What’s the best way to create your financial strategy?

Reid Hoffman (Partner & Co-Founder at Greylock Partners)
LinkedIn’s Series B Pitch to Greylock: Pitch Advice for Entrepreneurs

Always think about the next round. The usual tempo for raising money from venture capital is at a minimum of a year between financings. Every time you raise a round, you should be thinking about the next round. Who will be the next investors you pitch? What will their concerns be? What will you need to solve next? How will you raise money later?

Fred Wilson (Co-Founder and Partner at Union Square Ventures)
Maximizing Runway Can Minimize Success – AVC

To my mind, maximizing runway is not the game startups should be playing. Getting somewhere fast is the game they should be playing. You can always raise more money if you are doing well on the metrics that matter in your business. So focus on that and runway will take care of itself. If you can get the plane to take off, the length of the runway matters less. If you can’t, there is no runway long enough for you.

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

None of this is to suggest that going the accelerator, seed, angel, or some other more fashionable route is a bad idea. They all work just fine. And we are investing in plenty of companies that choose that route. But for some reason our firm is drawn to the bootstrapped model, and increasingly so.

Seth Godin (Founder at Yoyodyne Entertainment)
Seth’s Blog: What investors want

Assets (buildings, machines, powerful brands, new technologies) are less essential than ever before. For many organizations, a laptop is worth more than a building or a punch press. That’s great if you’re getting started, because the connection economy has made the cost of entry lower than ever before. It also means, though, that the easy-entry business you’re in might not respond well to the investor’s money. If there isn’t an asset you can buy… (read more)

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

Spend little. I can’t emphasize enough how important it is for a startup to be cheap. Most startups fail before they make something people want, and the most common form of failure is running out of money.

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

Get ramen profitable. “Ramen profitable” means a startup makes just enough to pay the founders’ living expenses. Once you cross over into ramen profitable, it completely changes your relationship with investors. It’s also great for morale

Mike Maples Jr (Managing Partner @ FLOODGATE)
Ron Conway, Mike Maples Jr. – Angel Investing Revealed by Stanford eCorner | Free Listening on SoundCloud

Prove something dramatic while you have six months of cash [in the bank]

Naval Ravikant (Founder, CEO & Co – Maintainer at AngelList)
Anatomy of an (un)fundable startup – Venture Hacks

“If you can’t generate traction, do you really want to raise money?” “If you need money to recruit the best, you’re not ready. ”

Reid Hoffman (Partner & Co-Founder at Greylock Partners)
LinkedIn’s Series B Pitch to Greylock: Pitch Advice for Entrepreneurs

People frequently think the most fundamental strategy of a startup is its product strategy. In fact, the most fundamental strategy is the financing strategy. If your company runs out of gas (finance), your company will die no matter how good your product strategy is.

Paul Graham (Co-Founder & Partner at Y Combinator)
Default Alive or Default Dead?

No matter how good your growth is, you can never safely treat fundraising as more than a plan A. You should always have a plan B as well: you should know (as in write down) precisely what you’ll need to do to survive if you can’t raise more money, and precisely when you’ll have to switch to plan B if plan A isn’t working.

Mark Suster (Managing Partner at Upfront Ventures)
Founder Showcase – Mark Suster Keynote on Vimeo

If you want to raise capital from professional money 9 months from now, six months from now, four months from now — get going now. You’ve gotta build relationships with these people.

Paul Graham (Co-Founder & Partner at Y Combinator)
How to Raise Money

And the right strategy, in fundraising, is to have multiple plans depending on how much you can raise. Ideally you should be able to tell investors something like: we can make it to profitability without raising any more money, but if we raise a few hundred thousand we can hire one or two smart friends, and if we raise a couple million, we can hire a whole engineering team, etc. Different plans match different investors. If you’re talking to a VC… (read more)

Paul Graham (Co-Founder & Partner at Y Combinator)
How to Raise Money

Be profitable if you can. You will be in a much stronger position if your collection of plans includes one for raising zero dollars—i. e. if you can make it to profitability without raising any additional money. Ideally you want to be able to say to investors “We’ll succeed no matter what, but raising money will help us do it faster. “

Sam Altman (President at Y Combinator)
Fundraising Advice for YC Companies – Y Combinator Posthaven

I’d close the first, say, $200k from the first reasonably good investors that offer it on reasonable terms–say a $5 million pre-money valuation or higher. This removes some uncertainty and pressure, gives you capital to execute with while raising the rest of your round, puts you in a stronger position, etc. It’s worth a discount for all of this. Beyond that, I’d then collect interest from investors. Then, after a set number of weeks you decide… (read more)

Mark Suster (Managing Partner at Upfront Ventures)
So What is The Right Level of Burn Rate for a Startup These Days? | Bothsides of the Table

Talking about existing investors is one way of talking about “access to capital” because if you already have VCs then you have “access.” And then you’re just assessing whether you can get access to new VCs or whether your existing VCs can help you in tough times.

