I'm not too keen on Dustin Moskovitz's whole spiel about telling people not to start startups. In a course about how to start startups, it seems really misplaced.

As there is a high failure rate in startups it is very important to know though whether you are made for that kind of world. True, you'll learn a lot with every failure but not all of us want to spend years and years on miscarriages.

But then why would you do a course on how to start a startup?

I'm not sure the two view points really contradict. While early microcomputers, BackRub and early Facebook may have seemed like toys I sure some of those folks were aware they could become "important." I think Gates and the Apple guys were aware microcomputers would become widespread and the Google guys were aware better search could be a big deal. I think from interviews Zuckerberg was a bit surprised by how theFacebook took off though. Although subsequently he's got the "For us, it is this vision of connecting the world," thing going on.

It's easy to write grand vision statements in retrospect. At the time though, Page and Brin said looking at Sean Parker, "We'll never be as famous as him", as per a story Ron Conway once told at Startup school.

*Shawn Fanning

I believe that in the early days Mark Zuckerberg wanted to build some kind of Dropbox, and that Facebook was some kind of interim thing. It was exposed in a chat that came out with litigation with Winklevoss brothers. He ended up sticking with building Facebook.

They addressed these points directly in the lecture.

Sam's message here is to try and shift the balance back to where it should be. PG says that they seemed like toys. Not that they were toys. I think what they've said is very well aligned. Many people in the past few years have totally dismissed having a good idea as being important.

Similarly, Dustin Moskovitz is just trying to counterbalance the way over-romanticized view of startups in our culture. Many people get into startups for the wrong reasons, and anyone convinced not to by what he has said is probably much better off.

Is it about balance or the truth?

Of course, eventually you want to do something important. But since we are talking about starting a startup, I just can't see how sama's advice aligns with this, for example:

I think the way to use these big ideas is not to try to identify a precise point in the future and then ask yourself how to get from here to there, like the popular image of a visionary. You'll be better off if you operate like Columbus and just head in a general westerly direction. Don't try to construct the future like a building, because your current blueprint is almost certainly mistaken. Start with something you know works, and when you expand, expand westward.

The popular image of the visionary is someone with a clear view of the future, but empirically it may be better to have a blurry one.

http://www.paulgraham.com/ambitious.html

I read Thiel's book and class notes, in which again he talks about having a vision and big idea. Sounds great until you stop to think about how Thiel's own startup Paypal came about.

Quoting Max Levchin from Founders at work:

I think we didn't know what we were doing. I think the hallmark of a really good entrepreneur is that you're not really going to build one specific company. The goal—at least the way I think about entrepreneurship—is you realize one day that you can't really work for anyone else. You have to start your own thing. It almost doesn't matter what that thing is. We had six different business plan changes, and then the last one was PayPal.

If that one didn't work out, if we still had the money and the people, obviously we would not have given up. We would have iterated on the business model and done something else. I don't think there was ever any clarity as to who we were until we knew it was working. By then, we'd figured out our PR pitch and told everyone what we do and who we are. But between the founding and the actual PayPal, it was just this tug-of-war where it was like, "We're trying this, this week." Every week you go to investors and say, "We're doing this, exactly this. We're really focused. We're going to be huge." The next week you're like, "That was a lie."

Paypal didn't follow any of Thiel's recipe for a great startup:

They didn't start out with a very clear plan or big idea. They pivoted lots. They had intense competition.

I believe you can explain the difference by understanding Sam to mean "important to the founders". As he explains, this is the source of the motivation to persist, despite the risk and downsides discussed by Dustin.

Thank you & good work.

I added these notes to a repo as a lot of these comments are awesome. Let me know if you'd like me to change/take it down.

https://github.com/thoughtpalette/Startup-Video-notes

Feel free to share this! Also feel free to mention my handle/name/website :)

"All the advice in this class is geared towards people starting a business where the goal is hyper-growth and eventually building a very large company. Much of it doesn't apply in other cases and I want to warn people up front that if you try to do these things in a lot of big companies or non-startups it won't work."

@3:12: "There are much easier ways of getting rich." Could I get some examples? Thank you!

Get a job programming. 10-year average pay gap is about 33%, which is not an insubstantial amount closer to "rich".

Marry into a rich family.

steal, inherit or create value.

Waiting for that very answer here:

www.ProjectAmericanDream.com

This could be helpful to you for purposes of comparison: https://www.wealthfront.com/tools/startup-salary-equity-comp...

Go into finance?

I had a few of those moments where I found something really interesting and wanted to hear more detail, but then the subject just changed.

So here is a simple idea. If you're going to work 80h/week anyway and you're a talented coder: source one contract job billing hourly in London and another in SF. Working out of EST you work 5AM-9PM on a 10-6 in both places -- Billing $80/hr with a good corporate setup and working 4000 hours/year you can get 320,000/year, if you have EU citizenship (potentially from one of the return countries) and US citizenship you can probably setup a decent double irish and keep about 280,000+ of that in offshore money. If you want the money in the US and are clever about it you can keep over 250,000 of that money. I suggest London and SF because the 8h timezone difference and high cost of living in both cities. But to give you an idea this is basically $2.5M after-tax locked in the time it takes to make a 10 year exit. That's 1/4 of the first example and way more than 25% of start-ups fail. Admittedly $2.5M isn't the kind of resources that lets you go after solving the biggest problems in the world, but it's pretty solid by developer standards. 1.8X is a good return for a venture capital fund and they have more favourable stock than employees or founders, so you have to think the average start-up return for founders, even enormously talented ones is far worse than that.

