Sam Altman and Dustin Moskowitz: How and why to create a startup?

Original author: Sam Altman, Dustin Moskovitz
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Stanford course CS183B: How to start a startup . Started in 2012 under the leadership of Peter Thiel. In the fall of 2014, a new series of lectures by leading entrepreneurs and experts of Y Combinator took place:

First part of the course

In the first lecture: Sam Altman (president of Y Combinator, topic: “Idea, product, team, implementation - Part I”), Dustin Moskowitz (co-founder of Facebook, Asana, Good Ventures, topic: “Why create a startup?”)

Disclaimer: carefully , traffic (bulk material + lecture slides).

Sam Altman: Idea, Product, Team, Implementation - Part I

Greetings to all CS183B course students. My name is Sam Altman. Today I head Y Combinator (YC) [Y Combinator (YC) is an acceleration program for start-ups that are at the seed stage of development - hereinafter approx. transl.]. Nine years ago, I studied at Stanford, but at some point I decided to found a company and left [in 2005, Sam founded Loopt, which was acquired by Green Dot Corporation in 2012]. The last few years I have been investing. At YC, we teach people how to work as part of startups and have been doing this for 9 years. The main part of the material that we give has the corresponding specificity, but about 30% of this information can be applied while working with almost any business. It was in this area of ​​knowledge that we decided to concentrate in the framework of this course. I am sure that these 30% will greatly help you in your business [In the third lecture of the course, Paul Graham once again emphasizes the fact that most of the problems that startups face are common to all projects, regardless of the specific area of ​​their functioning. It is such universal issues that are discussed in this course].

We taught the students of our course at YC a lot, but a significant part of this knowledge was not fixed in any way. As part of this course, we solved this problem by providing publicly available course materials. We invited the most famous experts, asking them to share what has already been voiced in for YC projects. To date, we have invested in 725 companies [including Dropbox, Twitch, Reddit and RapGenius, with a total capitalization of more than $ 30 billion] and are confident in the practical value of the knowledge that we share with you. Of course, our investment capacity is limited, but we are ready to freely share knowledge.

I will appear before you as a lecturer three times [in addition to this lecture, Sam has already conducted its second part and must complete the coursehis speech]. Including YC experts, all the speakers in this course [ Paul Graham , Mark Andressen , Ben Horowitz , etc.] have already participated in the creation of companies for a billion dollars or more. Based on this, we can talk about the practical nature of the advice that you will receive from people who have created their own business.

The materials of this course are aimed at those who launch a startup focused on rapid growth and the final transformation into a large company [ Steve Blank definedstartup as a temporary organization aimed at finding a repeatable and scalable business model]. I would like to warn you that many tips may not be suitable for use in cases where it is not a startup, but just a big business. One way or another, I think that we will be able to interest you. I am sure that startups have a future, although they differ from ordinary companies, and understanding the principles of their work is really worth it. In this and the next lecture, I will try to give an overview of the 4 main elements that you should concentrate on to maximize the results of your project [idea, product, team and implementation]. In the course of further lectures, these elements will be considered by our experts in a more in-depth format.

So, there are 4 key elements you will need: a great idea, a great product, a great team, and a great implementation. Of course, all these elements intersect, but I will tell separately about each in order for us to understand all this.

In any case, there is the likelihood of your failure. The formula for the final result looks something like this:

Idea x Product x Team x Implementation x Luck,

where luck is a random number from zero to ten thousand. Like that. And if you succeed in 4 areas that you can control, then you can count on modest success. Ben Horowitz

Comment :
This is a good approach to considering this issue, because you do not have any guarantees of success, regardless of the quality of implementation of your idea. Thus, we can say that for the most part luck comes unexpectedly from an area that you do not control.

For example, Palm created an excellent OS and a good smartphone. When they started, their competitors were Nokia and Blackberry. Both of these companies have lost a winning direction in the development of their products, and it would seem that Palm had to “shoot”.

Unfortunately, something happened to this company that practically does not happen in the technology market: two IT giants (Apple and Google) set their sights on a similar market niche, presented excellent products and moved Palm to third place. If neither Apple nor Google turned their attention to this niche or decided to sell their products, then the Palm story would be another success story. Yeah.

So, it was the failure that befell Palm. Sometimes such situations can be calculated, but for Palm it was really a big setback.

What is amazing is the fact that in the world of startups, the conditions of the game are equal for everyone. Both for experienced veterans and young beginners. Everyone can achieve their goal. In the world of startups, circumstances that are negative for any other field of activity, such as, for example, lack of funds and fame, are only good for you. This is exactly what I like about startups.

Before diving into the analysis of solutions, I would like to discuss the reasons why you are going to launch your own startup. I myself, to some extent, doubt the necessity of this course, for you should never start a startup for the sake of the process. There are much simpler ways to get rich, and any, absolutely any startup founder will tell you that he could not even think about all the difficulties of this path [Ben Horowitz wrote a good book on this subject ( excerptin English.)]. You should only work on your own startup if you are troubled by a problem and you don’t see any other way to solve it besides starting your own company [This remark by Sam is one of the key points of the first lecture. A similar assessment was made several years ago by Paul Graham, who conducted his seminar as part of this course. A much deeper understanding of the need for an irresistible desire to deal with any problem can be gleaned from Bret Victor ’s lecture ].

