Lecture 2: How to Start a Startup

Summary of Sam Altman's Class on "How to Start a Startup", the full version can be viewed here:

http://startupclass.samaltman.com/courses/lec01/

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Twitter: @GHackLabsWebsite: www.ghacklabs.com Email: luke@ghacklabs.com

By: Luke Fitzpatrick

You need a great idea, a great product, a great team , and

great execution. 2

Startups are young and inexperienced.

You should only start a startup if you feel compelled by a particular problem and

that you think starting a company is the best way to

solve it.

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There's a limit to how much you can do, before getting the product in the hands of a user.

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Great execution is at least 10x as

important and 100x harder than

a great idea.

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Hold on a Sec, What's Execution?

In its simplest form, it's a way to get your first loyal users, make them love your service. Tackle the

egg before you go for chicken. 6

Evaluating an Idea:

• Size and growth of the market.

• The growth strategy of the company.

• The defensibility strategy.

• And so on...

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What's MISSING in Startups?

• Plans themselves are worthless.

• The exercise of planning is really valuable and totally missing in most startups today.

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Long-term Thinking is so Rare, Especially in Startups.

• There is an advantage if you can do it.

• Remember the idea will expand and become more ambitious as you go.

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Defensibility

Build something that is difficult to replicate.

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The Best Companies are

Mission Orientated.

• This requires dedication & love.

• A lot of founders, especially students, believe that their startups will only take 2-3 years.

• Good startups usually take 10 years.

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The Advantage of a Mission Orientated Startup

• You'll get more support.

• Derivative companies, copy an existing idea with very few insights. This does not excite people, nor is it compelling.

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– Peter Thiel

“You want an idea that turns into a

monopoly.”

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GREAT IDEA

CRAZY

There's a Fine Line Between a Great Idea & Crazy.

The truly good ideas don't

sound like they're worth stealing.

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A Common Mistake of Founders

• First time founders, think the first version of their product - NEEDS to sound really BIG.

• It doesn't, it needs to take over a specific market and expand from there.

• This is unpopular, but should be what you are going for.

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Sequoia's Famous Question

WHY NOW?

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Market Size Evolving

• Small rapidly growing market.

• Seems small today, but will grow rapidly fast.

Advantages of a Small Market• Customers are pretty

desperate for a solution, and they'll put up with an imperfect, but rapidly improving product.

What Investors Want? What You Should Be Looking For:

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Commonalities to Build a Great Product

• Sitting in front of the computer and building it.

• Talking to customers.

• Think of what customers want.

• Think of the demands of the market.

• Constantly get user feedback.

If you want to learn how to test your ideas by getting user feedback, read it.18

Other Problems Founders Face

• Raising money.

• Getting more press.

• Hiring.

• Business development.

• Etc.

This is all significantly easier when you have a great product!

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Think about it, products you love, are really

simple to use. There's no coincidence.

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Be Fanatical About Your Product

• It's all about small details.

• The right copy to explain it right.

• Founders feel pain when the product sucks.

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Don't Buy Google Adwords in the Early Days

• You should go recruit users by hand.

• Get feedback daily.

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The Stanford DilemmaThese students often try to hire sales & customer service support

right away. You've got to do this by yourself, it's the only way!

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The Reality of Being a CEO

Magical Fairy Land The Actual Reality

People have this vision of being a CEO of a company that just

started - and being on top of that pyramid.

Everyone else is your boss - all of your employees, cusy

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– Phil Libin

“If you're going to be an entrepreneur, you will actually get some flex time to be honest. You'll be able to work any 24 hours a day you want!”

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What's the Best Reason to

Start a Startup?

• One is you're so passionate about it that you have to do it, and you're going to do it anyways.

• The other way to interpret it, the world needs you to do it.

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Maniac Determination"We couldn't stop working on it literally. The idea was beating

itself out of our chests and forcing itself out into the world."27

Some People Thought Pinterest Was a Joke! Who's the Joke on Now?

Ben Silbermann, when everyone thought Pinterest was a joke, recruited the initial Pinterest users by chatting up users in coffee shops. He really did, he just walked around Palto Alto, and said "Will you please use my product?"

He also used to run around the Apple store, and he would like set all the browsers to the Pinterest homepage real quick, before people kicked him out, (laughter) and so when people walked in they were like "Oh what's this?" This is an important example of doing things that don't scale. If you haven't read Paul Graham's essay, you should: http://paulgraham.com/ds.html

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