Edit corrected typo in time worked.

While I agree with the idea that working like crazy is likely to net more than a failed startup, a couple of comments:

> If you're going to work 80h/week anyway and you're a talented coder: source one contract job billing hourly in London and another in SF. Working out of EST you work 5AM-9PM on a 10-6 in both places -- Billing $80/hr with a good corporate setup and working 4000 hours/year you can get 320,000/year

I seriously doubt most people can produce 40 billable, quality architecture/programming hours a week, let alone 80 -- especially over a long period of time. Anyway 80/hour is way low for quality work as a consultant; 100 usd/hour should be a minimum. Target a more manageable 2300 hours a year (6 day work week or 5 long days) and invoice 230 000/year.

> if you have EU citizenship (potentially from one of the return countries) and US citizenship you can probably setup a decent double irish and keep about 280,000+ of that in offshore money.

Yeah, stealing (or tax evasion) is an easy way to get rich. If you want to break the law, you might want to look into smuggling or credit card fraud/skimming as well...

There is a very big difference between actually breaking the law and exploiting the fact that the law is poorly written, and doesn't properly account for a a variety of issues starting to be used by a sizeable portion of all US corporations.

Sure, if you're amoral but don't commit any crimes, you'll go free. If you're amoral, commit a crime and don't get caught, you'll also go free. There's a difference in the eyes of the law, but I don't think abusing the lack of efficient legislation gets you off the hook for doing wrong, though.

Extending this kind of reasoning leads to condoning such great corporate pioneers as Union Carbide and Dow Chemical (although I don't want to equate embezzling public money (via tax evasion) and killing and crippling people).

It does strike me as extremely short sighted when corporations that benefit immensely from government schooling, research etc go to such great lengths to dismantle the institutions that facilitate their access to skilled labour (among other things).

All that said, if you sneak away a million US or so, go for it. It makes no difference what any one individual does as such; I just wanted to demonstrate that I, at least, take issue with the idea that avoiding taxes should be considered on equal footing with launching a ground breaking technology company. I think the two are quite opposite, even if one might evolve into the other.

And I'm not saying that's what you said, the advice just seemed rather glaring in this context.

You may take issue with it, but it's a fact that a large number of very profitable companies have avoided hundreds of billions of dollars in taxes over recent years. Trying to shame an individual who wants to save a few hundred thousand for retirement is not only stupid, but inefficient.

Contrary to popular belief, not all tax evasion is created equal. A few hundred thousand by an individual is literally a rounding error to tax revenue. Take your tax crusade to Apple, Google, Amazon, Microsoft and the rest of the billion dollar club who are stealing your precious taxes by the hundreds of billions.

> A few hundred thousand by an individual is literally a rounding error to tax revenue.

Which is why I said: "All that said, if you sneak away a million US or so, go for it. It makes no difference what any one individual does as such(...)".

> (...) it's a fact that a large number of very profitable companies have avoided hundreds of billions of dollars in taxes over recent years. (...) Take your tax crusade to Apple, Google, Amazon, Microsoft and the rest of the billion dollar club who are stealing your precious taxes by the hundreds of billions.

Doing one does not preclude the other. If a company destroys wetlands by dumping chemical waste, that does not make it ok for an individual to destroy a small grove by doing the same.

What I probably failed to get across is that my main point is that I don't think it is OK to dodge taxes; I'm fully aware that pretty much anything any one individual does becomes a rounding error compared to what a big corporation does. But corporations are made up of people, and those people are guided by among other things prevailing sentiment. So the young whipper-snapper that starts out by dodging some taxes today, might think little of dodging billions in the capacity as CFO in thirty years.

For a second issue, there is a certain perception that start-up founders can produce far more than 40 hours/week of quality architecture and programming. Founding a company involves believing in that at some level. I agree it's not in the category of most people, but neither is start-up founder. If you have a serious belief in your ability to do so, try working like crazy on 3 month contracts and see if you actually can. Over 3 months you're unlikely to burn out completely, and you can adjust your expectations of the kind of hours you're capable of accordingly.

Perhaps. But working 4000 hours a year, and producing 4000 billable hours a year, aren't the same thing. There's lots of "fluff" that goes into running a business. Sure, if you can show me someone that are able to produce quality code for 4000 hours a year, that'd be great. But sounds like the EA death marches to me. On the other hand those games, bugs and all, do rack in a tidy profit. So maybe I'm wrong, and you can throw shit at people for a year, and still have them come back for more shitty code the next year?

That are some very optimistic assumptions... Startup founders don't generally work 80 hours per week. Not for 10 years, at least.

Get a reasonably paying technical job at large firm and switch jobs every two or three years. Invest most of your disposable income: some in real estate, some in a broad equity fund, and some in a handful of technology stocks in fields you know something about.

For the majority of people who go this route instead of starting their own company, they will be better off economically in ten years time.

Get a job at AmaGooBookSoft. Execute competently, getting the standard bonus and equity packages. Continue for 10 years. Congrats, you're a millionaire. [This was even easier for folks who joined Google / Facebook between the times when they were clearly unstoppable juggernauts and when they IPOed.]

Start a boutique consultancy with a buddy. Hire up until you get to ~8 employees. Continue for 10 years. Congrats, you're a millionaire.

Everyone knows the management consulting / investment banking career path, right? Congrats, you're a millionaire.

Go to med school. Specialize in whatever the high-demand fields are, like e.g. anesthesiology. Execute competently for 10 years. Congrats, you're a millionaire.

Really? 10 years at one of these companies (AmaGooBookSoft) and you're a millionaire?

