What’s the best way to create your competitive advantage?

Paul Graham (Co-Founder & Partner at Y Combinator)
Mean People Fail

Startups don’t win by attacking. They win by transcending. There are exceptions of course, but usually the way to win is to race ahead, not to stop and fight.

David Jackson (Founder, Seeking Alpha)
Your biggest competitor may not be who you think it is | A Founder’s Notebook

The real challenge is creating a compelling user experience, rather than being incrementally better than an existing competitor. This is why “worry more about your customers than your competitors” is good advice.

Seth Godin (Founder at Yoyodyne Entertainment)
Seth’s Blog: Wasted kindling

You need significant…things that keep the system working without a constant stream of promotion. A few: (a) a remarkable product that users enjoy talking about; (b) a product with virality built in–something that works better when my friends use it too; (c) a community orientation, so that each new user enhances the value of the community, creating a virtuous cycle; (d) economies of scale in both production and marketing – as you grow, things … (read more)

Michael Mauboussin (Managing Director and Head of Global Financial Strategies at Credit Suisse)
Michael Mauboussin: “The Success Equation:Untangling Skill and Luck” | Talks at Google – YouTube

If you’re in a competitive interaction, what you want to do is simplify the game to the areas where your skill will overwhelm that of your competitor. If you are the underdog, the weaker player, what you want to do is complicate the game. Add battlefields. You’ll still be the weaker player but it dilutes the strength of your competitor.

Tomasz Tunguz (Partner at Redpoint Ventures)
The 3 Competitive Defenses of Enduring SaaS Companies

[to create a competitive advantage try] data network effects, [customer] network effects, ecosystem creation.

Boris Wertz (Founder of version one ventures)
Marketplace dynamics: buyer mindshare is key to building a moat – Version One

A marketplace can adopt two strategies: protect the supply and protect buyer mindshare. When it comes to supply, you can give your sellers little reason to seek out other marketplaces. For example, you can lower listing/transaction fees for unique inventory, tie sellers to your site through reviews (which cannot be transferred to other marketplaces), or find some other innovative model like Uber’s leasing model.

David Jackson (Founder, Seeking Alpha)
Who has more power in the media business, celebrities or platforms? | A Founder’s Notebook

Platforms have power because (i) it’s hard to build traffic from scratch, and (ii) they benefit from network effects.

Paul Graham (Co-Founder & Partner at Y Combinator)
How to Make Wealth

When you’re running a startup, your competitors decide how hard you work. And they pretty much all make the same decision: as hard as you possibly can.

Peter Thiel (Co-Founder & Partner at Founders Fund)
First-mover advantage is over-rated | A Founder’s Notebook

Moving first is a tactic, not a goal. What really matters is generating cash flows in the future, so being the first mover doesn’t do you any good if someone else comes along and unseats you. It’s much better to be the last mover. Last movers build non-commoditized businesses. They are relationship-driven. They create value. They last. And they make money.

Mike Cassidy (Four successful exits – Ruba, Xfire, DirectHit, StylusInnovation)
What They Don’t Teach in Business School about Entrepreneurship – YouTube

Speed is the primary business strategy. Any average chess player can beat the best player in the world if they get to move twice for every time the grandmaster moves.

Fred Wilson (Co-Founder and Partner at Union Square Ventures)
Differences Matter – AVC

being different matters. But you have to be different in ways that users will feel right away. From differentiation comes defensibility. And in the hyper-competitive world of social media, that’s a good thing.

Fred Wilson (Co-Founder and Partner at Union Square Ventures)
Where Is The Value In The Tech Stack? – AVC

You need data to provide defensibility and differentiation. And so most of USV’s investments have been companies that combine software and data to provide a solution to the market that we believe is defensible, usually via network effects which are a data driven phenomenon.

Fred Wilson (Co-Founder and Partner at Union Square Ventures)
Where Is The Value In The Tech Stack? – AVC

I also don’t think data alone is the new oil.The new oil is going to be found in various places in the tech stack where software and data come together to produce a service that has high operating leverage at scale and is defensible by the network effects that the data provides. That’s a mouthful. Software is the new oil sounds a lot better. But the mouthful is more accurate.