The desire should be in the first place, and his specific embodiment in the form of a startup in the second. All classes at YC follow this principle, and in the second part of this lecture I will give the floor to Dustin Moskowitz, who will tell more about this. We were so doubled by the general attention to this course that we decided to dwell separately on those reasons, guided by which people decide to launch their own startup.

The first element of 4 is the idea. In recent years, a well-known saying has been formed: "A good idea in itself does not mean anything." Yes, and many hours of thinking about your idea no longer seem like some exciting activity. They are expecting a decisive start of work from you, the active use of the trial and error method without any time-consuming realization of the value and efficiency of your idea. The more fundamental changes (pivot) you make to your business model, the better.

There is some truth to this approach. Predicting the development of projects is completely and completely impossible. Especially when your product is still not in the hands of your customers. The implementation of a particular product is 10 times more important and 100 times more difficult to select a good idea.

Today, many go to extremes, while a bad idea remains a bad idea, and everyone around them is just waiting for another change of business model from you. A great implementation of a bad idea will not lead you anywhere. There are exceptions, but most successful companies start with a good idea, rather than changing their business model (pivot).

If you look at the stories of successful pivot'ov, you can notice the fact that they are almost always addressed to the problems of the founders themselves, and not to randomly invented ideas. For Airbnb, for example, it’s Brian Cesky’s inability to pay for housing while he had a couple of rooms available. In the general case, dramatic changes in the business model do not lead to the formation of large companies. I myself was convinced that ideas were worthless, but I am sure that this is not so at all today.

Commented by Dave McClure :
A good approach to generating ideas for your project is to solve a problem, or rather, the desire to solve your own problem (the presence of which is also confirmed by a significant number of other people). When people are interested in my opinion about their ideas, I always turn the situation around 180 degrees, asking them what their customers think (do they use the product, do they pay for it?). Usually, people who ask me a similar question are either poorly informed about their customers and their problems, or they do not work enough to understand how customers use their product and what they are willing to pay for.

Successful entrepreneurs are not interested in my opinion about their product or idea. They simply demonstrate the result and indicators, indicating the profitability of their project and the successful use of their products by customers.

The definition of the concept of an idea, if we talk about it, is rather vague. It includes the size and growth rate of the market, the company's growth strategy, protective strategy, etc. When evaluating ideas, you need to think about all this, and not just about the product. If everything goes well, then you will work on this project for a good 10 years, so preliminary thoughts about the value proposition of your business will not hurt. Of course, plans alone do not cost anything, the process of planning, which is often absent in modern startups, is significant.

Long-term planning is quite rare, but in startups its lack is felt more strongly than elsewhere. By including it in your work, you will get a significant advantage. Remember that your idea will evolve and become more ambitious over time. Of course, there is no need to think through every step you take on the path to taking over the world, but in any case you need to build on something. You need to formulate the core of your idea, which you can develop in the future.

Working with the founders of startups, we often encounter false beliefs about the need to create a business that is very difficult to copy [if there are absolutely no new ideas, then there must be at least an understanding of the competitive advantages of your project]. This is very important to understand at the stage of idea formation.

I would like once again to return to the idea that always comes first in the first place, in the second - the startup. Wait for the moment when you will be ready to give all of yourself to work on a certain idea, then start your company. This approach can also be used to select ideas for subsequent implementation. If you have several ideas at once, work on the one that takes your mind most of the time [including the non-working one]. We very often hear the stories of the founders, who regret that they did not take ideas that they really liked into their work.

If you look at this issue from the other side, it is worth saying that successful companies always focus on their mission. The effective activities of large companies require a fairly substantial concentration of efforts on a certain front of work, and the presence of an important mission helps them to achieve the necessary concentration. And the mission itself requires a good idea in its foundation, which in total allows talking about the dedication of the founders of the company.

Building a company takes many years (usually about 10 years), and if you do not like your job or do not believe in its success, then there is a chance of losing interest in this occupation at a certain stage of work. I don’t know of any other ways to counter all the difficulties that await you on the path to creating your own business, except for the belief in the significance of your business [faith in the significance of your mission]. Many people think that work on a startup will take only 2-3 years, and then you can do something really interesting, but this approach usually does not work. Successful projects take about 10 years to create.

Commented by Dave McClure:
I would even say that it is 5-10 years, but to confirm a sufficient degree of product quality will not work faster than in 6-12 months. And the understanding of whether the company itself is good enough does not come earlier than 1-3 years of work.

The success of companies does not arise out of the blue after 10 years of quiet life somewhere in the bushes. Usually it can be predicted much earlier.

Sam is right that implementing a good idea can take many years, and the growth of the organization itself is even greater.

Another advantage of companies whose work is built around a specific mission is that the presence of such a mission will help attract external support. It is much easier to get support when working on a complex and very important project, and not just on something derived. Starting a startup, it is very difficult to build on superficial ideas, it is much easier to take something fundamental as a basis. This seems illogical to many, but it’s quite difficult to exaggerate the significance of the mission of your project. I would like to emphasize it once again: derivative projects that copy existing businesses without any innovations introduced for their part are not very interesting to people from an emotional point of view and are not able to push the project team to complete dedication.