Mark Suster (Managing Partner at Upfront Ventures)
So What is The Right Level of Burn Rate for a Startup These Days? | Bothsides of the Table

Are Your Existing Investors Over Their Skis? We invest about half of our fund in our initial investments and we “reserve” about 50% of our investments to follow on in our best deals. If we have [already] committed $10 million and if you don’t have 3 other investors around the table and if you’re burning $800k / month (implying you need $10 million more to fund one-year’s operations or nearly $15 million to fund 18 months) – we’re simply “over our… (read more)

Seth Godin (Founder at Yoyodyne Entertainment)
Seth’s Blog: Why scale?

Investment costs money and it wants a return. But your customers don’t care about that.

Use capital wisely, because sooner or later, you work for it, not the people you set out to serve or the market you sought to change.

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 create a successful small company?

Paul Graham (Co-Founder & Partner at Y Combinator)
Default Alive or Default Dead?

When I talk to a startup that’s been operating for more than 8 or 9 months, the first thing I want to know is almost always the same. Assuming their expenses remain constant and their revenue growth is what it’s been over the last several months, do they make it to profitability on the money they have left? Or to put it more dramatically, by default do they live or die? If the company is default alive, we can talk about ambitious new things they … (read more)

Sam Altman (President at Y Combinator)
Growth and Government – Sam Altman

The first piece of startup wisdom I heard was increasing your sales will fix all problems. This turns out to be another way of phrasing Paul Graham’s point that growth is critical.

David Cancel (CEO, Co-Founder at Drift)
3 Startup Lessons I Learned the Hard Way

Believe me failing sucks really bad but there are no repeatable patterns that lead to startup success. None. Stop looking for one and just f***ing do it

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

It’s not that important to know a lot about startups. The way to succeed in a startup is not to be an expert on startups, but to be an expert on your users and the problem you’re solving for them.

Sam Altman (President at Y Combinator)
The separation of advice and money – Sam Altman

Great advice is really important; some founders don’t appreciate this initially (I was guilty of it) but always learn to. But great advice does not have to come from venture capitalists; it often comes from people like former founders.

Fred Wilson (Co-Founder and Partner at Union Square Ventures)
If It Sounds Too Good To Be True, It Probably Is – AVC

I’ve heard a lot of ideas over the years that, like this options strike price plan, sound too good to be true. And in most cases, they were just that.
I have developed a deep skepticism around anything that sounds like a free lunch. As the saying goes, there is no such thing.

Paul Graham (Co-Founder & Partner at Y Combinator)
Economic Inequality

Determination is the most important factor in deciding between success and failure, which in startups tend to be sharply differentiated.

Amir Elaguizy (CEO Cratejoy, YC Alumni)
58 things I learned at YC – Giftshop Scientist

It gets harder, not easier

Sam Altman (President at Y Combinator)
By endurance we conquer – Sam Altman

You can win by endurance. Most startups don’t die at the hands of a competitor. It’s more often something like an internal implosion, the founders giving up, or not building something people want.

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

Don’t give up. Even if you get demoralized, don’t give up. You can get surprisingly far by just not giving up. This isn’t true in all fields.

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

Become formidable. Also become tough. The road ahead is going to be painful and make you doubt yourself many, many times. Work really hard. Everyone wants a secret to success other than this; if it exists, I haven’t found it yet.

Fred Wilson (Co-Founder and Partner at Union Square Ventures)
Advice for 2013: Deliver On Your Promises – AVC

There has been a lot of discussion out there about the Series A crunch, the consumer sector falling out of favor, VCs getting more conservative, the need to focus on revenues instead of users, and so on and so forth. At times like this I think it is critical to focus hard on the most important things for your business. That could be revenues but may not be. That could be user traction but may not be.

Fred Wilson (Co-Founder and Partner at Union Square Ventures)
You Are Not Your Work – AVC

Failure can sow the seeds of success. It did for me. It did for Mark Pincus when he turned the failure of Tribe into the success of Zynga. It has done the same for countless others. But to get through failure, you need to be able to separate who you are and what your work is.