Fred Wilson (Co-Founder and Partner at Union Square Ventures)
The Emerging Architecture Of Internet Applications – AVC

The most important things to understand about this blockchain stack are the overlay networks (most of which are still emerging), and the shared data layer and the shared protocol layer. Differentiation and defensibility and network effects will be much harder to obtain with this architecture. Most things will work like email. Take your keys from one app to another and all your data and relationships come with it.

Fred Wilson (Co-Founder and Partner at Union Square Ventures)
The Dentist Office Software Story – AVC

software alone is a commodity. There is nothing stopping anyone from copying the feature set, making it better, cheaper, and faster. And they will do that. This is the reality that Brad and I stared at in 2003 as we were developing our initial investment thesis for USV. We saw the cloud coming but did not want to invest in commodity software delivered in the cloud. So we asked ourselves, “what will provide defensibility” and the answer we came t… (read more)

Fred Wilson (Co-Founder and Partner at Union Square Ventures)
Privacy As A Competitive Vector – AVC

And if that is the case, are there other big product categories out there other than search where privacy could be used as a competitive vector? How about email? How about messaging? How about maps? How about browsers?

Fred Wilson (Co-Founder and Partner at Union Square Ventures)
The Mutual Company – AVC

Maybe the creators of these networks ought to mutualize so that their users, who are creating the value, can participate in the upside. We have not seen anyone do this to date. We have talked to a number of startups and networks about the idea. We have not seen any takers yet.

Fred Wilson (Co-Founder and Partner at Union Square Ventures)
What Is Strategy? – AVC

Products, how it acts within a market relative to its competitors, or other aspects of the business. Specific approaches may include: Differentiation, in which products compete by offering a unique combination of features.
Cost, in which products compete to offer an acceptable list of features at the lowest possible cost.
Segmentation, in which products are tailored for the unique needs of a specific market, instead of trying to serve all consu… (read more)

Ben Horowitz (Co-Founder & Partner @ Andreessen Horowitz)
The Case for the Fat Startup – Ben’s Blog

If you are a high-tech start-up, your value is in your intellectual property. Don’t stare at your spreadsheets so long that you get confused about that.

Sam Altman (President at Y Combinator)
Startup advice, briefly – Sam Altman

Have a strategy. Most people don’t. Occasionally take a little bit of time to think about how you’re executing against your strategy. Specifically, remember that someday you need to have a monopoly (in the Peter Thiel sense).

Noah Kagan (Founder of AppSumo)
Mint Sales And Marketing: How Mint Beat Wesabe | OkDork.com

We spent countless weeks figuring out what people really wanted before we launched our beta. Guess who we found out Mint’s biggest competitor was? No one. Apathy. This shocked me! Most people would rather not track anything and just see how they are doing when they go to the ATM. Guess who was #2? Ms Money, Intuit, Wesabe? NOPE. Microsoft Excel. Who would have believed that!

Paul Graham (Co-Founder & Partner at Y Combinator)
Beating the Averages

A startup should give its competitors as little information as possible.

Peter Thiel (Co-Founder & Partner at Founders Fund)
Peter Thiel’s CS183: Startup – Class 11 Notes…

The basic challenge is to find things that are hard but doable. You want to find a frontier. It’s worth making a rough division between two different types of secrets. There are secrets of nature and then there are secrets about people. Natural secrets involve science and the world around us. Secrets about people are different. These are things that people hide because they don’t want other people to know about them. So two distinct questions to … (read more)

David Jackson (Founder, Seeking Alpha)
Why the best products don’t always win, AKA how to build a moat around your business | A Founder’s Notebook

If you want to build a moat around your product, make sure it has high switching costs and network effects, and lock up distribution. Many successful companies have done this. But as customers, we fear and resent lock-in. The alternative strategy is typified by Amazon: relentless focus on generating value for customers, resulting in remarkable trust and brand promise.

Sam Altman (President at Y Combinator)
Stupid Apps and Changing the World – Sam Altman

The value of a network grows as a function of the square of the number of nodes. So the value/importance of the service grows hyper-exponentially. There is all sorts of emergent behavior as something grows in importance a million-fold in a short period of time.

 

What’s the best way to come up with your startup idea?

Sam Altman (President at Y Combinator)
Projects and Companies – Sam Altman

Companies sound serious. When you start thinking of yourself as a company, you start acting like one. Worst of all, you won’t work on slightly crazy ideas. When you have a company, the clock is ticking and people expect results. It’s far better to be thought of and to think of yourself as a project than a company for as long as possible.