Commented by Dave McClure:
I can not agree with this. I think that really good ideas look too radical, but certainly not terrible. It may just not be very ideal or obvious.

Most likely they are just initial attempts to reach out to an unusual segment of the audience and solve their problem. For example, make a mouse for the iPad. In this case, the need is not too obvious.

I would say that good ideas are usually simply not always perfectly implemented in the first versions of the product, but somehow solve the main problem of the client.

At the first stages of product development, this is usually enough, and here the race begins for the adoption of this product by the consumer, taking into account the need to maintain the ability to compete in price, quality or other distinctive features.

In the next lesson, Paul Graham will talk more about different approaches to formulating ideas. This is quite difficult for many, but I am sure that the secret of success lies in practice, which needs to be given time.

Formulating ideas, we often come across the fact that the best of them are pretty ridiculous at the stage of their origin. The thirteenth search engine without the functionality of the web portal [of course, we can say that Sam denies his own logic, and this is a derivative idea]? Most critics did not see any point in this idea. The search was already implemented, but the portals at that time were in a completely different weight category. A tenth social network for college students only? Similarly, a completely empty thought. MySpace had an absolute monopoly, and no one saw its potential customers in students. Well, or the idea of ​​the possibility of spending the night on a sofa with completely strangers. There is nothing good to see at all.

All these ideas looked awful, but in the end formed the basis of success stories. If they initially seemed attractive, too many people would try to profit from them. In the fifth lesson, Peter Thiel will talk about how to transform a good idea into a monopoly. Of course, this cannot be achieved as soon as you start work. You need to find a small market niche, gain leading positions in it and only then begin to expand the boundaries of your audience. Based on this logic, one can understand why successful ideas look weak at the time of their inception.

“Today, only this small group of customers will use my product, but I intend to attract them all in the future. Almost all of them will become users of my product ”- such a statement on your part at this stage of the formation of the idea speaks of moving in the right direction.

You will often come across the following expression: "You will need confidence in your beliefs and the ability to ignore other people's criticism." The bottom line is that this statement balances on the verge of reason, because most of the people around you will criticize your ideas [especially good ideas on Sam’s logic]. You should only enjoy it. These people will not compete with you.

Thus, you should not be afraid to tell someone about your idea. In fact, good ideas will not seem to anyone sufficiently valuable. The ideal case is when you can recognize the outward clumsiness of your idea, and at the same time show your approach to understanding its potential. You will look crazy, but it will be “wise” madness. You need to take up the idea, the implementation of which a limited number of people work, and in its initial clumsiness there will be nothing to worry about.

One of the most common misconceptions is the desire to formulate such an idea or develop such a product that will be sufficiently ambitious in its first incarnation. This is not a good approach to business. Your project should first become a leader in a small market niche and only then move on to expand its influence. That is how most successful companies began their work. It is a development based on an accurate understanding, not a pursuit of popularity.

Your idea should not be very attractive at first glance, but good enough in its essence. In addition, you should consider various development options and the market itself. It is better to pay attention to those market niches that should demonstrate significant growth within the next decade. Most investors today are too meticulous in assessing the size of the market and completely forget about forecasting its development.

In fact, this is one of the systemic errors of investors. They think about the growth of startups, but they forget to take into account the growth of the market of these startups. For example, I am much more concerned about the growth rate of a certain market niche and the forecasting of its ceiling, rather than its current size. This is what you should think about. I prefer to invest in companies that work with a small but very fast-growing market. And I’m less interested in those companies that are trying to immediately cover the entire market, whose growth rate is much slower.

A significant advantage of working with a small market niche is the high demand for existing solutions to current customer problems. They are ready to use an absolutely imperfect product, knowing about its constant improvements. In this situation, students have an advantage in the intuitive understanding of which of the market niches will show rapid growth in the very near future. It is also necessary to understand the impossibility of creating those market niches that have not yet formed. In working with your project, you can change a lot, almost everything except the market. Thus, you will need to make sure of the presence and projected growth of the market niche with which you plan to work.

This approach can be described in various ways: following someone else’s movement, “getting on the elevator”, or belonging to a community. All this suggests that you are targeting a market whose rapid growth is just around the corner. Today, it may look modest, but, unlike others, you know that it will develop very quickly.

Think about where such situations may occur. To succeed, you will need a sense of tailwind.

The good news is that today a fair wind is found in more than enough volume. Marc Andressen, for example, says software is devouring the world. It is everywhere, and a huge number of good ideas work in this area. You just need to make your choice, find the idea that will appeal to you.

Sequoia's famous question “why now?” helps to find an explanation of the need to work with certain ideas or the need to create specific companies in your chosen time period. The answer lies in understanding why it was impossible to do all this, for example, a couple of years ago or vice versa - a couple of years from the current moment. Most of the successful companies that we have worked with have come up with really good ideas, and they had excellent answers to this question. If you still cannot find any explanation, then you should at least periodically try to do it.

In general, the best situation is always trying to solve your own problem within a startup. In this case, you will initially have a pretty good understanding of the essence of this problem, and the quality of your prototype will be much higher than if you had to be guided by the opinion of the client. The second case - when you solve someone else's problem [and not just your own] - will require recognition of the lost advantage in understanding all the subtleties and the need for a detailed study of the opinions of your customers. To do this, you can even immerse yourself in their working environment, if there is such an opportunity, or just try to get as much information from them as possible, communicating several times throughout the day.