Yes. Within the first four years, a million dollars will have flowed through your bank account. By 10 years, somebody with a rudimentary ability to save money and a disinclination to purchase sailboats or lease BMWs should have a million dollar net worth after taxes.

It's a really good time to in history to know how to program computers.

So you're indicating a $250k salary, is that realistic?

Again, yes. You can choose not to believe that, but it's not in your best interest to do so.

The market really is this good.

Anyone have a link that backs this up?

You might have to live in the heart of the housing bubble to get that salary. A colleague who was very gifted at JavaScript was offered a job at Google but he was coming out behind after the increased living expenses.

Or one can choose to believe actual data (see: published Visa related salary info, various government surveys, etc.), which indicates the average salary for these companies is somewhere around $150k (give or take). Sure, throw in bonuses and equity grants and some employees might top $200k regularly. Some very high performers are also going to regularly break $250k. I doubt anybody would debate that.

Let's assume the "big" guys (Google, Facebook, etc.) regularly pay average total compensation around $250k, so that patio11's remark is correct. So what? As many employees as they employ, they represent a small fraction of the number of people who are very well qualified programmers and engineers. Their salaries are by no means common. The market is good, but it's not that good.

You don't need a $250k salary to save $1mio in 10 years.

My rudimentary calculation shows you need to save ~50k in the first year, get 4% raises, keep expenses constant, and get a 5% return. Bonuses, options, etc are on top of that. Also, you could get step-raises in the middle for bigger promotions. And, you could marry someone doing the same thing and get there faster.

It helps if you buy property. If you can mortgage up and buy $1m worth, in 10 years it'll be worth $2m+. Sorted.

Ages 22-32, probably not. 32-42, I would say definitely. Somewhere in between -- it depends.

One thing that bothered me about the lecture was reinforcement of the idea that working hard is the same as working long. I can appreciate the fact that at times as a founder you have to work all hours of the day, but surely this is not the optimum scenario for maximum productivity. If I look at my own work situation currently, it's abundantly apparent to me that the law of diminishing returns affects me strongly after working 8-10 hrs straight.

I would have expected the message to be that the most successful founders in the long-term are the ones that figure out the right work/life balance, to ensure they don't burn out. In other words, successful founders are able to be focussed and driven for the hours that they work, and in recharge-mode when offline.

This is intuitively what I would have expected and I'm curious if the message from the lecture of "work all day, everyday" is really right.

Let's say you have 10 employees and you decide to work 7 hours/day. All your employees decide well sounds good. Versus, let's say you work 10 hours day and on average your team work 9 hours day. 3 plus 20 = 23 hrs * 350 days = 8000 more hours that year. Your an investor which team do you pick?

I think some part of your comment is missing, as I can't follow the numbers.

The whole point of my comment is precisely about the fact that extra hours don't necessarily represent proportionately greater productivity. If investors only look at number of hours you work and not what you produce, then I'd be fearful for their cash.

The lecture conveyed the "all day, everyday" message and that goes against my intuition.

To temper some of the nit picks, just wanted to say this lecture felt insightful and fun to watch. I hope YC continues this trend of investing effort in shareable advice content in the spirit of pg's essays.

This is the first time a lot of the YC flavor of startup how-to material has been presented in a lecture video format[1]. I suspect much of the long-term audience of these lectures wouldn't have come across pg's essays, Blake Masters' Peter Thiel startup notes or Dustin Moskovitz's excellent Medium posts before. Maybe some lecture watchers were allergic to long-form articles, or maybe some would rather receive a weekly email with videos. Myself, I consume this sort of material on my walk to work, either text-to-speeching essays or listening to lectures. The video lecture format was especially fun, I watched it full screen on the TV while eating an enchilada and poking my fiancee about points she might find relevant to her side project. How often do you get to consume this sort of content like that?

Having read pg's essays[2], I still had a number of "aha!" moments from Sam's slides and hearing his presentation. And hearing Dustin describe in his low-key tone why you should be employee 1,000 at an obviously successful startup rather than start your own, and backing it up with charts and photo-jokes about the elephant in the room was just entertaining. Seeing "this is how we'll teach you to do this thing. Here's an expert on why not to do this thing." is not always the type of juxtaposition you get with standalone online essays.

Looking forward to the next lecture. I'd say it's well worth the time and opportunity cost of putting this all together, so thanks all involved.

[1]: Yes, some Lean Startup™ and Principles of Entrepreneurship™ flavored material has been presented in lecture format before, but not YC™ lensed AFAIK.

[2]: Okay, I skipped the early seemingly pure-Lisp-focused ones. Though like Zen and the Art of Motorcycle Maintenance isn't about a long motorcycle trip, and maybe pg's Lisp essays are not really all about writing Lisp?

The presentation style is a bit rough but the material is gold.

There are easier ways to get rich? For Stanford Graduates, maybe. For those who don't have a degree in an ultra-paying job, I'd really like to know an easier way.

I'm usually sceptical about start-up chances, I know how much work it means, and I know that a lot of early-stage employees get rich, too. Yet, I don't think you can get rich this fast/easy with a modest degree... Even as early-stage employee often you'll still get a raw deal or you overestimate their chances of success.

I think some fairly average people become millionaires along the lines of manage a McDonnald's for a bit, get finance to have your own one, expand to have 2 or 3 at which point you'd likely be worth $1m+

So I don't know how McDonnalds works exactly, but you would either need the capital to buy (borrow etc) a restaurant or you would have to be chosen to run a restaurant. Meaning you have very high-paying abilities. And in some sense, growing a franchise-taking enterprise could be technically called a start up even if not particularly innovative!