David Jackson (Founder, Seeking Alpha)
Making other people successful | A Founder’s Notebook

Perhaps every company has a goal that ultimately reduces to (at least) one of these: provide basic necessities; make other people successful; give other people pleasure. Which is yours?

Paul Graham (Co-Founder & Partner at Y Combinator)
How to Be an Expert in a Changing World

I spent a lot of time learning to recognize [good ideas look like bad ideas at first], and the techniques I used may be applicable to ideas in general. The first step is to have an explicit belief in change. Beyond the moderately useful generalization that human nature doesn’t change much, the unfortunate fact is that change is hard to predict. Instead of trying to point yourself in the right direction, admit you have no idea what the right direc… (read more)

Paul Graham (Co-Founder & Partner at Y Combinator)
How to Be an Expert in a Changing World

The way to come up with new ideas is not to try explicitly to, but to try to solve problems and simply not discount weird hunches you have in the process.

Paul Graham (Co-Founder & Partner at Y Combinator)
How to Be an Expert in a Changing World

Good new ideas come from earnest, energetic, independent-minded people. [A] trick I’ve found… is to focus initially on people rather than ideas. Though the nature of future discoveries is hard to predict, I’ve found I can predict quite well what sort of people will make them.

Paul Graham (Co-Founder & Partner at Y Combinator)
Before the Startup

The way to come up with good startup ideas is to take a step back. Instead of making a conscious effort to think of startup ideas, turn your mind into the type that startup ideas form in without any conscious effort.

Paul Graham (Co-Founder & Partner at Y Combinator)
Schlep Blindness

The trick I recommend is to take yourself out of the picture. Instead of asking “what problem should I solve?” ask “what problem do I wish someone else would solve for me?”

Paul Graham (Co-Founder & Partner at Y Combinator)
Startups in 13 Sentences

Let your idea evolve. This is the second half of launching fast. Launch fast and iterate. It’s a big mistake to treat a startup as if it were merely a matter of implementing some brilliant initial idea. As in an essay, most of the ideas appear in the implementing.

Sam Altman (President at Y Combinator)
Startup advice, briefly – Sam Altman

You should start with an idea, not a company. When it’s just an idea or project, the stakes are lower and you’re more willing to entertain outlandish-sounding but potentially huge ideas. The best way to start a company is to build interesting projects.

Sam Altman (President at Y Combinator)
A Question – Sam Altman

I think it’s remarkable how much of what people do and use today didn’t exist 10 years ago. I’m always in awe of the remarkable technological progress we make decade over decade. I think its important to try not to lose your sense of wonder about this.

Phil Libin (Co-Founder & CEO of Evernote)
“The Six Crucial Questions for Every Startup Entrepreneur”, by Phil Libin (CEO of Evernote) on Vimeo

Wait until the world changes so that an important problem goes from impossible to just really hard, then execute

Fred Wilson (Co-Founder and Partner at Union Square Ventures)
Evidence On Our Smartphones – AVC

The rise of computers that we all carry with us everywhere, and their ability to capture what is going on around them, time stamp it, and geotag it, creates a ton of interesting opportunities. Including law enforcement opportunities. And I think that is a good thing.

Fred Wilson (Co-Founder and Partner at Union Square Ventures)
Payments Day – AVC

Payments are one of those things that are fundamental to the online experience. And there are large networks that are being built with payments at the core of them.

Eric Ries (Author, The Lean Startup)
The Lean Startup: How Today’s Entrepreneurs Use Continuous Innovation to Create Radically Successful Businesses

What products do customers really want? How will our business grow? Who is our customer? Which customers should we listen to and which should we ignore? These are the questions that need answering as quickly as possible to maximize a startup’s chances of success. That is what creates value for a startup. (p.181)

Fred Wilson (Co-Founder and Partner at Union Square Ventures)
Second Screen, Third Screen, … – AVC

It all makes me wonder if the current crop of social TV apps are missing a big aggregation opportunity. I suspect lots of good stuff was going on elsewhere last night (Facebook, Pinterest, Canvas, etc), but I just didn’t have enough screens in my family room to be everywhere at the same time. Maybe we need an app for that.