Another not entirely logical aspect of good ideas [which may not be obvious at first glance] is that you should always be able to explain them as accessible as possible to others. If you need more than one sentence in order to explain what you are doing, this is a sign of the complexity of your case. You need to be able to broadcast your vision with the minimum number of words. The quality of your idea can just be verified in this way. The description of a good idea is usually different from what is already on the market. If we are talking about a business clone whose key idea can be described using minor differences (such as, for example, improved design or scope, for example, for lovers of a wine as an audience for your product),

I repeat, as students, you have an excellent understanding of promising technologies, and the ability to formulate good ideas does not come right away - start developing it today. We constantly hear all sorts of regrets about the opportunities that were lost during the student years.

In addition, it makes sense to get acquainted with potential business partners [co-founders]. You can’t even imagine that you are in the most suitable environment for this, disposing people to unite around ambitious ideas. We always tell our students that partnership and cooperation is much more important than working on a startup.

I would like to end this part of my lecture with a quote of 50 Cent, his words regarding the Vitamin Water product. He talks about the importance of understanding customer preferences and market demands in general. Many, especially students, do not pay attention to this, but if you take into account at least only this issue, you will be ahead of those who are just starting to work on their own startup. As part of YC, we often encounter this problem. When working with YC resident projects, we understand that people do not put the market and the opinion of potential customers in the first place.

Many begin with what they themselves would like to do or express, and only then move on to finding an audience for all this.

It is worth doing everything the other way around and starting just with your audience.

Care must be taken to monitor changing needs and trends. Starting with a study of demand, you can provide an appropriate offer.

- 50 Cent

In the next part, I will dwell on the product, talking about which, it should be understood to a similar degree [as in the case of the idea] its comprehensive definition. It includes working with customers, and copywriting [not to be confused with copyright], and everything that is somehow related to the use of your product by customers.

In order to build a truly successful company, you must first move from an idea to creating a product. This is a very difficult process, but it is worth saying that it is quite entertaining. Although innovative products, by definition, are always new to their audience, and it’s rather difficult to talk about specific ways of creating them, there are quite a few common points in this area that we would like to draw your attention to.

One of the main tasks of the founder of the company is to create a good product. As long as you don't have one, it's too early to talk about anything besides this. The stories of the most successful startup founders are almost always concentrated around working at the computer - creating a product and communicating with customers. That's all they do, and you should think about it if your time is spent somehow differently. Most of the issues related to attracting investment, product promotion, business development, etc., are decided by the founders much more effectively when a good product is already created. It is very important to take care of this in the first place and create what your customers will like. In YC, we advise the founders to devote all their time to the product, communication with customers, food, sleep and exercises [we are talking about warming up in between these classes].

Your task is to develop a product that your customers or users will love. Almost no successful company managed to achieve its goal without solving this problem in the first place. Many strong teams failed, without creating anything that could arouse a feeling of sympathy among their customers. The implementation of an “intermediate” [from an emotional point of view] product can lead to failure, the reasons for which will not be very easy to understand in the course of events.

At YC, we consider it very important to emphasize the need to implement a product that they will love — let a small number of your customers [or users] love your product, but this is much better than most users just “liking” it. Of course, this is not very easy to implement as part of the first version of your product, and in reality you have to choose between the first and second. It is very important to understand the fact that project development is more effective if you are working with a dedicated audience. If you start from their opinions, then in this case a lot can be realized at first glance not quite properly, but if you just brush aside this group of clients and try to take into account the opinion of all in one way or another, most likely nothing good will come of it anyway. Starting work on your project and developing a product,

[Question from the audience]: Could you comment on this slide again?

You have a choice: to make a product that will be attractive to a large number of people, or to do otherwise. In reality, the implementation of the first option is almost impossible for you, because Google and Facebook are already doing this. Based on this, the many options that you could create are limited. And you can either do what you notice, but many quickly forget, or concentrate on something very attractive to a narrow circle of your potential customers. The volume of customer love is always constant, the only question is its distribution [audience laughter]. I’m just talking about a kind of law to preserve the benefits of your product for the outside world with the emphasis on the fact that this is the first product of your startup.

Startups are always faced with choosing their own path. Both options are somewhat similar [see slide above], but our experience has shown the opposite. We realized in practice that the most effective way of developing a product audience is around the core of its absolute fans. Using ambivalence or moderate enthusiasm as such a core will never allow you to attract a significant number of customers. Try to isolate a small group of your customers or users, starting from their preferences in working on your product.

You can understand the performance of this approach by feeling the effect of word of mouth. If people really like something, they usually share it with friends. And it works both in B2C and in B2B. Friendly recommendations from people give the so-called organic growth of your audience.

If you begin to speculate that the problem of the slow growth of your project or its absence is about to be resolved with the help of an upcoming partnership with company “X” or something like that, this is definitely a sign that the problem will not go anywhere. Sales and marketing are very important aspects of the work, we will talk about them in a couple of upcoming lectures.

A good product is the foundation of fast and long-term growth. This must be learned first. If this is left “for later,” then it definitely won’t become easier. Engaged in the preparation of processes and mechanisms that support growth [orig. growth machine], before implementing a quality product, you are likely to spend your time in vain. Fast-growing companies always provide their customers with a product that their customers will gladly distribute in the future.

