How to Start a Startup - Lecture 2 Notes

I’m taking down notes for Sam Altman’s class, How to Start a Startup and I figured I’d start sharing them. This is for the second lecture with the following notes:

Choosing a co-founder

• Don’t choose a random co-founder
• Choose someone you have a long history with
• When something goes really wrong, you have a past history that binds us together
• Meet a co-founder in college
• Meeting co-founder while working in a startup
• Starting a startup alone is STILL a bad idea
• Model for choosing a co-founder:
  • Look for a person that behalves like “James Bond” rather than one that’s an expert in a particular domain
• Tough and calm co-founder IF you aren’t.
• You need a technical co-founder
• Average number of co-founders: 2-3
• Q. How about co-founders that aren’t working in the same location?
  • DO NOT DO IT!

How to Hire

Don’t Hire

• First, try NOT to hire
  • The goal is not to hire for as long as possible
  • E.g. Airbnb hired only two people in the first year, and took 5 months
• Find people who feel that they’re apart of the founding of the company
• Hire slowly and with a high hiring bar

How to ACTUALLY Hire

• Recruiting is hard, not everyone wants to join. It can take a year sometimes.
• It’s important to get the product right first

If you’re going to join a startup, pick a “rocketship”. Something that you know is going to be huge, but not everyone realizes yet.

• Good people wait to see if you’re going to be a “rocketship”
• How much should you spend hiring: 0% or 25%

Mediocre engineers do not build great companies

• This can kill the company
• They are needed to build the culture of the company
• If you comprise in the first ~10 hires that may just kill the company
  • Will I bet the future of the company on this single hire?
• When you’re bigger, you will eventually comprise..

Sources of Candidates

• Personal referrals for the first 100
• Look outside the SV, it’s brutally hard to hire in SV
• Experience:
  • Experience matters for some roles.
  • Early hires doesn’t matter much, you need to look for aptitude.
  • Are they smart? Do they get things done? Do I want to spend a lot of time around them?
• Q. How do you know if their initial in-experience is going to be okay when things scale up?
  • People who are smart can almost always find a role in the company.
  • May need to move to a different role or team.
  • Great employees can move around easily and it’s usually an issue.
• Best way to hire is to work with them to hire. Sometimes you don’t need to even interview if you’ve worked on the same project together.
• Call references!
  • Is this person in the top 5% of the people you’ve ever worked with?
  • What specifically did you do?
  • Will you hire them again? Why aren’t you hiring them again?
• If someone cannot communicate clearly, that’s a BIG problem in the future that they’ll work out
• Someone who likes to take a bit of risk.

The Animal Test

• “You should be able to describe any employee as an animal of what they do.”
  • You need unstoppable people
• Mark Zuckerberg said he likes to hire people:
  1. He would spend time socially
  2. He’d be comfortable reporting to if the roles were reversed (you need to have high respect for them).

Employee Equity

• 10% to the first ten employees.
• Don’t be stingy with equity to employees, investors only write the check.
• Fight with investors to reduce the equity they get.
• Q. When should co-founders decide on the equity split?
  • Set this very soon as you get started.
  • If you’re not willing to give them equal shares, you should question if this is the right relationship?
• “You shouldn’t tell your employees they’re fucking up everyday otherwise they will.”
• Learn to praise your team, you need to give people more responsibility.
• Dan Pink (TED) talk on Autonomy, Mastery and Purpose.
• Use one-on-ones.

How to Fire..

• Every first-time founder waits too long
  • It’s better for you, and them
• Fire people who create office politics and always negative
  • These will kill a startup!
• Q. How do you balance firing people fast and make early employees feel secure?
  • Anyone will screw up once or twice
  • If someone is getting every decision wrong, it’s be blatantly obvious who these people are amongst others.
  • In practice, there’s almost never any doubt.
• Q. What if you’re relationship with a co-founder breaks down?
  • You have to have “vesting”.
  • Pre-negotiate how this will play out before this ever happens.
  • In SV, it takes four years to earn all of that.
    • E.g. If you leave after one year, you keep 25% of that, two years; 50%, etc.
  • If the company leaves with half the company, getting investments is VERY hard after that.
  • Talk about it early, don’t let it fester!

Execution

• The way to execute well is to execute it yourself.
• You need to been executing tasks; creates company culture this way.
• Put in the effort

Jobs of a CEO

• Set the vision
• Raise money
• Evangelize
• Hire and manage
• Make sure the entire company executes (!)
  • Can you figure out what to do?
  • Can you get it done?

Can you get it done: Focus

• There are several things that need your attention.
  • You need to figure which of the two or three tasks are the most important, get those done and differ the rest.
• Say no. A Lot.
• Don’t work really hard on the things no one cares about.
• Set overreaching goals.
  • This is what the whole company focuses on then.
• Communication
  • You can’t be focused without really good communication.
• Maintain growth and momentum
  • Have the right metrics and be focused on growing
• Don’t get (the company) distracted or excited with other things (PR).
• Work together. Again, remote co-founders DO NOT WORK.

Can you get it done: Intensity

• Startups can’t give you a good work/life balance - that’s the reality.
  • They’re all consuming.
  • You have to be able to outwork your competitors.
  • You have to be intense (needs to come from co-founders).
• Obsess with quality
  • You need to have a culture where people have high quality standards for everything the company does, but still move quickly.
  • Move fast and break things.
  • Be frugal in the right places, but care about quality everywhere.
  • “Don’t buy people shitty computers, if you don’t want them to write shitty code.”
• Be decisive/Quick
  • Talk about grand plans, but be biased towards action.
  • It lets you done in incremental pieces. In the end, you have a huge project completed.
• Show up
  • Get on a plane in marginal situations. <- This is good literal advice
• Momentum and growth are the life-blood of startups
  • Always keep momentum!

Growth

• When there’s a disagreement among the team on what to do, you ask your users.
  • Stuff isn’t working right now, we don’t actually hate each other, we just need to get back on track.
• Shipping a product
• Launching a new feature
• Reviewing/reporting metrics and milestones

Don’t worry about a competitor at all until they’re actually beating you with a shipped product. Don’t get down because of the press.

“The competitor to be feared is one who never bothers about you at all, but goes on making his own business better all the time.” - Henry Ford

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I'm a software enginer that's worked on various Android projects for a while now. If you'd like to follow me on Twitter, I don't always post about tech things.