Sam Altman (President at Y Combinator)
Successful people – Sam Altman

The most successful founders do not set out to create companies. They are on a mission to create something closer to a religion, and at some point it turns out that forming a company is the easiest way to do so.

Bill Gross (CEO Idealab)
Bill Gross: The single biggest reason why startups succeed | TED Talk Subtitles and Transcript | TED.com

If you’re underfunded at first but you’re gaining traction, especially in today’s age, it’s very, very easy to get intense funding.

Bill Gross (CEO Idealab)
Bill Gross: The single biggest reason why startups succeed | TED Talk Subtitles and Transcript | TED.com

Timing accounted for 42 percent of the difference between success and failure. Team and execution came in second, and the idea, the differentiability of the idea, the uniqueness of the idea, that actually came in third.

Bill Gross (CEO Idealab)
Bill Gross: The single biggest reason why startups succeed | TED Talk Subtitles and Transcript | TED.com

I think business model makes sense to be [less important, but still important] because you can start out without a business model and add one later if your customers are demanding what you’re creating.

Bill Gross (CEO Idealab)
Bill Gross: The single biggest reason why startups succeed | TED Talk Subtitles and Transcript | TED.com

What I would say, in summary, is execution definitely matters a lot. The idea matters a lot. But timing might matter even more. And the best way to really assess timing is to really look at whether consumers are really ready for what you have to offer them.

Sam Altman (President at Y Combinator)
Before Growth – Sam Altman

In the first few weeks of a startup’s life, the founders really need to figure out what they’re doing and why. Then they need to build a product some users really love. Only after that they should focus on growth above all else.

Seth Godin (Founder at Yoyodyne Entertainment)
Seth’s Blog: How to talk about your project

What is it for? When someone hires your product or service, what are they hiring it to do? Who (or what) are you trying to change by doing this work? From what to what? How will you know if it’s working? What does it remind me of? Are there parallels, similar projects, things like this that have come before? What’s the difficult part? How much of your time and focus are you spending on the difficult part?

What’s the best way to build a good company?

Brad Feld (Managing Director at Foundry Group)
The Long Lost Myth of Capital Efficiency – Feld Thoughts

When a company can become cash flow positive on a small amount of capital (say $5m – $10m) and grow over 100% year-over-year without raising another nickel of equity, well that’s a silent killer.

David Jackson (Founder, Seeking Alpha)
Why capital efficiency is critical for SaaS and subscription businesses | A Founder’s Notebook

Capital efficiency gives you time, which is critical for businesses that scale steadily but without viral growth, such as SaaS and subscription businesses.

Sam Altman (President at Y Combinator)
Super successful companies – Sam Altman

They can explain the vision for the company in a few clear words. They generate revenue very early on in their lives. They keep expenses low. They are tough and calm. They make something a small number of users really love. They move fast.

Ben Horowitz (Co-Founder & Partner @ Andreessen Horowitz)
Why Startups Should Train Their People – Ben’s Blog

As success drives the need to hire new engineers at a rapid rate, companies neglect to train the new engineers properly. As the engineers are assigned tasks, they figure out how to complete them as best they can. Often this means replicating existing facilities in the architecture, which lead to inconsistencies in the user experience, performance problems, and a general mess

Sam Altman (President at Y Combinator)
The Post-YC Slump – Sam Altman

The main problem is that companies stop doing what they were doing during YC instead of relentlessly focusing on building a great product and growing, they focus on everything else. In general, startups get distracted by fake work. Two particularly bad cases are raising money and getting personal press. But the list of fake work is long.

Mark Zuckerberg (Founder & Chairman & CEO at Facebook)
How To Get Ahead: Entrepreneurial Lessons From Mark Zuckerberg

The most important thing for you as an entrepreneur trying to build something is, you need to build a really good team. And that’s what I spend all my time on… I spend probably 25 percent of my time recruiting, finding good people, both outside the company and inside the company, to put them in more impactful roles.