Great presentation and very clear that the rest of the course will be focusing on advice for SV-style hyper-growth startups.

There's still some good advice for those of us not interested in that life style. I was particularly taken with the idea of building something that just a handful of people will really love. Having a rapt-audience for your product would be a huge win if you decide to build more, scale up, or sell out.

I think it's really good that they're at least trying to convey how difficult building the style of companies they're talking about can be. I can appreciate how challenging that must be. The cultural yard-stick for success these days are valuations and IPOs. There's a ton of pressure to go that route especially from YC. I'm glad they're being conscientious about it even if they don't 100% succeed at removing some of the glimmer from the stars in peoples' eyes.

There's nothing wrong with wanting to start a smaller enterprise and aspire to keep just a handful of customers you know by name.

@2:22: "You may still fail. The outcome is something like Idea x Product x Execution x Team x Luck, where Luck is a random number between 0 and 10,000, literally that much."

What does that mean? I'm not trying to rip on the video or anything like that, but am genuinely curious as to how much luck Sam Altman thinks is involved in a startup.

That simply means if you are extremely unlucky (e.g. luck being 0, like being hit by a bus), then all the other factors don't matter. On the other extreme, extreme luck can turn your company around even if you don't do so well on the other parts.

He believes he should recommend to risk a substantial amount of life blood (and money) on the chances of having a big success. Not to anyone, but a lot of highly talented individuals.

It depends on his ethics, of course, but I'd say this recommendation alone means he believes there to be a substantial chance...

Wow this was good information. It really got me thinking on what my reasons are and how bad they might be. Did anyone else get that from this?

I would also love if they cover how you work on a startup if you still have the 40 hours a week programming job as well. And how to avoid getting in trouble or legal issues with your job.

The recommended reading from the final slide:

- The Hard Thing About Hard Things

- Zero to One (CS 138A)

- The Facebook Effect

- The 15 Commitments of Conscious Leadership

- The Tao of Leadership

- Nonviolent Communication

I cannot find "The 15 Commitments of Conscious Leadership". Is it a book? I don't see it on Amazon. Is it an article? Does someone know the authors (I can't quite make it out on the image), or the link?

EDIT: http://consciousleadershipforum.com/wp-content/uploads/2011/... is the answer, I believe.

Evidently this book is scheduled to be published in November 2014. Nice way to create pre-sales buzz via the Stanford lecture.

Here's a link> http://www.businessconjunctions.com/2014/09/05/do-good-leade...

I find it artificial when the lecturer reads the presentation - it's not a joy to listen.

I thought it was fine.

I'm definitely looking forward to hearing from the people who have built companies with their presentation abilities

Sam: "Step 1, build something that users love"

How does this compare with an MVP approach where you put something out there first and test the market. Then there is the issue of runway. With enough time, you can start with an MVP and iterate in private beta until users love it, but in many cases a founder is not going to have that kind of runway. They have just enough resources to put something together, and they're going to have to go out to the market with that and iterate on the fly. Unfortunately, once you do get out there and need to take on all of the other responsibilities, then that's time taken away from building a great product.

The two concepts are not mutually exclusive. If you target a big enough pain point, your first users will love the product even if it lacks polish. It's also important to remember that MVP != shit. It is the minimum viable product; in the context of the YC motto it's the minimum product that a small, core group of users will love.

This is all theoretical on my part, FWIW--I have not successfully built such a thing on my own yet.

The MVP is a philosophy to get to "something that users love" as fast as possible.

Sam Altman's law of conservation of how much happiness you can put into the world with the first product from a startup -> the total amount of love is the same it's just a question of how it's distributed.

That line cracked me up. A great observation in an unexpected wrapper.

Why did we submit questions if the video was just going to cut out at the Q&A

This seems like a really valuable recruiting tool for YC. Start early at Stanford, groom freshman to have a great mindset and understanding of the fundamentals, fund them and make money.

YC is still a for-profit company, after all.

Sam mentioned that the idea was actually quite important. I recall PG saying that YC would often invest in the team because ideas change and aren't as important as good founders.

Anyone have thoughts on this?

Like a good startup YC wanted to validate their assumptions and experimented with "no-idea" teams. Considering they don't have that option anymore, I'd venture to guess that they disproved PG's original saying and are now realizing that a good idea correlates with success. That's my guess.

Having no idea is crazy though, you want someone with at least some idea of what they want to work on. Also I don't think they accepted enough no idea teams to have a good statistical reference.

I also don't agree that working on a startup should mean no work-life balance. There's a limit to how productive you can be, and working 90 hours/week is not going to make you more productive than working 45 hours/week. If you work too much, you'll do more mistakes. Ryan Carson, founder of TeamTreeHouse, can teach us a lot about it. http://ryancarson.com/

I disagree that a startup should commonly start with an "idea". Start with an unmet need people are willing to pay for. Or take an existing category with a lot of bad products and make a truly better one that improves every aspect of the experience. Often, you'll see many startups working on the same "idea". Something like Google is truly rare (a genuinely innovative approach to search).

Building a product for which people are willing to pay to meet an unmet need is an idea. As is building a good product in an existing category that contains only bad products. Just plug in the unmet need or existing category and you have the kind of ideas that sama talked about in the lecture.

True, it is an idea. I guess I was responding to the order in the slide deck. I'd rather have (1) more specific, "market need". I think going idea -> product might be misunderstood by younger folk. The whole point of doing idea -> product super fast is to validate the market.