In the long run, product quality likewise plays a key role. Do not pay attention to the next investments attracted by your competitors, or to their plans for the future. Most likely they are not particularly good. And a very small number of startups really can not stand the competition. The main reason startups fail is the lack of a product that their customers would love. Usually everyone forgets about it, but you should think about it first.

You can create such a product by starting with something simple. You can get a good product at the output much more effectively if you start from simple problems. Even if in the end you are planning something difficult, which I hope for, you can always start with a small part of the many problems that you are going to solve. The implementation of a good product is a complex matter, and for this you should take into account the minimum possible area of ​​tasks.

Think about the products you love yourself. Remember how the companies that created these products started - accessible for users to learn and easy to use in general. The first version of Facebook was ridiculously simple. The first version of Google was an ordinary web page with a window for entering text and two buttons - but it produced the best search results, which is why users liked it. Using the iPhone was much easier than any other smartphone before it, and it was the first smartphone that customers really loved.

Another argument in favor of “the simpler the better” is that this approach forces you to do everything exceptionally well - it is necessary that people love what you do.

Very often when you listen to the stories of successful founders about their products, the word “fan” [or even “fanatic”] comes to mind. The founders talk about their fanatical desire to bring the quality of the smallest details to perfection, make the product description as accurate as possible, and create the perfect support service. In fact, all successful YC projects have one thing in common - their founders connect Pagerduty to their ticket system, so even if an email from a client arrives in the middle of the night, he will still receive an answer within an hour. Usually companies do this at the dawn of their existence. Their founders [literally] feel physical pain, if the product does not work well, they want to correct all its shortcomings as soon as possible. They do not make low-quality products - or, at least, very quickly solve all the problems that arise. No doubt

In order to set up a feedback loop, you will need a certain number of users - but you must get these users yourself, attract them on your own. In the early stages of a product’s life, don’t buy ads on Google to form the core of users. And you do not need a lot of people, you only need those who can share their impressions about the product every day and ultimately love your product. Therefore, instead of attracting such users using Google Adwords, find them yourself - there are very few people who will be suitable users of your product at this stage.

When everyone thought Pinterest was a joke, Ben Silberman attracted the core of Pinterest users by talking to strangers in coffee shops. And so it was - he walked along Palo Alto and said: “Would you look at my product?” He also often went to the Apple store in Palo Alto and accessed Pinterest from the devices on display in the store. He did it very quickly, so as to get around as many devices as possible before being caught and driven out of the store - so that someone passing by could be interested in what he sees on the screen. This is an important example of how to do things that don't scale. If you have not read Paul Graham's essay on this subject, be sure to read.

So, attract users yourself and remember that the goal of all this is to make a small group of such people fall in love with your project. You must understand these people very well, be as close to them as possible. Listen to them and you will understand that they will be happy to give you feedback. Even if you create a product for yourself, listen to people from the outside and they will tell you how to make a product for which they would pay. Do whatever it takes to make them love your project and tell them what you are doing. Because they will become your supporters and help you find new users.

You want to develop a system that will allow the process of transforming feedback into product solutions. To do this, make changes in accordance with the wishes of the audience and show her the product again. Ask users what they like and dislike, watch how they use your product. Ask what they would pay for. Find out if they’re upset if your company ceases to exist. Ask what will make them recommend the product to their friends, and ask if they have recommended it to anyone else.

You should make this feedback cycle as short as possible. If your product gets 10% better every week, it will grow very quickly. One of the advantages of software startups is how short you can make the feedback cycle for receiving and processing feedback. It can be measured in hours, and the better the company, the faster it goes this cycle. You should try to keep this model in the later life stages of the company, but at first it is especially important.

The good news is that all of this is doable. It’s complicated, it takes a lot of effort, but it’s real. At least in this case, a plan is clear that will ultimately lead you to create a great product.

The great founders do not put anyone between themselves and their customers. The founders of prominent companies initially sell and work in technical support themselves. It is critical that the feedback processing cycle is integrated into your corporate culture. In fact, the problem that we see specifically at Stanford startups is that, for one reason or another, students immediately try to hire sales managers and technical support staff, and the only way that leads to success is that first you have to do it yourself.

You really need to use metrics to stay honest with yourself in this matter. Companies really can do whatever the CEO wants to measure. If you are creating an online service, don’t think about mass registrations, don’t talk about them, and don’t let anyone in the company do this - and observe the project’s growth, active users, activity levels, customer group retention, revenue, net support indices - all these things are important to you. And be extremely honest with yourself if you see that these indicators do not show the best results. Startups live off growth, it is an indicator of an outstanding product.

Here, perhaps, is everything that concerns the review of the main elements of an excellent product. I want to emphasize once again that if you do not do what was discussed, everything else that will be discussed further in this course will not matter. You can simply ignore everything that we will talk about until you take these first steps. On the other hand, the plus is that it is one of the most fascinating elements of creating a startup.

Here I would like to break off, I will continue the conversation on this topic in the next lecture, and now Dustin will talk about why you need to create a startup. Thanks for coming, Dustin!

Dustin Moskowitz: Why create a startup?