Sam Altman (President at Y Combinator)
The three steps to building a great company, and why most startups fail on the first step | A Founder’s Notebook

Task #1: Build a product that users love. Task #2: Figure out how you are going to grow. Task #3: Make sure you are going to stay a winner if you win. [Are the three tasks sequential? In other words, should you figure out growth only after you’ve finished building a product that users love? I think there’s overlap, but broadly speaking — yes, they’re sequential. ]

Dharmesh Shah (Co-founder and CTO of HubSpot)
Happy Birthday HubSpot! 9 Lessons From Our First 9 Years

As a startup, you need to seek that love. We don’t just want people to buy from us. We want people to love us. We want them to love what we love and respect what we do, even if they don’t buy from us. Even if they are unlikely to ever buy from us. Because what we believe is that the more people that love us, and want us to succeed, the more likely we are to do so.

Fred Wilson (Co-Founder and Partner at Union Square Ventures)
Long Roadmaps – AVC

And I replied that building a great company is a combination of patience and impatience in equal doses applied unevenly. Impatient short term, patient long term.

Paul Graham (Co-Founder & Partner at Y Combinator)
Beating the Averages

If you do everything the way the average startup does it, you should expect average performance. The problem here is, average performance means that you’ll go out of business. The survival rate for startups is way less than fifty percent. So if you’re running a startup, you had better be doing something odd. If not, you’re in trouble.

Tomasz Tunguz (Partner at Redpoint Ventures)
Why the Bubble Question Doesn’t Matter

1. Think long term 2. Manage your cash effectively 3. Only hire the right people 4. Mitigate churn 5. Raise capital opportunistically to amass a war-chest large enough to achieve your vision

What’s the best way to avoid common mistakes in management?

Sam Altman (President at Y Combinator)
Financial Misstatements – Sam Altman

First-time startup CEOs make a lot of mistakes, mostly due to ignorance. One particularly bad one is misunderstanding or misusing basic financial terms.

Ben Horowitz (Co-Founder & Partner @ Andreessen Horowitz)
Second Startup Syndrome – Ben’s Blog

Serial entrepreneurs who suffer from Second Startup Syndrome want to skip through the narrow early steps and move quickly to more exciting topics such as long-term strategy, sales and marketing, company positioning, company culture, and more. Unfortunately, when you build a house, it’s usually a very bad idea to start with the roof.

Fred Wilson (Co-Founder and Partner at Union Square Ventures)
DIY vs Delegate – AVC

I like it when I see a founder team that is resourceful, has range, and can do a lot of this stuff themselves. I like to see them running lean and mean and spending money on the things that really matter (product!!!!!).
But at some point they need to start delegating this stuff. And first time founders often make the mistake of waiting too long to take things off their plates. For one, they like the control and insights they get from doing thing… (read more)

Sean Ellis (CEO at GrowthHackers)
Figuring Out Your Way to Startup Success

It is OK to apply pressure for better execution of things that have been figured out, but it should be applied very sparingly when trying to encourage the team to figure out the remaining unknowns.

Sam Altman (President at Y Combinator)
Startup Playbook

Most of the principles on being a good manager are well-covered, but the one that I never see discussed is don’t go into hero mode. Most first-time managers fall victim to this at some point and try to do everything themselves, and become unavailable to their staff. It usually ends in a meltdown. Resist all temptation to switch into this mode, and be willing to be late on projects to have a well-functioning team.

Ben Horowitz (Co-Founder & Partner @ Andreessen Horowitz)
Ones and Twos – Ben’s Blog

When founding CEOs fail, a significant reason why is they never invest the time to be competent enough in the [process design, goal setting, structured accountability, training, and performance management] tasks to direct those activities effectively. The resulting companies become too chaotic to reach their full potential and the CEO ends up being replaced.

Fred Wilson (Co-Founder and Partner at Union Square Ventures)
Becoming A Boss – AVC

When we had our USV CEO summit last fall, we kicked it off by asking each founder/CEO to open with the one thing they had learned the hard way during the year. The recurring theme was that they had to let the people they hired do the work even though they wanted to jump in and do it themselves. And as they are all going around the room telling this story over and over, I am thinking “”and I want you to jump in and do the work too””. Because these a… (read more)

Sam Altman (President at Y Combinator)
Startup advice, briefly – Sam Altman

Learn to manage people. Make sure your employees are happy. Don’t ignore this.

Fred Wilson (Co-Founder and Partner at Union Square Ventures)
Handing Over Your Company To Someone Else To Manage – AVC

The thing we always remind entrepreneurs is that bringing in a CEO does not mean losing control of the company. In fact, bringing in a CEO is often a great way to keep control of a company if you do it well.