Sam Altman (President at Y Combinator)
Startup Playbook

If I had to distill my advice about how to operate down to only two words, I’d pick focus and intensity. These words seem to really apply to the best founders I know.

Ben Horowitz (Co-Founder & Partner @ Andreessen Horowitz)
Taking the Mystery out of Scaling a Company – Ben’s Blog

If you want to do something that matters, then you are going to have to learn the black art of scaling a human organization.

Fred Wilson (Co-Founder and Partner at Union Square Ventures)
Capital And Success – AVC

It is what you build, how you go to market with it, and how you monetize it that will determine your success. By all means raise money, from USV if at all possible, but don’t fool yourself into thinking that raising money is the secret to success. It is decidedly not.

Dr. Dana Ardi (Corporate Anthropology Advisors)
MBA Mondays: Guest Post From Dr. Dana Ardi – AVC

Of the four core qualities that he has observed make up most successful entrepreneurs and business-building, they know when to dial up…or dial town. They know when to emphasize passion, lower the pitch on assertion and bypass analytical smarts in favor of creative thinking or relational skills. In short, they’re as fluid and adaptable as the businesses they run.

What’s the best way to communicate with potential investors?

Armando Biondi (Cofounder & COO of AdExpresso)
#60 — Why communicate more with your existing investors (and how to do it efficiently) — Medium

There are two key benefits to sending your investors a monthly recap: a) you’ll give them a broad-enough but meaningful-enough perspective on what’s happening, b) you’ll give yourself a forcing function to generate relevant results in a reasonable amount of time. Here’s how: Short & sweet always win. Be numbers-oriented. Think actionable. Design matters. Use bullet points. Attach some multimedia content. Include cash position and burn-rate. Trigg… (read more)

Jason Lemkin (Managing Director at Storm Ventures, SaaStr.com)
How many hours per week does a venture capitalist expect startup founders to work? – Quora

Email responsiveness. Most great CEO respond to key emails with shocking alacrity. Listening. I know VCs sometimes give you terrible advice. But if you don’t at least listen, it creates anxiety that there is no trust.

Paul Graham (Co-Founder & Partner at Y Combinator)
How to Raise Money

Be nice when investors reject you as well. The best investors are not wedded to their initial opinion of you. If they reject you in [seed/Series A] and you end up doing well, they’ll often invest in [the next fundraise]. In fact investors who reject you are some of your warmest leads for future fundraising

Paul Graham (Co-Founder & Partner at Y Combinator)
How to Raise Money

Introducing an investor to your cofounder(s) should be like introducing a girl/boyfriend to your parents—something you do only when things reach a certain stage of seriousness.

Reid Hoffman (Partner & Co-Founder at Greylock Partners)
LinkedIn’s Series B Pitch to Greylock: Pitch Advice for Entrepreneurs

Stay aboveboard so you keep trust with prospective investors. I was forthright with the first venture firm about my intentions, telling them that they received the first look, and that I would talk to a few more firms to put time pressure. And Greylock knew I had gotten a term sheet to accelerate their decision process.

David Cummings (Managing Partner at Shotput Ventures)
Entrepreneurs and Calls from VC Associates | David Cummings on Startups

In the end, most entrepreneurs shouldn’t engage with associates unless they’re going to raise money in the near-term and they’ve pre-qualified the firm to ensure it’s a good fit. If getting ready to raise money, associates can be a good testing ground and opportunity to practice the pitch or make an ask at the end of the call to be introduced to three portfolio companies that might be potential customers.

Jason Calacanis (CEO of Inside.com, Formerly “Entrepreneur in Action” at Sequoia Capital)
How To Demo Your Startup | TechCrunch

If you don’t have an answer be honest and say you don’t. The worst thing to do when you don’t have an answer is to b. s. the person. So, feel free to say you don’t know –- folks find it refreshingly humble and honest. There are many ways to say this including: “I’m not really sure, I’m going to have to think about that for a bit and get back to you,” or “I’m not sure to be honest. What do you think?” “I’ve never really considered that. Perhaps y… (read more)

Fred Wilson (Co-Founder and Partner at Union Square Ventures)
What Do I Wish Entrepreneurs Would Ask? – AVC

Entrepreneurs often feel that they have to be selling when they pitch. And many come in telling a rosy story that is all upside and no challenges. That can come off as naive and can be off putting. It is way better to start with the upside. As I like to say, “take me up the mountain and show me the promised land on the other side.” But after you’ve accomplished that, it is wise to explain where the tough spots will be on the way up the mountain a… (read more)

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

Another big factor in our investment process was the “I told you so”. In late 2011 as Hailo was just launching in London, the team came to see us and told us everything they planned to do in 2012. We were impressed by the team, their backgrounds, and their attitude and energy. But we had big concerns about everything they said they were going to do in 2012. A year later, they came back to see us and not only had they done everything they said the… (read more)

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

How can I interview customers to create a better product or service?