I'm interested in Thiel's upcoming lecture. It seems like there has been a hard shift from "move fast/lean/mvp/pivot" to "make a monopoly". Economically speaking, it is accurate. Hopefully it will motivate people to go after problems previously taboo, ie healthcare, education, finance etc, and less about messaging and photo apps. Our world may depend on it.

Sam kept bringing up the 10 year number

But: YC (and therefore every YC company) is < 8 years old

What startups succeeded after this long (AND were still actually considered startups)

Some startups "succeed" earlier than the 10 years. Lot's of big exits beforehand, lot's of growth afterwards. Also a lot of founders and employees have plenty of success in between, depending on salary, funding rounds etc

A startup can easily take 10 years from funding to the point where it's purchased or no longer needing more investment. My first business was founded in 1995 before being sold (for decent money - e.g a successful outcome) in 2011. Was the business still a startup after 10 years? I would argue yes. There were still many ups and downs, funding challenges, near-death experiences etc, and our culture was still largely that of a startup business.

Even if you consider the massive tech IPOs and classic success stories, the timeline between incorporation and IPO is pretty long. Microsoft was founded in 1972 and IPO'd in 1986. Google took 9 years from incorporation to IPO, and it was 8 years from Zuck launching 'thefacebook' until the Facebook IPO. I think this backs up Sam's assertion that a startup is a 10 year commitment for a founder.

Funny that I just wrote about how I was considering killing a startup I started: https://medium.com/@piotr/i-failed-82b9469977ac?source=lates...

Probably the best way to know how to build a successful one is knowing how to build one that won't fail!

Are transcriptions of these videos going to be provided?

It's much easier for me to consume lectures as text rather than watching the video.

Ideas are important ... but if Ycombinator stresses so much on the idea being really great then they should take these lines off their website (its on the "Apply" page)

"Your idea is important too, but mainly as evidence that you can have good ideas. Most successful startups change their idea substantially."

It's refreshing to see such importance placed on the idea and building a product that users love.

Don't get me wrong I love Sam Altman I love y-combinator but a small part of me is thinking that a good first step to start a startup is to not watch that video and find your own way. Not because it's probably not great but because a startup is not a formula.

Your path is your own.

I would imagine this class is not a cookie cutter business plan but rather "here's the challenges startups face and how to approach them." So likely a MOOC form of YC

Ironically that's what the first 15 minutes is..."don't start a startup unless it's the best way to accomplish something you want". "don't start a startup unless it feels like an important mission" etc.

I agree. It strikes me as a very inefficient use of an enterpeneur's time who wants to launch a business to first watch a series of 20 lectures about all aspects of starting a business.

Just start doing it, and whenever you get stuck or need feedback ask someone whose expertise you trust for advice on a particular issue you're dealing with at that moment.

Perhaps it's not the most efficient use of an entrepreneur's time, and I agree that it definitely doesn't have to be the first step. Working on an idea helps you learn fast, but there was so much I didn't know at first (I still have a lot to learn). I am so grateful that resources like this exist, and I expect this one by YC to have a higher density of quality info in the time spent watching lectures.

“Principles and rules are intended to provide a thinking man with a frame of reference.” -- Karl von Clausewitz

Running a company is not about neither principles nor rules. To the extent it does it's doesn't require a thinking man.

Please elaborate.

Running a startup is not an intellectual exercise which is the context for that quote.

Running a startup is more like improvising in a jazz band. There is some theory behind it but if you think you stink.

...talent and genius operate outside the rules, and theory conflicts with practice - Carl von Clausewitz

I would argue that he agrees. However...

The general who wins the battle makes many calculations in his temple before the battle is fought. The general who loses makes but few calculations beforehand. - Sun Tzu

Both intellectualism and the ability to improvise are necessary. Arguably, if you have to adapt then a calculation has failed. Hearing the sound of thunder is not the mark of a keen ear, neither is entering battle and winning the mark of a great general.

There is no point reinventing the wheel. Many have come before and it seems wise to assimilate their experience with a critical mind.

Instinct ultimately rises from your existing body of knowledge. And even in jazz it emerges from a bass line.

Maybe a bit of both is the answer. Just watch lectures and read and nothing gets done. Rush ahead and do stuff without studying and you risk dumb errors that you could have avoided.

I agree, however since he has seen and dealt with so many startups he gets to notice a lot of patterns about what makes startups more likely to be successful than the average person. There was definitely some valuable info in the lecture.

I am pretty sure you are right. Whether that value is intellectual or actionable is what I am not so sure about :)

I found it was more "here's what you should notice" than "here's what you should do".

Yes it's all fine. All I want to say is that most ycombinator companies fail even though they have access to this advice.

Disagree strongly. These lectures are about 40 minutes and seem jam packed with good advice. A start-up isn't a formula but it does follow certain trends. Doing it wrong is a disaster and if you're taking on what can be a 10 year commitment without spending less than 20h exploring advice from some of the best data and people in start-ups you probably have misaligned your priorities. I suspect heeding the advice in the first lecture of this course would save most start-ups more time and money than 20h of the "CEO" co-founder.

Doing it wrong might actually sometimes mean doing it right.

Ycombinator companies have access to this advice yet most of these companies fail. Thats just how it is. You can get structural advice from a laywer the rest is up to you to explore.

YCombinator companies have a far higher success percentage than the general start-up population. Most fail is hardly a criticism when the default environment is 90% of start-ups fail. Moving 90% to 60% for example means your chance of success quadruples, but it still meets your criticism of "most fail".

The reason they don't fail is most likely more to do with the fact that yCombinator is already a powerhouse more than with the advice.