So, Sam asked me to tell you why you need to create a startup. There are many well-known reasons why someone should try to organize their own business - I hear them all the time. It’s important to understand that the reasons lie in you - some of them make sense only in a certain context, and some of them can even lead you astray. You may be disoriented by the manner in which Hollywood or the press loves to romanticize entrepreneurship, so I want to highlight some of these potential fallacies so that you make a fresh decision. And then I will talk about the reason for creating startups, which I like the most, it is strongly connected with what Sam just talked about. But, surprisingly, this reason is not the most popular. Usually people are guided by one of a number of other reasons, or, as they say,

So, I will list four main reasons for creating a startup: 1) “firstly, it's beautiful”, 2) you are your own boss, 3) your work becomes more flexible - primarily by increasing the flexibility of your schedule, 4) you You will be able to influence others more and earn more money than if you were employed in an already established company.

I think you are quite familiar with this concept - when I wrote a post about a year agoat Medium, which many of you read, it seemed to me that the stories [about entrepreneurs] in the media do not fully reflect the reality, that entrepreneurship is slightly embellished. In the film, the Social Network showed a lot of negative aspects of what it means to be an entrepreneur, but in general the film painted us this picture: you hang out at parties and flutter from one outstanding idea to another - this description created the impression that doing business very cool.

I believe that reality is far from being so attractive, entrepreneurship has a gloomy side and, more importantly, in reality, most of the time you will spend on hard and ungrateful work. Sam mentioned this - this means that you will sit at the table, completely immersed in the work, and answer letters from customers, make sales, solve complex technical issues. Therefore, it is very important to soberly assess the situation before starting your business. And entrepreneurship is a rather nervous process. Not so long ago, an interesting publication appeared in the press: Last week, The Economist magazine published materialunder the heading “Anonymous Entrepreneurs,” in which the startup’s founder was painted hiding under a table and talking about his entrepreneurial depression [it’s not entirely fair to say that the article is completely devoted to entrepreneurial depression, but it understands in some detail the emotional side of a startup’s failure]. And this is quite real. So let's be honest: if you are going to found a company, know that it will be incredibly difficult to do this.

Why is entrepreneurship stressful? There are a couple of reasons. The first is that you have a lot of responsibility. People in any profession are afraid of failure; this is a kind of dominant motive of one of the directions in psychology. But if you are an entrepreneur, your fear of failure rests entirely on your shoulders and on the shoulders of all who choose to follow you. This is really a lot of pressure. In some cases, your failure can deprive people of their livelihoods, and even if it is not, they decide to spend the best years of their lives following you. So you become responsible for their lost profits from not investing their time and energy in other projects. If something happens - you will be responsible for it anyway - not all the time, of course, you will be pulled out of bed at 3 a.m. although for some startups this is possible - but if something important happens, you will have to deal with it. It will always be this way - no matter on vacation or on the day off - you must constantly monitor the situation and be mentally prepared to resolve all issues that arise. A good example of such stress is the process of attracting investment.

Here is a scene from the Social Network. Here we celebrate something and work in parallel - someone everywhere sprinkles champagne - a lot of time was spent on the Social Network to create such personnel. Mark is not present in this scene: another aspect on which the attention in the film is constantly focused is an attempt to expose him as a complete nerd.

But the real photo from Palo Alto - he spent a lot of time at this table, working hard. Mark, of course, sometimes behaved like a nerd, but he did not refuse to have fun and was not a sociopath a la “rejected lover”. Therefore, here he simply indicates his intention to focus on work, and [temporarily] not communicate.

But the scene in which the occurrence of insight is shown, it is as if taken from the movie Mind Games, they literally copied it from there. The creators of the Social Network chose to portray this scene and skip from one to another with interruptions to parties.

But in reality, we all sat and worked all day. So if you take another photo for comparison, you will see: Mark is here in the same position, but dressed differently - the photo was definitely shot the other day. That's what it looks like in reality - I just talked about it when I was talking about an article from The Economist.

Another type of stress is unwanted press attention. If you are “in trend”, then sometimes you get positive reviews in the media: it's nice to see yourself on the cover of Time and become the Person of the Year. It’s not so nice to find one of your wedding photos in People magazine. It depends, of course, on you, personally, I can’t stand this, but when Valleywag analyzes your lecture and puts you to shreds - you definitely don’t want this, nobody wants it at all.

I almost never heard people say that someone is much stronger than others devoted to the idea. This is because if you work in a startup, and your nerves are at the limit, and things are not going well, you will feel miserable, and as a result, you can leave the project. If you are a founder, you also have the opportunity to do this, but others will not appreciate such an act - this episode will fall into a black spot throughout your career. In fact, you will surely be loyal to the idea of ​​ten years if your things are going well, and about five years - if circumstances are less successful. Of these five, you will need three years to understand that your business is bad, and then, if you find where to put your company, you will spend another two years in the company that will acquire your business. If you leave the project before this point, You will not only cause financial damage to yourself, but also harm your employees. So, if your idea is not viable, and you quickly realized it, consider yourself lucky - most often in life everything happens differently.