Do you understand the “job to be done” that your customer is hiring your product or service for?

  • Yes I do. Why aren’t people using my product?
  • Not yet. What’s the best way to interview customers?
BrainQuilt
  • “Focusing on a Job To Be Done removes the need to specify who your target customer is, because your target customer is anyone who needs to get this job done.” — David Jackson, Seeking Alpha
  • “We realized that the causal mechanism behind a purchase is, ‘Oh, I’ve got a job to be done.’ And it turns out that it’s really effective in allowing a company to build products that people want to buy. — Clayton M. Christensen, The Innovators Dillemma
  • “Early stage startups often describe their product as meeting a “market need”. But markets don’t have needs; real people have needs” — David Jackson, Seeking Alpha
  • “Google was designed for the job of finding information, not for a search demographic. The unit of analysis in the work that led to Procter & Gamble’s stunningly successful Swiffer was the job of cleaning floors, not a demographic or psychographic study of people who mop.” — Clayton M. Christensen, The Innovators Dillemma
  • “You can’t avoid doing sales by hiring someone to do it for you. You have to do sales yourself initially. Later you can hire a real salesperson to replace you.” — Paul Graham, Y Combinator
More information

The job to be done is what your customer is the reason the customer is choosing your product or service. Think about it as them “hiring” your product or service, just like they would a Task Rabbit. What are they hiring them to do?

Clayton Christensen shows a compelling example with his Milkshake Marketing piece (h/t David Jackson). The job of the milkshake is to keep them full and entertained on their commute. To do this well it had to be portable (on the go), thick (to keep them busy), and was hired instead of coffee/bagel/donut.

 

 

 

Should I hire a growth hacker/growth engineer?

Does anyone like your product so much that they spontaneously recommend it to other people?

 

BrainQuilt
  • “A startup that prematurely targets a growth goal often ends up making a nebulous product that some users sort of like and papering over this with ‘growth hacking’.  That sort of works—at least, it will fool investors for awhile until they start digging into retention numbers—but eventually the music stops.” — Sam Altman, Y Combinator
  • “There’s an initial period of slow or no growth while the startup tries to figure out what it’s doing. As the startup figures out how to make something lots of people want and how to reach those people, there’s a period of rapid growth.” — Paul Graham, Y Combinator
  • “Leaky buckets don’t need more water, they need their holes fixed. It’s a rookie mistake to focus on customer acquisition instead of customer retention, especially early in a startup’s life.  Talk to people instead of banging on a keyboard.” — Kissmetrics
  • “I think the right initial metric is “do any users love our product so much they spontaneously tell other people to use it?”  Until that’s a “yes”, founders are generally better off focusing on this instead of a growth target.” — Sam Altman, Y Combinator
  • “Are users using your product more than once? Are your users fanatical about your product? Would your users be truly bummed if your company went away? If you’re a B2B company, do you have at least 10 paying customers? If not, we tell companies to make their product better.” — Sam Altman, Y Combinator
  • “At some point, there was a very noticeable change in how Stripe felt. It tipped from being this boulder we had to push to being a train car that in fact had its own momentum.” — Patrick Collison, Stripe

 

More information

Growth is just a function of [# visitors] * [% that convert to users] * [% that stay users].

The secret is that although you need all three of these variables to grow to drive your business, if you don’t fix the [% that stay users] part, the other two don’t matter at all. See David Jackson’s How low retention of customers and suppliers bankrupted Homejoy for a detailed anecdote.

If you haven’t hit the “spontaneous recommendation” threshold, you may be tempted to spend some money to acquire users to “learn”, but most likely your time would be better spent going out and physically installing users and getting their feedback. (See Paul Graham’s Do Things that Don’t Scale).  >> How can I interview customers to create a better product or service?

If you have, then digging into what type of users recommend your product and making it easier for them is the next step.  >> Who are my power users and how can I get more of them?