Can't nest comments any further, but one of my previous companies got rejected at YC before becoming the most recent example of how not to apply to YC, and having a successful exit. I recognize the lines from the application, we're literally the example of what not to do according to YC, had a decent outcome and I'm still convinced this lecture had lots of great advice and if I were to start myself I'd follow more of it. Take what you will from that.

But there are many other companies not doing what YC recommends who do just fine and that is the point. Advice is great but be careful what you think it teaches you.

Probabalistic advice is different from deterministic advice in that there are exceptions to the rules. Assuming you are the exception as an excuse to avoid the rules generally results in worse performance rather than better. Avoiding the advice entirely without even trying to comprehend why you are the exception seems to border on certifiable to me.

You are trying to prove a point which makes no sense to prove.

There are many ways to success following advice can both take you down the right and the wrong path so can not following it.

There is only one test and that is reality. If you believe otherwise you are fooling yourself imho.

There's still going to plenty of "finding your own way". I suspect most founders and early employees could find a lot of useful information in the material.

Not disagreeing. But whether it's actionable is what I would question.

Not spending on PR or going to conferences pre-product is highly actionable for a large number of start-ups who do the opposite. Balancing the early team to be able to execute a product people love before scaling a marketing organization is highly actionable as well. The advice on doing a start-up for the right reasons is the most actionable of all.

And yet the reality is that this worked for some. There is no meta advice, no big secret besides find out how to make it work for you.

Yes. This works for some. If I ask you to choose between winning a bet where you roll 1,2,3,4,5 on a d6 or winning a bet where you roll 6, I think the fact that sometimes you win with 6 is true but almost useless.

Problem is that you haven't shown that to be the case. You are just making up your own premises to prove a point you haven't proven.

Here are some timestamped notes synced with the video: https://timelined.com/how-to-start-a-startup/lecture-1-how-t...

looks like rap genius is putting up a full transcript http://tech.genius.com/Sam-altman-how-to-start-a-startup-lec...

Can non-Stanford students drop in or is this for students only?

I posted some casual, but in depth notes on my site for anyone wanting to skip the video:

http://chriskvamme.com/

its really sad that he is reading the presentation..

Yeah.. And not very well.

I'd much prefer incoherent rambling, than this robot presentation. Put the script on a blog somewhere.

Just a quick question - are these a Sam only initiative, rather than YC? Is that why they are on Sam's domain?

This is a really good video lesson. I fell inspired to work harder on my dreams of growing my startup.

Just watched the lecture.

The first part of the lecture was on the "Idea", and I want to give an alternative approach.

First, do I believe that what Altman describes can work and is what he has seen has worked? Definitely yes.

Second, is that all that can work? I don't think so.

Third, do I suggest that the alternative approach I describe here will be common and/or always better than what Altman describes? No. Sometimes better? I do believe so. But even if the alternative approach is rare, that should not be a huge obstacle since the success Altman is talking about, the goal, is also rare. That is, for the rare successes, we should expect that some of the means will also be rare and not common.

But for the alternative approach, given that it is rare, we should have some solid evidence of its effectiveness, and I believe that we can.

I want to propose that it can be possible to have an idea, test it, essentially just on paper, and, if it passes the test, be quite sure the resulting product will be good and fairly sure the resulting company will be successful.

Yes, I'm proposing that the alternative approach provides a way to have the idea be by far the most important part of the work and the rest, e.g., the execution, be routine.

Or I would say that a good idea is one that makes it through the filters of my alternative approach. Then I am claiming that with a bad idea, yes, execution is everything but with a good idea execution is routine.

Yes, to me, the ideas like Altman describes look to me as far too unpromising to be taken seriously and promise that, yes, indeed, execution will be many times more difficult than the idea. Indeed, Altman is admitting that many start ups fail, that building a successful start up is difficult. I would agree that, starting with a bad idea, building a successful start up is difficult.

Now, for the alternative approach for finding a good idea for a start up:

First, the alternative approach is very selective, that is, rejects a lot of ideas. Some of the ideas the approach rejects will be able to be the basis of successful companies. The alternative approach rejects ideas when it just cannot build a rock solid case that the idea is good. E.g., the alternative does not know how to conclude that the ideas for Facebook or Twitter would lead to success. The alternative wants to accept only good ideas and in doing so will reject a lot of good ideas. The alternative approach asks for a lot from an idea, and many good ideas will not have that much.

Second, Altman does emphasize that a need and a corresponding solution one person sees in their own life can be relevant. Okay, I've been there and done that, that is, I've seen needs and solutions.

Third, what I'm proposing for an alternative is, at least in broad terms, and compared with what Altman describes, much older, much more thoroughly tested, and with a much better, really excellent, track record.

Actually, we all know at least something, maybe a lot, about the alternative and its track record. I learned about the alternative early in my career doing mostly US DoD projects around DC and also some other experiences, but there is much more information about the alternative readily available far from me.

So:

(1) Need.

To make the alternative work, we have to start with a suitable need, i.e., market need, that is, a suitable problem to solve. We want the first good or a much better solution to be, obviously, no doubt, a "must have" and not just a "nice to have".

Next, for this need, we want to find the first good or a much better solution, presented just on paper.

Then we want to evaluate the solution, also just on paper. Sorry, no, we don't "get out of the building" and talk to other people.

Big example of such a need? Okay, we'd like to have a safe, effective, inexpensive one pill taken once to cure any cancer. So, yes, early on, for Facebook, Twitter, Snapchat, a lot of doubt. For such a cancer pill, we have "no doubt"; to know this we don't have to "get out of the building", ask people, throw trial solutions against a wall to see if there is interest, etc.