I must say that in my life there were a lot of stressful situations, especially in the early years of creating Facebook - I lost my health, did not engage in myself, often felt discomfort in my back - stably every 6 months. And this despite the fact that I was 21-22 years old - this is real madness! So, if you are creating a company, keep in mind that you will have to face this. And you have to really work with your health, this is one of your key responsibilities. Ben Horowitz likes to say that the CEO’s number one task is to manage his own psyche, and that’s the truth, so make sure you work on it [Ben wrote a post about this saying: “What is the CEO’s most difficult skill? "].

Ben Horowitz Comment:
Incidentally, the most difficult skill that I, as a CEO, needed to acquire - the ability to manage my own psyche ... Nevertheless, people hardly talk about it, and I have not read a single material on this topic. It’s like a fight club for managers: the first rule of the CEO’s psychological crisis is not to mention the psychological crisis.

Another reason [to start a startup], especially if you already work in another company, stems from your thoughts that “the people who manage this other company are idiots, they make stupid decisions and spend time no matter what, and if I create own company, then everything will be much better for me. I will set my own rules. ”

Sounds good - that makes sense. If you read my post, you know what follows, I will give you a couple of seconds to read this quote:

It seems to people that if they are the founders and CEO of the company, then they are at the top of the pyramid. It motivates someone, but reality is not at all like that.

What reality is like: in reality, everything in a row becomes your bosses - all your employees, customers, partners, users, mass media - all of them are your bosses. I have never had more bosses, and I have never been forced to take into account the opinions of so many people.

Being a CEO means reporting to everyone around, at least that is what I and most CEOs I know think. If you want to feel power over others, better go to the army or politics. Do not become an entrepreneur.

- Phil Libin

This quote finds a powerful response in me. It is important to emphasize that in reality decisions have many nuances. The people whom you considered idiots are most likely not such - they just need to make very difficult decisions in conditions when each of their circle tries to pull them to their side. So the most common task that I, as a CEO, have to deal with is working with the problems that other people come to me with, working with the priorities that they create - and most often it occurs in the form of conflict. People want to move in different directions, customers want different things. And I can have my own opinion on all this, but my task in this case is to understand who I will disappoint the least and try to maneuver between all these difficult situations.

This happens every day: I can come to work on Monday with ambitious plans for what I will do to make the company better. But if an important employee begins to threaten us with dismissal, this will be my first priority. This is what I spend my time on.

The thought that arises from the proposition that you are your own master is that you yourself control your schedule. This is a very attractive idea. And here is what reality looks like:

If you are going to become an entrepreneur, to be honest, you really get some flexibility in scheduling. You can work for any 24 hours a day!

- Phil Libin

This quote is also very close to me. Part of the reason for this situation is that you should always “keep your finger on the pulse”. Perhaps you are still not going to work around the clock, but you cannot even control when you work and when to relax.

You are a role model of the company, and this is extremely important. You may have successful and unsuccessful weeks, at some periods you will feel a breakdown and want to take a couple of days off. And if you are an entrepreneur, doing so is bad. The team will copy your behavior - so if you release your foot from the gas pedal, they will do the same.

In any case, you will work permanently. If you really “burn” the idea, it will pull you along. If you work with first-class investors, with excellent partners, they will work tirelessly and want the same from you.

Some companies like to tell stories that you can work as you please: you can arrange a four-day work week, and if you are Tim Ferris, then a twelve-hour one. This idea is extremely attractive, and in certain cases it really works - for example, if you are engaged in small business in a single market niche, or maybe several niches at once. But in this case, it should be determined already on the 2-3 client - in the end, you still have to switch to a full time job.

You will have more money, and you will be able to exert a stronger influence on others

This is a powerful motivation, the one that I hear most often - for example, when they tell me: “You know, I would like to work for a small company or create my own business, because I will get a larger piece of the pie, I will have more influence on what the company is doing, I will have more shares, which means I can make more money. ” Let's find out in what cases this may turn out to be true.

I will explain these tables. They are a bit confusing, so let's first focus on the table on the left. It talks about Dropbox and Facebook and their current estimated cost, as well as how much you would be able to earn if you came to these companies as a hundredth employee - especially if you are an experienced engineer and you have about 5 years of work in the industry (in this case, you would most likely receive an offer in the region of 10 basis points [base point is one hundredth of a percentage point, so in the example the developer’s share in the company will be 0.1%]). If you joined Dropbox a couple of years ago, the ceiling for raising stock price returns would be about $ 10 million for you - and could increase in the future. If you joined Facebook in the second year of its existence, the ceiling on the return on your stock would be $ 200 million - that's a gigantic amount! And even if you joined Facebook as a thousandth employee (that is, you would have done it in 2009), you could still earn $ 20 million, and this is also a huge amount - these are the indicators you should focus on when thinking about how much you can earn as an entrepreneur.

Now let's move on to the table on the right - here are two fictitious companies, the founder of which you can become. “Uber for pet grooming [in the absence of the owners — for example, on vacation]” is a great idea [Fred Wilson of Union Square Ventures called companies like “Uber for pet grooming” companies like “This for that” and wrote about this post], and if it suits you, then you can start and create a company valued at $ 100 million, and your share in the company will probably be about 10% - this figure can fluctuate greatly, for some founders the share is higher, for some - below, but after repeatedly eroding your share in the company and many rounds of creating a pool of options, in all likelihood you will own about that part of the company. If this value turns out to be more for you, pay attention to Sam's post about the division of shares in the company between the founders and employees - most likely, you should share part of your share.

