How to Start a Startup - Lecture 13 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 thirteenth lecture with the following notes:

How to be a Great Founder

Perception

• Perception of a founder:
  • Elon Musk, Bill Gates, Steve Jobs, etc.
  • An image of Superman/Superwoman
• Reality:
  • Someone who deals with a lot of problems
  • No one is generally “superpowered”
  • You want to have a couple of “superpowers”, something that gives you an edge
  • Although, this is not a function of genius
  • It’s hard to tell the difference between genius/madness
• Potential skills of a founder:
  • Founding Team
  • Location
  • Delegation
  • Flexibility
  • Vision
  • Focus
  • Confidence
  • Evaluation
  • Risk
  • Persistence
  • Data
  • Time Horizon
• May seem like a super human task
• You don’t necessarily want to score 10/10 in all the skills of a founder

Team

• It’s usually best to have two/three people as the founders (broad set of skills to spread)
• You can compensate with other founders weaknesses
• Diversity of problems as a founder, you can go at them from different angles
• Have a high degree of trust with those co-founders (see previous lectures for more detail)

Location

• In order to be successful, I need to go where the strongest networks are where the particular kind of problem that I’m trying to solve.
• Silicon Valley is good for software products (not for all though!)
  • This is due to various off-topic reasons
• e.g. Groupon needed massive numbers of sales forces. Silicon Valley is suboptimal for plans where you want to rent a 20 storey building full of sales people. Groupon was required to be in Chicago which is good at this.
• What kinds of startups would someone be an idiot to do in SV?
  • e.g. Designing a fashion company. Great idea, but there isn’t a good network for it here!
• Should I be a contrarian?
  • (A contrarian is a person who takes up a contrary position, a person who seems to be “contrary for the sake of being contrary,”)
  • Its hard to be contrarian and right.
  • How does a smart person actually disagree with me?
  • A really good contrarian idea: what would smart people (in that field) think is a good idea.
  • In general, as a founder, it’s good to be a contrarian.

Delegation

• Should I do the work or delegate the work?
  • In truth: both
• Should I be recruiting people?
• Sometimes one at 100% or the other at 100%

Flexibility

• Should I be flexible or persistent?
  • Again: both
• You get opinions from both ends of the spectrum on how to do this.
• Have an investment thesis (possibly contrarian) on why you think is potentially a good idea.
  • Should include what you know that others don’t know
  • Do I have an increase in confidence or decreasing?
• If increasing, stay on track, be persistent
• If decreasing, you don’t have to necessarily jump out
  • What do we do to fix this? (flexibility)

Confident

• Should I be confident or cautious?
  • Third time: both
• I have my vision of how the world should be BUT smart enough to listen to criticism, negative feedback, competitive entries.
• Is this changing my investment thesis?

Internally

• Should I focus internally or externally?
  • People in the back haven’t heard: both
• Internally: Build the product, ignore the world, ignore competitors
• Externally: Recruiting, meeting people, gathering network intelligence

Vision or Data

• Should I work by vision or data?
  • Both
• Data: motivated by data, gather the data, be guided by the data
• Data only exists within the framework of a vision you are building to

Risk

• Should I take risks or minimize risks?
  • Both
• You have to be a risk taker
• One of the skillsets you need to build on is, how do I make intelligent risks
  • How do I minimize my other risks with this? (i.e. two birds with one stone)

Vision

• Should I focus on the short term or long term?
  • Both
• Jump between the two
• Solve the problem that’s immediately in front of you
• Short term: What do I need to be doing today? Have I made progress today?
  • BUT, is it largely on path?

How do you know if you are a Great Founder?

• You should have some superpowers
• Useful to be a product person (in software especially)
• Useful to have leadership and persuading people

• Recognizing whether you’re on track or not (am I STILL on track with my thesis?)

• There’s no one skillset
• There’s an ability to learn and adapt, and the ability to constantly have a vision that drives you, and take input from all sources and take networks from around you. (!)

Questions

Q. How did you stick with a strategy to get your investment thesis?

Ans.

• The problems in 2003 were different from what we have now. They (LinkedIn) sent out invitations to different people, and got PR to get people.
• Now, how are you competing for potential customers?
• What is the hack that I know that others don’t?

Q. How do you know if someone is a good founder or not?

Ans.

• I’m a believer of references
• Only meet with people through a reference
• It’s a way to sort out time
• Network is really key

Q. Density of insight is a strong signal for great founders. Being able to distil a thesis into a concise sentence.

Ans.

• The ability to be coherent on what you’re targetting.
• NOT a Swiss army knife approach
• Founders who have analyzed the problem in a good way
• Founders who do not have a good analysis, but have an instinct on what they’re doing

Q. What kept you going with persistence (RE: LinkedIn)?

Ans.

• Believing the right economic system design was to have a public professional profile
• It may not have taken off the speed that we want
• It takes us longer to get there, but that’s okay

Q. When you get a founder that you think is going to be good. What makes you get wrong about someone who looks good at first observation?

Ans.

• Conviction in the person when they’re trying to reason with you is what you look for in a founder
• Sometimes you find people who have learned to mimic that behaviour. They look like they’re thinking about the challenges that you’re bringing up but they’re actually ignoring you.
• Adaptability questions
• Is there an ego issue that might get in the way

Q. Co-founding team, how to evaluate how to be co-founders?

Ans.

• Serious trust
• People say don’t invest in a husband-wife team (since personal dynamics can affect)
• You should ask: do they collaborate well? Do they help each other get to truth?
• Adjusting to what is the truth (i.e. people who work off each other)

Q. Different founder, different areas. How do you identify them?

Ans.

• This talk is about, what is unique to all founders as a whole (not specifically technology).
• Investors try to understand a domain so they cam better invest in that domain.
• Each domain has a set of attributes in that domain.

Q. How do you know when to stay in longer than expected? Or when do you pivot?

Ans.

• The part of the reason of having an investment thesis (IT)
• If your confidence in IT is decreasing for a very long time:
  • You’ve gone into intense mode to see what could do to increase confidence
  • When THAT starts failing, then you should consider pivoting.
• A frequent mistake: wait till everything has crashed into the wall. You waited way too long!
• Founders have no balance
  • While you are working on this thing, you cannot remain balanced. It is 100% of you that goes into it.
  • (This isn’t forever, but maybe for a couple of years before you go off to do other things)

Q. How good is the startup eco-system in identifying contrarian opportunities?

Ans.

• Mixed.
• Generally, the system is good at it.

Q. What you do think about creating markets vs. covering them?

Ans.

• What would lead you to believe what would be a market there or not?
• What is it that you think you know that others don’t know.

Q. When do you know someone long enough to ask someone to be their co-founder?

Ans.

• It’s one of the risks that you take
• You’re going to spend 20+ hours with this person, do you feel comfortable doing that?
• Have a set of robust conversations with this person that you can later bring up (re-iterating trust)

Discussion, links, and tweets

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.