(2) Solution.

Given the need from (1), we try to find a solution. If we fail here, and likely we will, we return to (1) and find another need. E.g., clearly so far the one pill cure for any cancer will fail here for at least a long time.

We want a solution that we are sure, "no doubt", will be the first good or much better.

Here's a way: Start with the real problem and see what about it we can assume. Then convert this problem and its assumptions into a mathematical problem. So, we are limiting ourselves to needs that lead faithfully to mathematical problems. Sorry, no intuitive heuristics need apply.

Next find a mathematical solution.

Develop the mathematical solution just on paper, as carefully done theorems and proofs, and then severely check the proofs.

Then observe that it is totally clear that the mathematical solution will be fully close enough to the first good or much better solution we want for the need.

If any of the work here in step (2) fails, then return to step (1)

(3) Product.

Write software to do the data manipulations specified by the mathematical solution. Severely check the software. That's essentially the product.

If fail here, then return to (1).

Track record? Okay:

(A) GPS.

(B) The version of GPS done first by the US Navy for the SSBNs.

(D) The A-bomb of WWII -- all three exploded just as planned.

(E) The H-bomb of the 1950s -- first test, 15 million tons of TNT.

(F) The SR-71, for Mach 3+, 80,000+ feet, 2000+ miles without refueling; proposed by Kelly Johnson just on paper; built and flown just as proposed.

(G) Keyhole satellite, essential a Hubble, before Hubble, but aimed at earth instead of space.

(H) The F-117 stealth, essentially a modified F-16, flew as planned, through Saddam's anti-aircraft artillery without a scratch.

(I) The airplane the Wright brothers took to Kitty Hawk, NC.

(J) Phased array radar for Aegis class ships.

(K) High bypass turbofan engines.

(L) RSA encryption.

(M) Hubble.

(N) LHC.

(O) COBE, WMAP, and Planck.

And there are many more. Such projects that failed in execution? Tough to find. Batting average? Near 1000.

Right: Projects A-O are all just technical projects. Right. But in each case they provided the intended solution for the need. As we have explained, to have a successful technical solution lead to a successful solution in business, we want such a solution to be a "must have"; else we return to (1).

The high bypass turbofan jet engine a commercial "must have"? Darned right: It saves an ocean of expensive jet fuel. How? Simple: Burning jet fuel releases energy. Want to convert that energy to kinetic energy and get the resulting momentum. But for mass m and velocity v, kinetic energy is (1/2) mv^2 and momentum is just mv. So, we pay in energy (1/2) mv^2 and get in the momentum we want mv.

So, since in kinetic energy we have v^2 but in momentum have just v, to get more of our desired momentum from our given, available energy, we want m to be large and v to be small. So, mostly we want to use the hot gasses from the combustion to turn a big ducted propeller that moves a huge mass of air at a low velocity. Instead, the military jet engines intended for supersonic speeds, and long used in commercial aviation because they were available, move a smaller mass at high velocity. So, for commercial, subsonic flight, a high bypass turbofan is a "must have". Then have the first good one or a much better one, as we have assumed, and very much should have a successful business.

This was kind of hard to read, but I think you've missed the point.

You seem to be talking about developing new technologies. Sam is talking about commercialising them. There's a big difference. In almost every of the cases you listed the technology was built in response to customer demand.

Yes, there are differences, and you mentioned some. But I believe that the alternative approach I described can work for commercial products and where the founder observes the need. Indeed, as I mentioned, the approach has a severe filter; if the founder can't observe a need where the first good or a much better solution will be a "must have", then back to (1) and try again.

Getting an idea all the way through the filter might be challenging. But, it seems to me that for an idea that does get through the filter, execution should be routine and project success quite likely.

Your way of thinking is interesting, but in all of the examples you give, the execution was vastly more difficult than the idea. Furthermore, most of them weren't commercial products and couldn't have been done by a startup.

> the execution was vastly more difficult than the idea

But the execution was fully routine, that is, low risk.

> couldn't have been done by a startup

Right. But maybe in the future, and because of my main point: It's fully possible for the planning to be rock solid and lead to a successful product with low risk. That's the main point -- it really is possible, indeed, in applied science and engineering, nearly standard.

That the examples were not commercial products need not detract much from the main point -- again, we can plan just on paper and have a low risk, high payoff project.

But now we have enhanced opportunities: The math I assumed can be cheap, for someone with an appropriate math background, dirt cheap, fast, fun, easy, and low risk. Then for the product, I assumed that that is just software. So the guy who does the math also does the software -- we're still in the low budget area. Next, the product needs computer hardware, but now enough computer hardware to execute 100,000 lines of code can be less than $2000.

If the product is just a Web site supported by ads, then for just a focused start, where I agree with Altman, might do quite well: E.g., maybe the start up sends Web pages of 400,000 bits per page. Each page has on average 5 ads. From the Mary Meeker data at KPCB, maybe get paid $2 per 1000 ads displayed (CPM = $2). Maybe have an Internet connection with 25 million bits per second upload bandwidth. Maybe half fill that 24 x 7. Then the monthly revenue would be

2 * 5 * 25 * 106 * 3600 * 24 * 30 / ( 2 * 400,000 * 1000 ) = 810,000

dollars. That's enough to fuel organic growth.

So, on average, how many Web pages sent per second?