So, if you are extremely confident that you can create a company for $ 100 million, that is a big question in itself (of course, you have more trust in Facebook in 2009 or Dropbox in 2014 than for a startup that has not yet exists), then it's worth it to do. The indicators in the left and right tables are comparable only if you have an idea of ​​no less than $ 100 million, and you are absolutely sure that you can implement it.

If you consider yourself to be the person who can create Uber for space travel (and this is a very serious undertaking, the undertaking for $ 2 billion), you will receive a decent amount from it. Definitely, it’s worth doing this - at such a price the company will be evaluated in only 4 years, so this idea makes sense, and if you are thinking of implementing something like this, you can not listen to me, but immediately go and create a company.

So how are financial rewards and influence related? I am sure that financial reward is strongly correlated with the impact that we have on the world around us: if you do not believe me, let's analyze a number of specific examples and [for a while] forget about shares in the company.

So, why can you have a serious impact on the world around you by joining an already formed company? Because in this way you get a multiplier of your efforts: such a company already has a certain number of users - if it's Facebook, then we are talking about a billion users - the same can be said about Google. In such a company, there is already an infrastructure on the basis of which you can create your product - this is also true for new startups, such as AWS and all sorts of cool independent service providers, but, as a rule, you get some kind of microtechnology, which is the property of the company , and the company develops it for you, so such a company is an excellent platform for starting. And besides, you work in a team that helps you develop your ideas and turn them into something significant.

Here are a couple of specific examples: Brett Taylor came to Google for about a thousand and a half employee and created Google Maps, a product that you use most likely daily — I used it myself to get here — this product is used by hundreds of millions of people around the world. Brett did not need to create a company for this, and he received a serious financial reward, but the point here is that his development had a huge impact on the world around him.

My cofounder Justin Rosenstein joined Google shortly after Brett - he worked there as a project manager and as a third-party project he created a chat prototype, which was supposed to be a separate application integrated with Gmail - and before he came up with this, no one I could not imagine that you can sit in the chat via Ajax or chat in the browser. Justin just showed his work to the team, and the project was implemented. This is a product that you most likely also use daily.

Perhaps even more impressive is the fact that shortly after Justin quit and became about two hundred and fifty employees on Facebook, he and people like Andrew Bosworth came up with a project for creating a “Like” button on the hackathon, and now this is one of the most popular elements of all Internet pages, which has radically changed the way people use the Web. And again, he did not need to create a company for this - and even if he tried to do this, he would most likely fail, because in order to put this idea into practice, it needed to be widely disseminated by Facebook.

Therefore, it is necessary to understand the context: which company do you want to create in the end and where you can implement your plan.

So, when is it worth it to create your own company?

Sam has already said something about this - a company should be created only when you understand that you cannot [live and work] differently. You are incredibly inspired by your idea, you feel that you are suitable for its implementation, you must implement it. So what can be meant by this condition?

Sorry for the tautology, but there are two cases when you “cannot help but create” your company. The first is that you are so passionate about the idea that you simply have to implement it, and you will do it no matter what. This is very important, because in this case you need courage and inspiration in order to get through all the difficult moments of the entrepreneur’s life that we have already discussed. You will also need all your inspiration and “charged with the idea” in order to effectively hire people to the team - candidates “feel in their gut” if you do not have this spark, and are unlikely to agree to work with you when there are so many entrepreneurs around who really Believe in your business. Confidence and inspiration will be the stakes in your business. If you subconsciously feel that you do not have this spark, it will mean

Another case is when the world needs you to do something. This means that you have a confirmation of the value of an idea that can change the world for the better — the world needs such an idea. If the world does not need your idea, start working on a project that will have this quality. Your time is really valuable, there are a lot of good ideas, maybe not your own, maybe some companies will already work on them, but you can also work on what will ultimately be useful to many.

The phrase “the world needs you to do something” can also emphasize the word “you”. Perhaps you already know a lot about the problem that you are going to solve. If not, this is a sign that your time can be more profitably spent on something else. Otherwise, at best, all that you do is to squeeze out the teams from the market that really will have the necessary expertise - from the point of view of solving the problem, this alignment will be optimal.

So, returning to my personal experience in Asana: Justin and I were “involuntary entrepreneurs” - until the founding of this project, we worked on Facebook and at the same time tried to realize our idea. We could work on our usual projects all day, and then, in the evening, continue to work on this task manager, which we used inside the company, simply because we were so passionate about this idea, its value was so obvious that we couldn’t do otherwise .

And at some point we had to seriously talk about what will happen to us if we do not create this company. We saw how useful our work turned out to be for Facebook, we were sure that it has value for the world. We were also sure that no one, except us, was going to carry it out, despite the fact that the problem that our project was solving had existed for a long time. All the analogues that we saw were only temporary improvements in the current situation, and we believed that if we did not create our product that solved the problem better than others, its potential value would remain unfulfilled. We could not stop working on the project - we fired up on this idea, it made its way into the world. It seems to me that this is the feeling you should feel when creating a company - so you will understand that your idea is worthwhile.

To this I would like to conclude my speech. For a more complete immersion in the topic, I recommend that you read this list of books:

[ Translation of Sam's next lecture ]

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