25 * 106 / ( 2 * 400,000 ) = 31.25

Depending on the project, that might take several computers at $2000 each, but if early on send just 1 page a second, and for some projects early on one computer could do that, and get monthly revenue of

1 * 2 * 5 * 3600 * 24 * 30 / ( 1000 ) = 25,920

dollars so that in one month have free cash flow enough to buy computers enough to send 31.25 Web pages a second.

The 31.25 Web pages a second is a lot of Web pages per month, is

31.25 * 3600 * 24 * 30 = 81,000,000

So how to justify this? Well, as we assumed, the first good or a much better solution for the problem is a "must have". The problem has been selected so that we can attack it essentially just with math. We do the math, as theorems and proofs, and check the proofs carefully -- fairly routine and low chances of errors for a well trained pure/applied mathematician. We convert the math to software and check the software -- again, fairly routine with low risk of errors. Now we have the product, and it is a "must have". Then we go to Altman's lecture and use what he said about viral growth. And we use the assumption that the problem is such that many people want the solution (I hope I made that assumption clear also). What's left to do? Get the checks from the ad networks. Yes, very much do need to meet the assumptions, find the solution, write the software, etc., and if can't then return to (1) and try again.

Once I had a project that looked pretty good on the alternative approach, but the software was going to be too much work because I'd need to write a lot of code for a lot of data collection and with too little information about what the APIs and interfaces were or would be. So, I dropped the project. That is, back to step (1).

You are correct that nearly all the successful, famous projects I listed were, yes, routine, but expensive to execute. And for a start up, we need projects that are cheap to execute. Do such projects exist? I believe so.

It appears that we are not considering the same issues, i.e., we are not communicating,

E.g., right up front in my post I said, as a summary, and overview, and a statement of my purpose in my post:

> I want to propose that it can be possible to have an idea, test it, essentially just on paper, and, if it passes the test, be quite sure the resulting product will be good and fairly sure the resulting company will be successful.

To me, this statement of mine about the idea is very different from what Altman said and very different for the plan and the resulting execution and business. Here I will avoid taking enough words to quote enough from Altman's lecture to show these differences; I assume we agree that, on the idea Altman and I are saying very different things.

For your

> in all of the examples you give, the execution was vastly more difficult than the idea.

Sure, but if you are concerned about this then you are not really responding to what I wrote.

All the examples (A)-(O) do illustrate what I said about the idea.

For execution I said that with a good idea, execution should be routine and low risk. Projects (A)-(O) also illustrate this point -- routine and low risk -- about execution. So, with a sufficiently good idea, execution can be routine and low risk. Here, too, what I am saying is different from what Altman said.

You are also concerned about the amount of effort in the execution. Right. And, right, mostly the projects (A)-(O) do not illustrate low effort. Okay. But we can't use those projects to conclude that there are no projects, start ups, that follow what I said about ideas and that have have low execution effort.

So, for effort in execution, can we also have projects that have low execution effort and, thus, are suitable for start ups? Well, except maybe for the project (L) RSA I listed, the projects in (A)-(O) do not illustrate low effort.

But I do believe that, as we select projects, we can also have some that follow what I described and also have low execution effort. How? Broadly, just do what is the focus of Hacker News -- Information technology that exploits Moore's law and current infrastructure software.

E.g., in

The Happy Demise of the 10X Engineer By Sam Gerstenzang at

http://a16z.com/2014/07/30/the-happy-demise-of-the-10x-engin...

is a discussion of the question:

"How long before we have a billion-dollar acquisition offer for a one-engineer startup?"

So, this is from A16Z: They are guessing that the issue you raised about "effort", we should be able to have a "billion-dollar ... one-engineer startup".

So, A16Z and I agree that now, in information technology start ups, low effort in execution is reasonable to expect.

The A16Z arguments add to mine and do not conflict. I would suggest that my arguments help show the way to the A16Z information technology "billion-dollar ... one-engineer startup" with low risk and low effort.

Why don't we have a lot of examples of projects that followed my arguments, and were "billion-dollar start ups" with low effort? Sure: What I am saying is. so far in practice, mostly new for information technology start ups -- instead of what I described people have followed what Altman described in his lecture. I'm saying that there is a better way, heavily in the planning.

That what I am saying seems new for information technology start up can seem good news unless find the thinking wrong.

Nutshell View: I'm claiming that we can do good planning and with a good plan execution can be routine and the intended success low risk. A key to a reliable path from plan to success is some math for the core of the product. Another key is a problem where the first good or a much better solution is a "must have". My project examples (A)-(O) illustrated that such planning, the role of math, routine execution with low risk, and "must have" solutions are possible. Yes, nearly all the project examples (A)-(O) had high effort. For effort, there's evidence, e.g., from A16Z, that now, due to Moore's law, etc., that for some information technology start ups we might get all of these project attributes along with low effort.

Here what I'm saying is very different from what Altman said and maybe good news.

Is there a download link for the video to make offline viewing possible?

You can use the yotube-dl script: http://rg3.github.io/youtube-dl/

I loved the video and it really encouraged me to keep on trying.

Sam, your voice sounds very irritating to me. Sometimes too fast, no "tempo". I think you should change the way you deliver your points to a classroom. (constructive feedback, not rant)

Very interesting lectures and it's great that they are doing this. Both of the speakers could benefit from a public speaking class though.

It was so good I wish It was thursday.

I want mooooore!

subtitles please!!

Ycombinator leading the way once again. Looking forward to this!

I guess all the people downvoting this are from other incubators. Not sure why this is being downvoted.

Because your comment does not add anything to the discussion.

Or adds the wrong thing. Go team A, we're better than team B stuff is not that productive.

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